The end of the paraffine and gatsch cartel case (ChemPharm case – 16th January 2017)

La version française de l’article est disponible sur le site village-justice.com sous le titre « La conclusion de l’affaire du cartel des cires de paraffine et de gatsch – Arrêt ChemPharm du 16 janvier 2017 (CJUE) ».

In a judgement of the 16th February 2017¹, the Court of Justice dismissed the appeal filed by H&R ChemPharm against a judgment of the General Court of the 12th December 2014² in which the General Court imposed a fine of an amount of 22 000 000 euros for the participation of H&R ChemPharm to a continuing agreement and/or a concerted practice in the paraffin waxes sector. This judgement was rendered following an appeal filed against a decision of the Commission of the 1st October 2008³ that has sentenced a cartel in the sector of the production, marketing and distribution of paraffin and gatsch waxes. H&R ChemPharm was a participant to this infringement⁴.

The concerned practice was composed of two aspects, the main one concerned an agreement related to price-fixing and disclosure of business sensitive information, the second one concerned customer-sharing or market-sharing⁵.
H&R ChemPharm was fined by the Commission only for the main aspect of the infringement concerning an agreement regarding price-fixing and disclosure of business sensitive information⁶.

Two other appeals were filed against the same decision of the Commission by two other participants to the infringement in its main aspect. The Commission fined Tudapetrol, a company responsible for the distribution and the marketing of paraffin and gatsch waxes for an amount of 12 000 000 euros⁷. The Commission fined Hans & Rosenthal for an amount of 24 000 000 euros (including 22 000 000 euros jointly and severally with H&R ChemPharm)⁸.
The Group H&R is active in the oil products sector. The three companies are part of the same group of companies and are linked by personal, business and capital ties, in particular in relation with the facts of the case⁹.

H&R ChemPharm brought an appeal before the Court of Justice against the judgment of the General Court for several reasons.

1 – Regarding the issue of the autonomy of the entities and the separate liability of the companies concerned

H&R ChemPharm company argued that the Commission had considered that the participants to the infringements, H&R ChemPharm and Tudapetrol, were independent companies in order to impose separate fines to each participant to the infringement. However, at the same time, the Commission considered the companies concerned as a « common entity »¹⁰.
H&R ChemPharm stated that the companies H&R ChemPharm and Tudapetrol were constituting only one common economic entity. Thus, the companies of the group involved in the infringement should be sentenced only once as an economic entity¹¹.

The Court ruled on this question that the General Court did not considered that the companies concerned were part of an economic unity within the meaning of the European Law.
At the point 13 of the judgement, object of the appeal, the General Court agreed with the point of view of the Commission that stated: « The investigation shows that Hansen & Rosenthal and Tudapetrol are two separate and independent undertakings. »¹²
Moreover, the Court ruled that the General Court had rightly found that the Commission has described the functioning of the infringement to which H&R ChemPharm was a participant relatively to paraffin and gatsch waxes. The General Court has in particular rightly found that the Commission has described the duration of the participation of H&R ChemPharm to the infringement, has identified the persons attending to the meetings during which the anticompetitive practices were discussed and their tasks. According to the General Court, the Commission has also described the affectation of these persons in the company for the period of the anticompetitive practices¹³.
Therefore, the General Court has sufficiently identified the separate responsibility of H&R ChemPharm in the performance of the infringement¹⁴.

The courts of the European Union rule according to a constant case law that the companies which belong to the same group of companies are constituting an economic unity as long as they do not determine their own behaviour independently on the market¹⁵.
The absence of an independent behaviour on the market is presumed where a subsidiary company is wholly owned by the parent company and therefore where an economic unity exists¹⁶.
Thus, the Commission examines the behaviour of the economic entity within the meaning of the European law to sanction an anticompetitive practice and not the behaviour of the companies taken separately¹⁷.

In this case, the Commission found an economic unity comprising subsidiary companies owned at 100 % by Hansen & Rosenthal and the company Hansen & Rosenthal itself¹⁸. The economic entity was composed by the subsidiary companies wholly owned by Hansen & Rosenthal and the company Hansen & Rosenthal itself taken together, but the economic entity was not considered regarding the companies composing the economic entity taken individually¹⁹.

The companies H&R ChemPharm and Tudapetrol were not owned at 100 % by the same company. The presumption of absence of an independent behaviour was therefore not applicable to the companies even if they were bound together by strong ties.
The Commission has thus considered that the two companies were independent and separate²⁰. Therefore, the two companies were fined separately, respectively within the limits of the responsibility of each one in the performance of the infringement.

