General Court of EU Upholds Cartel Fines of €131 Million Imposed on Toshiba and Mitsubishi Electric, Dismisses Arguments Based on Principle of Equal Treatment
By two judgments of January 19, 2015 (Case T-404/12 Toshiba v. Commission and Case T-409/12 Mitsubishi Electric v. Commission), the General Court of the European Union (GCEU) upheld the fines of €131 million imposed by the European Commission (EC) on Toshiba and Mitsubishi for their participation in a cartel on the market for gas insulated switchgear (GIS), dismissing a line of reasoning essentially based on the principle of equal treatment.
The cartel, involving 20 European and Japanese undertakings, consisted in an agreement between competitors with the objective of coordinating the commercial activity worldwide of the members. The cartel members developed a quota system aimed at determining the market shares to allocate between them. In parallel, the cartelists reached an unwritten understanding, according to which GIS projects in the European market and Japanese market were reserved to European members and Japanese members of the cartel, respectively.
In its 2007 decision, the EC found a single and continuous infringement of competition law on the GIS product market between 1988 and 2004 and imposed fines on Toshiba and Mitsubishi, inter alios, of €86.25 million and €113.92 million, respectively. It also found the two Japanese undertakings jointly and severally liable for up to €4.65 million. Both companies challenged the EC decision, which led to two judgments of the GCEU (Case T-113/07 Toshiba v. Commission and Case T-133/07 Mitsubishi Electric v. Commission), subsequently upheld by the Court of Justice of the European Union (CJEU) (Case C-498/11 P Toshiba v. Commission and Case C-489/11 P Mitsubishi Electric v. Commission). The GCEU annulled the fines imposed on the two Japanese undertakings, finding that the Commission had infringed the principle of equal treatment in calculating their fines. The reference year used to calculate the fines for the applicants was indeed different from that chosen for the European participants in the infringement.
Having been asked to reexamine its decision, the EC recalculated the fines imposed on Toshiba and Mitsubishi and fixed them at €56.79 million and €74.82 million, respectively, without changing the amount of the fine for which they were held jointly and severally liable. The two Japanese undertakings then lodged a new appeal before the GCEU seeking the annulment of the revised fines. In support of their action, the applicants alleged, inter alia, an infringement of the principle of equal treatment as regards the determination of their level of culpability as compared to the European participants in the infringement and the starting amount of the fine.
First, Toshiba and Mitsubishi argued that they were less culpable than their European counterparts because their participation had been limited to agreeing not to enter the European Economic Area (EEA) market, whereas the European undertakings had distributed the GIS projects on that same market through active collusion. In other words, they contended that their participation only consisted in a failure to act and that, consequently, they could not be held as liable as the European undertakings for the implementation of the cartel.
The GCEU reiterated its settled case-law, according to which the fact that an undertaking did not take part in all aspects of an anticompetitive scheme or that it played a minor role in the aspects in which it did participate must be taken into consideration when the gravity of the infringement is assessed and when the fine is determined. Nevertheless, the GCEU relied on the fact that the decision of the Japanese undertakings not to enter the European market, without which the allocation of market shares in the EEA would not have been possible, was a prerequisite for the implementation of the infringement as a whole. In that context, the applicants could not have ignored the unlawful nature of their conduct within the bigger picture of the framework in which such conduct took place. The GCEU concluded that the two different types of infringement – concrete action vs. agreement not to enter a market – are comparable, so it is therefore consistent for the applicants to receive the same treatment as the European undertakings.
Second, the applicants claimed an infringement of the principle of equal treatment as regards the starting amount of the fines. The fines of their European counterparts had been calculated on the basis of their respective GIS sales in 2003. Following the annulment of the first fines imposed on Toshiba and Mitsubishi, the Commission was under the obligation to determine the applicants’ new fines on the basis of sales achieved in 2003 (as held by the GCEU and confirmed by the CJEU). However, the applicants had not themselves achieved any GIS sales that year since in 2002 they had transferred their operations in that sector to a joint venture (JV) jointly owned by them. In consequence, the GCEU ruled that they were not placed in a comparable situation as the European GIS producers and the Commission was entitled to treat them differently.
In this context, the Commission chose (i) to determine a starting amount of the fine for the JV (using its GIS sales in 2003) and then (ii) to divide it between its shareholders – Toshiba and Mitsubishi – on the basis of their respective GIS sales in 2001; i.e., the last year where they had each achieved sales on that market. The applicants argued against this method by contending that the starting amount of their fines should have been determined individually after having divided the JV’s worldwide GIS sales between them in consideration of their respective shares in the JV’s turnover in 2013.
The GCEU ruled that the Commission had a certain margin of discretion when calculating the applicants’ fines and approved of the method applied in the case at hand. Therefore, the Commission did not breach the principle of equal treatment. In this case, the GCEU adopted a pragmatic and functional approach to cope with the technical pitfall.
Paul Dodeller is co-author of this article.