The European Commission extends its settlement procedure to abuse of dominance cases under Article 102 TFEU, rewarding companies with a reduction of fines if they acknowledge the infringement and consent to appropriate remedies.
Pursuant to Article 7 of Directive 94/62/EC on packaging and packaging waste, the Member States have to ensure that systems are established which provide for the collection of packaging waste from the final users, in order to channel it to the most appropriate waste management alternative (preferably recycling). Following this instruction, so-called producer responsibility organisations (PRO) were established in many Member States. PROs are corporations owned by producers and/or resellers of packaging materials which organise waste management systems for the collection, sorting, and recycling of used packaging. By participation in these systems, the producers may discharge themselves from the obligation to take back the packaging after use. The development of best practices for the well functioning of such PRO systems is an important element of the circular economy initiative recently launched by the Commission.
Altstoff Recycling Austria AG (ARA) is a not-for-profit PRO established in Austria in 1993 to set up a system in line with Directive 94/62/EC. ARA offers its exemption services both with regard to household and commercial packaging waste. The contracts underlying the ARA system were notified to the Commission in 1994 and received negative clearance and, in some respects, an exemption under Article 101(3) TFEU by Decision COMP D3/35470—ARA.
Until 2015, ARA was the only provider for exemption services for household packaging in Austria. As of 1998, competing systems (e.g. the German ALBA-Group) emerged in the field of commercial packaging. Even here, however, ARA maintained its position as market leader.
As of about 2005, some commercial service providers moved to enter the market for household exemption systems. These attempts failed, allegedly because of the inability of the new players to secure contracts with municipalities and collectors for the shared use of the collection infrastructure set up by those contractors on behalf of ARA.
In 2009, one of the potential market entrants complained to the Commission that the Austrian Waste Management Act is not sufficiently in support of competition in the field of exemption systems. This complaint prompted the Commission to launch an investigation into ARA's behaviour, including a dawn raid in October 2010. In July 2013, the Commission sent ARA a statement of objections. The Commission found that the nationwide collection infrastructure in Austria, partly controlled and partly owned by ARA, qualifies as an essential facility, most of all because the Austrian authorities would not have granted an authorisation to an ARA competitor which operates (wholly or in part) an independent infrastructure. The investigation also found that between March 2008 and April 2012, ARA effectively refused to give access to its infrastructure. In particular, ARA induced municipalities and collectors to enter into shared use contracts with new market players only on condition that these systems are able to show, on a region by region basis, that they are unable to establish their own infrastructure without using ARA's containers and bins. The Commission held that such behaviour was in breach of Article 102 TFEU. As well as finding an infringement, the Commission fined ARA €6 mio and imposed a structural remedy to address the issue of foreclosure. ARA was obliged to divest the part of the household collection infrastructure that it owns itself.
As of 2016, ARA cooperated with the Commission by acknowledging the infringement and by ensuring that the Decision could benefit from administrative efficiencies (e.g. no secondary statement of objections). Also, ARA suggested the appropriate structural remedy itself. The Commission took account of ARA's comprehensive cooperation in calculating the fine, which was reduced by 30 per cent. Further, whereas the statement of objections charged ARA with another abuse relating to commercial packaging, this objection was not upheld in the final Decision.
In a communication published alongside the Decision, the Commission explains its thinking behind this novel way to resolve an Article 102 case. As the Commission notes, in antitrust cases other than cartels (where the parties can cooperate under the leniency and settlements procedures), there is currently limited practice for rewarding cooperation by the undertakings under investigation. While parties can cooperate by offering commitments according to Article 9 Regulation 1/2003, some cases are not suitable for such a solution. This may be because the infringement of competition rules has already finished, or because the Commission wishes to establish the finding of an infringement and impose a fine.
The ARA Decision is the first case where the Commission established a structured framework for rewarding cooperation in non-cartel antitrust cases leading to a prohibition decision under Article 7 Regulation 1/2003. In order to do so, the Commission relied on point 37 of the Commission's 2006 Fining Guidelines which states that, while the Guidelines present the general methodology for the setting of fines, the particularities of a given case or the need to achieve deterrence may justify departing from such methodology. In substance, this has already happened in a number of cases before the entry into force of Regulation 1/2003, such as the Hilti case (1987), the Tetra-Pak case (1991), and in the Nintendo case (2001).
