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Marc Abenhaim, Kristina Nordlander, Stephen Spinks, Sep 16, 2015
On May 20, 2015, the General Court of the European Union dismissed the appeal brought by Timab Industries and its parent company Cie Financière et de Participations Roullier against the European Commission’s decision fining them for their participation in the animal feed phosphates cartel. This cartel involved the allocation of sales quotas and customers, as well as the coordination of conditions of sale, among six European producers between 1969 and 2004.
The investigations were initially triggered by several leniency applications, including one filed by Timab and CFPR. Based on these leniency applications, the Commission opened infringement proceedings and invited cartel participants to engage in bilateral settlement discussions. Timab took part in these discussions and, in that context, was notified of the range of likely fines envisaged by the Commission. However, unlike the five other cartel participants,Timab ultimately decided not to take part in the settlement proposed by the Commission.
It is the first time that the General Court had to rule on such a hybrid cartel case, where both the standard enforcement procedure and the settlement procedure run in parallel. Under the standard procedure, the undertakings concerned receive a fully-fledged statement of objections and enjoy their full rights of defense. The settlement procedure allows them to enter into settlement discussions, waive their rights of defense, and admit their participation in—and liability for—the cartel, in exchange for “a 10% reduction in the amount of the fine which would have been imposed upon them under the standard procedure.”
Hybrid cases arise when the undertakings concerned do not all agree to settle. In such cases, both the settlement procedure and the standard procedure run in parallel and the Commission ultimately adopts, on the one hand, a settled decision addressed to the settling parties and, on the other hand, a standard decision addressed to the other undertakings. This case was also hybrid in the sense that another form of cooperation—the EU leniency program—was involved.
The case therefore illustrates the interplay among the standard procedure, the settlement procedure, and the leniency program. The case also illustrates how such interplay can backfire on the undertakings involved. The fine ultimately imposed on Timab (EUR 59,850,000)—the only undertaking that exercised its full rights of defense—represented 79 percent of the total fines imposed on all cartel participants (EUR 75,647,000) and an increase of 36 percent compared to the higher end of the range of fines initially notified during the bilateral settlement discussions (EUR 44,000,000).
Such an increase seems all the more “paradoxical” as, in exercising its rights of defense, Timab successfully shortened the duration of its participation in the infringement: The Commission only managed to establish its liability from September 16, 1993 to February 10, 2004, instead of December 31, 1978 to February 10, 2004. However, the Commission also re-assessed the added value of Timab’s cooperation and corresponding fine reductions. While the settling parties obtained significant fine reductions in exchange for their recognition of liability, the Commission’s re-evaluation of Timab’s cooperation led to “the non-application of the 35% reduction due to mitigating circumstances, the lesser reduction granted under the leniency notice (5% instead of 17%) and the non-application of the 10% reduction required by the settlements notice [thus leading to] a higher fine than that proposed during the settlement procedure.”
The General Court entirely approved that approach, holding that the Commission “correctly” decided not to apply the 35 percent reduction for mitigating circumstances and did not manifestly exceed the limits of its discretion in re-assessing Timab’s cooperation under the leniency program. This judgment sends potential settlers a strong message: Way beyond the 10 percent settlement reduction, deciding to drop out of a settlement may sometimes “spill over” on the standard procedure (II), or the leniency program itself (III). Such spillover effects should be carefully factored in deciding about whether or not to settle (IV).