Case T-38/07

Shell Petroleum NV and Others

v

European Commission

(Competition – Agreements, decisions and concerted practices – Market in butadiene rubber and emulsion styrene butadiene rubber – Decision finding an infringement of Article 81 EC – Imputability of the offending conduct – Fines – Gravity of the infringement – Aggravating circumstances)

Summary of the Judgment

1.      Competition – Community rules – Infringements – Attribution – Parent company and subsidiaries – Economic unit – Criteria for assessment

(Arts 81 EC and 82 EC)

2.      Competition – Community rules – Infringements – Attribution – Parent company and subsidiaries – Economic unit – Criteria for assessment

(Arts 81 EC and 82 EC)

3.      Competition – Fines – Amount – Determination – Criteria – Gravity of the infringement – Aggravating circumstances – Repeated infringement – Concept

(Arts 81 EC and 82 EC; Commission Notice 98/C 9/03, Section 2)

4.      Competition – Fines – Amount – Determination – Criteria – Deterrent effect of the fine

(Arts 81 EC and 82 EC; Commission Notice 98/C 9/03, Section 1A, fourth para.)

5.      Competition – Fines – Amount – Determination – Criteria – Gravity of the infringement – Effective capacity to cause significant damage to competition on the market concerned

(Arts 81 EC and 82 EC; Commission Notice 98/C 9/03, Section 1A, first to fourth and sixth paras)

6.      Competition – Fines – Amount – Determination – Criteria – Gravity of the infringement – Assessment according to the nature of the infringement – Very serious infringements

(Arts 81 EC and 82 EC; Commission Notice 98/C 9/03, Section 1A, first and second paras)

7.      Competition – Fines – Amount – Determination – Criteria – Observance of the principle of proportionality

(Arts 81 EC and 82 EC; Council Regulation No 1/2003, Art. 23(2); Commission Notice 98/C 9/03, Section 1A)

1.      Where there is an infringement of the competition rules, the conduct of a subsidiary may be imputed to the parent company in particular where, although having a separate legal personality, that subsidiary does not decide independently on its own conduct on the market, but carries out, in all material respects, the instructions given to it by the parent company, having regard in particular to the economic, organisational and legal links between those two legal entities. In such a situation, the parent company and its subsidiary form a single economic unit and therefore form a single undertaking. Thus, the fact that a parent company and its subsidiary constitute a single undertaking enables the Commission to address a decision imposing fines to the parent company, without having to establish the personal involvement of the parent company in the infringement.

In the specific case where a parent company has a 100% shareholding in a subsidiary which has infringed the competition rules, the parent company can exercise a decisive influence over the conduct of the subsidiary and, moreover, there is a rebuttable presumption that the parent company does in fact exercise a decisive influence over the conduct of its subsidiary. In those circumstances, it is sufficient for the Commission to prove that the subsidiary is wholly owned by the parent company in order to presume that the parent exercises a decisive influence over the commercial policy of the subsidiary. The Commission will be able to regard the parent company as jointly and severally liable for the payment of the fine imposed on its subsidiary, unless the parent company, which has the burden of rebutting that presumption, adduces sufficient evidence to show that its subsidiary acts independently on the market.

(see paras 53-54)

2.      The Commission is entitled to presume that, owing to the fact that a parent company directly or indirectly holds 100% of the capital of its subsidiaries, it exercises a decisive influence over their conduct. It is for the parent company to rebut that presumption by demonstrating that those subsidiaries determine their commercial policy autonomously in such a way that they and their parent company do not constitute a single economic entity and, therefore, a single undertaking for the purposes of Article 81 EC.

Specifically, it is for the parent company to adduce any evidence relating to the organisational, economic and legal links between its subsidiaries and itself which in its view are apt to demonstrate that they do not constitute a single economic entity. When making its assessment the Court must take into account all the evidence adduced, the nature and importance of which may vary according to the specific features of each case.

It is not because of a parent-subsidiary relationship in which the parent company instigates the infringement nor, a fortiori, because of the parent company’s involvement in the infringement, but because they constitute a single undertaking that the Commission is able to address the decision imposing fines to the parent company of a group of companies. Thus, attribution to the parent company of the unlawful conduct of a subsidiary does not require proof that the parent company influences its subsidiary’s policy in the specific area in which the infringement occurred.

