French feed firm’s appeal dismissal will incentivize settlement in cartel cases: legal experts

27-May-2015 - Last updated on 29-May-2015 at 07:10 GMT

The European General Court has found against, Timab, part of France’s Roullier Group, over an appeal it lodged challenging a fine – nearly €60 million - that the EU Commission had imposed on it due to its participation in a feed phosphates cartel.

The ruling shows the “wide discretion the Commission now has in terms of fining and further investigating cartel participants that withdraw from settlement arbitrations,” David Wood, anti-trust law expert and partner in Brussels based legal firm, Gibson, Dunn & Crutcher, told FeedNavigator.

He said it also increases the number of uncertainties that already exist around the settlement of cartel cases in Europe.

Daniel Geey and John Cassels, specialists in EU competition and regulation law at FieldFisher, in a comment on the case, said the judgment is appealable to the Court of Justice.

But they said those entering into settlement discussions with the Commission will now be “alive to the possibility of increased fines which may well incentivize settlement and lead to less 'last-minute' hybrid cases.”

Background to Timab’s appeal

A number of feed phosphate additive companies including Tessenderlo, FMC Corp and Ercros, were fined a total of €175m ($227m) in July 2010 over a 35-year long cartel for price fixing and market sharing in most of the European Union.

Yara International and Kemira Oyj received immunity from a fine.

Timab was the only member of the cartel that did not use the Commission’s cartel settlement procedure, having withdrawn from settlement talks in protest over the fine the EU regulator had originally indicated it would be levying at the company - €41 to €44M.

The Commission instigated a standard procedure against Timab and a fast-track one with the other members of the feed phosphate cartel.

However, in spite of the EU regulator downgrading the duration of the firm’s role in the cartel from 26 to 11 years in its final ruling, the penalty ultimately levied against Timab was €59.8m - around 25% higher than that originally proposed by the Commission.

Company claimed it was hit for exiting talks

Timab alleged the fine indicated it was being punished due to its decision to opt out of the settlement talks.

It appealed the decision saying the penalty should have been no more than 10% over the upper boundary of the Commission's estimate during the settlement talks.

But last week – 20 May - the General Court denied Timab's plea, finding there had been no infringement of that firm’s rights of defense, and that it had not been penalized for withdrawing from settlement.

The court found the Commission used the same calculation methodology to fine all cartel members.

It also said the EU watchdog had applied reductions that it was not required to and that the standard procedure had uncovered new information which led to the fine being readjusted upwards.

“The Court notes that the Commission correctly investigated the case during settlement discussions, conducted a proper analysis and assessment of the anti-competitive practices attributed to the Roullier group and did not err in calculating the amount of the fine,” said the ruling.

Cartel settlement procedure

The Commission established the settlement procedure in 2008 in order to give companies who were being investigated for cartel involvement the possibility of a 10% reduction in their fine, if they admitted their role in various competition law breaches and waived certain procedural rights.

The benefit to the Commission is purported to be quicker, simpler and more streamlined investigations with more cost effective use of its resources.