Commission’s Discretion, Court’s Self-restraint. On the EU Court’s Approach to Reviewing Fines in Competition Cases

By Robert Foyle, University College Dublin*

 

The General Court consistently defers to the European Commission’s discretion and fining guidelines when imposing fines. This change limits judicial intervention and may undermine defendants’ rights. A reliance on the Commission’s Guidelines has contributed to this restrained approach, raising concerns about the implications for fair competition enforcement.

 

As was seen in the recent judgement Clariant AG and Clariant International AG v European Commission of October 2023, the General Court refrains from thoroughly adjudicating on the level of the fine imposed by the Commission and consistently defers to their broad discretion on the matter. However, this has not always been the case. This blogpost will present the evolution of the Court’s limited use of its ample powers under Regulation 1/2003 and Article 261 of the TFEU.

Under Regulation 1/2003, the competence of unlimited jurisdiction enables the Court of Justice of the European Union (CJEU), in addition to carrying out a mere review of the lawfulness of the penalty for competition infringements, to substitute its own appraisal for the European Commission’s and, consequently, to cancel, reduce, or increase the amount of the fine or penalty payment imposed.

As discussed below, when reviewing fines imposed by the European Commission in competition cases, the General Court rarely departs from the European Commission’s Fining Guidelines when considering the appropriate level of the fine. The Court does often does not even question the level of the fine or the method used to impose it.  This is a marked divergence from the first thirty years of the European Community, where the EU Courts fully considered the merits and proportionality of the penalties. This current practice may have implications, inter alia, for an applicant’s right of defence.

 

Legal Basis for Unlimited Jurisdiction

Article 263 TFEU empowers the CJEU to review the legality of acts of EU institutions, organs, and other bodies of the European Union. This review of legality is limited to four grounds of annulment: lack of competence, infringement of an essential procedural requirement of the Treaty, or any rule of law related to its application, and misuse of powers. Where the CJEU finds the decision of a particular EU institution to be illegal, it may only go so far as to annul it. The CJEU has no power to issue a new decision that would replace the one issued by the Commission. Thus, described as ‘annulment jurisdiction,’ the CJEU is strictly confined to reviewing the legality of an act of a particular EU institution.

By contrast, Article 261 TFEU provides the possibility to give the CJEU unlimited jurisdiction in relation to penalties. This competence was then implemented in the area of competition by Article 31 of Regulation 1/2003. Article 31 states that the CJEU shall have unlimited jurisdiction to review decisions where the Commission has fixed a fine or periodic penalty payment – it may uphold or overturn the Commission’s decision, or decide to adjust the fine itself, either downward or, exceptionally, upward. In addition to reviewing the legality of a financial penalty, Article 31 allows the General Court to substitute its own assessment for the Commission’s in determining the amount of that penalty. Describing the extent of the unlimited jurisdiction of EU courts, Advocate-General P. Maduro noted that “the distinguishing characteristic of the jurisdiction of the Community Courts under this provision is that it allows them not only to review the legality of the sanction but also to vary the sanction, even in the absence of a material error of fact or law on the part of the Commission.”

However, in recent years there has been a clear discrepancy between the considerable powers provided to the CJEU and the very limited, perhaps insufficient, use of such powers.

 

Early Case Law

There has been a very noticeable evolution in the strictness with which the General Court has reviewed fines. In the earlier cases, the Court showed very little deference to the Commission, fully considering the merits and proportionality of the fine.

In ACF Chemiefarma NV v Commission of the European Communities, the Court conducted a thorough examination of all circumstances surrounding the imposition of the fine.  The Court considered factors such as the nature of the restrictions of competition, the number and the size of the undertakings concerned, the respective proportions of the market controlled by them within the Community, and the situation of the market when the infringement was committed. The Court concluded that the error in duration did not “appreciably diminish the gravity of the restrictions of competition arising from the agreement” and therefore justified only slightly reduced the fine. Similarly, in Musique Diffusion Française and others v. Commission of the European Communities, the Court of Justice engaged in a detailed evaluation of the particular circumstances of each undertaking. As discussed in the case, the Court did not simply limit itself to only reviewing the duration of the infringement but “entered in a general assessment to be made by it within the framework of its powers of unlimited jurisdiction.”

