On 5 March 2015, the Court of Justice of the European Union ("ECJ") handed down its judgment on an appeal brought by Versalis, (formerly Polimeri Europa) and its parent company Eni against the General Court ("GC") judgments that partly dismissed their appeals against the European Commission's 2007 decision in the chloroprene rubber ("CR") cartel case. In a separate judgment, the ECJ also ruled on an appeal brought by the European Commission against the same GC judgment. Both appeals were dismissed.
In December 2007, the Commission imposed fines totalling over € 243 million on a number of CR producers for engaging in market-sharing and price-fixing between 1993 and 2002 in violation of Article 101 of the Treaty on the Functioning of the European Union ("TFEU"). Versalis and its parent company Eni were fined over € 132 million for their involvement (see VBB on Competition Law, Volume 2007, No. 12, available at www.vbb.com).
In December 2012, the GC upheld the liability of Eni for the infringement committed by its subsidiary Versalis, but reduced the fine imposed on Eni from € 132 million to € 106 million. The GC found the Commission had incorrectly increased the fine on Eni based on: (i) grounds of recidivism; and (ii) an incorrect multiplier for deterrence. Eni and Versalis, as well as the Commission, subsequently lodged an appeal before the ECJ.
As regards the appeal brought by Eni and Versalis, the ECJ found, inter alia, that in accordance with the settled case law on the succession of undertakings, the GC had not erred in law in attributing the infringement in question to Versalis. Specifically, the ECJ noted, where two entities constitute one economic entity, the fact that the entity that committed the infringement still exists (i.e., Enichem) does not as such preclude imposing a penalty on the entity to which its economic activities were transferred (i.e., Versalis). The ECJ also concluded that the GC's judgment was not vitiated by any failure to state reasons to attribute the infringement on Eni because Eni was presumed to have exercised actual and decisive influence on its subsidiaries since it held 99.9% of their capital.
With respect to the appeal lodged by the Commission, the ECJ held, inter alia, that the GC had committed an error of law when setting out the conditions for relying on recidivism to increase the fine, but nevertheless upheld the GC judgment because it was well-founded on other legal grounds and as such that error was not capable of leading to the annulment of the judgment. The GC had found that the Commission was not entitled to hold Eni liable for previous infringements (i.e., the 1986 cartel in the polypropylene sector and the 1994 cartel in the PVC sector) because it had not been the addressee of a Statement of Objections and was not penalised by a Commission decision in those earlier cases. The ECJ disagreed and sided with the Commission by finding that, in order for the Commission to rely on recidivism to increase the fine, it is not necessary for a parent company to have been the subject of previous legal proceedings giving rise to a Statement of Objections and a decision. What matters is an earlier finding of a first infringement resulting from the conduct of a subsidiary with which the parent company formed, at the time of that first infringement, a single undertaking for the purposes of Article 101 TFEU.
Contrary to what the GC ruled, the ECJ reasoned that a parent company's rights of defence are adequately safeguarded if it is able to defend itself at the time when the repeated infringement is alleged against it. That being said, the rights of defence require that, if a parent company is not an addressee of a decision finding a first infringement, then the Statement of Objections addressed to that parent company in relation to any subsequent infringement must contain all the information demonstrating that the conditions for a finding of recidivism are fulfilled. In particular, the Statement of Objections must clearly establish that the parent company formed, at the time of the first infringement, a single undertaking with the company found to have committed the first infringement.
The ECJ noted that the Commission decision had stated, without explanation, that Eni was a repeat offender. As a result, because it considered that Eni was not in a position to defend itself and that the EU courts were not capable of carrying out a review of the basis on which the Commission reached this conclusion, the decision finding Eni a repeat offender had no legal basis. The ECJ therefore confirmed the GC's judgment in so far as it reduced the fine, but not as regards the conditions to establish recidivism.
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