European Union: Cartels: Significant Developments In November 2016

In this section, we give a factual overview of a significant case development at EU level, and then provide a more detailed analysis of the important substantive and procedural developments addressed in this case.

1.1 Summary of Significant Case Development

Advocate General Kokott recommends dismissing appeal in Southern European Banana cartel case

On 17 November 2016, Advocate General ("AG") Kokott delivered her opinion on an appeal lodged before the European Court of Justice ("ECJ") by Pacific Fruit (and its parent companies) against a judgment of the General Court ("GC") upholding the European Commission's decision finding an illegal price-fixing cartel in relation to bananas sold in Greece, Italy and Portugal (see VBB on Competition Law, Volume 2015, No. 6, available at www.vbb.com).

In her opinion, AG Kokott has recommended that the ECJ dismiss all grounds of appeal put forward by the appellant, including whether the Commission unlawfully relied on evidence transmitted to it by the Italian tax authority in the establishment of the infringement and whether the Commission had to carry out an extensive examination of the economic and legal context of an infringement that restricts competition by object (see Section 1.2 below) (Case C-469/15 P, FSL Holdings and Others).

1.2 Analysis of Important Substantive and Procedural Developments

Southern European Banana cartel case: Commission may use evidence transmitted by national tax authority in antitrust proceedings

In her opinion, AG Kokott restated the principle that national law governs the lawfulness of the gathering of evidence by national authorities and the transmission of such evidence to the Commission. The EU judicature accordingly has no jurisdiction to rule on the lawfulness of a measure adopted by a national authority. However, according to the AG, this does not mean that, in antitrust proceedings, the Commission or the EU Courts may knowingly rely on evidence that was clearly obtained in breach of essential procedural requirements. The right to good administration and the right to a fair trial, as enshrined in the Charter of Fundamental Rights, require that the EU institutions carry out at least a summary examination of how the evidence was obtained in the light of all the circumstances of the particular case of which they are aware. AG Kokott opined that, in administrative antitrust proceedings, the Commission must ensure that the evidence in question was neither unlawfully gathered by the national authorities nor unlawfully transmitted to it. The GC must also check the evidence against those criteria in the case of a challenge on these grounds.

In the present case, the Commission had initiated antitrust proceedings against Pacific Fruit on the basis of notes that had been obtained by the Italian tax authority in the course of a criminal investigation and which it had, subsequently, transmitted to the Commission. In the judgment under appeal, the GC ruled that the Commission could validly use this evidence in its investigation under the EU competition rules.

In her opinion, AG Kokott agreed with the GC and considered that, under EU competition law, reliance on particular items of evidence could only be precluded on the ground that the use of the evidence was prohibited. The use of evidence could be prohibited either if it was obtained in breach of an essential procedural requirement or if it was to be used for an unlawful purpose. AG Kokott concluded that this was not the case here for several reasons. First, the evidence had been transmitted lawfully to the Commission by the relevant national authority since transmission had not been prohibited by an Italian court and the evidence had been forwarded with the authorisation of the competent Italian prosecutor's office. Second, the evidence transmitted by the Italian tax authority was not used for an unlawful purpose, since the scope of Article 12(2) of Regulation 1/2003 is confined to the exchange of information between the competition authorities at EU and national levels. Nor does that article enshrine a general principle of law to the effect that evidence which was not originally gathered for the purpose of a competition law investigation could never subsequently be used for that purpose. Lastly, the use of evidence for a purpose other than that for which it was gathered could only be precluded if EU or national law prescribed an intended purpose for the gathering of such evidence, which was not the case here.

Finally, with respect to the alleged violation of the applicants' rights of defence, AG Kokott found that the applicants had been granted access to the evidence at issue and had been given the opportunity to comment on it.

In light of the above, AG Kokott concluded that the Commission could lawfully rely in the context of its antitrust proceeding on the evidence transmitted by the Italian tax authority.

Southern European Banana cartel case: No extensive examination of economic and legal context required if anti-competitive object is readily apparent

In her opinion, AG Kokott restated that agreements with an anti-competitive object are those which by their very nature have the potential of restricting competition. Thus, where the anticompetitive object of the agreement is established, it is not necessary to examine its actual effects on competition. In order to determine whether an agreement between undertakings reveals a sufficient degree of harm to be considered a restriction of competition by object, regard must be had to the content of its provisions, its objectives and the economic and legal context of which it forms part.

In its appeal, Pacific Fruit argued that the GC had failed to sufficiently examine the economic and legal context of the contested conduct. AG Kokott disagreed. Referring to the ECJ's judgment in Toshiba Corporation v. Commission (Case C‑373/14 P), she considered that the level of detail with which the GC must examine the economic and legal context depends on the nature of the contested conduct. As the anti-competitive conduct was readily apparent in the case at hand, which involved the exchange of sensitive information in relation to price setting, AG Kokott considered that the GC's analysis could be limited to what was strictly necessary to establish the existence of a restriction of competition by object. In this regard, AG Kokott warned that "[t]he fundamental difference between restrictions of competition by effect and by object [...] would become blurred if the competition authorities and the courts [...] were required to carry out an extensive examination of the economic and legal context even in the case of collusive practices between undertakings which are self-evidently anticompetitive".

Furthermore, AG Kokott advised the ECJ to disregard the contextual factors to which Pacific Fruit referred in an attempt to demonstrate that the exchange of information was not detrimental to competition. In particular, she noted that the fact that the EU's common agricultural policy provided for an organisation of the market in bananas did not amount to a "carte blanche" for practices which impaired competition. Moreover, she considered the frequency of the exchange of sensitive information between competitors to be irrelevant, as well as their (allegedly small) market share and the (allegedly small) size of the market. Accordingly, in the AG's view, the GC had not infringed Pacific Fruit's rights of defence by not carrying out a detailed analysis of the economic and legal context in which the contested conduct took place.

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