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The European Commission’s Investigative Powers Curtailed by the EU Court3월 14, 2016
On 10 March 2016, the Court of Justice of the European Union (“the Court”) annulled a request for information that the European Commission (“the Commission”) had made to several cement makers in a cartel probe.
Suspecting a breach of antitrust rules, Commission officials undertook unannounced inspections in eight Member States in 2008 and 2009 at the premises of companies active in the cement and related products industry.
In December 2010, the Commission opened formal antitrust proceedings against eight cement manufacturers in order to investigate possible import/export restrictions, market sharing, and price coordination in the markets for cement, cement-based products, and other materials used to produce cement-based products.
In the course of the investigation, the Commission sent several lengthy questionnaires to the companies under investigation about their business practices. The information requests were made by simple request as is customary. Some of the responses by the companies were incomplete; so, in March 2011, the Commission ordered the companies to provide the information it deemed necessary. These requests were made by formal decision under Article 18(3) of Regulation No 1/2003, which obliges a company to reply in a correct and complete manner and within the specified time limit. Failure to comply might lead to the imposition of a fine by the Commission of up to 1% of the company’s total turnover.
Commission’s decision challenged before the General Court
Seven companies appealed the Commission’s decision to request information, claiming that the information requested was not necessary to prove the infringement, that it was excessive and created a disproportionate burden on the companies, and that the decision was not adequately motivated. On 14 March 2014, the General Court fully rejected these allegations, stating that the Commission’s questionnaires were justified.
The Commission welcomed the judgments, explaining that “they confirm the scope of the Commission’s powers to investigate suspected antitrust infringements. In particular, the Court confirmed that it is for the Commission to decide what information it considers necessary to request from companies when investigating potential anticompetitive practices, as long as the Commission can reasonably expect that the information would help it to determine whether the alleged infringement took place. The Court also acknowledged that the Commission is not obliged to have information establishing the existence of an infringement before sending a request for information. It is sufficient that the Commission has reasonable suspicions of a breach of the EU antitrust rules. Moreover, the Commission is not obliged at the investigative stage of its enquiry to inform the undertakings of the evidence already in its possession, in order not to compromise the effectiveness of its enquiry. The Court may nevertheless verify the evidence in the Commission’s possession that led the Commission to request information. The Court carried out this verification in the present case and it concluded that the Commission was justified to seek information from the investigated companies.”
Judgments appealed before the Court of Justice
Despite the fact that the Commission dropped the probe last year without finding illegal activity, four companies had appealed the judgments before the European Union’s top court.
Advocate General Wahl considered that the cement makers should be successful in their appeals given that the purpose of the Commission’s request for information was insufficiently clear and was ambiguous. It was consequently excessively difficult (i) for the undertakings to understand the presumed infringements under investigation and (ii) for the Court to exercise a judicial review.
In what will be considered a limitation of the Commission’s wide appreciation in conducting its investigation, on 10 March 2016, the Court of Justice set aside the General Court’s judgements and annulled the Commission’s requests for information. The Court recalled the Commission’s obligation to state the ‘purpose of the request’ laid down in Article 18(3) of Regulation No 1/2003, which must be indicated with sufficient precision. In its request, the Commission has the obligation to indicate the subject of its investigation and to identify the alleged infringement of competition rules. The adequacy of the statement of reasons depends on whether or not the putative infringement that the Commission intends to investigate is defined in sufficiently clear terms. In addition, the precision of the request must enable the Court to exercise a judicial review on whether the information requested is ‘necessary’.
In this case, the Court concluded that the Commission required the disclosure of extremely extensive and detailed information, and that the decision at issue (i) does not disclose, clearly and unequivocally, the suspicions of infringement and (ii) does not make it possible to determine whether the requested information is necessary for the purposes of the investigation. Given that the Commission’s statement of reasons is excessively succinct, vague and generic and, in some respects, ambiguous, it does not fulfil the requirements of the obligation to state reasons laid down in Article 18(3) of Regulation No 1/2003.
On the same day, the Commission’s spokesman stated that “the implications of the judgments are likely to be confined to the present case, as the ECJ pronounced itself only on the issue of reasoning.”
Despite the fact that the Court considered only the first ground of appeal, the message is clear. The ruling is a reminder of the Court’s duty to ensure that the interpretation and application of the Treaties are observed. This comprehends the fact that the European Union judicature has the power to review the Commission’s application of Regulation No 1/2003. The Court shows the limits to what the Commission can ask companies and how it can do it, which curtails the competition watchdog’s investigative powers. Therefore, the implications of the judgments are not confined to the present case, as the Commission will have to be more specific in its requests. General ‘fishing expeditions’ questions that clearly go beyond the specific scope of the suspected infringement will therefore be harder for the Commission to justify.
This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Christian Riis-Madsen, an O'Melveny partner licensed to practice law as an Avocat in Belgium and as an Advokat in Denmark, and Charlotte Jacquot, an O'Melveny associate licensed to practice law in Paris and as an Avocat in Belgium, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.
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