The Shortest Competition Judgment Ever: AC-Treuhand II

By Rick Busscher, Martin Herz, and Hans Vedder

Competition law judgments are notorious for their length. An extreme example is the 5134 paragraph judgment in Cement. In most cases the appeal judgment is significantly shorter, as with the 391 paragraphs in the appeal in Cement. AC-Treuhand is no exception to that rule, but it takes it to the extreme by reducing the Court’s reasoning to a single paragraph. This single paragraph supports the finding that cartel facilitators are also liable under Article 101 TFEU. The issue whether a company that is not active on the affected market should also be brought under the scope of article 101, is a difficult matter. However, the Court finds it ‘surprisingly’ easy to solve this matter, which raises practical points as well as some fundamental questions. We will discuss and comment on this one paragraph below, as well as on some of the fluff that surrounds it, but we will start with the facts.

Introduction: what happened before

Basically, we have a bog-standard cartel and as with any cartel, there needs to be supervision and enforcement. This is tricky for cartelists themselves, as the supervisor is exposed to the risk of being qualified as a ringleader, negating the possibility of immunity under the Leniency Guidelines. Hence, the heat stabilisers cartel thought of a better way, namely hiring an independent firm to ensure that parties stick to the cartel. Swiss consultancy AC-Treuhand was more than willing to offer its services in overseeing the cartel and the compliance of the cartel members. It also provided a place to meet for the cartelists, collected and shared market data, and worked to secure compromises between the members of the cartel, thus clearly qualifying it as a cartel facilitator.

However, despite the efforts, one of the cartelists blew the whistle on the cartel, thus exposing the chemical companies, and AC-Treuhand. This resulted in a decision that imposed fines of a total amount of 173 million Euro’s on several chemical companies, including a fine of € 174.000 on AC-Treuhand for having facilitated the cartel. AC-Treuhand’s appeal, based on Article 49 of the Charter, the principle that offences must be defined by law, nullum crimen, nulla poena sine lege priori, was rejected by the General Court. In the view of AC-Treuhand, the GC infringed Article 49 of the Charter of Fundamental Rights of the European Union by reaching this conclusion. The main question before the ECJ is whether the text of Article 101 TFEU is sufficiently precise to also catch cartel facilitators and not just the undertakings that have some kind of relationship on the market(s) where competition is restricted (paras. 18 and 20). This question is answered in the affirmative in a single paragraph:

“It should also be noted that the main objective of Article [101(1) TFEU] is to ensure that competition remains undistorted within the common market. The interpretation of that provision advocated by AC‑Treuhand would be liable to negate the full effectiveness of the prohibition laid down by that provision, in so far as such an interpretation would mean that it would not be possible to put a stop to the active contribution of an undertaking to a restriction of competition simply because that contribution does not relate to an economic activity forming part of the relevant market on which that restriction comes about or is intended to come about.” (para. 36)

This affirmative answer of the ECJ, therefore, is essentially, solely based on the full effectiveness of Article 101(1) TFEU. Granted, the judgment also reveals some arguments put forward by the Court to substantiate the conclusion. Firstly, there is something close to an a contrario reason given in paragraph 27: nothing in the wording of Article 101(1) suggests that it is only directed at the undertakings active on the market where competition is restricted. This is followed by a series of recitals (paras. 28 – 35) that regurgitate the Court’s case law to the effect that this shows that Article 101(1) has a very broad scope.

Secondly, the Court describes the role played by AC-Treuhand in the cartel to find that this role is ‘directly linked’ to anti-competitive objectives. This means that these activities cannot be qualified as ‘mere peripheral services’ unconnected with the restriction of competition (paras. 38, 39).

The final fluff added to the effet utile reasoning in paragraph 36 comes in paras. 40 – 45, where the Court explains the civil law doctrine that applies to Article 101. This means that there is room for a ‘gradual, case-by-case clarification’ of the rules by judicial interpretation, provided that this clarification was ‘reasonably foreseeable’. This reasonable foreseeability may still exist when the person involved must take legal advice (para. 42). Therefore, the Court finds that AC-Treuhand ‘should have expected’ its conduct to be incompatible with Article 101, in particular in the light of the broad scope of this provision. AC-Treuhand’s other grounds for appeal received similarly short shrift.

