Antitrust Law Daily Wrap Up, ANTITRUST—EUCtJust: Appeal by FLS Plast of fines for participation in plastic bags cartel denied, (Jun 20, 2014)

By Peter Reap, J.D., LL.M.

An appeal by FLS Plast A/S of €14.45 million in fines imposed upon it for participating in a complex of agreements and concerted practices in the plastic industrial bags sector was without merit and must be dismissed, the European Court of Justice has ruled (FLS Plast A/S v. European Commission, June 19, 2014).

Specifically, the Commission determined that FLS Plast participated in a cartel in Belgium, Germany, Spain, France, Luxembourg and the Netherlands, consisting of the fixing of prices and the establishment of common price calculation models, the sharing of markets and the allocation of sales quotas, the assignment of customers, deals and orders, concerted bidding in response to certain invitations to tender, and the exchange of individualized information.

Background. In December 1990, FLS Plast acquired 60% of the share capital in Trioplast Wittenheim. The remaining 40% was acquired by FLS Plast in December 1991. In turn, FLS Plast sold Trioplast Wittenheim, in 1999, to Trioplanex France SA, a French subsidiary of Trioplast Industrier AB, the parent company of the Trioplast group. That transfer took effect on January 1, 1999.

In November 2001, British Polythene Industries informed the European Commission of the existence of a cartel in the plastic industrial bags sector. On November 30, 2005, the Commission adopted the decision at issue. The Commission decided inter alia that, from December 31, 1990 to January 19, 1999, FLSmidth and FLS Plast had infringed Article 81 EC by their participation in the cartel.

The Commission imposed on Trioplast Wittenheim a fine of €17.85 million, taking account of a reduction of 30% granted pursuant to the Leniency Notice. Of that amount, FLSmidth and FLS Plast were held jointly and severally liable for the sum of €15.30 million and Trioplast Industrier was held jointly and severally liable for the sum of €7.73 million.

By application lodged at the Registry of the Court of First Instance (now ‘the General Court’) on February 24, 2006, FLS Plast brought an action challenging the decision at issue. By the judgment under appeal, the General Court partially upheld FLS Plast’s second plea, on the ground that the Commission had not established to the required legal standard that FLS Plast exercised actual control over Trioplast Wittenheim throughout the year 1991. Consequently, the General Court annulled the decision at issue in so far as it concerned the imputability of the infringement to FLS Plast for the period from December 31, 1990 to December 31, 1991. As a result, the General Court also reduced to €14.45 million the amount of the fine for which FLS Plast had been held jointly and severally liable.

Analysis. FLS Plast put forth several arguments on appeal and all of them were dismissed by the court.

First, FLS Plast contended that the Commission applied an incorrect legal test for the purpose of establishing a parent company’s liability. FLS Plast contends that the General Court erred in accepting the legal test applied by the Commission and in holding that it did not rebut the presumption, arising from the fact that it held 100% of the capital of its subsidiary Trioplast Wittenheim, that it exercised decisive influence over the latter. That test contains a strict presumption that the parent company is liable for the conduct of its subsidiary and is, therefore, contrary to the presumption of innocence laid down in Article6(2) of the European Convention for the Protection of Human Rights and Fundamental Freedoms, it argued.

Regarding the alleged unlawfulness of the presumption applied in European Union competition law that a company holding directly or indirectly all the capital of another company exercises decisive influence over the latter company, the validity of that presumption is clear from settled case law, the court explained. Furthermore, the application of such a presumption did not in any way infringe the presumption of innocence. The General Court correctly recalled the principles resulting from the Court of Justice’s case law that relate to the circumstances in which a subsidiary’s parent company, such as FLS Plast, could be held liable for anticompetitive actions attributed to that subsidiary - in this instance, Trioplast Wittenheim.

Consequently, on the basis of that case-law, the General Court was also correct in holding that the Commission could presume that during the period covering the years 1992 to 1998 FLS Plast exercised decisive influence over the conduct of Trioplast Wittenheim, given the 100% stake that FLS Plast had held in Trioplast Wittenheim over that period.

FLS Plast also asserted that the amount of the fine was disproportionate to the duration of the infringement. FLS Plast failed to demonstrate this, according to the court.

As to the gravity of that infringement, it should be noted that the infringement consisted in participating in a complex of agreements and concerted practices concerning six Member States and that it related to the fixing of prices and the establishment of common price calculation models, among other things. It is in that sense that the Commission correctly classified the infringement as “very serious,” the court observed.

Further, it did not appear that, when the General Court set the fine for €14.45 million, namely at an amount markedly lower than the minimum amount of €20 million — laid down in the third indent of point 1.A of the Guidelines — that was generally envisaged by the Commission as the starting amount for calculating fines for “very serious infringements,” it set the fine imposed at a disproportionate amount, the court reasoned.

FLS Plast also argued that the judgment under appeal was delivered by the General Court at the conclusion of proceedings whose duration was excessive, as six years elapsed between the lodging of the application and delivery of the judgment under appeal. According to the Court of Justice’s case-law, however, in order to ensure that the competition rules of European Union law are complied with, the court could not allow an appellant to reopen the question of the amount of a fine which has been imposed upon it, on the sole ground that there was a failure to adjudicate within a reasonable time, where all of its pleas directed against the findings made by the General Court concerning the amount of that fine and the conduct that it penalizes have been dismissed, according to the court.

Therefore, even though the procedure in the General Court infringed the second paragraph of Article 47 of the Charter in that it did not comply with the requirement to adjudicate within a reasonable time, which constitutes a sufficiently serious breach of a rule of law intended to confer rights on individuals, in light of the above the argument advanced by FLS Plast based on excessive duration must be dismissed, the court held.

The case is C-243/12 P.

Companies: FLS Plast A/S

Cases: Antitrust