Competition21/03/04 / cata_european-union-news

Judgement of the Court of First Instance - "lysine" (T-220/00, T-223/00, T-224/00 and T-120/00) of 9 July 2003

On 9 July 2003 the Court of First Instance issued four judgements relating to four significant cartel agreements. These decisions clarify the criteria for assessing fines for infringement of EU competition law governing agreements distorting economic competition. The ECJ also directed its attention to other aspects of anti-competitive conduct and principles of EU law, other aspects of anti-competitive practices and the principles of EU law, which it ultimately took into account in its assessment of the aggregate fines. The product relevant market was defined as the lysine sales market. Lysine is a basic amino acid used in animal feed preparations.

In 1996 the competent authorities in the USA filed an action against five undertakings for executing a cartel agreement fixing the price of lysine and dividing up the market from 1990 to 1995. The undertakings were subsequently fined 328,000 to 70 million USD. Three members on the board of one of the companies investigated were convicted of criminal offences and given custodial sentences. Following the findings of the investigation, significantly enhanced by the co-operation of one of the cartel members, the Commission issued a decision in July 2000 wherein it held that the cartel members had executed a series of prohibited agreements with one another on matters including price fixing, sales volumes and the exchange of information on sale of synthetic lysine, and that these agreements had a real impact on the lysine market in the entire European Economic Area from 1990 to 1995. For this breach of Article 81 of the EC Treaty, the Commission imposed an aggregate fine of 110 million EUR.

The members of the cartel appealed against the Commission decision, arguing that the Commission had not taken into account the fines already imposed on the undertakings in the USA for identical infringements. They argued that the Commission had acted contrary to the principle ne bis in idem, whereunder a party may not be punished twice for the same offence. The Court of First Instance held that the principle of ne bis in idem was inapplicable in this instance, on the grounds that the proceedings initiated and fines imposed by the Commission (on the one hand) and by the USA authorities (on the other) did not have the same purpose - the Commission had acted to protect the European market, whilst the USA authorities sought to protect the American market.

The Court took the opportunity to clarify the basis of calculating fines. It held that a percentage increase or reduction of fines is based on the aggravating (e.g. leading position in a cartel) or mitigating (e.g. passive role in a cartel) circumstances, which must be applied to the basic amount of the fine. This basic amount will depend on the gravity and duration of the cartel agreement, rather than any increased amount already reflecting duration of the infringement, or to any figure resulting from the first increase or reduction based on aggravating or mitigating circumstances. The Court held that this was the only method ensuring equal treatment to members of the same cartel.

Judgement of the Court of First Instance in the Van den Bergh Foods (T-65/98) of 3 October 2003

In 1998 Van den Bergh Foods (formerly HB Ice Creams), the chief manufacturer of ice cream in Ireland and a member of the Unilever Group ("HB"), was held to have abused its dominant position on the market for ice-cream for immediate use.

HB provided chill boxes for storing goods, free of charge to retailers. Under the terms of a goods supply agreement, the retailers were bound to use such chill boxes exclusively for the storage of ice cream supplied by HB. When Mars, a competitor of HB, sought to break through on the Irish market, some retailers began to store goods produced by Mars in the chill boxes supplied by HB. Subsequently, HB sought to enforce the exclusivity provisions of the goods supply agreement executed with the retailers. The Commission held that the exclusivity clause was incompatible with EU competition law. Given that HB was in a dominant position, it had at its disposal a whole network of agreements that incorporates the exclusivity clause, which closed the market to HB's competitors.

In proceedings following an action for an annulment of the Commission Decision, the ECJ upheld the Decision and held that HB had the benefit of a dominant position. Although the provision of chill boxes, subject to the application of exclusivity clauses such as those in the agreement in this case, is standard practice on the relevant market, such a course of action may restrict competition where the beneficiary of the exclusivity clause is a company with a dominant position.

Other significant judgements in this area of law include the Court of First Instance judgement in Michelin (T-203/01) dated 30 September 2003, whereby the Court upheld the Commission Decision to fine Michelin for abuse of its dominant position (the issue related to loyalty bonuses), and the Court of First Instance judgement in General Motors Nederlands, Opel Nederlands (T-368/00) dated 21 October 2003 (restriction of supplies upon distribution of vehicles).