Commentary

There are five remarks we want to make regarding this judgment. The first and most obvious of all: the judgment that AC-Treuhand’s conduct was foreseeable, is rather questionable. There is a simple test to check the foreseeability: read Article 101 para. 1 TFEU, the facts of the case, and the judgment up to and including para. 35. When interpreting ‘parties’ as just the parties to the agreement or on the market, the ruling that a facilitator would also be liable for infringing art. 101 para. 1 TFEU was clearly unexpected, and thus not foreseeable. And even the Court seems to acknowledge this, as it only recites case law that involves cartelists. We, just as AG Wahl in para. 87 of his Opinion, expected the unexpected, as the Court (again) used its ‘classic’ effet utile argument, and solely on this basis came to its conclusion (or in reverse order). This, however, does not make the outcome ‘foreseeable’.

Secondly, AC-Treuhand is yet another wonderful example of the redundancy of learned Opinions. On 29 October 2015, Lenaerts, our fresh new ECJ president, related to this in an interview in the Dutch Financieel Dagblad (Financial Daily Newspaper):

“We do not do politics or (enact) monetary policy and are no master of our own agenda. The Court has to wait until a case is submitted to it. Each decision requires legally conclusive and compelling arguments. Within this straitjacket we have some discretion, I will not deny this, but we exercise this very cautiously”.

There is a dialectic between the conclusion of the Advocate General and the collegial judgment of the Court of Justice. The Advocate General, independently and entirely impartially, draws a conclusion in every major case. The Court follows, refines, or rejects the proposed conclusion. Hence, in fact the Advocates General deliver the concurring and dissenting opinions” [free translation by the authors].

It could be argued that the ECJ had not been able to properly establish the scope of Article 101 TFEU by declaratory judgment, in accordance with the principles of civil law on which the EU legal order is supposedly based, as there was no earlier case in which it could ‘clarify’ this. Hence, as per AC-Treuhand, the Court grasped the opportunity to state that facilitators also fall within 101’s scope. However, Lenaerts also opines ‘we do not need dissenting opinions in EU law, because we have Advocates General’. In our opinion, just having them is not enough. In AC-Treuhand II, AG Wahl puts forward sound arguments why ‘the facilitator’ should not be covered by Article 101 TFEU, but the Court does not, not even once, refer to his Opinion.

Wahl focuses on a necessary relation between the parties and the restriction of competition. His main point is that there is no competitive relation between AC-Treuhand and the cartel parties. In this regard, we could even point to the Court’s earlier case law referred to as authoritative by the Court itself in paragraph 30, where it reiterates the need to pursue ‘common objectives’ and ‘same objectives’ for the finding of participation in an infringement of Article 101 TFEU. It simply flies in the face of reality to hold that AC-Treuhand pursued the same objective as the chemical companies. AC-Treuhand’s objective was to maximise profits regarding its consultancy services, which is fundamentally different from the objective of restricting competition and raising prices. A reasoned argument by the Court to refute the reasoning put forward by the Advocate General would have added some foundation to Lenaerts’ claim that the EU can do without dissenting opinions.

The third comment is focused on the consequences of this decision. The commandment is clear: thou shalt not facilitate cartels. Now, what does ‘facilitate’ mean? Obviously, AC-Treuhand facilitated the cartel, but what if it only aggregated data or provided a place to meet? On a similar note, we are often told – by the lawyers involved – that they have a feeling that compliance courses also lead to more (refined) cartels (see also the point made by Wils, p. 13). Does that mean that a cartel that adapts its actions to the teachings of a compliance course was facilitated by the teaching lawyers? The other side of this coin would be the question what precautions a potential facilitator would have to take to avoid infringing Article 101? Should Alfonso – Chillin’Competition – Lamadrid now advise his parents that they should request the visitors to their hotel to declare that they will not hold cartel meetings in any of their rooms? In other words, the Court ‘introduced’ a new open-ended term into Article 101 TFEU, that can undoubtedly be further ‘clarified’. Perhaps the Court has more categories up its sleeve.

