Chillin'Competition

On 20 November we wrote a post on cartel fines saying the following:

“In spite of temporary appearances, though, one should not expect these figures to remain as they are. The upcoming LIBOR decision will certainly inject some significant (record breaking?) “capital” into this years’s numbers.  On top of that, there appear to be a number of cartel decisions stuck somewhere in the pipeline (interestingly, only one cartel decision has so far been adopted in 2013)!.

We got it right (not that it was very difficult):

On the 27th, the Commission adopted a cartel decision fining North Sea shrimp producers [BAD JOKE ALERT] -what you’d call shellfish cartellists- with 28 million euros.

And yesterday, the Commission imposed the highest fine ever (1.7 billion euros) on a number of banks within the framework of the LIBOR investigation (still ongoing in relation to a number of parties who chose not to settle).

An interesting coincidence: yesterday representatives of the troika “advising” Spain on economic issues recommended that banks avoid any price wars (no kidding). Anyone sees mixed signals??

Also yesterday, the Commission unconditionally authorized the Microsoft/Nokia deal. It’ll be interesting to appeal (this time I’m kidding… or not) read the decision once it’s published  🙂

Finally, yesterday we had a reception to celebrate the launching of the procedural bible. A great evening all round.

Last week I wrote a post about the Groupe Gascogne Judgment (and other stuff) which has elicited some interest. Somehow oddly, I will now present counter-arguments against all those who… actually agreed with me.

Given that I wrote about the Judgment within minutes of its publication I obviously hadn’t thought the issue through. My initial reaction was (and regarding these points it still is) that by endorsing the De Grüne Punkt solution (i.e. choosing actions for damages as the procedural path to compensate breaches to the right to be judged within a reasonable time) instead of the Baustahlgewebe one (under which the ECJ itself would reduce a fine on account of the said breach when ruling on an application brought before it), the Court of Justice was adopting the less practical solution, and one that could provoke strange situations. Some of you have developed this last point in several comments to that post.

Now, after some reflection (although not much, to be frank) I think I may see what the Court and one of the commentators to the post meant, even if the Judgment’s reasoning may perhaps not have been crystal clear (please note the understatement).

In my post I only gave one view, and I believe that it’s good that readers also get to see the contrarian arguments. Not that I’m second guessing myself, but I don’t like it when we criticize Judgments/decisions without trying to understand first the reasons underlying the choice of a given approach (believe it or not Judges, clerks and Commission officials are actually clever enough not to be producing absolute nonsense all the time, as some lawyers like to claim). In other words, in some cases they may choose the wrong solutions (particularly if they ever rule against me in one of my cases -not that this actually would ever happen-; please note the implicit advertising claim), but there are always reasons for every approach they chose, and it’s healthy for us to try to identify them and debate them on their merits.

Cutting to the chase: it could be argued that endorsing Baustahlgewebe would have implied creating a specific regime that could only address the problem (a) only in competition cases [given that it is the sole area where the Commission enjoys the power to impose sanctions; in all other cases (frozen assets, for instance) actions for damages would be the only practicable solution], and (b) only in cases where a given company were to lose a first instance appeal before the General Court.  Also, c) an assessment of damages by the ECJ would require it to rule on factual issues (namely harm quantification), when its jurisdicion is limited by the Treaty to points of law only. Furthermore, d) by providing that excessive delay in itself may open the door for an action for damages/a remedy, the ECJ could be effectively avoiding the possibility that “victims” might go to the ECHR (according to the ECHtR’s case law, there’s no “victim” in the sense of Art. 34 of the ECHR when the national legal system already envisages a remedy/compensation for the breach).

I can see how all these might have resonated within a Court like the ECJ. And it is probably true that Gascogne may be more “legally perfect”, albeit arguably at the cost of practicality and risking the odd situations pointed out in the previous post.

In spite of those perfectly valid arguments, I think I liked other solutions better, for instance:

a) one under which both Courts could assess the existence of excessive delays without it being necessary for parties to bring an additional action (the Commission, in fact, has done this in several past cases, and Courts could too). This is not legally unorthodox; it would not not be a matter of damages as such, but a reason to mitigate an initial sanction made more burdensome by the passing of time in the absence of judicial review. A solution of this sort is common to many national criminal law systems and is justified not on the actual damages suffered, but rather on the fact that there was an additional element (excessive time) subsequently added to the intended outcome of condemnation (i.e. the sanction). To counter-argue again against myself: admittedly, the quasi criminal nature of competition law may not be criminal enough for these purposes.

or

b) a compromise, middle-way and probably less legally controversial solution under which the ECJ would be competent to declare a violation of the right to a fair proceeding by account of excessive delays on the part of the GC (as it arguably did in this specific Judgment). Only quantification would then be left to the GC itself should the party wish to lodge an additional action for damages. For full disclosure: this is an alternative solution that we’re actually advocating before the ECJ in a pending case. But it’s reasonable, isn’t it?  😉

On second thoughts, the recent bad case law on the notion of “restriction by object” may incidentally, and unexpectedly, fetter the margins of the Commission, and in particular its ability to handle all cases under the obese Article 9 procedure.

As hinted recently by DG Italianer in a most interesting speech, cases such as Irish Beef (C-209/07), Expedia (C-226/11), Slovak Banks (C-68/12) and Allianz Hungary (C‑32/11) all suggest that agreements which are devoid of the “obvious” capacity to harm competiton are nonetheless “restrictions by object” because they are “serious” violations of the law.

In other words, those infringements are restrictions by object because they are sinful – in competition cases, the Court says “by nature injurious to the proper functioning of normal competition” – so sinful that they should be prosecuted even absent anticompetitive intent or effects.

This line of judicial precedents brings restrictions of competition close to the notion of “infractions objective” known in criminal law. Take murder: you can be convicted of homicide even if you unsuccessfully or unwittingly try to kill someone (in some legal orders, it is even illegal to shoot a dead body). Closer to competition law, take insider trading. You can be sentenced even if you use insider information unknowingly or ineffectively.

The bottom line: such infringements are so morally sinful that they should be prosecuted just for the sake of it. Regardless of their impact. Regardless of their motives. Full stop.

Now, let us revert to competition law. If the concept of a restriction by object means infringements that are morally sinful or morally so “serious” that they should be unlawful for the sake of it, then the Commission should no longer be free to settle such cases and decline to reach a finding of infringement.

This is the rule applied in most criminal law systems, where in principle the gravest infringements (eg crimes such as homicide, rape, etc.) cannot be subject to settlements.

The same should apply in competition proceedings. Restrictions by object ought to be treated under Article 9.  If restrictions by object are that bad, then the sole procedural way to handle them is under Article 7 . Full stop.