(1) refers to both agreements and concerted practices but cases may arise (particularly in the case of a complicated and long-running cartel with numerous adherents) where collusion presents some of the elements of both forms of prohibited cooperation.
A concerted practice relates to a form of cooperation between undertakings which, without having reached a stage where an agreement properly so-called has been concluded, knowingly substitute practical cooperation for the risks of competition.
(33) The object of the Treaty in creating a separate concept of concerted practice is to forestall the possibility of undertakings evading the application of Article 85 (1) by colluding in an anti-competitive manner falling short of a definite agreement by (for example) informing each other in advance of the attitude each intends to adopt, so that each may regulate its commercial conduct in the knowledge that its competitors will behave in the same way: Judgment of the Court of Justice of 14 July 1972 in Imperial Chemical Industries Ltd v. Commission, Case 48/69 [1972] ECR 619.
In its later Judgment of 16 December 1975 in relation to the European Sugar Cartel - Suiker Unie and Others v. Commission, Joined Cases 40 to 48, 50, 54 to 56, 111, 113 and 114/73 [1975] ECR 1663 - the Court of Justice in expanding upon the above definition of a concerted practice held that the criteria of coordination and cooperation laid down by the case-law of the Court, which in no way requires the working-out of an actual plan, must be understood in the light of the concept, inherent in the provisions of the Treaty relating to competition, that each economic operator must determine independently the commercial policy which he intends to adopt in the market. This requirement of independence does not deprive undertakings of the right to adapt themselves intelligently to the existing of anticipated conduct of their competitors but it does strictly preclude any direct or indirect contact between them, the object or effect whereof is either to influence the conduct on the market of an actual or potential competitor or to disclose to such a competitor the course of conduct which they themselves have decided to adopt or contemplate adopting on the market.
Collusive conduct falling short of an agreement may thus equally fall within the ambit of Article 85.
(34) The Court's definition of a concerted practice is particularly apt to cover the involvement of Shell which cooperated with the cartel without being a full member, and was able to adapt its own market behaviour in the light of its contac with the cartel.
The importance of the concept of a concerted practice does not result so much from the distinction between it and an agreement as from the distinction between forms of collusion falling under Article 85 (1) and mere parallel behaviour with no element of concertation. Nothing therefore turns in the present case upon the precise form taken by the collusive arrangements.
4. The object and effect of the agreement
(35) Article 85 (1) expressly mentions as restrictive of competition agreements which directly or indirectly fix selling prices or share markets between producers; these are the essential characteristics of the agreement under consideration in the present case.
The basic purpose behind the institution of the system of regular meetings and the continuing collusion of the producers was to create a permanent mechanism for controlling the tonnage sold and achieving concerted price increases.
By planning common action on price initiatives with target prices effective from an agreed date, the producers aimed to eliminate the risks which would be involved in any unilateral attempt to increase prices.
The control of volumes also had as its objective the creation of artificial market conditions favourable to price rises and thus inextricably linked to the price initiatives.
In pursuit of these objectives, the producers were aiming at the organization of the PVC market on a basis which substituted an institutionalized and systematic collusion between producers for the free operation of competitive forces and amounted to a cartel.
(36) The Commission is well aware of the circumstances of the industry, in particular that for a considerable period the PVC operations of most producers were loss-making and that often price initiatives were only planned to keep in line with feedstock price rises.
Such considerations do not however relieve the agreement of its anti-competitive object.
If competitive conditions in a particular product area (e.g. a large number of suppliers) are such that it is difficult for producers to operate profitably, the remedy does not lie in collusion by the producers to raise price levels. In this respect the argument advanced by Montedison in particular, to the effect that if any meetings occurred they were prompted by a desire on the part of the industry to ensure fair competition (i.e. the prevention of unprofitable price cutting) must be rejected.
The fact that such price cutting may have occurred cannot in any circumstances justify an infringement of the Community rules on competition: Judgment of the Court of Justice of 17 January 1984 in VBVB and VBBB v. Commission, loc. cit. pp. 63-64.
(37) It is not strictly necessary, given the manifestly anti-competitive object of the agreement, for an adverse effect upon competition to be demonstrated.