Another noteworthy consequence relates to the financial liabilities for the undertakings involved: who gets to pay what fine or which damages? For the cartelists, this is easy, and the point of departure is the gain derived from the cartel calculated on the basis of the value of the affected sales. This ensures some linkage between the fine imposed and the harm to competition. However, this does not work for a facilitator, which was rightly indicated by AC-Treuhand, considering that the Commission imposed a lump sum in this case. Speaking of harm, and causation, we will not even begin to open Pandora’s box of issues relating to damages claims against facilitators.

Fourthly, we return to the only relevant paragraph of the case, para. 36, and the doctrine or principle of full effectiveness. In many cases, the ECJ put forward this doctrine, and when it relies on it everybody instantly knows something is going to happen: expect the unexpected! However, a quick look behind the sensible words – especially in this case where the facts are clear – can cast doubt on the statement that the full effect would be negated when not including facilitators in Article 101. Firstly, it must be remembered that the cartelists are still very much in its scope. The only thing this ruling does, in terms of effectiveness, is adding one other party, the facilitator, to the list of potential leniency claimants. In addition, it may potentially remove the need to have a ring leader, resulting in more cartelists with an incentive to blow the whistle on the cartel. This increase in the number of leniency claimants may (significantly) increase the chance of one of those parties actually blowing the whistle, and may thus add to the already impressively effective leniency instrument. We could also agree that the specific role of AC-Treuhand in this case increased the cartel’s effectiveness. Prohibiting such actions will arguably increase the effectiveness of Article 101. So, yes, this ruling means more effectiveness, but to argue that the alternative negates the full effect, ignores reality.

The last remark we want to make is focused on the principles of civil law that underlie EU law, which determines that the legislator is the primary source of the law. This is in contrast with the common law tradition, in which judges can create new law. If a judge in a civil law system is in doubt about the fact whether its decision is creating new legal rules, it should leave matters to the legislator. This should have been the route taken by the Court, as the ‘foreseeability’ is rather questionable. It also shows the weakest point in the Court’s argument, which is the claim that if it did not decide the case in this way, “it would not be possible to put a stop to the active contribution of an undertaking to a restriction of competition”. This is simply not the case, as the legislator can create new legal rules that apply to these situations. Further, as AG Wahl points out, the UK, with its common law tradition, also took the legislative route to address the same problem.

So, in the end, the ECJ should have left it to the legislator to decide whether it wants to create new legal rules that include accomplices of 101 infringements. If the Court, however, found that the matter was of such importance or urgency that it should be dealt with instantly, it should have at least provided (to speak with Lenaerts) ‘conclusive and compelling legal arguments’. We see no such reasoning here.

Rick Busscher is a PhD student at the University of Groningen. His research is focused on EU Competition Law and on Political Philosophy.

Martin Herz is a teacher of European and Competition Law at the University of Groningen.

8 comments

  1. martinned

    Even though this is not the place for a detailed discussion, I do wonder: By what logic is something that is clearly an agreement in the contract law sense of the word not an agreement for competition law purposes? If anything, I would expect the competition law definition of an agreement to be broader than the contract law definition – after all it includes concerted practices. So what is the intuition behind excluding from the scope of cartel law a category of agreements in the contract law sense without any basis in the text of the Treaty requiring this result?

  2. Laurens Ankersmit

    I agree with you Martin, but from the more general perspective that the ECJ is given the explicit task through article 19 TEU to give meaning and uphold article 101 TFEU. I don’t see how the legislature should be involved a priori, also on the basis of legislation already adopted under 103 TFEU. It would have been nice of course if the Court explained the scope of application of 101 to cartel facilitators a bit more, but practice and academia can provide commentary before the Court has another go at this issue.

