Case T‑106/17
(publication in extract form)
JPMorgan Chase & Co. and Others
v
European Commission
Judgment of the General Court (Tenth Chamber, Extended Composition) of 20 December 2023
(Competition – Agreements, decisions and concerted practices – Euro Interest Rate Derivatives sector – Decision establishing an infringement of Article 101 TFEU and Article 53 of the EEA Agreement – Manipulation of the Euribor Interbank Benchmark Rates – Exchange of confidential information – Restriction of competition by object – Single and continuous infringement – ‘Hybrid’ procedure staggered over time – Presumption of innocence – Impartiality – Fines – Basic amount – Value of sales – Article 23(2) and (3) of Regulation (EC) No 1/2003 – Obligation to state reasons – Amending decision supplementing the statement of reasons – Equal treatment – Proportionality – Unlimited jurisdiction)
1. Competition – Administrative procedure – Commission decision finding an infringement – Means of proof – Reliance on a body of evidence – Taking into account of evidence established outside the infringement period – Whether permissible
(Art. 101(1) TFEU)
(see paragraphs 64-71)
2. Agreements, decisions and concerted practices – Agreements between undertakings and concerted practices – Concept – Participation in a network of bilateral contacts with an anticompetitive object – Passive modes of participation – Included – Condition – No distancing – Condition fulfilled
(Art. 101(1) TFEU)
(see paragraphs 279-312)
3. Agreements, decisions and concerted practices – Concerted practice – Definition – Coordination and cooperation incompatible with the obligation on each undertaking to determine independently its conduct on the market – Exchange of information between competitors – Exchanges of confidential information between traders of financial institutions – Exchanges relating to attempted manipulations of the Euribor interbank reference rates – Exchanges on trading positions and pricing strategies in the Euribor- or EONIA-linked derivatives sector – No pro-competitive effects that are demonstrated, relevant and specifically related to the agreement concerned and sufficiently significant – Exchanges revealing a sufficient degree of harm to be regarded as being restrictions by object
(Art. 101(1) TFEU)
(see paragraphs 325-337, 341-364, 377-438)
4. Acts of the institutions – Statement of reasons – Obligation – Scope – Decision to apply competition rules – Commission decision finding an infringement and imposing a fine
(Arts 101(1) and 296, second para., TFEU)
(see paragraphs 338, 339, 368-375)
5. Agreements, decisions and concerted practices – Prohibition – Infringements – Agreements and concerted practices constituting a single infringement – Attribution of liability for the entire infringement to a single undertaking – Conditions – Unlawful practices and conduct forming part of an overall plan – Assessment – Criteria – Contribution to the single objective of the infringement – Knowledge or foreseeability of the overall plan of the agreement, decision or concerted practice and of its key elements
(Art. 101(1) TFEU)
(see paragraphs 441-450, 453-473, 477-501, 504-508)
6. Competition – Administrative procedure – Settlement procedure – Procedure not involving all the participants in a cartel – Adoption of a settlement decision and of a decision at the end of an ordinary procedure staggered over time – Whether permissible – Conditions – Respect for the duty of impartiality and the presumption of innocence – Observance of the rights of the defence – Scope
(Art. 101 TFEU; Charter of Fundamental Rights of the European Union, Arts 41 and 48; Commission Regulation No 773/2004, Art. 10a)
(see paragraphs 514-544)
7. Competition – Administrative procedure – Commission decision finding an infringement – Duty of the Commission to examine carefully and impartially all the relevant aspects of the individual case – Public statements made by the competition Commissioner during the administrative procedure – Statements that may demonstrate a lack of subjective impartiality – No impact on the impartial assessment of the case by the Commission
(Art. 101(1) TFEU)
(see paragraphs 549-558)
8. Competition – Fines – Amount – Determination – Judicial review – Unlimited jurisdiction of the EU judicature – Scope – Determination of the amount of the fine imposed – Criteria for assessment
(Arts 101(1) and 261 TFEU; Council Regulation No 1/2003, Arts 23(3) and 31)
(see paragraphs 567, 568, 698-728)
9. Competition – Fines – Amount – Determination – Determination of the basic amount – Determination of the value of sales – Application of the method laid down in the guidelines – Proxy established on the basis of cash receipts discounted by the application of a discount factor – Inadequate statement of reasons as regards the determination of the discount factor
(Art. 101(1) TFEU; Council Regulation No 1/2003, Art. 23(2); Commission communication 2006/C 210/02, points 13 and 37)
(see paragraphs 583-595, 602-608, 612-621)
10. Action for annulment – Pleas in law – Infringement of essential procedural requirements – Infringement of the obligation to state reasons – To be considered of the Court’s own motion
(Art. 263 TFEU)
(see paragraphs 609-611)
