Presentation prepared for the workshopMILESTONE JUDGEMENTS IN COMPETITION LAWOrganised by the Small States Network for Economic Developmentin collaboration with the Barbados Fair Trading Commission

Barbados Hilton30-31 July, 2012Gas Insulated Switchgear

David BaileyKings College London

Gas Insulated SwitchgearOutline of presentationHow did the case arise?Legal issues for determination by the General CourtThe judgmentThe aftermathLessons to be learned from the case

David Bailey*SSNED-Barbados FTC

SSNED-Barbados FTC

Gas Insulated SwitchgearHow 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

SSNED-Barbados FTC

Gas Insulated SwitchgearDavid BaileySSNED-Barbados FTC*

SSNED-Barbados FTC

Gas Insulated SwitchgearHow did the case arise?Cartel members took sophisticated measures to keep the cartel secretCode names for companies and individualsAnonymous e-mail addresses

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

David BaileySSNED-Barbados FTC*

SSNED-Barbados FTC

Gas Insulated SwitchgearHow did the case arise?The Commission found that the suppliers had engaged in a complex of agreements and concerted practices to:share marketsallocate quotas and maintain historic market sharescollusive tenderingexchange of sensitive market information

David BaileySSNED-Barbados FTC*

SSNED-Barbados FTC

Gas Insulated SwitchgearNine appeals to the General Court:

Breach of rights of defenceDenied involvement in all or parts of the cartel Contested fines as excessive and/or unjustifiedChallenged liability for the cartel where ownership of one of the cartelists changes

David BaileySSNED-Barbados FTC*

SSNED-Barbados FTC

Gas Insulated SwitchgearLegal issues for determination by the General CourtFirst issueWhat is the correct approach to the evidence?Note the difficulties of proving a secret cartelNote the Commissions investigatory powers and leniency programmeDoes modern technology help or hinder the discovery of cartels?

David BaileySSNED-Barbados FTC*

SSNED-Barbados FTC

Gas Insulated SwitchgearLegal issues for determination by the General CourtSecond issueDid 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?David Bailey*SSNED-Barbados FTC

SSNED-Barbados FTC

Gas Insulated SwitchgearLegal issues for determination by the General CourtThird issueWas the fine lawfully and fairly imposed by the Commission and was it calculated correctly?Year of turnover used for calculationsUnequal treatment concerning deterrence multiplierRingleader role in the cartelRules for attributing liability for payment of finesDavid Bailey*SSNED-Barbados FTC

SSNED-Barbados FTC

Gas Insulated SwitchgearThe judgmentThe first issueWhat 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

David BaileySSNED-Barbados FTC*

SSNED-Barbados FTC

Gas Insulated SwitchgearThe 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)David BaileySSNED-Barbados FTC*

SSNED-Barbados FTC

Gas Insulated SwitchgearThe judgmentSecond issueWas there a common understanding that the European and Japanese producers would not enter each others markets?No document recording the common understandingWhistleblowers evidence was credibleWhistleblowers evidence was corroborated Whistleblowers evidence was not contradicted by the appellantsCompensation mechanism was indirect evidence

David Bailey*SSNED-Barbados FTC

SSNED-Barbados FTC

Gas Insulated SwitchgearThe judgmentThe 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)

David Bailey*SSNED-Barbados FTC

SSNED-Barbados FTC

Gas Insulated SwitchgearThe judgmentThe third issueAlstom and Areva did act as ringleaders, but not for as long as SiemensThe 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-acquisitonApportionment of joint and several liability (para 158)

David BaileySSNED-Barbados FTC*

SSNED-Barbados FTC

Gas Insulated SwitchgearThe aftermathEight appeals to the Court of JusticeEven if an appellant successfully appeals on procedural grounds, the Commission will often rectify the error and readopt its infringement decisionOn 27 June 2012 readopted decision imposed total fines of 131.6 million on Toshiba and MitsubishiDavid BaileySSNED-Barbados FTC*

SSNED-Barbados FTC

Gas Insulated SwitchgearLessons 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

David Bailey*SSNED-Barbados FTC

SSNED-Barbados FTC

Gas Insulated SwitchgearLessons to be learned from the case

The EU Courts have consistently been sensitive to the difficulties of unearthing and proving secret cartelsApply a realistic standard of proofEnsure 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 cartelDavid Bailey*SSNED-Barbados FTC

SSNED-Barbados FTC

Gas Insulated SwitchgearLessons to be learned from the case

Follow-on actions for damages have been brought in the Netherlands and the UKE.g. National Grid v ABB (England and Wales)

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

David BaileySSNED-Barbados FTC*

SSNED-Barbados FTC

In particular, the Japanese companies agreed not to sell in Europe and European companies would not sell in JapanCommission says at para 308 By its very nature, the implementation of a cartel agreement of the type described above leads to a significant distortion of competition, to the exclusive benefit of producers participating in the cartel and to the detriment of their customers ****