  3. Joop

    martinned: The question is not whether an agreement falls within the scope of Article 101; it is whether the agreement in question falls within the scope of an agreement with the object or effect of restricting competition in the sense of Article 101.

    Unfortunately your point on the competition law definition of agreement makes no sense whatsoever either. In the first place, the competition law definition of agreement does not include concerted practices. Concerted practices are a separate category in Article 101. Secondly, the fact that an agreement is an agreement in the sense of standard contract law is completely irrelevant. Again, the question is whether it is an agreement in restraint of competition.

    Laurens: nowhere in Article 19 TEU it is stated that the ECJ should “give meaning” and/or “uphold” articles or Treaties. It does not even state the ECJ has the explicit task of “interpreting” the Treaties, which you might mean when you say “give meaning”. Its sole explicit task is ensuring that *the law is observed* in the interpretation and application of the Treaties. I would reckon the principle of legal certainty is part of the law.

    I have no idea what you mean with “involving the legislature a priori”. A priori? Before the experience? Inserting fancy Latin doesn’t necessarily make a comment sensible..

    If what you mean is to say that the court can interpret Article 101 on the liability of facilitators, even if the legislature has not specifically made legislation on this point, you are obviously right (hint: the concept “a priori” is still totally misplaced). But this is not the question. The question is whether the court has reasonably concluded that agreements with facilitators are within the scope of Article 101. Do such facilitation agreements have the object or effect of restricting competition? Are they capable of restricting competition in themselves, which is a conditio sine qua non (to use a Latin phrase) for the applicability of both the object and the effects category in the first place.

    “It would have been nice of course if the Court explained the scope of application of 101 to cartel facilitators a bit more”. Excuse me, but I suggest that we first ask ourselves whether cartel facilitators should be included in the scope of application of Article 101, and only if the answer is yes, care about whether the Court has given the proper reasons for this conclusion. If weak arguments are given for right conclusions, “it would have been nice” if stronger arguments were provided. Weak arguments for highly disputable conclusions is not “not so nice”, it is a shame.

    I find it rather remarkable if not ignorant that you speak so easily about a judgment devoid of any logical, economic or even legal arguments, which stretches the scope of Article 101 to operators which could not possibly have foreseen this; in any case not on the basis of the Treaty text, not on the basis of any precedent, and hardly on the basis of competition law doctrine.

    Obviously, it is utter nonsense to mitigate “it would have been nice” even further by arguing that “practice and academia can provide commentary before the Court has another go”. What you’re basically saying is:

    “the Court can stretch the scope of articles without any reasoning required, even if there is no precedent and this factually creates a new rule not supported by the Treaty text, because well, academia can provide commentary and then the Court can try again”.

    This is how papers in a first year’s bachelor course are written: students can write a completely senseless paper without any arguments supporting the conclusion. Then the teacher can provide commentary, before the student has another go and hand in a second draft.

    The ECJ is not a first-year student. The ECJ is an immensely powerful court capable of creating new law. It does not deserve second drafts; it must provide top-notch arguments right away.

    It’s not a matter of what “would have been nice”. It’s a matter of avoiding the shame of a court acting as a first-year student.

    • Benedikt Pirker

      The editors decided to publish this comment as it contains some useful points and may thus advance the discussion. However, we would like to remind our readers and commentators that a legal argument should be phrased in polite terms and with civility. We reserve the right to not publish comments which are needlessly rude in order to protect the general moderate tone of discussion.

  4. martinned

    @Joop: I’m not sure why I’m responding to a comment that is written so rudely, but let me just point out that in Treuhand there was only one agreement, and the agreement was unquestionably anticompetitive by object. That said, I have considerable sympathy for the view that this judgement was so unforeseeable as to engage the rule that no unforeseeable penalties should be imposed, but that question is largely academic. Going forward, the law on this point is clear.