According to the Commission's communication, the level of fines reduction shall depend on the extent and timing of the cooperation and the resulting benefits in terms of efficient procedure and effective enforcement. This may involve, as in the ARA case, an acknowledgement of the infringement (which permits administrative efficiencies) or providing a structural remedy, but might also relate to the disclosure of evidence. Procedurally, the Commission and ARA modelled their discussions on the Commission's notice on the conduct of settlement procedures in cartel cases.
Quite obviously, the Commission regards the ARA case as a model for the future. The authority was actively looking for an opportunity to expand its instruments in antitrust enforcement outside cartel cases. It is to be expected that the authority will work in a similar direction in other suitable matters, both non-cartel cases under Article 101 as well as abuse cases under Article 102 TFEU.
The benefits of the novel procedure for the Commission are manifold. Cooperation of the undertakings under investigation may, as in leniency situations, contribute to adopting prohibition decisions more quickly and reduce the burden on the Commission's resources. At the same time, the authority is still able to establish an infringement and to show that it is prepared to hand out fines where necessary. Last but not least, a cooperative solution allows for better targeted remedies to actually improve market conditions.
A more difficult question to answer is whether the novel ‘consent procedure’ is also an attractive option for the undertakings concerned. At first glance, this is not necessarily the case, as the new instrument is likely to reduce the number of Article 9 decisions, which are more favourable for the defendants as there is neither a finding of an infringement nor a fine. In fact, ARA proposed such a solution to the Commission services, but was turned down.
Secondly, a ‘settlement’ of the present kind may be somewhat unsatisfactory for the defendant. The fact that ARA acknowledged the main findings of the Commission does not necessarily mean that ARA is seriously convinced to have committed an infringement. In substance, the case focused on the question whether ARA's collection infrastructure is an essential facility, i.e. cannot be duplicated. ARA always maintained that, from a purely technical perspective, a duplication (at least in part) is possible. Ultimately, the Commission's Decision hinges on the question how the Austrian authorities would have applied their public interest test in the authorisation of competing systems. Would the authorities have admitted a system using its own network of containers and bags, or would they have turned down such an application, e.g. for ecological reasons? The answer to this question leaves a margin of appreciation, and divergent opinions are possible.
One of the main reasons for ARA to consent to the cooperative solution was the fear that the General Court, in an action for annulment, would have exercised only a marginal review. The interpretation of national law, such as the Austrian Waste Management Act, is—in front of the Community Courts—a question of fact, not law. ARA faced the risk that the General Court, in this respect, would have resorted to the Microsoft-Doctrine. In Microsoft (T-201/04, ECLI:EU:T:2007:289), the court stated that ‘insofar as a Commission decision is the result of complex technical appraisals, those appraisals are in principle subject to only limited review by the Court, which means that the Community Courts cannot substitute their own assessment of matters of fact for the Commission's’. Thus, it was well possible that ARA would have been unable to receive an opinion of an independent judge on the most pertinent question in the case. The ARA case is an example that the institutional design of antitrust enforcement may well influence the substantial outcome of competition proceedings.
Apart from that, the statement of objections charged ARA with a second abuse in the commercial sector. While ARA believed that the Commission rightly dropped these accusations, here as well divergent opinions are possible. The Commission services left no doubt that, in a confrontative situation, they would have tried these allegations as well.
Nonetheless, from a practitioner's point of view, the ARA case is a positive example on how to conduct antitrust proceedings. While it took the Commission relatively long to issue its statement of objections, the proceedings were swift, efficient, and constructive as soon as it became clear that a ‘settled solution’ needs to be looked for. ARA was given ample opportunity to present its position, and despite the rather divergent starting points, the discussions were held in mutual good faith. Practically, this is the main advantage of a cooperative solution: a defendant which wants to settle opens the door for a truly substantial discussion with the Commission's services. In the ARA case, these discussions led to a reasonable compromise.
Compared to this advantage, the reduction of the fine granted by the Commission is of secondary importance. Clearly, an agreement on an acceptable level of fines is important to come to a solution, and (as in the ARA case) the reduction for cooperation may tip the balance. However, the efficiency of the process is much more important. For these reasons, we expect that, in the future, other companies as well (if they cannot convince the Commission of an Article 9-solution) will try to take benefit from this novel way to solve non-cartel prohibition cases.