A recently published decision by the Cartel Court1 showed how a long-term relationship turned into an equally lengthy "war of roses" and came to a decisive turning point. An Austrian company, active since 1824 in the rubber and plastic industry ("Semperit"), in 1989 formed in Thailand a joint venture with a group of Thai companies ("STA") for the production of examination gloves made from natural rubber. While Semperit contributed industrial know-how, STA had local facilities and access to supply in natural rubber. Together with the joint venture, separate "distribution agreements" were concluded, basically reserving for Semperit the exclusive distribution in Europe and the Near East. From 2015 onwards, the STA also tried to sell their part of the production outside Thailand, including Europe. This resulted in several Court and out of Court activities by Semperit trying to prevent this, including arbitral proceedings before the ICC. In 2016, the Austrian Competition Authority filed with the Austrian Cartel Court – STA acting as leniency applicant and "witness of the prosecution" - for cease and desist, establishment of illegal activities and a fine against Semperit.
The defense raised by Semperit was, that
- the exclusive distribution agreement basically was a side agreement ("ancillary restraint") closely related to the joint venture and not at all an intended restriction of competition. To support this, Semperit argued that it has contributed know-how, a distribution network, IP and customer connections to the joint venture while STA provided access to local authorities, raw materials and cheap means of production;
- the exclusive distribution was exempted under the EU Vertical Block Exemption Regulation and, finally,
- the exemption of Art 101 para 3 TFEU could apply to the distribution arrangements.
The Cartel Court rejected the defense and found that the distribution agreements were not at all an ancillary restraint necessary and indispensable for the joint venture. The Supreme Court, confirming this decision2 basically reasoned that only the objective necessity is relevant here, not the subjective assessment by the Parties. Unlike the assessment under Art 101 Abs 3 TFEU it is not sufficient, that the ancillary restraints are necessary to support the business success in the relevant market, but it has to be checked whether the main agreement could have been implemented at all without the ancillary restraint. Consequently, the investments and contributions of the Parties to the joint venture were not evaluated in detail by the Court. Further, the Supreme Court found that not the situation at the very start of the joint venture is relevant, but its situation later on.
In the appeal to the Supreme Court, Semperit challenged the Cartel Court's reference to ECJ decisions "Toshiba"3 and "Siemens"4 and distinguish the present case against those facts with the argument that unlike "Toshiba" and "Siemens", here was no "naked" market sharing (i.e. without further contractual context) but the division of territory was embedded in the agreement setting up the joint venture. The Supreme Court rejected this argument, stating that the joint venture was created to manufacture and distribute the products in question, and their markets were divided. Following recent ECJ case law, the distribution agreement by its object and purpose is an indented restriction of competition. Which, considering the market shares on the European market (global shares are not relevant here) is an illegal restriction of competition. The fig leaf has dropped.
The final curtain fell, when by decision of July 19, 2018 the Federal Cartel Authority imposed, with STA as leniency applicant in a settlement procedure a fine of EUR 1.6 million against Semperit, for violating the Austrian Cartel Act and Art 101 TFEU for a time period or roughly 15 years.
Originally published by International Law Office.
1. KartG 19.7.2018, 27 Kt 5/16m.
2. OGH 6.9.2017, 16 Ok 10/16f.
3. ECJ 20.1.2016, C-373/14p.
4. ECJ 19.12.2013, C-239/11p.
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