The principle of fault in EU competition law: C-681/11 Schenker & Co and others

 In some American movies prison dialogues often go like this: Question: ‘What are you in for?’ Answer ‘Lawyer screwed me, I’m innocent!’ In C-681/11 Schenker & Co and others this was more or less the defence a couple of Austrian transport companies came up with after being fined for infringing competition rules. Those companies had received some dubious legal advice which effectively gave them the green light for a price fixing agreement. The case contains some pretty interesting questions on whether undertakings can be fined if they have not culpably infringed competition law. In other words, if companies have taken the necessary precautions to assure themselves that their conduct was legal, can they still be fined because the authorities made a different assessment? The particularly noteworthy feature of this case are the different approaches taken by the CJEU (focussing more on what people should know about the law) and the AG (focussing more on what people can expect from legal experts and authorities).

 AG Kokott’s elaborate Opinion

The Advocate General’s Opinion (Kokott) is quite elaborate and a good read. I’ll briefly highlight the central parts of the AG’s  Opinion and then go into the judgment. The main question, according to AG Kokott was ‘whether the concept that an error of law as to the wrongfulness of an act precludes liability, which is familiar from general criminal law, is recognised in European competition law (para. 38).’ The Advocate General subsequently proceeds to lay down a number of criteria to assess whether ‘the error committed by the undertaking regarding the lawfulness of its market behaviour was unavoidable’. As a preliminary point she notes that ‘such an unavoidable error of law would appear to occur only very rarely. It can be taken to exist only where the undertaking concerned took all possible and reasonable steps to avoid its alleged infringement of EU antitrust law. (para 46)’ The Opinion is then split in two parts:

  • Assessing the attributability of the error of law in relation to the undertaking’s expectations created by legal advice;
  • Assessing the attributability of the error of law in relation to the undertaking’s expectations created by actions of national competition authorities.

In relation to legal advice Kokott noted that the enforcement system now in place with Regulation 1/2003 has fundamentally changed things. It is no longer possible to be granted authorisation or negative clearance by Commission decisions. Therefore, according to the AG, ‘it is not acceptable, on the one hand, to encourage undertakings to obtain expert legal advice but, on the other, to attach absolutely no importance to that advice in assessing their fault in respect of an infringement of EU antitrust law. If an undertaking relies, in good faith, on – ultimately incorrect – advice provided by its legal adviser, this must have a bearing in cartel proceedings for the imposition of fines. (para. 58)’ For the AG, only under certain strict conditions can legal advice lead to precluding liability.

Basically, the undertaking must rely in good faith on the legal advice: ‘if the facts justify the assumption that the undertaking relied on a legal opinion against its better judgment or that the report was tailored to the interests of the undertaking, the legal advice given is irrelevant from the very outset in assessing fault for an infringement of the rules of European competition law’ (para. 62). Therefore, the advice must come from an independent (and not an inhouse) lawyer specialised in EU competition law, based on an accurate description of the facts, and the advice must be based on EU case law and other relevant documents. Furthermore, the advice must not be manifestly incorrect and in case of an unclear legal situation the undertaking bears the legal risk if it wishes to proceed.

In relation to actions of national competition authorities the AG notes that they play an important role in the decentralized form of EU competition law enforcement and therefore ‘give undertakings operating in the internal market important indications as to the understanding of the applicable legal situation in European competition law (para. 84)’. She notes that based on the principle of legitimate expectations ‘it is by no means impossible for undertakings to rely upon decisions taken by national authorities and courts in matters of EU law. Furthermore, expectations created by the statements made by such State authorities appear to be more legitimate than expectations created by the opinions of private legal advisers (para. 85).’ However, undertakings can only rely on those expectations if the following minimum requirements are met: it must concern decisions by NCA’s or courts which have the power to apply EU competition law (note para. 88 here), the decision must be based on all relevant information, the decision must not be manifestly incorrect, and the undertaking must act in good faith (para’s 87-96).

The judgment

The CJEU’s judgement is quite succinct and focuses much more on what the undertaking itself should have known about the law as opposed to focussing on the quality of the legal advice as the AG did.  For the CJEU, an infringement of EU competition law is committed ‘intentionally and negligently

‘where the undertaking concerned cannot be unaware of the anti-competitive nature of its conduct, whether or not it is aware that it is infringing the competition rules of the Treaty’.

Therefore, the fact that the undertaking concerned has characterised wrongly in law its conduct upon which the finding of the infringement is based cannot have the effect of exempting it from imposition of a fine in so far as it could not be unaware of the anti-competitive nature of that conduct.’ (para. 37 and 38)

The CJEU then addresses the gigantic elephant in the room by stating that

‘It is apparent from the order for reference that the members of the SSK coordinated their behaviour in relation to their tariffs for domestic consolidated consignment transport throughout Austria. Undertakings which directly coordinate their behaviour in respect of their selling prices quite evidently cannot be unaware of the anti-competitive nature of their conduct. It follows that, in a situation such as that at issue in the main proceedings, the condition in the first subparagraph of Article 23(2) of Regulation No 1/2003 is met.’

While this is very true of course, I am a bit puzzled by the subsequent paragraphs of the judgment relating to the role of NCA’s and the assistance they can give to undertakings in providing legal certainty. The CJEU refers to its Tele 2 judgment and states that since NCA’s cannot adopt negative decisions ‘they cannot cause undertakings to entertain a legitimate expectation that their conduct does not infringe that provision.’ (para. 42) This appears to be the final nail in the coffin for any kind of individual guidance by NCA’s towards undertakings. As to the legal advice by lawyers, the CJEU is even more dismissive: ‘legal advice given by a lawyer cannot, in any event, form the basis of a legitimate expectation on the part of an undertaking that its conduct does not infringe Article 101 TFEU or will not give rise to the imposition of a fine.’

I personally wonder if in other cases the approach chosen by the CJEU will lead to different outcomes. Focussing more on what people ought to know about the law might lead the CJEU to actually lower the bar in really complex assessments that require a thorough knowledge of the law. Unfortunately, the law is not always as clear as we want it to be, not least because of difficult dilemmas faced by courts and conflicting case law.