• Court of First Instance annuls vitamin cartel decision in relation to two Japanese companies
  • October 28, 2005
  • Law Firm: Watson, Farley & Williams (New York) LLP - New York Office
  • On 6 October 2005, the Court of First Instance ("CFI") handed down a judgement in which it found that the European Commissions 2001 decision, finding that members of vitamin products cartels had infringed Article 81 of the EC Treaty, should be annulled in so far as it concerns Sumitomo Chemicals Co. Limited ("Sumitomo") and Sumika Fine Chemicals Co. Limited ("Sumika"). For the first time the CFI found that the Commission had failed to show that it had a legitimate interest in reaching a decision in relation to infringements that had already ceased. In support of their application to the CFI, Sumitomo and Sumika raised two pleas in law. Firstly alleging that the Commission's power to find the infringements was time barred and second that the Commission lacked competence. The CFI concluded that a decision finding an infringement is not a penalty within the meaning of Article 1(1) of Regulation No 2988/74, the Regulation which lays down the limitation period. Therefore, the first plea in law was unfounded. With respect to the lack of competence on the part of the Commission, they stressed that the provisions of the EC Treaty and the relevant implementing legislation conferred on the Commission only the power to adopt measures to bring to an end any existing infringement and to impose fines or periodic penalty payments. However, neither the EC Treaty nor the legislation deals with the question of whether the Commission has the power to declare, by decision, that an undertaking has infringed the Treaty's competition rules in the past, where that infringement had come to an end before the decision or even before the Commission began its investigations. The CFI took into account its own decision in GVL v Commission, that concluded, in order to adopt a decision which finds an infringement which has already come to an end, the Commission must demonstrate the existence of a "legitimate interest", and the existence of a genuine danger of a return to the practice in question, thereby justifying a clarification of the legal situation by a formal decision. However, in this instance the CFI was of the view that the Commission, when adopting the Decision, failed to consider whether the findings of the infringements against the applicants was justified by a legitimate interest, and thereby committing an error of law. As a result the CFI annulled the Decision in so far as it concerned Sumitomo and Sumika.

    The CFI's judgement in the vitamin cartels case is to be welcomed for clearly restating the legal position concerning limits to the powers of the Commission when adopting a decision after an investigation into anti-competitive behaviour has ceased. The two companies concerned had brought to an end their activities within the cartel a long time ago; well over five years before the Commission's investigation began and seven and a half years before the final decision. The CFI confirmed that as a matter of settled law the cessation of an infringement before the adaptation of a Commission decision does not of itself preclude the Commission from adopting a finding of infringement. Neither does the fact that the Commission is time-barred from imposing a fine or penalty preclude it from adopting a finding of infringement. However, it must be able to show that it had a legitimate interest for doing so. The CFI is telling the Commission to be more rigorous in setting out why it is legitimate to make such a finding (and open flood gates to litigation against the company by injured third parties) in a case where all unlawful activities has ceased. This decision is a triumph of common sense and will come as a blessed relief to all those that conduct business in Europe. Companies should not be exposed to the sins of the past on a forever basis. The Commission, and indeed national regulators, are now rightly being required to focus their resources on those cases that are relevant to today's consumers and not yesterday's.