On 12 November 2014, the Court of Justice of the European Union ("ECJ") handed down its judgment on the appeal brought by Guardian Industries Corp. and Guardian Europe Sàrl ("Guardian") against a General Court ("GC") judgment that dismissed in its entirety their appeal against a 2007 European Commission ("Commission") decision fining them for their participation in a cartel in the flat glass sector from 20 April 2004 to 22 February 2005. The ECJ partly set aside the GC's judgment and reduced the fine imposed on Guardian by 30%, i.e., from € 148 million to € 103.6 million.
In its November 2007 decision, the Commission imposed fines totalling approximately € 487 million on four flat glass producers - Asahi, Guardian, Pilkington and Saint-Gobain - for their participation in a cartel. The Commission found that the companies had participated in a single and continuous infringement of Article 101 TFEU, which covered the territory of the EEA, and consisted in the fixing of price increases, minimum prices, target prices, price freezes and other commercial conditions in their sales to independent customers of four categories of flat glass products used in the building industry, as well as in the exchange of commercially sensitive information. Guardian was fined € 148 million for its participation in the cartel. The decision was appealed before the GC, but Guardian's appeal was dismissed in its entirety (see VBB on Competition Law, Volume 2012, No. 10, available at www.vbb.com).
In its appeal, Guardian challenged the methodology used by the Commission to calculate the amount of the fine. Guardian argued the fact that the internal sales of other infringing vertically-integrated undertakings (e.g., Saint-Gobain) were not accounted for on the same basis as sales to third parties breached the principles of equal treatment and non-discrimination. The ECJ sided with Guardian and recalled that the Commission, for the purpose of fixing the amount of a fine, could have regard to both the total turnover of the undertaking and to the proportion of that turnover that the goods subject of the infringement account for. However, the Court held that the Commission's discretion is limited by a number of rules, including those listed in its 2006 Fining Guidelines. Specifically, the ECJ referred to point 13 of the Fining Guidelines, which states that in determining the basic amount of the fine, the Commission must take the value of the undertaking's sales of goods and services to which the infringement directly or indirectly relates in the relevant geographic area. According to the ECJ, the objective of this point is to adopt, as the starting point for the calculation of the fine imposed on an undertaking, an amount which reflects the economic significance of the infringement and the relative size of the undertaking's contribution to it.
Taking into account these objectives, the ECJ considered that a distinction should not be drawn between sales depending on whether they are made to independent third parties or made to entities belonging to the same undertaking, even where the Commission has not made any finding that internal sales were affected by the cartel. To ignore the value of the sales belonging to that latter category, as done by the Commission, would give an unjustifiable advantage to vertically integrated companies, given that excluding internal sales from the relevant turnover would reduce their relative weight in the infringement to the detriment of the other undertakings. The ECJ considered that such an exclusion would contradict the objectives pursued by point 13 of the Fining Guidelines. As a result, in accordance with its power of unlimited jurisdiction, the ECJ reduced the amount of the fine imposed on Guardian by 30%, from € 148 million to € 103.6 million to place Guardian on an equal footing with the vertically integrated companies whose internal sales had not been counted in the calculation of the fine.
The ECJ's judgment is significant in two respects. First, the ECJ finds that in calculating fines the Commission is bound under the 2006 Fining Guidelines to treat a party's internal sales in precisely the same way as external sales in order to avoid discrimination between vertically integrated and non-vertically integrated companies. Second, the ECJ dismissed the Commission's arguments that, even if it been incorrect in excluding the internal sales of the vertically integrated companies in its calculation of the fine, this did not affect Guardian's position given that it had not been the subject of this error. The ECJ simply ruled that, having found the Commission's approach illegal, it was entitled to substitute its own appraisal for that of the Commission. In so doing, the ECJ attached primary importance to the principle of equal treatment in the calculation of the fine.
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