Opinion of Mr Advocate General Mengozzi delivered on 17 February 2011.

First ground of appeal: the General Court failed to take account of the rules governing the imputability to a parent company of the practices of its subsidiary

The applicant’s first ground of appeal is, in essence, that in examining the evidence which it adduced to prove its independence on the market and to rebut the Commission’s presumption as regards Elf Aquitaine, the General Court required a probatio diabolica of it, contrary to the rules governing the imputability to a parent company of the practices of its subsidiary and also to the applicant’s right to a fair hearing, enshrined in Article 6(1) of the European Convention for the Protection of Human Rights and Fundamental Freedoms (‘ECHR’).

It must be pointed out, as the General Court did at paragraphs 67 to 69 of the judgment under appeal, that it is clear from the case-law, that where a parent company has a 100 % shareholding in a subsidiary which has infringed the Community competition rules, first, the parent company can exercise a decisive influence over the conduct of the subsidiary^(*) and, second, there is a rebuttable presumption that the parent company does in fact exercise a decisive influence over the conduct of its subsidiary.^(*) In those circumstances, it is sufficient for the Commission to prove that the subsidiary is wholly owned by the parent company in order to presume that the parent company exercises a decisive influence over the subsidiary’s commercial policy. The Commission will be able to regard the parent company as jointly and severally liable for the payment of the fine imposed on its subsidiary, unless the parent company, which has the burden of rebutting that presumption, adduces sufficient evidence to show that its subsidiary acts independently on the market.^(*)

The applicant’s complaints relate in particular to paragraph 76 of the judgment under appeal, in which the General Court states as follows:

‘With regard to the merits of the evidence adduced by the applicant to prove its independence, it must be observed that the claim that Elf Aquitaine is only a non-operational holding company that rarely intervenes in the management of its subsidiaries is not sufficient to rule out the possibility that it exercises decisive influence over the applicant’s conduct by coordinating inter alia financial investments within the Elf Aquitaine group. In the context of a group of companies, a holding company that coordinates financial investments within the group is in a position to regroup shareholdings in various companies and has the function of ensuring that they are run as one, including by means of such budgetary control.’

According to the applicant, in stating that the holding company has ‘the function’ of ensuring that the subsidiaries are run as one, the General Court made the presumption concerning the parent company’s decisive influence over the conduct of the subsidiary irrebuttable in law because any attempt to prove that the subsidiary acts independently on the market would run counter to the very function which the General Court finds holding companies to have, and would therefore be bound to fail.

First of all, as the Commission observes in its reply to the appeal, Arkema disputes neither the principle of the Commission’s presumption as regards Elf Aquitaine nor the fact that the presumption applies in the circumstances of the present case (the parent company holds 98 % of the subsidiary’s share capital). On the other hand, the applicant’s objections are directed only at the reasoning on the basis of which the General Court ruled out the possibility that the fact that Elf Aquitaine is a non-operational holding company may be sufficient to rebut the presumption.

In paragraph 76 of the judgment under appeal, the General Court stated, first, that the fact that a holding company does not act directly on the market does not in itself rule out the possibility that it may exercise decisive influence over the commercial policy of its subsidiaries by means of the coordination of financial investments within the group. In saying that, the General Court aimed to counter the applicant’s argument that the purely financial nature of the parent company meant that it would not interfere in the market practices of the operational companies in the group. However, the applicant’s objections do not aim to challenge in substance the conclusion that follows from that assertion, namely that the presumption that decisive influence is actually exercised on the commercial policy of subsidiaries may be applied to a non-operational holding company also.

The General Court then justifies that conclusion by stating that ‘a holding company that coordinates financial investments within the group is in a position to regroup shareholdings in various companies and has the function of ensuring that they are run as one, including by means of such budgetary control’. According to Arkema, it is the second part of that sentence that makes the presumption applied as regards Elf Aquitaine de facto irrebuttable because, as the applicant explains in its statement in reply, ‘the criterion that subsidiaries are run as one is precisely the criterion which, according to the Commission, makes it possible to impute a subsidiary’s practices to its parent company’.

I note straightaway that, if Arkema’s reasoning were to be followed, the Court’s assertion would in fact have a much wider implication than that which the applicant itself attributes to it and would, in essence, amount to saying that any holding company, whether operational or non-operational, and irrespective of any consideration regarding the size of its shares in the capital of its subsidiaries, must be held liable for its actions simply because of its function of running those companies as one. It is clear that the Court’s assertion has no such implication.

On the other hand, in view of the context of that statement, I think it must be regarded as confined to non-operational holding companies and to situations where the conditions for applying the presumption relied on as regards Elf Aquitaine are fulfilled.

Furthermore, it is clear from settled case-law that the conduct of a subsidiary may be imputed to the parent company in particular where, although having a separate legal personality, that subsidiary does not decide independently upon its own conduct on the market, but carries out, in all material respects, the instructions given to it by the parent company,^(*) having regard in particular to the economic, organisational and legal links between those two legal entities.^(*) However, contrary to what the applicant seems to imply, the function which the General Court recognises that a non-operational holding company has of running the group companies as one does not necessarily entail interference in the commercial policy of its subsidiaries, particularly in the terms required by the case-law cited above. Such interference must be proved and, in accordance with the relevant principles, which are not disputed by the applicant, it may be presumed where the parent company holds the entire share capital of the subsidiaries. According to the same principles, it will always be open to the parent company or its subsidiaries to prove the contrary.

