Let's talk antitrust - The European Commission’s use of hybrid procedures – reeled in?

Mark Simpson: Hi Richard, I thought today we might talk about a recent judgment of the EU General Court in the ICAP vs. Commission case and that judgment came out on 10 November 2017, so it’s very current but was also very eagerly anticipated. One of the issues people have been looking to this case about was the use of the so-called hybrid procedure, that being where the Commission might agree a settlement with a number of parties in a cartel case, but say one or two decide that they want to exercise their full rights of defence and be subject to the normal procedure i.e. to receive a Statement of Objections to have an oral hearing. The use of that procedure was one of the grounds of appeal in this case. What was ICAP arguing and what did the court actually decide?

Richard Whish: Well it’s an interesting point, of course settlements are common nowadays, I think there have been 25 to date. And normally the Commission settles with everyone, all the members of the cartel at the same time but sometimes you get this phenomenon that one or two parties decide not to settle and so the Commission does settle with A, B and C but then there’s an adversarial procedure in relation to X, Y and Z. Now, the first time there was one of these so-called hybrid cases was animal phosphates and there the Commission adopted the settlement decision and the adversarial decision on the same day, but there have been several cases since then, steel abrasives, canned mushrooms, trucks recently with Scania and some of the Libor Tibor cases, Euribor cases, where we had a so-called staggered hybrid settlement. So, you have a settlement decision at a certain point in time, the adversarial procedure continues in relation to the outliers and then you get a decision maybe a year and a half to two years later, which is what happened in the case of ICAP. The difficulty one gets into is that, if in the settlement decision the Commission has said that X, Y and Z have settled, but of course ICAP was a party to the infringement, they haven’t settled with ICAP, ICAP hasn’t admitted liability, you still have an adversarial decision which takes another 18 months. And yet, here is a piece of paper in which the Commission says that they are guilty. And in those circumstances the General Court has now said well that involves a breach of the presumption of innocence and the Court specifically says in paragraph 268 that in that situation the Commission has got to be very very careful how it proceeds and it actually suggests perhaps the Commission should proceed as it did in animal phosphates by adopting the two decisions on the same date.

Mark Simpson: That’s right, and there’s a very strong finding in this judgment that there was a breach of a very important right of defence that parties have which is a presumption of impartiality or innocence, yet strangely in this judgment, the Court decides that there aren’t any legal consequences that follow from that finding, that the Commission actually was right to find that ICAP had participated in the infringement. Can you explain that? It seems rather odd.

Richard Whish: Well, I am struggling a little bit with this because we’ve had several of these cases recently, UPS where the conclusion was the error by the Commission did lead to annulment of the prohibition decision. Intel where a different error didn’t, there’s another one Ferrier Nord, a case under the originators under European Coal and Steel Community Treaty, where there was a failure to hold an oral hearing and the Court says that was a ground for annulling the decision and now here we are told that a breach of the presumption of innocence wasn’t a ground, so it does seem to me that there is a bit of confusion in this area.

Mark Simpson: So, I mean that’s worrying for business to some extent if you are involved in one of these investigations that might be subject to one of these hybrid staggered procedures but what’s the Commission doing or what do you expect the Commission would do in terms of its procedures to address this?

Richard Whish: It may be that to someextent this is a question of learning by doing. The settlement procedure is relatively new, hybrid settlements have always been known to be complex in various ways, maybe the problem was that the Commission went too far in identifying ICAP as having been a facilitator of the cartel. I know that in the steel abrasives case Pometon is arguing the same thing, that the Commission said in the settlement that it was in the cartel and then proceeded to send a Statement of Objections. So, maybe what the Commission needs to do is simply avoid referring to the non-settling parties, but I see that could be a problem if that makes it difficult to describe the anatomy of the cartel as it were.

Mark Simpson: Yes, well I mean I am sure the Commission are thinking very carefully about this judgment and what it means so we will wait and see what they actually do in terms of cases going forward. But another interesting element of this case was the fact that ICAP were actually found not to have participated in the underlying infringements, which were between the banks, but were found to have breached competition law for being a facilitator. What does that actually mean and what should businesses involved in say broking or other service providers in markets like this be thinking about?

Richard Whish: I think it’s important to remember that the Commission first identified a guilty facilitator in 1980, in Italian cast glass, so we mustn’t delude ourselves into thinking this is some new-fangled concept. The General Court and the Court of Justice in two AC Treuhand decisions has made clear that there is a doctrine of facilitation and it seems to me that the relevant law is actually the law of what constitutes a single overall agreement. Is there a single overall cartelisation of the market and then did X, whether it’s a producer of the goods in question or whether it’s a facilitator, did it know of the single overall agreement? And did it intend to contribute to that agreement and did it take the risk of doing so?

Mark Simpson: That raises an interesting point in relation to this case again, because reading the judgment, I saw that ICAP were actually successful in terms of annulments for some of the infringements that they were found to have participated in. This case being quite unusual in that there were a number of infringements which were alleged to have occurred. I think one of those related to the notion that they either were not aware of or should not have been aware of, or could not reasonably have been aware of, the underlying infringement. What does that say about that standard of evidence that applies to the Commission?

Richard Whish: Well, this doesn’t in any sense call into question the doctrine of facilitation, to my mind. This is simply the General Court doing what the General Court is meant to be doing, which is reviewing the evidence base which led to the adoption of the Commission’s decision and you know there are several judgments on single overall agreement where the Court has overturned Commission findings that there was a single overall agreement on the basis of the evidence, that’s what the Court is there to do.

Mark Simpson: Indeed, I think that is probably a good place to end. Thanks very much Richard.