2 – Regarding the erroneous imputability of the infringement to H&R ChemPharm

H&R ChemPharm reproached to the General Court to have taken in account elements of imputability of the infringement prior to the hiring of an employee directly involved in the anticompetitive practices of the company. The Commission found that this employee was participating to the meetings during which the anticompetitive practices were discussed. Thus, according to the Commission and the General Court, the company was liable for the behaviour of the employee prior to his hiring. The principle of the individual nature of penalties has therefore been allegedly breached.

The Court refused to reassess the facts of the case because the General Court has « exclusive jurisdiction to find and appraise the relevant facts and to assess the evidence. »²¹
The Court might however still reassess the facts and evidence of a case subject to the condition that the facts or evidence of the case are distorted.²² In another case, the Court ruled that « the distortion must be obvious from the documents in the Court’s file, without there being any need to carry out a new assessment of the facts and the evidence ».²³]

The Court recalled that the Commission may establish an anticompetitive practice with a number of coincidences and indicia which taken together may in the absence of another plausible explanation, constitute sufficient elements to prove the infringement²⁴.
According to the Court, the Commission does not have the duty to establish direct evidence of the concerted practice on the whole period concerned by such a practice as long as the Commission establishes a set of indicia sufficiently specific, precise and consistent to allow to establish the practice for the period without direct evidence²⁵.
Thus, the Court upheld the precedents of the General Court²⁶.

Since then, facts prior to the date of the hiring of the employee, which was also the date assessed as being the beginning of the infringement might serve as evidence because these facts were constituting a set of indicia and coincidences allowing to establish the infringement.

3 – Regarding the disproportionated amount of the fine imposed in regard to the turnover achieved by the subsidiary company Klaus Dahleke KG

H&R ChemPharm argued that the Commission should not have taken in account the turnover achieved by Klaus Dahleke KG because the company did not take part to the infringement and because the two companies did not form an economic unity within the meaning of the European Law²⁷.
In confirming the reasoning of the Commission, the General Court has allegedly violated the principle of the individual nature of penalties²⁸.

The Court ruled that if the Commission had given evidence that the parent company was liable for the anticompetitive practices of the subsidiary company, then the Commission did not have to give evidence of the absence of autonomous behaviour on the market of each of the subsidiaries of the group of companies²⁹.
The company concerned has in this case according to the precedents of the Court to demonstrate that the consolidated turnover of the group of companies taken in account by the Commission is irrelevant for the calculation of the amount of the fine. In any case, the fine cannot be more important than 10 % of the turnover achieved by the company concerned³⁰.

In this case, H&R ChemPharm did not give any evidence of the absence of power of control on the subsidiary company Klaus Dahleke KG. Instead, H&R ChemPharm included several times the turnover of Klaus Dahleke KG in the documents notified to the Commission.
The company did not give any evidence of the absence of relevance of the inclusion of the consolidated turnover of the group of companies in the calculation of the amount of the fine³¹.

Thus, the Court considered that the principle of individual nature of penalties had not been not breached and that the amount of the fine was not disproportionate in regard to the turnover achieved by Klaus Dahleke KG.

4 – Regarding the erroneous inclusion of the turnover achieved by foreign subsidiaries

H&R ChemPharm argued that the turnover achieved by foreign subsidiaries had been wrongly taken in account by the Commission to calculate the value of sales concerned by the infringement. In particular, the Commission has taken in account the turnover achieved by companies acquired in 2004 to calculate the average value of sales for the period 2002-2004³².
Thus, the average value of sales taken in account by the Commission to assess the damages resulting from the infringement for the period between 2002 and 2004 has been extrapolated from turnover only partially achieved on this period.

The Court ruled on this question on the basis of the Guidelines 2006. These guidelines provide that « the combination of the value of sales to which the infringement relates and of the duration of the infringement is regarded as providing an appropriate proxy to reflect the economic importance of the infringement as well as the relative weight of each undertaking in the infringement » and « reference to these factors provides a good indication of the order of magnitude of the fine and should not be regarded as the basis for an automatic and arithmetical calculation method ».³³

The Court stated that, according to the guidelines, the Commission must retain a value of sales regarded as an appropriate proxy to reflect the economic importance of the infringement as well as the relative weight of each undertaking in the infringement for the whole duration of participation to the infringement.³⁴

The Commission is not bound however by an automatic and arithmetical calculation of the value of sales according to the changes in the value of sales during the period of the infringement.³⁵
Thus, the argument of H&R ChemPharm was rejected by the Court.