11. Acts of the institutions – Statement of reasons – Obligation – Scope – Decision to apply competition rules – Correction of an error of reasoning during the proceedings before the Court by the adoption of an amending decision – Not permissible
(Arts 101(1) and 296, second para., TFEU)
(see paragraphs 627-633)
12. Competition – Fines – Amount – Determination – Determination of the basic amount – Determination of the value of sales – Application of the method laid down in the guidelines – Proxy established on the basis of cash receipts discounted by the application of a discount factor – Calculation of the cash receipts of undertakings involved in the same infringement using different methodologies – Immaterial impact on the values used – No breach of the principle of equal treatment
(Art. 101(1) TFEU)
(see paragraphs 636-671)
13. Competition – Fines – Amount – Determination – Adjustment of the basic amount – Mitigating circumstances – Lesser intensity of participation in the infringement compared with the participation of the main players – 10% reduction of the basic amount – No failure to observe the principles of proportionality, equal treatment and the individualisation of penalties
(Council Regulation No 1/2003, Art. 23(2); Commission communication 2006/C 210/02, point 29)
(see paragraphs 674-695)
Résumé
In 2011, the Barclays banking group applied to the European Commission for leniency, informing it of the existence of a cartel in the Euro Interest Rate Derivatives (EIRD) sector.
These EIRDs are linked to the Euro Interbank Offered Rate (Euribor), a set of benchmark interest rates intended to reflect the cost of euro-denominated interbank loans, or to the Euro Over-Night Index Average (EONIA), which fulfilled a function equivalent to that of Euribor, but with regard to daily rates. The Euribor rate is based on the individual quotes notified by the banks belonging to a panel made up of 47 financial institutions (‘the Euribor panel’).
Following the initiation of infringement proceedings by the Commission, the financial institutions Barclays, Deutsche Bank, Royal Bank of Scotland and Société générale decided to participate in a settlement procedure pursuant to Article 10a of Regulation (EC) No 773/2004. (1) At the end of that procedure, the Commission adopted, on 4 December 2013, a decision (2) finding that those institutions had participated in a single and continuous infringement with the object of distorting the normal course of pricing on the EIRD market.
Since the financial institutions JPMorgan Chase & Co., JPMorgan Chase Bank, National Association and J. P. Morgan Services LLP (together, ‘JP Morgan’), Crédit agricole and HSBC had not submitted a proposal for settlement, the Commission continued its investigation against them.
By decision of 7 December 2016, (3) the Commission found that JP Morgan had infringed Article 101 TFEU and Article 53 of the EEA Agreement by participating, from 27 September 2006 to 19 March 2007, in a single and continuous infringement with the object of distorting the normal course of pricing components on the EIRD market and imposed on it a fine of EUR 337 196 000.
According to the Commission, JP Morgan’s infringing conduct consisted of discussions between one of its traders and the traders of two other financial institutions belonging to the Euribor panel concerning, in essence, the manipulation of their banks’ submissions to that Euribor panel for the purpose of the calculation of Euribor, trading positions as regards EIRDs and their pricing intentions and strategies concerning EIRDs.
Before the General Court, JP Morgan seeks, first, the annulment in part of that decision, and, second, in the alternative, the annulment of the fine imposed or a reduction of the amount of that fine.
After the action was brought, the Commission adopted an amending decision (4) to supplement the statement of reasons in the contested decision in the light of the judgment in HSBC Holdings and Others v Commission, handed down by the Court in a related case. (5)
By its judgment, the Tenth Chamber (Extended Composition) of the General Court clarifies the criteria for establishing whether an undertaking participated in anticompetitive practices, in particular through the exchange of information, in the financial products sector. However the Court annuls the contested decision in so far as it imposes a fine on JP Morgan on the ground of an inadequate statement of reasons. It then exercises its unlimited jurisdiction and imposes on JP Morgan a fine in the same amount as that imposed in the contested decision.
Findings of the Court
After confirming the accuracy of the findings as regards the exchanges between the JP Morgan trader, the Deutsche Bank trader and the Barclays trader examined in the contested decision, with the exception of one of those exchanges, the Court rejects JP Morgan’s arguments that they did not have the object of manipulating Euribor or EONIA. In that context, the Court states, in particular, that JP Morgan’s alleged conduct does not consist of the manipulation of Euribor as such, but of participation in a network of bilateral contacts the object of which was to distort the normal course of pricing components in the sector of EIRDs linked to Euribor and/or EONIA.