In view of the non-availability of price instructions from the majority of producers the Commission did not attempt to demonstrate that all the producers applied uniform and simultaneous increases in list prices during the period covered by this Decision. Moreover, it remains a matter of speculation whether in the long term price levels would have been significantly lower in the absence of collusion.
The Commission does not however accept the assertion of some producers that their arrangements were entirely without effect on competition.
(38) In the first place, and quite apart from the success or otherwise of any concerted price initiative, the producers put into effect a continuing machinery for monitoring their individual actions in the context of a perceived mutual solidarity.
Secondly, the setting by the industry of a European target price level meant that the free play of market forces in establishing a competitive price level was restricted. In normal circumstances, if conditions of supply and demand favoured a price increase, the leading producers would test the market with different price levels and the market would eventually stabilize at the appropriate level.
Where a single target or list price is set, the operation of this process is restricted or prevented. In the present case the establishment of a single list or reference price limited the opportunities of customers to negotiate. Any discounts or special conditions would still be determined by reference to the list price.
In the third place, actual price levels rose towards the target levels on the occasion of many identified price initiatives. Even if the producers did not reach the targets in full, many documented initiaves were still judged successful by producers either in stopping a trend to lower prices or in substantially improving prices. It is however apparent from the producers' internal reports that the success or otherwise of price initiatives depended to a considerable extent on factors outside their control. Given the characteristics of the market it would be futile to attempt concerted price initiatives unless conditions were favourable to an increase.
It is unlikely however that if the arrangements were wholly ineffective, as the producers argue, they would have continued their regular meetings and concerted price initiatives for over three years.
Finally, as regards the quota scheme, the details available to the Commission show that far from being a proposal that was put forward but never followed, quota arrangements were indeed put into practice, were for some time during 1981 reinforced by an attempted compensation scheme, and were still being applied as late as May 1984.
5. Effect upon trade between Member States
(39) The agreement between the PVC producers was likely to have an appreciable effect upon trade between Member States.
The collusive agreement in the present case extended to all Member States and covered virtually all trade in the Community in this major industrial product (11). Most producers supply the product throughout the Community and with imbalances of supply and demand in the different national markets there is a considerable intra-Community trade.
The fixing of target prices must have distorted the pattern of trade between Member States and effect on price levels of differences in efficiency between producers. Arrangements intended to discourage so-called 'customer tourism' - such as a freeze on customers or turning away inquiries - were clearly intended to prevent the development of new trade relationships.
The volume control system from 1980 onwards was expressly based on company-by-company European quotas rather than on national quotas. Nevertheless the very existence of such constraints would operate to restrict the opportunities open to a producer. It is also clear from the documentation found at Solvay that information was exchanged on the division of each national market by the undertakings which considered themselves as national or local producers.
6. Undertaking identity
(40) Since 1980 the Western European petrochemical industry - including the PVC sector - has undergone substantial restructuring, a process which received the support of the Commission.
The particular problem in the present case for the application of EEC competition rules is whether after this restructuring an undertaking existing today can be held liable for the involvement in the cartel of a predecessor.
(41) The subjects of EEC competition rules are undertakings, a concept which is not identical with that of legal personality for the purposes of national law. The term 'undertaking' is not defined in the Treaty. It may refer to any entity engaged in commercial activities and in the case of a large industrial group it may be appropriate (according to the circumstances) to apply the term to a parent or to a subsidiary company or to the economic unit formed by the parent and subsidiaries together. In a case where a producer has been subject to reorganization or has divested itself of its PVC activity the essential task is:
(i) to identify the undertaking which committed the infringement;
(ii) to determine whether that undertaking in its essential form is still in existence or whether it has been liquidated.
The question of undertaking identity is one to be determined according to Community law and changes in organization under national company laws are not decisive.
It is thus irelevant that an undertaking may have sold its PVC business to another: the purchaser does not thereby become liable for the participation of the seller in the cartel. If the undertaking which committed the infringement continues in existence it remains responsible in spite of the transfer.
On the other hand, where the infringing undertaking itself is absorbed by another producer, its responsibility may follow it and attach to the new or merged entity.
It is not necessary that the acquirer be shown to have carried on or adopted the unlawful conduct as its own. The determining factor is whether there is a functional and economic continuity between the original infringer and the undertaking into which it was merged.