  5. Rick Busscher, Martin Herz, and Hans Vedder

    First of all, thank you for your comments. The general category in 101 is ‘cooperation’, which covers ‘agreements’, ‘decisions by associations of undertakings’, and ‘concerted practices’, and the category ‘agreement’ in competition law is indeed broader than in contract law. In the case of AC-Treuhand, there is definitely an agreement. Actually, we think there are two agreements: one between AC-Treuhand and the cartel (the facilitation agreement) and one between the cartel parties (the cartel agreement). The point that we make here is that for AC-Treuhand it was not ‘foreseeable’ that the ‘facilitation agreement’ would also have fallen within the scope of the concept of ‘agreement’ under 101. Until this point in time, this article had namely just been applied to ‘cartel agreements’. Or, to turn it around: the category ‘agreement’ under 101 is (apparently) very broad, and its boundaries are not clear. So, in light of AC-Treuhand, one can have doubts about whether this is still in accordance the lex certa principle.

    Next to that, if you start analysing the case from the framework of 101, something odd happens. Firstly, the ‘cooperation’ condition is fulfilled by the ‘facilitation agreement’ between AC Treuhand and the cartel. The second step is verifying whether this agreement affects trade between the MS. This seems not to be the case, as it is the ‘cartel agreement’ that does this. Also for the third step, a restriction of competition, either by object or effect, you have to make a switch, as AC-Treuhand, with the ‘facilitation agreement’, did not restrict competition. The object of this agreement was the ‘facilitation of a restriction of competition’. So if you state that there are two agreements, a switch between the different agreements seems to be made, which does not make sense from a 101 perspective.

    There is one other option however, as you point out martinned, which would be that the two agreements are so closely related that they should be perceived as one (cartel) agreement. If the Commission (and the Court) followed this path, it would have concluded first that AC-Treuhand was a party at the (cartel) agreement and thus violated 101, and then it had to provide an argument (this is not that difficult, a simple reference to the facilitating role of AC-T would do) that it should be excluded/not responsible/not liable to a certain extent, because it had a (mere) facilitating role. This is however not what happened, as the Commission imposed a lump-sum and there is no exclusion done in the judgment, so the Commission and the Court apparently did not follow this path.

    We hope this elucidates it a bit further.

    • martinned

      Thank, you that’s very helpful.

      That said, I’m not sure if I’m quite convinced. I would find it very artificial to separate the “cartel agreement” from the “facilitation agreement” when that facilitation agreement is an essential reason why the cartel is able to persist for so long. As far as I can tell, the participation of AC Treuhand was a condition sine qua non for the cartel agreement to function, or even for it to be concluded in the first place.

      As you suggested, I went back to the Commission’s prohibition decision, and I’m not convinced that they did differently than I suggest. Most obviously, in par. 5.3.1.2.3, which describes AC Treuhand’s role in the infringements, the key paragraphs are phrased as “AC Treuhand’s active involvement and central role in the (…) cartel”. Likewise, in the operative sections AC Treuhand is listed equally among the infringing parties, having participated in “a complex of agreements and/or concerted practices”. I see no evidence that the Commission distinguished between a “cartel agreement” and a “facilitation agreement”.

      In its 2008 judgement, the General Court seems to deliberately avoid the question:

      “152 Independently of the question whether the applicant was a ‘contracting’ party to the 1971 and 1975 agreements and whether the agency agreements concluded with the three organic peroxide producers were an integral part of the cartel in the wider sense, the Court notes that it has become apparent that the applicant actively contributed to the implementation of that cartel between 1993 and 1999. (…)

      154 Without there being any need to assess in detail the points of dispute between the parties regarding the actual extent of the applicant’s participation in the cartel, the Court concludes from the information set out in paragraph 153 above that the applicant actively contributed to the implementation of the cartel and that, contrary to its submissions, there was a sufficiently definite and decisive causal link between that activity and the restriction of competition on the organic peroxide market. (…)

      155 Accordingly, it is not relevant that the applicant was not formally and directly a contracting party to the 1971 and 1975 agreements. First, for the purposes of applying Article 81(1) EC, the question whether or not there is an agreement which is in writing, or otherwise explicit, between the participating undertakings is not decisive so long as they act in collusion (see paragraphs 115 to 123 above).”

