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European Court of Justice knocks back the European Commission over a cartel 'fishing expedition'

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Summary: In a judgment released on 10 March 2016, Europe’s highest court has criticised and overturned a “vague, generic and ambiguous” information request issued by the European Commission (“Commission”) during a cartel investigation in the cement sector in Europe.

In a judgment released on 10 March 2016, Europe’s highest court has criticised and overturned a “vague, generic and ambiguous” information request issued by the European Commission (“Commission”) during a cartel investigation in the cement sector in Europe. The European Court of Justice’s (“ECJ”) decision is good news for businesses subject to investigations as it will act as a restraint on the Commission’s incentive and ability to issue unreasonable and untargeted information requests in future.

What was the case about?

In 2008, the Commission carried out a number of unannounced “dawn raids” at the offices of a cement companies suspected of being engaged in cartel conduct. Unusually, rather than launching an investigation on the back of a cartel member applying for leniency and “blowing the whistle” on the cartel, the Commission launched this investigation based on its own suspicions, so-called “ex officio” investigations.

Having launched formal proceedings against the companies in 2010, the Commission issued detailed information requests, containing some 94 pages and 11 sets of questions, in 2011. The cement makers appealed against the Commission’s decision to issue the information requests, claiming that they were inadequately reasoned and overly burdensome. The General Court dismissed the appeals. Despite the Commission closing its formal probe in 2015 on the basis of having insufficient evidence, the parties pursued an appeal against the information requests to the ECJ.

What did the ECJ decide?

The ECJ overturned the decision of the General Court, holding that the Commission had not adequately stated its reasons for issuing the information requests. In particular, the ECJ noted that the reasons given referred to an investigation into “cement and related products” and that the alleged infringements took place in the “EU or the EEA”.

While the ECJ acknowledged that, in the context of an investigation, the Commission was not required to precisely set out the nature of the presumed infringements and the extent of the relevant markets, the reasoning in this case was excessively succinct, vague, generic, and in some respects, ambiguous. The Commission is obliged to indicate as precisely as possible what is being sought and the matters to which that information relates, and in this case the Commission already had sufficient information to present its suspicions more precisely.

What does this decision mean in practice?

The ECJ’s decision confirms that the Commission cannot simply go on “fishing expeditions” when it suspects businesses of being in breach of the European Union competition laws. The Commission must provide businesses with sufficient information to assess the scope of their duty to cooperate with the Commission and protect their rights of defence.  The decision will help to constrain the Commission in future to a material extent as it will be required to be more targeted and precise in its requests for information which is good for business and the fair and efficient administration of investigations in the EU.

However, while the decision highlights the difficulties that the Commission faces prosecuting cartels when it does not have a “whistle blower” on board as in this case, its importance in practice may be limited at least in cartel matters. This is because most cartel cases come to the Commission’s attention by way of a leniency applicant which provides the Commission with detailed and often damaging information about the operations of the alleged cartel, meaning that the Commission is rarely required to go on similar fishing expeditions to find a smoking gun. That said, the Commission will no doubt take heed of the advice provided by the ECJ when it issues information requests in the future – particularly in relation to non-cartel prosecutions, for example alleged abuses of dominance.

The decision could also have the practical effect of deterring the Commission from launching “ex-officio” cases and instead rely even more heavily on leniency applicants to prosecute cartel cases. The Commission has indicated that it wanted to increase the level of “ex officio” investigations to decrease its reliance on whistle blowers where possible, but this case may put a dent in that hope. This decision reveals the difficulty the Commission now faces in finding a smoking gun without someone supplying it to them.

The BLP Antitrust and Competition team has extensive experience advising clients on cartel and other European Commission investigations, and has been involved in some of the EU’s most significant investigations. If you have any questions about the ECJ’s decision, the powers of the European Commission or any related subject, please get in contact with any of the BLP lawyers listed.

BLP partner Dave Anderson was quoted in the The Wall Street Journal’s coverage of the ECJ’s decision.

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