The Court dismissed the argument taken from the Esso case, which provided that the Commission had determined a disproportionate basic amount of fine³⁶. In the Esso case, the turnover retained by the Commission was the turnover prior to the merger with the company responsible of the anticompetitive behaviour. The General Court ruled that the basic amount of the fine calculated on the basis of this turnover and the average value of sales retained by the Commission was disproportionate in regard to the gravity of the infringement.³⁷

The Court ruled that the facts of the present case were not similar to the facts of the Esso case,
because the basic amount of the fine is not disproportionate to the gravity of the infringement concerning H&R ChemPharm.³⁸
This precedent is therefore not applicable to the present issue and the Court rejected the argument.

5 – Regarding the disproportionate amount of the fine

H&R ChemPharm stated that the amount of the fine imposed on the company was disproportionated for several reasons.
Firstly, the Commission applied a coefficient of 17 % of the average value of sales to increase the amount of the fine imposed on H&R ChemPharm while the Commission applied a coefficient of 18 % of the average value of sales to increase the amount of the fines imposed on the other companies having participated to the prohibited practice.³⁹
These other companies have been fined for having participated to the two aspects of the infringement, while the participation of H&R ChemPharm was limited to the practices involving price-fixing and disclosure of business sensitive information.

H&R ChemPharm claimed that the amount of the fine imposed on a participant to an agreement must be calculated regarding the amount of the fines inflicted to the other participants and not independently, in order to avoid discrimination amongst the companies that have been fined.
Thus, the Commission should have taken in account the amount of the fines imposed on the other participants to the infringement to calculate the amount of the fine of H&R ChemPharm.⁴⁰

Secondly, H&R ChemPharm claimed that the customer-sharing or market-sharing practices were more serious infringements than price-fixing and disclosure of information because customer-sharing and market-sharing were a cause of isolation of the markets and might be implemented in a particularly sustainable and efficient way.⁴¹

Thirdly, H&R ChemPharm stated that the amount of the fine imposed on the company by the Commission was disproportionate in regard to the size of H&R ChemPharm. The fine imposed in 2007 on another participant to the anticompetitive behaviour, ExxonMobil, represented 0.04 % of the turnover of the company while the fine imposed on H&R ChemPharm represented 2.5 % of its turnover.⁴²

The Court ruled in the same way it had done before⁴³ in stating that « only inasmuch as the Court of Justice considers that the level of the penalty is not merely inappropriate, but also excessive to the point of being disproportionate, would it have to find that the General Court erred in law, on account of the inappropriateness of the amount of a fine ».⁴⁴

The Court also stated that the General Court had effectively compared separately the coefficients applied to the fines for companies which have only participated to the main aspect of the infringement, as it is the case for H&R ChemPharm and the coefficients applied to the fines for companies which have participated to the both aspects of the infringement.⁴⁵

The Court ruled that « the Commission is not required, when determining the amount of fines, to ensure, where such fines are imposed on a number of undertakings involved in the same infringement, that the final amounts of the fines reflect any distinction between the undertakings concerned in terms of their overall turnover ».⁴⁶
The Court judged in the continuity of its own precedents on the issue.⁴⁷

The Court considered eventually that « the difference in rates between the basic amount and the total turnover of the group of companies, so far as ExxonMobil and H&R are concerned, is solely the consequence of the fact that the revenues accounted for by the goods belonging to the markets affected by the cartel represent an incomparably lower percentage of ExxonMobil’s turnover than in the case of H&R ».⁴⁸
In the absence of a disproportionate amount of fine, the argument of H&R ChemPharm has been dismissed.

6 – Regarding the question of the costs of the procedure

H&R ChemPharm challenged the ruling of the General Court on the ground that the judgement declared H&R ChemPharm liable to cover the costs of the procedure for an amount of 10 000 euros, while the procedure before the General Court is in principle free.⁴⁹

The Court considered that, while the procedure before the General Court is free, according to the article 90 a) of the rules of procedure of the General Court, if the General Court has to incur expenses that may have been avoided, the General Court may condemn the party which is responsible for the expenses to reimburse them.⁵⁰

However, the Court did not rule on the substance of the question raised by H&R ChemPharm, because according to constant precedents, when every other questions of an appeal have been dismissed, the Court must reject any claim grounded on the alleged irregularity of the decision of the General Court ruling on the issue of liability for the expenses incurred for the procedure.⁵¹

Thus, the Court dismissed the appeal in its entirety and closed eventually the paraffin wax cartel case.