      The ECJ went a little closer to your position, but still seems to equivocate:
      “39 In those circumstances, contrary to what is claimed by AC‑Treuhand, even though those service contracts were formally concluded separately from the commitments entered into by the producers of heat stabilisers among themselves, and notwithstanding the fact that AC‑Treuhand is a consultancy firm, it cannot be concluded that the action taken by AC‑Treuhand in that capacity constituted mere peripheral services that were unconnected with the obligations assumed by the producers and the ensuring restrictions of competition.”

      They all seem to draw a distinction between the “formal” situation whereby AC-Treuhand had a consultancy contract with this company or other, and its actual involvement in the infringement. Since cartel agreements don’t have to be in writing, or evidenced by any other document, the conclusion is that the “formal situation” does not prevent AC-Treuhand from being a party to the cartel agreement just like all the others.

  6. martinned

    Thank, you that’s very helpful.

    That said, I’m not sure if I’m quite convinced. I would find it very artificial to separate the “cartel agreement” from the “facilitation agreement” when that facilitation agreement is an essential reason why the cartel is able to persist for so long. As far as I can tell, the participation of AC Treuhand was a condition sine qua non for the cartel agreement to function, or even for it to be concluded in the first place.

    As you suggested, I went back to the Commission’s prohibition decision, and I’m not convinced that they did differently than I suggest. Most obviously, in par. 5.3.1.2.3, which describes AC Treuhand’s role in the infringements, the key paragraphs are phrased as “AC Treuhand’s active involvement and central role in the (…) cartel”. Likewise, in the operative sections AC Treuhand is listed equally among the infringing parties, having participated in “a complex of agreements and/or concerted practices”. I see no evidence that the Commission distinguished between a “cartel agreement” and a “facilitation agreement”.

    In its 2008 judgement, the General Court seems to deliberately avoid the question:

    “152 Independently of the question whether the applicant was a ‘contracting’ party to the 1971 and 1975 agreements and whether the agency agreements concluded with the three organic peroxide producers were an integral part of the cartel in the wider sense, the Court notes that it has become apparent that the applicant actively contributed to the implementation of that cartel between 1993 and 1999. (…)

    154 Without there being any need to assess in detail the points of dispute between the parties regarding the actual extent of the applicant’s participation in the cartel, the Court concludes from the information set out in paragraph 153 above that the applicant actively contributed to the implementation of the cartel and that, contrary to its submissions, there was a sufficiently definite and decisive causal link between that activity and the restriction of competition on the organic peroxide market. (…)

    155 Accordingly, it is not relevant that the applicant was not formally and directly a contracting party to the 1971 and 1975 agreements. First, for the purposes of applying Article 81(1) EC, the question whether or not there is an agreement which is in writing, or otherwise explicit, between the participating undertakings is not decisive so long as they act in collusion (see paragraphs 115 to 123 above).”

    The ECJ went a little closer to your position, but still seems to equivocate:
    “39 In those circumstances, contrary to what is claimed by AC‑Treuhand, even though those service contracts were formally concluded separately from the commitments entered into by the producers of heat stabilisers among themselves, and notwithstanding the fact that AC‑Treuhand is a consultancy firm, it cannot be concluded that the action taken by AC‑Treuhand in that capacity constituted mere peripheral services that were unconnected with the obligations assumed by the producers and the ensuring restrictions of competition.”

    Both the General Court and the ECJ seem to draw a distinction between the “formal” situation whereby AC-Treuhand had a consultancy contract with this company or other, and its actual involvement in the infringement. Since cartel agreements don’t have to be in writing, or evidenced by any other document, the conclusion is that the “formal situation” does not prevent AC-Treuhand from being a party to the cartel agreement just like all the others.

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