(42) Elf Atochem was formed in 1980 as Chloe Chimie - a joint venture company then owned by ELF, CFP and Rhône-Poulenc - and changed its name to Atochem S.A. on 30 September 1983 when it absorbed its sister company ATO Chimie and the major part of the activities of PCUK.
The August 1980 planning document found at ICI had named as participants both PCUK and 'the new French company', clearly referring to Chloe; Chloe had from the start close links with ATO Chimie and their PVC activities were harmonized in an economic interest group (GIE) known as Orgavyl.
Under the express terms of the Chloe-ATO-PCUK merger in 1983 the legal personality of both Chloe and ATO Chimie in fact continued under the new 'Atochem' denomination, although the main issue for the purposes of EEC competition law is the functional and economic continuity of the undertaking rather than its legal identity.
The change of name to Elf Atochem SA in 1993 has no effect on the present proceedings.
Elf Atochem represents the fusion and the continuation of the economic activities of Chloe and ATO Chimie which in the PVC sector had already been linked since 1980 in the form of Orgavyl. Elf Atochem is therefore clearly responsible for the participation of these two of its constituent undertakings in the cartel prior to 1983.
As Elf Atochem is clearly liable for Ato Chimie/Chloe/Orgavyl the Commission does not propose for the purposes of assessing the fine on Atochem to attribute to it liability for PCUK as well.
DSM transferred its PVC activity to LVM (a joint venture with SAV) at the beginning of 1983 but itself continues in existence as an undertaking. The same considerations apply to the other parent, SAV. The Commission therefore considers that DSM and SAV each remain responsible for their participation in the cartel up to the creation of LVM.
After the formation of LVM that undertaking participated in the cartel in its own right.
The acquisition by the EMC group (the parent company of SAV) of the whole of the share capital of LVM in 1989 has no effect upon the present proceedings or the designation of LVM as an addressee of this Decision.
(43) Enichem comprises the Italian State-owned chemical sector formerly operating as Anic. Notwithstanding the various reorganizations there was a functional and economic continuity between Anic and Enichem and indeed after the restructuring Enichem continued to participate in the cartel. Enichem must therefore take the responsibility for the activity of Anic. The fact that in 1986 Enichem transferred its PVC activity to EVC, a joint venture with ICI, does not affect the issue of liability since Enichem itself continues in existence as an undertaking.
ICI's liability is similarly not affected by the transfer of its PVC activity to the EVC joint venture.
Montedison also remains in existence as an undertaking and is responsible for its participation in the cartel until it left the PVC sector in March 1983.
7. The addressees of decisions
(44) Although the concept of an undertaking as the subject of EC competition rules does not depend upon company law, for the purposes of enforcement it is always necessary to identify an entity possessing legal personality. There might be considerable difficulties with regard to collection of a fine under Article 192 of the Treaty if the Decision were not addressed to a legal entity. In the case of a large industrial group it is therefore normal to address any Decision to the group holding company or headquarters company, although the undertaking itself consists of the unit formed by the parent and all its subsidiaries.
(45) Enichem and Montedison have claimed that the appropriate addressee of any Decision should be the company inside the group which is currently responsible for thermoplastics activities. The Commission notes however that in both cases the marketing responsibility for PVC was shared by other companies of the group: for instance, while Enichem Anic SpA is responsible for Enichem's sales of PVC in Italy, its international marketing operations are directed by the Zurich-based company Enichem International SA and in each Member State PVC sales are undertaken by the appropriate national subsidiary of Enichem. The Commission considers it appropriate to address this Decision to the main holding company at the head of the Enichem and Montedison groups.
(46) The Royal Dutch/Shell group presents particular problems consisting as it does of a large number of companies in which the two group holding companies Royal Dutch and Shell hold 60 % and 40 % interests respectively. There is no single group headquarters company to which it might be appropriate to address a Decision. Shell International Chemical Company Ltd (SICC) is a service company responsible for the coordination and strategic planning of the Royal Dutch/Shell group's thermoplastic activities and although the various operating companies in the chemical sector apparently have a large degree of management autonomy, SICC represents the centre of Shell's chemical operations. In the present case it was SICC which was in contact with the cartel and attended the meetings in 1983. By reason of its overall responsibility for the planning and coordination of the activities of the Shell group in thermoplastics Shell International Chemical Company Ltd is considered by the Commission to be the appropriate addressee of this Decision.
