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Competition News
December 2012
Powers of inspection: the General Court of the European
Union critizes the European Commission for conducting
fishing expeditions
In two judgments of November 14, 2012, the General Court defined the limits
of the European Commissions powers of inspection in the investigations it
conducts into anti-competitive practices. The two judgments came after
unannounced inspections by the Commission in undertakings operating in the
electric cable sector which were suspected of participating in a cartel. The
undertakings appealed, following which the Court partially annulled the
Commissions decisions ordering the inspections, since their subject matter
was not consistent with the facts on which the inspection decisions relied.
The undertakings had first criticized the too broad subject matter of the
inspections, which prevented them from knowing what their obligations were
and the extent of their defence rights. The decision referred to their potential
participation in anti-competitive agreements in relation to the supply of electric
cables and material associated with such supply, including, amongst others,
high voltage underwater electric cables, and, in certain cases, high voltage
underground electric cables. However, the Court dismissed the claimants
argument, considering that while the Commission had to describe the
sectors covered by its investigation, it did not have to delimit the
relevant market precisely. The General Court observed that the subject
matter of the inspections had been determined since it covered all electric
cables and associated products, whatever they were used for (telephone
wires, electricity distribution cables, cables for household electrical products).
After confirming the broad subject matter of the investigation, the General
Court was then able to partially annul the inspection decision, noting that the
subject matter of the inspection far exceeded the sectors for which the
Commission had reasonable grounds for suspecting a cartel prior to
making its inspection. By referring in the subject matter of its inspection to
all electric cables, the Commission could conduct a fishing expedition to
identify anti-competitive practices relating to all the activities of the
undertakings concerned, whereas it only had reasonable grounds as regards
high voltage underwater and underground electric cables. According to the
General Court, these inspections were arbitrary and interfered in the private
sphere of activity of the undertakings concerned.
It is reassuring that the notion of effectiveness in the fight against anticompetitive practices, which is very much in the forefront of competition
authorities practice, is no justification for all infringements of the rights of the
defence. Nevertheless it is to be regretted that the inspection decisions were
not annulled completely and questions are raised about the practical
consequences of the partial annulment. In fact the only consequence seems
to be that the Commission will not be able to use the documents seized
concerning the activities for which it did not have reasonable grounds.
However, there is no certainty that the Commission will not be able to use
these documents indirectly and obtain evidence relating to these other
activities by other means, for example, in the context of requests for
information.

Paris 5437800.1

...these inspections were

arbitrary and interfered in the
private sphere of activity of
the undertakings concerned.

A request to defer the immediate payment of a fine must be

assessed on the basis of the turnover of the whole group
Competition law, founded on the economic concept of undertaking,
frequently disregards the legal concept of company. This economic
reasoning has a particularly significant impact when establishing the amount
of fines and assessing the financial situation of the sanctioned companies, as
illustrated by an order of November 13, 2012 of the First President of the Paris
Court of Appeal.
The French Competition Authority decision of March 13, 2012 in the flour case
imposed two fines on Grands Moulins de Strasbourg, the holding company of
the group of the same name, for two separate offences representing overall
28.82 million euros. The latter company lodged an appeal against the
decision on the merits and, while awaiting the judgment, requested that it be
allowed to defer payment of the fine, as an appeal against the Authoritys
decision does not exempt undertakings from paying the fine. It relied
particularly on two previous orders of July 3, 2012, which had ruled that the
existence of clearly excessive consequences likely to arise from the
immediate payment of a sanction must be assessed based on the financial
situation only of the company which is fined and not the group to which
it belongs (Competition News, September 2012). Grands Moulins de
Strasbourg asked for this principle to be applied to its case, arguing that the
combined amount of the fines represented 261% of its turnover, 60% of its
equity and 20 years of its operations.

the potential
consequences for a company
of the application of the
sanction must necessarily be
assessed in light of the
consolidated turnover of the
group.

The November 13, 2012 order refused the request and adopted a completely
opposite solution to the July 3, 2012 orders: it found that the potential
consequences for a company of the application of the sanction must
necessarily be assessed in light of the consolidated turnover of the group.
The Authority has lodged an appeal against the July 3, 2012 orders before the
French Supreme Court, which will therefore have the opportunity to settle this
question.
From the legal standpoint, the solution confirmed by the November 13, 2012
order seems to be more convincing. Since the Authority is entitled to establish
the amount of the fine taking into account the situation of the group to which
the undertaking belongs, it would be contradictory to allow the deferred
payment on the basis of the financial performance only of the company which
has to pay the fine, particularly when it is a holding company without any
operational activity.
The European Competition Network (ECN) facilitates the introduction of
numerous applications for leniency in cases of cross-border cartels
When a secret cartel has a cross-border dimension, several competition
authorities can have competence in parallel to grant total or partial immunity to an
undertaking applying for leniency. To ensure convergence of treatment of
applications for leniency presented in parallel before several authorities, a model
leniency programme has been put in place since 2006. The programme defined
the rules for leniency applications, which the ECN members agreed to transpose
into their own programmes. The summary application system was introduced for
the benefit of the first leniency applicant in a same cartel, using a common
standard form.
On November 22, 2012, the ECN members approved a revision of the model
leniency programme. From now on, when a secret cartel involves at least three
Member States of the EEA, any leniency applicant, irrespective of the position in
which its application is received, will be authorized to file a summary leniency
application using a standard form. The revised programme has added certain
clarifications: it completed the list of duties which the applicant for leniency must
comply with in the context of the cooperation with the relevant competition
authorities and defined the scope of the leniency programme, specifying that it
covers secret cartels which also have vertical aspects.
This newsletter does not constitute legal advice. No part of this newsletter may be copied or
quoted without the prior written consent of Salans. 2012. All rights reserved.
Paris 5437800.1

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