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Presentation prepared for the workshopMILESTONE JUDGEMENTS IN COMPETITION LAW

Organised by the Small States Network for Economic Developmentin collaboration with the Barbados Fair Trading Commission

Barbados Hilton30-31 July, 2012

Gas Insulated Switchgear

David BaileyKing’s College London


Outline of presentation• How did the case arise?• Legal issues for determination by the

General Court• The judgment• The aftermath• Lessons to be learned from the case

David Bailey 2SSNED-Barbados FTC


How did the case arise?• In January 2007 the European Commission

imposed fines totalling over €750 million on eleven groups of companies for having infringed Article 101(1) of the EU Treaty

• The companies had participated in an illegal cartel in the market for gas insulated switchgear projects for 16 years



David Bailey SSNED-Barbados FTC 4


How did the case arise?• Cartel members took sophisticated measures to keep the

cartel secret– Code names for companies and individuals– Anonymous e-mail addresses

• ABB blew the whistle to the EU Commission – ABB was a recidivist!– Importance of the evidence provided by leniency

applicant



How did the case arise?• The Commission found that the suppliers

had engaged in a ‘complex of agreements and concerted practices’ to:– share markets– allocate quotas and maintain historic market shares– collusive tendering– exchange of sensitive market information



• Nine appeals to the General Court:

– Breach of rights of defence– Denied involvement in all or parts of the cartel – Contested fines as excessive and/or unjustified– Challenged liability for the cartel where

ownership of one of the cartelists changes



Legal issues for determinationby the General Court

First issue

• What is the correct approach to the evidence?– Note the difficulties of proving a secret cartel– Note the Commission’s investigatory powers and

leniency programme– Does modern technology help or hinder the discovery

of cartels?




Second issue

• Did each of Mitsubishi, Toshiba, and Hitachi participate in a market-sharing agreement and/or concerted practice? – Was there a ‘common understanding’ that Japanese

suppliers would not compete for contracts in Europe and vice versa?




Third issue

• Was the fine lawfully and fairly imposed by the Commission and was it calculated correctly?– Year of turnover used for calculations– Unequal treatment concerning deterrence multiplier– Ringleader role in the cartel– Rules for attributing liability for payment of fines



The judgmentThe first issue

• What is the correct approach to the evidence?– Evidence “must be precise and consistent” (para 75)– Evidence is evaluated solely by its reliability (para 85)– Can rely on leniency materials (paras 87-89)

• Some caution is generally called for • But attempts to mislead Commission could call into question

the cooperation of the undertaking and affect any leniency



The judgment• “the Commission cannot be required to produce documents

expressly attesting to contacts between the traders concerned … The existence of an anti-competitive practice or agreement may therefore be inferred from a number of coincidences and indicia which, taken together, can, in the absence of another plausible explanation, constitute evidence of an infringement of the competition rules” (Mitsubishi, para 76)



The judgmentSecond issue

• Was there a common understanding that the European and Japanese producers would not enter each other’s markets?– No document recording the common understanding– Whistleblower’s evidence was credible– Whistleblower’s evidence was corroborated – Whistleblower’s evidence was not contradicted by the appellants– Compensation mechanism was indirect evidence



The judgment• “The existence of a mutual agreement necessarily implies

the existence of a meeting of minds, even if there is no evidence which makes it possible to determine with precision the exact point in time that meeting of minds was manifested … the content of that understanding was understood, accepted and implemented by all the participants to the cartel without the need for any specific discussion on it.” (Mitsubishi, para 231)



The judgmentThe third issue

• Alstom and Areva did act as ringleaders, but not for as long as Siemens

• The ‘infringing entity’ itself continues to be liable even if it is acquired by another

• The acquirer may be held responsible only for the wrongdoings of its subsidiary post-acquisiton

• Apportionment of joint and several liability (para 158)



The aftermath• Eight appeals to the Court of Justice• Even if an appellant successfully appeals on

procedural grounds, the Commission will often rectify the error and readopt its infringement decision– On 27 June 2012 readopted decision imposed total

fines of €131.6 million on Toshiba and Mitsubishi



Lessons to be learned from the case

• Proved an unwritten cartel on the basis of statements made by other participants in an unwritten cartel, including the whistleblower




• The EU Courts have consistently been sensitive to the difficulties of unearthing and proving secret cartels– Apply a realistic standard of proof– Ensure the effective enforcement of the competition rules

• The EU Courts will reduce the level of fines where one member of a cartel has been treated unequally compared with others in the same cartel




• ‘Follow-on’ actions for damages have been brought in the Netherlands and the UK– E.g. National Grid v ABB (England and Wales)

• Difficulties of obtaining access to the evidence– Case T-164/12 Alston v Commission (pending)– Case T-344/08 EnbW v Commission (2012)


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