8. Council Regulation (EEC) No 2988/74 (12)
(47) Several producers have claimed that the Commission is precluded by Regulation (EEC) No 2988/74 from imposing fines on them in relation to any involvement in the alleged cartel before January 1982, that is, five years before the investigations which were carried out in January 1987.
Under that Regulation the imposition of fines is in the first place subject to a limitation period of five years although this can be extended. Time runs from the date of the infringement, and in the case of a continuing or repeated infringement, from the date the infringement ceases. The limitation period may be interrupted by any action taken by the Commission to investigate any party to the suspected infringement. Each action by the Commission starts time running afresh.
The arguments of these undertakings overlook the express provisions of the Regulation. They fail to appreciate that the first actions taken by the Commission to investigate the suspected cartel on 21 November 1983 interrupted the limitation period for all participants in the suspected infringement, not just the particular producers visited at the time.
The result is that only undertakings which had ceased to participate in any infringement before November 1978 could possibly benefit from the Regulation. Since the infringement alleged only commenced in 1980, the undertakings cannot invoke limitation in this case.
9. Duration of the infringement
(48) Although collusive arrangements in PVC may already have existed before the 1980 proposal for a new cartel structure, the Commission will proceed on the basis that the present infringement commenced in about August 1980.
That was the date of the ICI proposals and it is apparent that the new system of meetings began about that time.
It is not however possible to establish with certainty the date on which each individual producer began to attend meetings. Most of them - against the weight of the documentary evidence - deny all participation in or knowledge of meetings. The 1980 document however implicates all the producers except Hoechst, Montedison, Norsk Hydro and Shell (and of course LVM) in the formation of the original plan. The likely dates when these producers adhered to the plan can however be ascertained from other documents. Thus Hoechst is already identified in the Solvay documents as a participant in the exchange of information on market shares in Germany in 1980. Similarly, Montedison is implicated from the beginning in the documentation relating to Italy. Shell claims not to have attended meetings before 1983 but its own documents show that it knew of and supported price initiatives during 1982 and it admits contacts with Solvay from January 1982. The Commission accepts that its participation in the cartel was limited and probably began later than the others, and indeed it was the only producer said by ICI to be outside the compensation arrangement in May-June 1981.
LVM's participation in the scheme dates from the time it took over the PVC interests of its two parent companies, DSM and SAV, in April 1983.
Some of the producers had left the PVC sector before the Commission began its investigations: Montedison had transferred its operations to Enichem at the beginning of 1983 and both DSM and SAV were no longer directly involved after transferring their PVC business to LVM.
(49) In the absence of information from the producers, it is not even possible to establish whether or not the collusion - in some form or other - has ever ended.
Clearly the cartel continued after the Commission carried out its first investigations into the PVC sector in late 1983.
The document found at Atochem shows that monitoring of sales quotas was being operated and information exchanged as late as May 1984. All the PVC producers active in the sector at the relevant time are identified in relation to this scheme. Only for Shell and ICI are there indications that they had ceased to take an active part in the arrangements, and even their involvement in volume quotas probably continued to have effect for the whole of 1984.
The phenomenon of initiatives involving several producers simultaneously attempting to raise price levels to a particular level was still being reported in the trade press at the time of the investigation in 1987. Although there is no concrete evidence of cartel meetings, it is likely that such initiatives were the manifestation of a continuing mutual solidarity between producers and are not a spontaneous occurence.
The Commission will however make a distinction between duration for the purposes of assessing fines under Article 15 (2) of Regulation No 17 and for the purposes of a termination order under Article 3: see recital 54.
B. Remedies 1. Article 3 of Regulation No 17
(50) Where the Commission finds that there is an infringement of Article 85, it may require the undertakings concerned to bring such infringement to an end in accordance with Article 3 of Regulation No 17.
The undertakings have all denied that any infringement of Article 85 occurred. Most have continued to dispute - against the weight of the evidence - that the regular meetings even touched on matters affecting competition. Others deny any knowledge of meetings. While a few undertakings have informed the Commission that steps have been taken to ensure that their representatives avoid suspect contacts with competitors, it is not known whether meetings or at least some communication between firms on prices and volumes have in fact ever ceased.