In particular, the fact that the parent company is merely a non-operational holding company, which rarely intervenes in the management of its subsidiaries, is not sufficient to rule out the possibility that it exercises decisive influence over the conduct of those subsidiaries by coordinating, inter alia, financial investments within the group. In the context of a group of companies, a holding company that coordinates, inter alia, financial investments within the group is in a position to regroup shareholdings in various companies and has the function of ensuring that they are run as one, including by means of such budgetary control.

(see paras 66-68, 70)

3.      Section 2 of the Guidelines on the method of setting fines imposed pursuant to Article 15(2) of Regulation No 17 and Article 65(5) of the ECSC Treaty refers, as an example of aggravating circumstances, to repeated infringement of the same type by the same undertakings. The concept of repeated infringement, as understood in a number of national legal orders, implies that a person has committed new infringements after being punished for similar infringements. Any repeated infringement is among the factors to be taken into consideration in the analysis of the gravity of an infringement of the competition rules.

The Commission has a discretion as regards the choice of factors to be taken into account for determining the amount of fines, such as, inter alia, the particular circumstances of the case, its context and the deterrent effect of fines, without the need to refer to a binding or exhaustive list of the criteria which must be taken into account. The finding and the appraisal of the specific characteristics of a repeated infringement come within the Commission’s discretion and the Commission cannot be bound by any limitation period when making such a finding.

The fact that an undertaking has repeated its unlawful conduct, particularly shortly after the adoption of an earlier decision, which itself had been adopted less than 10 years after an initial decision, shows a propensity on the part of the undertaking concerned not to draw the appropriate consequences from a finding that it had infringed the competition rules, and therefore the Commission is entitled to rely on those earlier decisions for the purpose of finding a repeated infringement and, in so doing, it does not infringe the principle of legal certainty.

Moreover, the measures adopted by the undertaking concerned in order to comply with competition law cannot affect the reality of the infringement committed and the repeated infringement found by the Commission. Thus, the adoption of a compliance programme by the undertaking concerned does not oblige the Commission to grant a reduction in the fine on that account. Furthermore, it is impossible to determine the effectiveness of internal measures taken by an undertaking to prevent future infringements of competition law.

In the same way, the cooperation of the undertaking concerned during the administrative procedure cannot make the repeated infringement any less of an aggravating circumstance either.

Last, as regards the proportionate nature of an increase in the fine for repeated infringement, the Commission has a discretion when setting the fine and is not required to apply a precise mathematical formula. In addition, when determining the amount of the fine the Commission must ensure that its action is deterrent. A repeated infringement is a circumstance that justifies a considerable increase in the basic amount of the fine. Repeated infringement is proof that the penalty previously imposed was not sufficiently deterrent. Furthermore, the Commission may, in determining the amount of the increase for repeated infringement, take account of evidence tending to confirm the propensity of the undertaking concerned to ignore the competition rules, including the time which has elapsed between the infringements in question.

(see paras 90-93, 95-98)

4.      Where the Commission imposes a fine on an undertaking for infringement of the competition rules, and sets the amount of that fine using a different multiplier from that used to calculate a fine imposed on the same undertaking in another decision, the principle of equal treatment is not breached if the facts underlying the two decisions are different.

The Commission’s power to impose fines on undertakings which, intentionally or negligently, commit an infringement of Article 81 EC is one of the means given to it with which to carry out the task of supervision conferred on it by Community law. That task encompasses the duty to pursue a general policy designed to apply, in competition matters, the principles laid down by the Treaty and to guide the conduct of undertakings in the light of those principles. It follows that, in assessing the gravity of an infringement for the purpose of setting the amount of the fine, the Commission must ensure that its action has the necessary deterrent effect, especially as regards those types of infringement which are particularly harmful to the attainment of the objectives of the Community. This requires that the amount of the fine be adjusted in order to take account of the desired impact on the undertaking on which it is imposed. This is so that the fine is not rendered negligible or excessive, notably by reference to the financial capacity of the undertaking in question, in accordance with the requirements resulting from, first, the need to ensure that the fine is effective and, second, respect for the principle of proportionality. A large undertaking, owing to its considerable financial resources by comparison with those of the other members of a cartel, can more readily raise the necessary funds to pay its fine, which, if the fine is to have a sufficiently deterrent effect, justifies the imposition, in particular by the application of a multiplier, of a fine proportionately higher than that punishing the same infringement committed by an undertaking without such resources.