The Court has also recognized its duty to examine whether the fine is proportional in relation to the duration and gravity of the infringement. This is in addition to examining whether the Commission respected its Fining Guidelines. In Parker Pen Ltd v. Commission, for example, the Court of First Instance concluded the fine was “inappropriate having regard to the low turnover to which the infringement was related.”

 

Current Judicial Practice

In recent years, however, the EU Courts have elected not to exercise their unlimited jurisdiction, rarely making findings contrary to the Commission or departing from the methodology set out in the Commission’s own Fining Guidelines. This fact was conceded in Ballast Nedam v Commission where the General Court stated that, while the Guidelines are not necessarily binding, it may have to rely on the methodology therein when reviewing the fine in order to avoid discrimination between the undertakings being sanctioned. Thus, while the Commission’s Fining Guidelines are nothing more than ‘soft law,’ they may, in practice, be constraining the exercise of the EU Court’s unlimited jurisdiction. This current judicial practice and ‘hands-off’ approach was again exemplified in Siderurgica Latina Martin SpA v Commission, where the General Court did not question either the level of the fine or the methodology used by the Commission to impose it.

The recent Clariant AG and Clariant International AG v European Commission further displays this ‘hands-off’ approach utilised by the Court. This case involved the Commission imposing a fine of €155.8 million on Clariant on the basis of the Fining Guidelines. As part of Clariant’s appeal, they focused on the aggravating factors applied by the Commission. One such factor was a 50% increase for recidivism on the basis of paragraph 28 of the Fining Guidelines, which states that the basic amount of a fine can be increased by up to 100% when an undertaking continues or repeats “a similar infringement”.  The Commission had previously sanctioned Clariant for its participation in a sales cartel 7 years earlier. The Court held the Commission was entitled to apply a recidivism multiplier even though Clariant’s previous Article 101 infringement was a sales cartel and not a purchasing cartel as was the case here. The Court stated that the “Commission has a particularly wide discretion as regards the choice of factors to be taken into account for the purposes of determining the amount of fines, such as, inter alia, the particular circumstances of the case, its context and the dissuasive effect of fines, without the need to refer to a binding or exhaustive list of the criteria which must be taken into account.”

Moreover, in Koninklijke Wegenbouw Stevin v. Commission, the General Court used the previous decision-making practices of the Commission as guidance on whether the fine should be increased for obstruction. Such an approach seems inconsistent with the significant power afforded to the General Court to substitute its own assessment for that of the Commissions.

Such a constraint on the EU Courts could impede an applicant’s right of defence. As discussed in 1. garantovaná a.s v. Commission, an additional guarantee on the rights of defence of the undertakings concerned is the fact that the General Court ‘may in particular cancel or reduce the fine.’ Today, however, as long as the Commission has followed its Fining Guidelines, there is little chance that the General Court would reduce or cancel the fine. To put it starkly, the Court’s unwillingness to exercise this power allows the Commission to essentially act as the ‘judge, jury and executioner,’ with the ability to decide there has been an infringement, administer a judgment, and impose a penalty. This is all while being subject to a ‘light judicial review’ where the Court merely confirms that the Commission has followed their own Fining Guidelines.

Perhaps, considering the high workload of the General Court, it is unsurprising that there has been an increase in deference shown to the Commission. The Courts are faced with copious requests by undertakings to review the fines they have incurred for breaches of competition rules. The burden of assessing each of these cases de novo would be considerable. Thus, the sheer pressure of time is likely to be part of the explanation for the changing intensity of the judicial review in competition cases.

 

Conclusion

In summary, the evolution of the General Court’s application of unlimited jurisdiction highlights a shift from thorough, independent assessment to greater deference to the European Commission. This trend potentially undermines applicants’ rights of defence by limiting the courts’ intervention in the Commission’s penalty decisions. Despite the robust legal framework enabling extensive judicial review, practical constraints such as workload pressures may have led to a more restrained approach.

 

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*The author is a graduate of University College Dublin and was previously employed as an analyst by the Irish Competition and Consumer Protection Commission.

 

 

 

 

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