It is therefore necessary to include in any decision a formal requirement that those undertakings still active in the PVC sector terminate the infringement and refrain in the future from any collusive arrangements having a similar object or effect.
2. Article 15 (2) of Regulation No 17
(51) Under Article 15 (2) of Regulation No 17, the Commission may by Decision impose on undertakings fines of from ECU 1 000 to ECU 1 million or a sum in excess thereof but not exceeding 10 % of the turnover in the preceding business year 3of each of the undertakings participating in the infringement where, either intentionally or negligently, they infringe Article 85 (1). In fixing the amount of the fine, regard is to be had to both the gravity and to the duration of the infringement.
The undertakings to which this Decision is addressed deliberately infringed Article 85. They deliberately set up and operated a secret and institutionalized system of regular meetings to fix prices and volume targets in an important industrial product. Several of the undertakings concerned - BASF, Hoechst and ICI - had already been the subject of fines imposed by the Commission for collusion in the chemicals industry (Dyestuffs - Commission Decision 69/243/EEC (13)).
The Commission also takes account of the evidence that most of the undertakings to which this Decision is addressed continued to be involved in collusive arrangements until at least six months after the Commission had begun its investigation in November 1983. Only Shell and ICI seem to have distanced themselves from the cartel at this time.
(52) In fixing the general order of fines to be imposed the Commission has also taken into account the following considerations:
- collusion on pricing and market-sharing are by their very nature serious restrictions of competition,
- PVC is a major industrial product with sales of over ECU 3 000 million annually in Western Europe,
- the undertakings participating in the infringement accounted for virtually the whole of this market,
- the collusion was institutionalized in a system of regular cartel meetings which set out to organize in detail the market for PVC.
It is, however, accepted in mitigation of fines that over a large part of the period covered by this Decision the undertakings concerned reported substantial losses in the PVC sector.
The Commission also takes into account the fact that the majority of the undertakings have already been the subject of substantial fines for their participation in another cartel in the thermoplastics sector (polypropylene) during much the same period as that covered by this Decision.
(53) In assessing the fines to be imposed on individual undertakings, the Commission has considered the degree of involvement of each one and taken into consideration the role (so far as can be ascertained) played by each in the collusive arrangements and their respective importance in the PVC market.
Although some indications point to ICI and Solvay playing the role of prime movers in the cartel, the Commission cannot, in the present case, identify with certainty any ringleaders who should bear the major responsibility for the infringement.
No substantial distinction be made between the producers attending meetings on the basis of the perception by themselves or by others of their degree of individual commitment to the arrangements. Individual interests may have diverged from time to time but all the producers attending the meetings were involved in a common venture.
As indicated above, the Commission does however draw a distinction between the full members of the cartel and Shell which operated on the periphery. In Shell's case it is reasonable to impose a fine of a significantly lower order than those appropriate for most of the other producers.
(54) The absence of detailed information as to the participation of producers in meetings has made it impossible to determine the precise date on which (with the exception of those producers leaving the PVC sector) their involvement in the infringement ceased, if indeed it ever did.
Account will be taken of the indications that the involvement of Shell probably began at a later date than that of the other producers. Montedison was involved from the start but left the sector at the beginning of 1983. As for DSM and SAV, their role in the cartel was taken over by LVM when it was formed by them as a joint venture in mid-1983.
Similarly the Commission will assess fines on ICI and Shell on the basis that their active participation in meetings and other contacts probably ceased in October 1983.
For the remaining producers named in the document found at Elf Atochem the Commission will assess fines on the basis that their participation in the cartel continued until at least May 1984.
C. Proceedings before the Court of Justice (55) On 21 December 1988 the Commission adopted Decision 89/190/EEC (14) pursuant to Article 85 of the Treaty finding that an infringement had been committed by 14 undertakings and imposing fines on the addressees of this Decision as well as on Solvay and Norsk Hydro. The Decision was notified to the undertakings in February 1989.
All the addressees of that Decision, with the exception of Solvay, applied to the Court of Justice for the annulment of the Decision. On 15 November 1989 the Court transferred their applications to the Court of First Instance.
