Fine in Phosphates Cartel Case Confirms Need to Carefully Evaluate European Commission Settlement Proposals

Businessman's hands exchanging euro on blue background, closeup shot Fine in Phosphates Cartel Case Confirms Need to Carefully Evaluate European Commission Settlement Proposals

On January 12, 2017, the Court of Justice of the European Union (“CJEU”) dismissed Roullier group’s appeal and thereby confirmed a fine of €59,850,000 imposed by the European Commission (“EC”) in the phosphates cartel case.[1] This blog post summarizes the decision and discusses the CJEU’s reasoning, which provides valuable guidance to a firm in a cartel investigation that is evaluating a settlement proposal from the EC. In particular, the firm must weigh the fact that, pursuant to the CJEU’s decision, the EC may ultimately impose fines greater than those it proposed in a rejected settlement offer, even if it determines that the firm’s cartel participation was significantly less than it thought at the time of settlement discussions.

I. The Phosphates Cartel Case: Long-Term and Serious Anticompetitive Practices

In 2010, the EC imposed fines amounting to €175,647,000 on thirteen companies that had participated in a phosphate price-fixing cartel and divided the market for phosphate used in animal feed. These companies operated both throughout Europe and in various individual European states for over thirty years. Among these companies, only two–Timab Industries SA and Compagnie Financière et de Participation Roullier (both Rouiller group undertakings)–decided not to settle with the EC.[2]

The CJEU, and previously the General Court[3], confirmed the EC’s decision asserting that, from 1993 to 2004, Roullier group participated in an anticompetitive agreement prohibited by article 101 of the Treaty on the Functioning of the European Union (“TFEU”). The EC’s investigations also revealed that the thirteen companies shared sales quotas for regions and customers, coordinated prices and, in some cases, agreed on the conditions of sale.

II. Termination of Settlement Discussions With Some But Not All Undertakings

The phosphates cartel is the first case in which the EC entered into a “hybrid” settlement by settling with some but not all alleged infringers and followed both settlement and ordinary procedures.

Pursuant to EU Regulation n° 773/2004,[4] the EC proposed a settlement to the thirteen accused infringers. Pursuant to the Commission Notice on the conduct of settlement procedures, the EC informed each company of “the essential elements taken into consideration so far, such as the facts alleged, the classification of those facts, the gravity and duration of the alleged cartel, the attribution of liability, an estimation of the range of likely fines, as well as the evidence used to establish the potential objections.”[5]

According to the EC, the anticompetitive behavior occurred between 1978 and 2004. On that basis, the EC estimated a range of fines from €41 to €44 million based on Roullier group’s participation in the cartel.[6] Unlike the other undertakings taking part in the cartel, Roullier group rejected the settlement offer, partially disputed the statement of objections and, in the alternative, challenged the amount of the fine.

III. Unfortunate Outcome: A More Substantial Fine Imposed

As a consequence of the termination of settlement discussions with Roullier group, the EC was required to follow its ordinary procedure rules.

Although Roullier group succeeded in demonstrating that its participation in the cartel did not begin until 1993, which reduced the duration of its participation from 26 to 11 years, the EC imposed a fine of €59,850,000 on Roullier group–substantially more than the maximum fine the EC had offered during settlement discussions.[7]

Roullier group’s appeals before the General Court and the CJEU have been rejected and the amount of the EC’s fine has been confirmed. The CJEU specifically held that the EC could impose a fine larger than the upper end of a range of potential fines it had proposed during settlement discussions.

In retrospect, Roullier group was faced with something of a Hobson’s choice: accept the EC’s findings (including as to the duration of Roullier group’s cartel participation) and the EC’s proposed fine range, or challenge the EC’s findings and in so doing take the chance that the EC might impose an even greater fine. As things turned out, the EC imposed–and the CJEU confirmed–a fine larger than that the EC had proposed during settlement discussions, even though it determined that Roullier group had not participated in the cartel for its entire duration. In short, the Roullier group was required in 2017 to pay a fine between 27% and 32% higher than it could have paid by settling with the EC in 2010.

Companies facing settlement offers from the EC should balance the range of potential fines with the consequences of challenging the EC’s findings, such as the loss of fine reductions or the risk of private damages actions. Even if companies are sure that their role in the challenged conduct was far less than the EC suspects, they should consider these consequences in order to limit the financial costs related to their alleged anticompetitive practices.

[1] EUCJ, January 12, 2017, Timab Industries SA and Compagnie Financière et de Participation Roullier (CFPR) v. Commission, C-411/15P.

[2] EC, July 20, 2010, Animal Feed Phosphates, Case COMP/38866.

[3] General Court, May 20, 2015, Timab Industries and Compagnie Financière et de Participation Roullier (CFPR) v. Commission, T-456/10.

[4] UE Regulation n° 773/2004 of April 7, 2004 relating to the conduct of proceedings by the EC, Article 10 bis.

[5] Commission Notice on the conduct of settlement procedures in view of the adoption of Decisions pursuant to Article 7 and Article 23 of Council Regulation (EC) No 1/2003 in cartel cases, July 2, 2008, n° 2008/C 167/01, points 16 and 17.

[6] « Transiger ou ne pas transiger? Telle est la question… », January 17, 2017, Laure-Anne Willermoz, LamyLine.

[7] EC, July 20, 2010, Animal Feed Phosphates, Case COMP/38866.