European Union General Court Upholds Cartel Liability Of Facilitators, But Attempts To Rein In Commission’s Approach In Settlements
12/12/2017On November 10, 2017, the European Union General Court (GC) handed down its judgment in Icap v Commission. Judgment of the General Court in Case T-180/15 Icap and others v Commission, 10 November 2017. This note examine three aspects of the decision: (1) the imposition of liability for cartel infringement on a “facilitator” who was not a primary participant in the cartel; (2) the Commission’s procedural obligations with regard to settlement procedures in hybrid cases; and (3) the standard for a “by object” infringement of Article 101(1) Treaty on the Functioning of the European Union (TFEU).
In February 2015, the Commission found Icap, an interdealer broker and provider of post-trade services, liable as a facilitator of the Japanese Yen LIBOR cartel. The Commission held that Icap facilitated six separate bilateral infringements of Article 101(1) TFEU of differing durations. The Commission had already found in a separate settlement decision in December 2013 that five banks and another broker had participated in the same cartel infringements. Icap had previously withdrawn from the settlement procedure that resulted in the settlement decision. The Commission found that Icap had facilitated the infringements by circulating spreadsheets with quotes, price, and volume information related to JPY LIBOR rates to the participating banks and others. In addition, the Commission found that Icap disseminated misleading information amongst panel banks at the direction of participating banks.
In its judgment, the GC partially annulled the Commission’s decision: one of the infringements was annulled in its entirety because the Commission failed to produce adequate evidence of Icap’s knowledge of this infringement, and four of the infringements were annulled in part in light of a lack of sufficient evidence as to their duration. Finally, the Court annulled the fine imposed on Icap in full because the Commission did not provide an adequate explanation for its fine calculation.
“Facilitation” of a Cartel as an Infringement of Article 101(1) TFEU
This judgment is only the second case to deal with the potential liability of a third-party facilitator of a cartel for an infringement of Article 101(1) TFEU, AC Treuhand, Judgment of the Court of Justice in Case C-194/14 AC-Treuhand AG v Commission, 22 October 2015, being the first. Icap argued that the Commission had incorrectly applied the “facilitation test” established in AC Treuhand.
To address Icap’s claims, the GC addressed two key factors in evaluating facilitator liability—whether the alleged facilitator: (1) intended to contribute by its own conduct to the common objectives pursued by all participants; and (2) was aware of the actual conduct planned or put into effect by the other parties pursuing the same objectives, or could reasonably have foreseen such action and was prepared to take the associated risk.
As to the first requirement, the GC held that, from the Commission’s finding of Icap’s knowledge of collusion among the banks and the “very high degree of complementarity” between the banks and Icap’s conduct, it followed that Icap intended to contribute to the banks’ common anticompetitive objective. Further, the collusive plan to manipulate JPY LIBOR rates scheme would have been less likely to succeed had it relied solely on the coordinated submissions of the participating banks without Icap’s dissemination of the information. Icap’s role was “key” in influencing the JPY LIBOR panel submissions in the direction desired by the banks. On the second requirement, the Court held that the evidence adduced by the Commission supported a finding that Icap knew of the existence of collusion between the banks or could have reasonably foreseen the collusion in all but one infringement.
Icap argued that there had been a breach of the presumption of innocence and principle of good administration based on the Commission’s 2013 settlement decision that named Icap as a participant in the infringement after Icap had withdrawn from the settlement procedure. The Court agreed that the presumption of innocence had been breached because Icap’s withdrawal from the settlement procedure meant it was not provided with the necessary opportunity to present its views prior to the adoption of the 2013 decision in which it was expressly implicated. The Court concluded, however, that this breach did not impact the validity of the 2015 decision because the 2015 contested decision was the result of a separate and independent proceeding.
In addition, the Court emphasized points for the Commission to consider in its operation of settlement procedures. Most importantly, the Court rejected the Commission’s assertion that the efficiency of the settlement procedure demands that it reference the conduct of third parties in settlement decisions where necessary to adduce the guilt of settling parties. Thus, in hybrid settlements where the Commission finds that it is unable to determine the liability of settling parties without taking a view on the conduct of non-settling parties, it must take “necessary measures” allowing for the presumption of innocence to be upheld—for example, the adoption of related contested and settlement decisions on the same date. Finally, the Court found that because the Commission established that the evidence supporting its decision met the requisite legal standard, the concerns raised as to the principle of good administration and potential lack of impartiality by the Commission were not sufficient to annul the decision.
Assessment of “by Object” Infringements
Icap also argued that the Commission had erred in characterising its conduct as a “by object” infringement. The Court rejected this contention, finding that the Commission had appropriately focused on the economic and legal context of conduct, as well as the nature of the relevant goods or services and the functioning and structure of the relevant market when identifying a “by object” infringement, and reiterated that price information exchanges may in certain circumstances be regarded as “by object” infringements, even without a direct connection between such exchanges and subsequent price levels, or any actual anti-competitive effects on the relevant market. Further, the Court found that the coordination of the JPY LIBOR panel submissions did have a direct effect on the levels of the “fixed” and “floating” portions or “legs” of the derivative contracts in question.
The GC’s judgment confirms the Commission’s broad ability to impose fines on third-party market players for their involvement in the most severe of cartel infringements. Professional firms should therefore take a precautionary approach to their conduct, even in markets in which they do not ordinarily operate, in order to comply with EU competition law.
The finding related to hybrid settlements, by contrast, serves as a warning to the Commission and highlights the potential challenges to the Commission’s ability to resolve settlement and contested decisions in hybrid cases a number of months apart. While the objections as to procedure asserted here did not affect the ultimate decision, the Court’s criticisms in Icap may exert pressure on the Commission to revisit the method in which it operates hybrid settlements in order to avoid any potential breach of the parties’ procedural rights. In any event, the Court’s view on this issue is likely to be developed further in pending appeals of non-settling parties in hybrid cases: Scania in Trucks, HSBC, JPMorgan Chase and Credit Agricole in Euro Interest Rate Derivatives, and Pometon in Steel Abrasives.
Finally, the GC’s discussion of the “by object” analysis reaffirms the potential for broad application of this concept. Although Cartes Bancaires clearly obliges the Commission to undertake a detailed analysis of the legal and economic context before finding a “by object” infringement, this does not preclude the Commission from reaching such a conclusion where there is no direct impact on prices or an actual anticompetitive effect in the relevant market.CATEGORY: Government Enforcement