Norsk Hydro's application for annulment was dismissed as inadmissible by the Court of First Instance on 19 June 1990 as it had been filed out of time.
By its judgment of 27 February in 1992 in Case BASF and Others v. Commission (Joined Cases T - 79/89, 84/89, 85/89, 86/89, 89/91, 91/89, 92/89, 94/89, 96/89, 98/89, 102/89 and 104/89 - [1992] ECR II-315), the Court of First Instance declared Decision 89/190/EEC non-existent.
The Commission appealed against that judgment - Case C-137/92P. On 15 June 1994 the Court of Justice set aside the judgment of the Court of First Instance and annulled the Decision of the Commission, the latter on the ground that the Commission had not complied with Article 12 of its then Rules of Procedure which required the Decision to be authenticated in the authentic language versions by the signatures of the President and the Secretary-General (referred to as the 'Executive Secretary').
(56) Under Regulation (EEC) No 2988/74 (see recital 47) where the limitation period for the imposition of fines is interrupted by any action of the Commission for the purpose of the preliminary investigation or of the proceedings, time will start running afresh after each action. However, the imposition of a fine will be definitively time-barred on the day on which a period equal to twice the limitation period has elapsed without the Commission having imposed a fine (i.e. 10 years from the date the infringement ceased). This period shall be extended by the term during which the decision of the Commission is the subject of proceedings pending before the Court of Justice (including the Court of First Instance). That provision enables the Commission to re-adopt a decision where (as is the present case) it was annulled by the Court on procedural grounds (see Fourth Competition Report, p. 33).
(57) Article 2 (1) of the Regulation identifies certain actions of the Commission which will interrupt the running of the prescription period against all the participants in the infringement, including (a) written requests for information or a Commission decision requiring the requested information, (b) authorizations to investigate or a decision ordering an investigation, (c) the commencement of proceedings, and (d) notification of a statement of objections. The list is not exhaustive and a fortiori the adoption by the Commission of its decision under Article 85 on 21 December 1988 (i.e. well within five years of the earliest date on which most of the undertakings can be taken to have ceased to participate in the cartel) must also be considered as an action which interrupted prescription. It is not however even necessary to adopt this interpretation of the Regulation, since even if the notification of the statement of objections (expressly mentioned in Article 2 (1) (d)) on or about 5 April 1988 is taken as the last action which qualifies under Article 2 to interrupt the running of time, the Commission would, as against almost all the addressees, have until April 1993, plus the period (five years and two months) during which proceedings were pending before the Court of Justice, to re-adopt a decision, i.e. until June 1998.
(58) In the case of Montedison, which left the sector (and thus the cartel) at the beginning of 1983, and possibly of DSM and SAV which were replaced in the cartel by their joint venture LVM in mid-1983, the statement of objections was notified just after five years had elapsed since its last proven involvement. It would not therefore (at least as against Montedison) make time run afresh. However under Article 2 (1) (a) of Regulation (EEC) No 2988/74, a written request for information or a decision requiring that information expressly interrupts the running of the limitation period. A decision pursuant to Article 11 (5) of Regulation No 17 was in fact notified to Montedison itself on 20 November 1987 and started time running afresh. The additional five-year period set off by that decision expired at the end of November 1992 but with the addition of the time during which the proceedings were pending before the Court, the ultimate date for re-adopting a decision imposing fines against Montedison (and possibly DSM and SAV if the statement of objections does not qualify to stop time running as regards them) is January 1998.
(59) Since Solvay did not make an application to the Court of Justice for the annulment of the decision, and Norsk Hydro's application was declared inadmissible, Decision 89/190/EEC remains valid as against them. It is not therefore necessary for this Decision to re-impose fines on those undertakings as the fines originally imposed are payable. However it is appropriate for the purposes of defining the infringement with which this Decision is concerned to name Solvay and Norsk Hydro as participants therein. As against them Article 1 of the operative part of this Decision is therefore only descriptive in nature, and since they are already the subject of a valid termination order pursuant to Article 3 (1) of Regulation No 17, it is also unnecessary for Article 2 of this Decision to apply to them. This Decision is therefore not addressed to Solvay or Norsk Hydro,
HAS ADOPTED THIS DECISION:
