On 18 March 2021, the Court of Justice of the European Union (“CJEU”) largely dismissed the appeal by Pometon against the General Court’s (“GC”) judgment, which previously partially dismissed Pometon’s appeal against the European Commission (“Commission”) steel abrasives cartel decision.
Following an immunity application by Ervin, the Commission carried out dawn raids at the premises of various producers of steel abrasives (i.e. steel particles used in the steel, automotive, metallurgy, petrochemical and stonecutting industries for cleaning or enhancing purposes). Early in 2013, the Commission initiated formal cartel proceedings with a view to engaging in settlement discussions with Ervin, Winoa, Metalltechnik Schmidt (“MTS”), Eisenwerk Würth and Pometon. The Commission adopted a Settlement Decision on 2 April 2014, as Ervin, Winoa, MTS and Eisenwerk Würth settled in exchange for reduced fines up to a total of approximately 30 million euros.
Although Italian steel abrasives firm Pometon initially confirmed its willingness to engage in settlement discussions, it subsequently withdrew from that procedure. On 25 May 2016, two years after the settlement decision, the Commission adopted a Prohibition Decision against Pometon, concluding that between 2003-2007, Pometon had participated in the cartel. The Commission fined Pometon approximately 6.2 million euros. The steel abrasives decisions were the result of a so-called staggered hybrid settlement procedure, which involves the adoption of a settlement decision, later followed by a prohibition decision.
Pometon appealed the Prohibition decision before the GC arguing that references to its conduct in the settlement decision breached its rights of defence and that the Commission had failed to conduct a proper investigation. In its judgment of 28 March 2019, the GC largely dismissed the appeal. The GC ruled that the settlement decision did not breach Pometon’s rights of defence, as the duty of impartiality does not preclude any reference to a non-settling party in settlement decisions. The GC noted that the settlement decision did not contain a legal qualification of the role of Pometon, but remained limited to a description of the facts. The GC also confirmed the legitimacy of the Commission’s investigation, particularly concerning its analysis that the cartel’s setting of a scrap surcharge constituted a single anti-competitive object to influence pricing. The GC did, however, find that the Commission failed to sufficiently substantiate the calculation of the fine, in particular the reduction, and reduced Pometon’s fine by almost 40 % down to 3.87 million euros.
Pometon appealed the GC’s judgment before the CJEU.
The CJEU’s assessment
In its judgment of 18 March 2021, the CJEU rejected Pometon’s appeal of the finding of an infringement, but the court set aside the parts of the judgment of the GC by which the GC set the amount of the fine imposed on Pometon.
The CJEU largely dismissed the appeal, and did uphold the principle of the staggered hybrid settlement approach. It confirmed the judgment of the GC, reiterating that the Commission had not breached Pometon’s rights of defence by referring to it in a settlement decision that predated its prohibition decision. Pometon was not an addressee of the EC’s decision, it was subject to a separate proceeding and the references to Pometon were used exclusively to establish the liability of the other cartel participants (Pometon para 73). The Commission did not go to great lengths in describing the non-settling firm’s behaviour in the settlement decision, contrary to its settlement decision in the Yen interest rate derivatives cartel with respect to ICAP, as discussed in our article on the GC’s ICAP judgment.
The CJEU pointed out that, according to the findings of fact made by the GC, Pometon and Winoa were in different situations (Pometon para 150). The CJEU refers to the findings of the GC, which stated that Pometon had “a more limited role overall in the cartel” than Winoa, that “its influence in the infringement was substantially less” than that of Winoa and that “its turnover did not reach one third of Winoa’s” (Pometon para 150).
The CJEU held that the GC judgment did not adequately explain why it was consistent with the principle of equal treatment to grant Pometon a rate of reduction identical to that granted to Winoa, despite the contrasting factual situations between the two firms (Pometon para 152). The CJEU therefore upheld this ground of appeal relating to the duty to state reasons and principle of equal treatment and set aside the part of the GC judgment determining the fine. In addition, the CJEU issued a final judgment on the fine to be imposed on Pometon. Specifically, the CJEU reduced Pometon’s fine to 2.63 million euros, making a comparison to the position of MTS, “in so far as those two undertakings played a relatively limited role in the cartel and in so far as their overall weight in the cartel was also proportionally low having regard to the value of their specific sales in the EEA” (Pometon para 163).
Firstly, the CJEU’s findings stresses the importance of the principle of equal treatment and the obligation for the Commission to properly substantiate the calculation of the fine.
Secondly, and more importantly, the CJEU took a position on the principle of impartiality and the presumption of innocence in hybrid settlement procedures. The steel abrasives investigation followed a hybrid settlement procedure, leading to the adoption of a settlement decision and subsequently a prohibition decision, and the appeal’s pleas over the fairness of that procedure have wider relevance. As mentioned in a previous blogpost, it has been made clear by the GC that staggered hybrid settlement procedures are possible, insofar as the settlement decision does not contain a legal qualification of the role of the non-settling parties, but remains limited to a description of the facts in that respect. In its judgment, the CJEU confirms this position by stating that in complex criminal proceedings “references by the competent court to the participation of third persons, who may later be tried separately, may be indispensable for the assessment of the guilt of those who are on trial separately.” (Pometon para 63). Further, the CJEU stresses the importance of only referring to non-settling parties when necessary (“the relevant court should avoid giving more information than necessary for the assessment of the legal responsibility of those persons who are accused in the trial before it”) and the choice of words (“the reasoning of judicial decisions must be worded in such a way as to avoid a potential prejudgment about the guilt of the third parties concerned, capable of jeopardising the fair examination of the charges brought against them in the separate proceedings”) (Pometon para 63). The CJEU then states that this is, mutatis mutandis, relevant for hybrid procedures (Pometon paras 64-65). The CJEU thus establishes a coherent framework to be adopted for future hybrid settlement procedures. In particular, it provides the Commission with a roadmap to ensure it does not infringe fundamental rights when adopting such procedures. However, caution will likely prevail in relation to such complex cases. A sudden influx of hybrid settlement cases flowing from this judgment is therefore unlikely.
The authors would like to thank Elliot Moore, secondee trainee solicitor in the London office, for his support in drafting this post.