• EU Cartel Fines; Ability to Pay Becomes Highly Relevant
  • July 15, 2010 | Authors: Matthew R.E. Hall; Robert Rakison
  • Law Firms: McGuireWoods LLP - Brussels Office ; McGuireWoods LLP - London Office
  • On June 23, 2010, the European Commission recognized that even its flagship policy (the fight against cartels) must take into account the financial crisis. In adopting a decision fining 17 bathroom equipment manufacturers a total of EUR 622 million for a 12-year cartel covering six EU countries, the Commission took into account that five of the companies were financially in “very bad shape already,” and accordingly reduced the levels of their fines to “a level they should be able to pay.” This approach is referred to in the Commission’s 2006 guidelines on fines, but only now has it become of real practical relevance.

    Of the 17 companies, 10 claimed they would be unable to pay, but the Commission found that only half of these claims were justified. This required a case-by-case analysis of financial statements and projections, profitability, solvency and liquidity, as well as the relations between the companies and their banks and shareholders, and “the social and economic context of each company” (which would appear to leave a wide discretion). The justification for reductions in fines, where appropriate, is that pushing a company into bankruptcy would inevitably reduce competition.

    A further illustration of the new importance of this ability-to-pay analysis was provided by the June 30, 2010, decision of the Commission in which it fined 17 producers of prestressing steel a total of more than EUR 518 million. Three of the fines were reduced by inability-to-pay arguments, albeit a further 10 companies had these applications denied. Also of importance in this decision was the finding that two companies did not fulfill their obligations to cooperate as leniency applicants, and therefore did not receive any reduction in their fines.