The General Court on procedural rights in “hybrid” settlement cases

The General Court has reaffirmed the European Commission’s obligation of impartiality and the importance of the presumption of innocence when entering into a “hybrid” settlement decision (T-433/16 Pometon v Commission). The EC must ensure that its settlement decision does not compromise the procedural rights of non-settling parties involved in an ongoing investigation.

Although the GC dismissed Pometon’s appeal in this case, the decision serves as an important reminder of the procedural rights of non-settling parties. The judgment is in line with the ICAP ruling of November 2017, in which the GC confirmed that settlement decisions should not pre-judge the outcome of the EC’s investigation in relation to non-settling parties. [1]   

Background and settlement

In June 2010, the EC carried out unannounced inspections at the premises of five producers of steel abrasives in the EEA and subsequently opened an investigation into the alleged cartel behaviour of all five companies.

In 2014, the EC adopted a decision under its settlement procedure which concerned four of the five cartel participants (Ervin, Winoa, Metalltechnik Schmidt and Eisenwerk Würth). The EC’s settlement procedure has been in place since June 2008 and allows parties to a cartel investigation to admit liability for their involvement in the cartel in exchange for a shorter administrative procedure plus a 10% reduction in fine.

The fifth participant, Pometon, opted out of the settlement procedure and the EC continued its investigation into Pometon’s behaviour. In 2016, Pometon was fined EUR 6.2 million by the EC for price fixing in relation to the same cartel.

“Hybrid” settlement

These facts give rise to what we refer to as a “hybrid” settlement. This is where alleged cartel participants engage in settlement discussions with the EC but one or more of the alleged participants opt out of the procedure. The EC may still settle with the willing parties and then follow the 'normal' procedure for the parties that opt out of settlement.

Because of the split nature of hybrid cases, there is a time lag between the decision resulting from the (procedurally more efficient) settlement procedure and the “normal” infringement decision. This can give rise to issues concerning the rights of defence of non-settling parties, because non-settling parties will be mentioned in the EC’s settlement decision, and guilt may be implied by association, before they have been given adequate opportunity to defend themselves.

The appeal

Pometon appealed against the EC’s fining decision alleging, inter alia, that its rights of defence had been infringed. Pometon argued that the EC had ascribed specific conduct to it in the context of its settlement decision which meant that the EC had entered into the fining decision against Pometon without being able to impartially assess Pometon’s position or the arguments put forward in its defence.

The GC on the presumption of innocence

In its judgment, the GC recalled that the principle of the presumption of innocence applied to procedures relating to infringements of the competition rules. It also recalled the fundamental obligation of impartiality which binds the EC when drafting a settlement decision in the context of a “hybrid” procedure.

What this means is that the EC must take necessary precautions to ensure that the decision, as drafted, does not affect the procedural rights of the party or parties that opted out and are subject to an ongoing investigation. The EC must distinguish, as clearly as possible, between the legal position of the companies that have settled, and that of the company which has exercised its right to withdraw from the settlement procedure.

The EC met its obligations in the present case

The GC found that the EC did comply with these requirements. In its settlement decision, the EC expressly excluded Pometon from its finding of an infringement on the grounds that it had chosen not to pursue the settlement and therefore the case against it was ongoing. There was no indication in the settlement decision that the EC had concluded that Pometon had infringed Article 101. The other cartel participants were the addressees of the decision, not Pometon.

The EC did mention Pometon in its decision, but the GC concluded that the duty of impartiality cannot be extended to mean that any reference to a non-settling party in the settlement decision is prohibited.

Implications of the Pometon’s decision

Although Pometon lost its appeal, the GC’s judgment should not be viewed as a step back from European case law on the presumption of innocence in “hybrid” cases. On the contrary, it is in line with ICAP and the GC has stressed that settlement decisions should not pre-judge the outcome of the EC’s investigation into non-settling parties.

[1]    The ICAP judgment is currently on appeal to the Court of Justice of the EU but in relation to a separate legal issue.