BRIEFING

GENERAL COURT ANNULS FINES IN AIRFREIGHT CARTEL JANUARY 2016

● A NEW TWIST IN THE AIRFREIGHT CARTEL SAGA – IMPLICATIONS

Introduction The General Court of the EU has annulled fines on several airlines who were alleged “...IT IS INEVITABLE THAT to have participated in an airfreight cartel. We await the European Commission’s CURRENT COURT (the “Commission”) reaction: will it appeal further to the Court of Justice of the EU, ACTIONS AGAINST THE or will it re-adopt its decision on a sounder legal footing? In either case, it is inevitable that current court actions against the carriers for damages will be CARRIERS FOR DAMAGES significantly delayed. In this briefing, we summarise and comment on this latest WILL BE SIGNIFICANTLY development. DELAYED.” The ruling On 16 December 2015, the EU’s lower-tier General Court (the “Court”) allowed the appeal brought by several airlines whom the Commission had found had participated in the airfreight cartel. The Court has annulled fines of approximately €790 million.1

The Commission’s investigation began when it received an immunity application in 2005 from Deutsche (and its subsidiaries) concerning anti-competitive contacts that occurred between several airlines active in the airfreight market. The alleged anti-competitive contact involved the carriers coordinating their actions on surcharges for fuel and security without discounts over a six year period. On 9 November 2010, the Commission adopted a decision whereby it found a “single

1 Judgments in Cases T-9/11 , T-28/11 Koninklijke Luchtvaart Maatschappij, T-36/11 , T-38/11 Airways, T-39/11 Airlines International, T-40/11 Latam Airlines Group and Others, T-43/11 and Others, T-46/11 Deutsche Lufthansa and Others, T-48/11 , T-56/11 SAS Cargo Group and Others, T-62/11 -KLM, T-63/11 Société Air France and T-67/11 Martinair Holland v Commission (not yet published).

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and continuous”2 infringement of Article 101 of the Treaty on Functioning of the European Union, deriving from several carriers coordinating their behaviour in the pricing of freight services.3 It fined all of the carriers except Lufthansa and its subsidiaries, as they were granted immunity.4

These carriers (except ) appealed against the fines. In its judgment, the Court upheld the carriers’ argument that the Commission’s decision did not allow them to determine the nature and scope of the infringement/s they were alleged to have committed. The Court agreed there was a contradiction between the grounds and the operative part of the Commission’s decision ‒ the operative part of the decision refers to four infringements relating to different periods and routes and committed by different carriers, whereas the grounds of the decision refer to one single and continuous worldwide infringement covering all the routes.

This ruling ‒ while an important victory for the carriers concerned ‒ does not change “THIS RULING ‒ WHILE AN the law of what amounts to a “single and continuous” infringement, or what IMPORTANT VICTORY FOR amounts to a cartel behaviour. The ruling addresses defects in the Commission’s THE CARRIERS decision, which were sufficiently serious that it “infringed the applicant’s rights of defence and also, prevented the Court from exercising its power of review.” CONCERNED ‒ DOES NOT CHANGE THE LAW OF This judgment shows that Commission decisions must be clear and consistent. The WHAT AMOUNTS TO A Court emphasised that the principle of effective judicial protection requires that the operative part of a Commission decision be particularly clear and precise so that the “SINGLE AND undertakings held liable and penalised can understand it, and can contest it CONTINUOUS” properly, if they wish to do so. INFRINGEMENT, OR WHAT What’s next? AMOUNTS TO A CARTEL The Commission may choose to appeal or to rectify the defects and re-adopt the BEHAVIOUR.” decision. The Commission has two months from the date of the judgment of the

Court to bring an appeal before the European Court of Justice. However, there is no set time limit within which the Commission is required to re-adopt its decision ‒ it is likely to be a lengthy procedure which could take a few months at the least.

Recently, the Commission re-adopted a decision to impose fines in the switchgear cartel5 after the Court had annulled the Commission’s earlier decision for a failure to calculate the fines correctly. In the switchgear cartel case the Court had upheld the relevant companies’ participation in the cartel agreement but took issue with the Commission’s attribution of fines. Here, the Court has not ruled on the substance of the cartel at all. If the Commission does decide to re-adopt its decision it would have to ensure that the airlines’ defence rights are not affected, and it would also have to remove any inconsistencies between the facts it has gathered and the cartel it presents.

2 The Commission uses the concept of “single and continuous” infringement to address complex cartels where the “agreement” varied in scope of conduct, levels of participation, products concerned or time, rather than finding a series of separate infringements. 3 Commission Decision C(2010) 7694 final relating to a proceeding under Article 101 TFEU, Article 53 of the EEA Agreement and Article 8 of the Agreement between the European Community and the Swiss Confederation on Air Transport (Case COMP/39258 — Airfreight). 4 The carriers who are the subject of the decision include: Air Canada; Air France-KLM; Société Air France; Koninklijke Luchtvaart Maatschappij; British Airways; Cargolux Airlines International; Cathay Pacific Airways; Japan Airlines; LAN Airlines; Lufthansa; Martinair Holland; Qantas Airways; SAS; and Singapore Airlines. 5 Summary of Commission Decision of 27 June 2012 amending Decision C(2006) 6762 final of 24 January 2007 relating to a proceeding under Article 81 of the EC Treaty (now Article 101 of the Treaty on the Functioning of the European Union) and Article 53 of the EEA Agreement to the extent that it was addressed to Mitsubishi Electric Corporation and Toshiba Corporation, C-2013/70.

European General Court annuls fines in airfreight cartel case 3

We await the Commission’s choice.

Other considerations The Court’s ruling will affect the on-going related private action damages claims in the UK, Germany and the . Until the Commission makes a move, the airlines who have appealed can point to the absence of a valid Commission infringement decision on which to found a follow-on action. The new ruling will add more time to the lengthy damages action process.

The Commission's decision, however, is still valid as regards Qantas as the Court specifically annulled the decision only in so far as it related to carriers who lodged the appeal. Therefore, it may remain the target of the on-going litigation and it is unlikely that it will be able to rely on the Court's ruling.

Conclusion The Court’s ruling is another twist in the long running airfreight cartel saga. The law on cartels is unchanged; what is interesting is how businesses who are found to have infringed competition law can find effective ways to hold the Commission to account for producing legally sound decisions.

FOR MORE INFORMATION

Should you like to discuss any of the matters raised in this Briefing, please speak with a member of our team below or your regular contact at Watson Farley & Williams.

JEREMY ROBINSON DR. CHRISTINE BADER

Partner Partner Hamburg +44 20 3036 9800 +49 40 800 084 458 [email protected] [email protected]

VINEET BUDHIRAJA DR. GABRIEL ALEXANDER BAUMSTARK Associate Associate London Hamburg +44 20 7814 8414 +49 40 800 084 341 [email protected] [email protected]

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