As regards the Commission’s finding of a single infringement, the Court states that three factors are decisive for concluding that an undertaking participated in such an infringement:
(i) the various forms of conduct in question must form part of an ‘overall plan’ with a single objective;
(ii) the undertaking must have been aware of the offending conduct planned or put into effect by other undertakings in pursuit of the same objectives or have reasonably been able to foresee all that conduct and have been prepared to take the risk, and;
(iii) the undertaking must have intended, through its own conduct, to contribute to the common objectives pursued by all the participants.
As regards the first factor, the Court states that the Commission defined the single objective, in a sufficiently precise manner, as seeking to influence the cash flow payable under EIRD contracts to the detriment of the counterparties to those contracts. All of the exchanges relied on against JP Morgan had the same single objective.
Moreover, that conclusion is supported by other evidence relied on by the Commission in the contested decision. Indeed, the practices at issue concerned the same products, namely EIRDs and took the form of relatively regular bilateral exchanges overlapping in time and taking place between a stable group of individuals employed by the banks concerned.
As regards the second factor, JP Morgan specifically disputed only its awareness of the conduct put into effect by the other parties to the cartel seeking to manipulate Euribor fixings. In that regard, the Court finds, however, that the evidence, viewed as a whole as a body of evidence, shows that the JP Morgan trader could reasonably have foreseen that the exchanges at issue in which he participated formed part of a single infringement involving other banks aimed at altering the cash flows payable under EIRDs through concerted actions to manipulate the Euribor rate, and that he was prepared to take the risk.
As regards the third factor, the Court states that the JP Morgan trader participated, jointly with traders from other banks, in the collusive practices and thus intended to contribute through his own conduct to the common aim pursued by all the participants.
Having thus confirmed the finding of the alleged infringement and its categorisation as a single and continuous infringement, and having rejected the claim for annulment in so far as that finding of the contested decision was concerned, the Court, by contrast, upholds the claim for annulment of the contested decision in so far as it imposes a fine on JP Morgan, on the ground that the Commission breached its obligation to state reasons as regards the determination of the amount of the fine.
Although the Commission did not make an error of assessment by using, for the purpose of determining the amount of the fine imposed on JP Morgan, discounted cash receipts as the proxy for the value of sales, it did not sufficiently explain why the discount factor applied to those receipts was set at 98.849%. Furthermore, since the Commission did not demonstrate that it was practically impossible to state to the requisite legal standard the reasons for the contested decision in that respect, the supplement to the statement of reasons provided in that regard in the amending decision cannot be accepted either, since it did not amend the operative part of the contested decision.
Lastly, exercising its unlimited jurisdiction, the Court examines JP Morgan’s claim for a reduction of the amount of the fine that was imposed on it.
Noting that the fixing of a fine in the exercise of its unlimited jurisdiction is not an arithmetically precise exercise, the Court uses, as the Commission did in its approach, the value of discounted cash receipts as the initial data for determining the basic amount of the fine, since that value reflects the economic significance of the infringement and the relative strength of the undertaking in the infringement. As regards determining the reduction factor, the application of which is necessary in order to prevent the imposition of a fine that is over-deterrent, the Court notes that the parties agree that that factor should be set at 98.849% at the very least.
With regard to the gravity of the infringement, the Court states that, since the conduct at issue relates to factors that are relevant to the determination of the prices of EIRDs, they are, by their very nature, among the most serious of restrictions to competition. In addition, the practices at issue are particularly serious and harmful since they are liable not only to distort competition on the EIRD market, but also, more broadly, to compromise the trust placed in the banking system and the financial markets as a whole and their credibility.
With regard to mitigating circumstances, the Court finds that JP Morgan played a less important role in the infringement than the main players. However, the exchanges in which JP Morgan participated are characterised by their specific frequency and regularity, and JP Morgan’s participation in the infringing conduct was intentional. Moreover, the conduct at issue is particularly serious. Consequently, the impact of the mitigating circumstances accepted can be only marginal.
In conclusion, the Court finds that, on a fair assessment of the circumstances of the case, the amount of the fine should be set at EUR 337 196 000.
In the light of the foregoing, the Court annuls the contested decision in so far as it imposes a fine on JP Morgan, sets the fine at the same amount as that imposed by the Commission, namely EUR 337 196 000, and dismisses the action as to the remainder.