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Competition: Commission welcomes Court of Justice judgment in zinc phosphate case
Commission Européenne - MEMO/07/232 07/06/2007
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Brussels, 7th June 2007
The European Commission welcomes today’s judgment by the European Court of Justice (case C-76/06 P) dismissing the action by Britannia Alloys & Chemicals Ltd against the judgment of the European Court of First Instance of 29 November 2005 (case T-33/02). In the latter judgement, the Court of First Instance had dismissed the action brought by Britannia Alloys & Chemicals Ltd against the Commission decision of 11 December 2001 fining the company €3.37 million for participating in a cartel in zinc phosphate. The Court of Justice has now confirmed the original findings of the Court of First Instance, and dismissed the appeal in its entirety. The fines imposed by the Commission in the original decision have now been definitively upheld.
On 11 December 2001, the Commission fined six European companies a total of
€11.95 million for participating in a Europe-wide cartel between 1994 and
1998, through which they fixed the price and shared out the market for zinc
phosphate, an anti-corrosion mineral pigment widely used for the manufacture of
industrial paints. The companies fined were the UK companies Britannia Alloys
& Chemicals Ltd
(€3.37 million), James Brown Ltd (€0.94 million) and Trident Alloys
Ltd (€1.98), Germany’s Heubach GmbH & Co. KG (€3.78
million), France's Société Nouvelle des Couleurs Zinciques S.A.
(€1.53 million) and the Norwegian company Waardals Kjemiske Fabrikker A/S
(€0.35 million). Part of the evidence on the cartel was provided to the
Commission by the companies involved, under EU rules providing for full or
partial immunity from fines for companies that co-operate with the Commission in
cartel cases (1996 Leniency Notice). The companies’ conduct was a very
serious infringement of the competition rules, as set out in Article 81 of the
European Union Treaty and Article 53 of the EEA-Agreement (see IP/01/1797).
The judgment of the Court of Justice
In February 2006, Britannia Alloys & Chemicals Ltd brought an appeal against the judgment of the Court of First Instance claiming in essence that the Court of First Instance committed various errors in law by holding that the Commission could apply such a method of calculation. It asked the Court of Justice (ECJ) to rule that, in so doing, the Court of First Instance infringed Article 15(2) of Regulation No 17 and the principles of equal treatment and legal certainty in the judgment under appeal.
In today's judgement, the Court of Justice rejects all the applicant's arguments.
First, the Court holds that in the present case, the company concerned had not achieved any turnover for the business year preceding the adoption of the Commission decision. Therefore, the Commission was entitled to refer to another business year – the year ending 30 June 1996 - in order to be able to make a correct assessment of the financial resources of that company and to ensure that the fine has a sufficient deterrent effect.
Secondly, as regards the principle of equal treatment, the ECJ holds that when calculating fines on companies which participated in a cartel, the Commission has the discretion to use differential treatment of the companies in this area. The ECJ also concluded that the CFI correctly held that Britannia was not in a comparable situation to that of the companies referred to in previous Commission decisions since it had not achieved any turnover in the business year preceding the adoption of the contested decision. In those circumstances, the Commission was justified in treating Britannia differently from those undertakings.
Finally, as regards the principle of legal certainty, the ECJ supported the finding that cessation of the company's commercial activities in the zinc sector would not result in its escaping a fine for the infringement committed.
The ECJ has now confirmed the original findings of the Commission as already upheld by the CFI. The fines imposed by the Commission in the original decision have now been definitively upheld.
Zinc phosphate is widely used as an anti-corrosion mineral pigment in protective coating systems. Paint manufacturers use it for the production of anti-corrosive industrial paints for the automotive, aeronautic and marine sectors. During the infringement period, the annual market was valued approximately €16 million in the European Economic Area – the 15 EU member states and Norway, Iceland and Liechtenstein. Whilst the companies concerned were of a modest size, they accounted for over 90% of the EEA-wide market for zinc phosphate.
In May 1998, the Commission carried out on-the-spot investigations at the premises of Heubach GmbH & Co. KG, Société Nouvelle des Couleurs Zinciques S.A, Trident Alloys Ltd and Waardals Kjemiske Fabrikker A/S. The investigation in Norway was carried out on behalf of the Commission by the EFTA Surveillance Authority.
During the infringement period (1994-1998), the cartel participants decided to maintain the “status quo” on quantities of zinc phosphate supplied in Europe. It was decided to attribute to each member of the cartel a reference market share to be complied with. The market shares were defined in reference to the 1991-1993 sales figures in France, Germany, the United Kingdom and Scandinavia. During the cartel meetings, the cartel participants circulated lists of “recommended” minimum prices and shared out specific customers. In order to ensure that market shares were adhered to, a monitoring system was also set-up. The cartel participants held regular meetings, sixteen of which were clearly identified by the Commission.
The companies’ conduct was a very serious infringement of the competition rules, as set out in Article 81 of the European Union Treaty and Article 53 of the EEA-Agreement.
 In March 1997 the zinc phosphate activities of Britannia Alloys took the name of Trident Alloys Ltd following a Management Buy Out. The new company continued its involvement in the illegal practice. Since Britannia Alloys existed, as a 100-percent subsidiary of M.I.M. Holdings, both it and Trident Alloys were the addresses of this decision.