In addition, taking into account the overall turnover of each undertaking participating in a cartel is relevant in setting the amount of the fine. The objective of deterrence which the Commission is entitled to pursue when setting fines is intended to ensure that undertakings comply with the competition rules laid down by the Treaty in respect of the conduct of their activities within the Community or the European Economic Area. It follows that the deterrence factor which may be included in the calculation of the fine is assessed by taking into account a large number of factors and not merely the particular situation of the undertaking concerned. That principle applies, in particular, where the Commission has determined a deterrence multiplier with which the fine imposed on an undertaking is adjusted.

Furthermore, the Commission enjoys a wide discretion in the area of setting fines and is not bound by assessments which it has made in the past. It follows that the undertaking concerned cannot invoke the Commission’s decision-making policy as an argument before the Courts of the European Union.

Last, in any event, the principle of equal treatment is breached only where comparable situations are treated differently or different situations are treated in the same way and such treatment is not objectively justified.

(see paras 119-122, 125-126, 129, 136)

5.      The Guidelines on the method of setting fines imposed pursuant to Article 15(2) of Regulation No 17 and Article 65(5) of the ECSC Treaty distinguish between minor infringements, serious infringements and very serious infringements (first and second paragraphs of Section 1A of the Guidelines). Furthermore, the differentiation between undertakings consists in determining, in accordance with the third, fourth and sixth paragraphs of Section 1A of the Guidelines, the individual contribution of each undertaking, in terms of actual economic capacity, to the success of the cartel for the purpose of its classification in the appropriate category.

The individual contribution of each undertaking, in terms of actual economic capacity, to the success of the cartel must be distinguished from the actual impact of the infringement referred to in the first paragraph of Section 1A of the Guidelines. In the latter case, account is taken of the actual impact of the infringement, where this can be measured, in order to classify the infringement as a minor, serious or very serious infringement. The individual contribution of each undertaking, on the other hand, is taken into consideration in order to apply weightings to the amounts determined on the basis of the gravity of the infringement.

Even if there is no measurable actual impact of the infringement, the Commission can decide, in accordance with the third, fourth and sixth paragraphs of Section 1A of the Guidelines, and after having classified the infringement as minor, serious or very serious, to differentiate between the undertakings concerned.

Furthermore, the Commission can set the starting amount of the fine at a higher level for those undertakings with a relatively larger market share than the others in the relevant market. It thus takes account of the actual influence of each undertaking on that market. That factor is the expression of the higher degree of responsibility of the undertakings with a relatively larger market share than the others in the relevant market for the damage caused to competition and, in the final analysis, to consumers by forming a secret cartel.

(see paras 146, 149-150, 154)

6.      It follows from the description of very serious infringements in the Guidelines on the method of setting fines imposed pursuant to Article 15(2) of Regulation No 17 and Article 65(5) of the ECSC Treaty that agreements or concerted practices aimed in particular at setting target prices or the allocation of market shares may entail, solely on the basis of their very nature, the characterisation as ‘very serious’, without the Commission being required to demonstrate an actual impact of the infringement on the market. Similarly, horizontal price agreements are particularly injurious under competition law and may, by reason of that fact alone, be classified as very serious.

(see para. 166)

7.      The principle of proportionality requires that the measures adopted by Community institutions must not exceed what is appropriate and necessary for attaining the objective pursued. In the context of the calculation of fines for infringement of the competition rules, the principle of proportionality requires the Commission to set the fine proportionately to the factors taken into account for the purposes of assessing the gravity of the infringement and also to apply those factors in a way which is consistent and objectively justified.

(see para. 175)