Likewise, to acknowledge, as the General Court does, that the function of a non-operational holding company is to run its subsidiaries as one does not deprive them or their parent company of the option of attempting to rebut that presumption by proving that the abovementioned function (assuming that it takes the form of interference in the commercial policy of the operational companies in the group) was not actually exercised. It is clear from the case-law cited above that the presumption refers to the actual exercise of decisive influence on the conduct of its subsidiary by a parent company which holds the entire share capital of that subsidiary.

It follows that, contrary to what the applicant claims, the statement at paragraph 76 of the judgment under appeal cannot be understood as confirming that any holding company, whether operational or non-operational, inevitably actually exercises decisive influence simply because it has the function, within a group of companies, of running those companies as one.

In the passage at issue, the General Court merely asserts that the possibility cannot be ruled out that a non-operational holding company, in spite of the fact that it does not act directly in the market, may exercise a decisive influence on the commercial policy of its subsidiaries in view of its function of financial management and coordination and that therefore such influence may be presumed to be actually exercised where the subsidiaries are wholly owned or almost wholly owned. That is why, to follow the Court’s reasoning, it is not sufficient to claim that the parent company is non-operational in order to rebut the presumption, which remains a rebuttable presumption, as the Court points out, citing the settled case-law of the Union courts in other passages of the judgment under appeal, particularly at paragraphs 67 and 82.

Consequently, because it arises from a misreading of the judgment under appeal, there is no foundation for the complaint that the rules governing the imputability of a subsidiary company’s practices to its parent company were disregarded because the General Court affirmed that the presumption based on the fact that the subsidiary is wholly owned by the parent company is irrebuttable.

There is likewise no foundation for the complaint that Article 6(1) of the European Convention for the Protection of Human Rights and Fundamental Freedoms was infringed because, notwithstanding the lack of argument on the part of the applicant, it cannot be read as starting from the same erroneous premiss that, in the judgment under appeal, the General Court made it legally impossible to rebut the abovementioned presumption.

I therefore suggest that the first ground of appeal be dismissed in its entirety as unfounded.

Second ground of appeal: infringement of the principle of non-discrimination

The applicant’s second ground of appeal is that the assertion by the General Court that the presumption based on the fact that the subsidiary company is wholly owned by the parent is irrebuttable amounts to an infringement of the principle of non-discrimination as between the members of a cartel, depending on whether they belong to a group of companies or not. I consider that this second ground of appeal must also be dismissed as unfounded because it arises from the same – in my view mistaken – reading of the judgment under appeal

Third ground of appeal: infringement of the principle of equal treatment and the right to a fair hearing

In the context of its third ground of appeal, the applicant claims in essence that the General Court, in response to the applicant’s fifth plea, examined only Elf Aquitaine’s submissions and not those of the applicant, thus infringing its right to a fair hearing and the principle of equal treatment. This ground of appeal is directed at paragraphs 122 to 129 of the judgment under appeal.

Like the Commission, I have some difficulty in understanding fully the subject-matter of this ground of appeal.

Paragraphs 122 to 129 of the judgment under appeal respond to the applicant’s complaints raised at first instance in its plea alleging that there was no statement of reasons in the decision. However, in criticising those paragraphs in the present ground of appeal, the applicant does not appear to be complaining that the General Court omitted to impose a penalty for the lack of a statement of reasons or that it misconstrued the extent of the Commission’s obligation to state reasons, but rather that it omitted to examine the substance of Atofina’s submissions to prove that it acted independently on the market.

In those circumstances, I question whether the formulation of that ground of appeal satisfies the conditions of clarity which are required for it to be admissible.^(*)

As to the merits, assuming that the present ground of appeal must be construed as claiming that the General Court omitted to condemn the Commission’s alleged failure to take into account the evidence submitted by Atofina or the Commission’s failure to state reasons for finding that that evidence was irrelevant or insufficient, I observe that, at paragraph 127 of the judgment under appeal, the General Court states that ‘since the Commission’s response to the main points of Elf Aquitaine’s arguments […] would not differ according to whether the parent company or its subsidiary was concerned, the Commission was not required to reply separately to the arguments put forward by the applicant’. That point refers to paragraph 75 of the judgment under appeal, in which the General Court, after finding in the previous paragraph that ‘the applicant’s arguments seeking to prove its independence were also put forward by its parent company […] to prove that it did not exercise a decisive influence on its subsidiary’s commercial policy’, concluded that ‘in dismissing the arguments put forward by the parent company, the Commission gave an overall response to both companies’.

The General Court therefore clearly started from the premiss that the arguments put forward by Atofina and by Elf Aquitaine during the administrative procedure were the same and that examination of the former entailed examination of the latter. However, it must be observed that the applicant does not even attempt to dispute the reasonableness of that assumption. In particular, the applicant does not state which evidence specifically adduced by Atofina, other than that adduced by Elf Aquitaine, was not examined by the Commission or was rejected without a sufficient reason begin given, and without the General Court condemning the failure to examine it or to state a reason.

In those circumstances, and in so far as it is to be construed as stated in paragraph 30 above, the present ground of appeal must be dismissed as unfounded.

I think the conclusion must be the same if the purpose of the ground of appeal is to complain that the General Court did not itself examine the merits of the evidence adduced by Atofina during the administrative procedure to prove that it acted independently on the market. It is clear from paragraphs 76 to 80 of the judgment under appeal that the General Court did examine that evidence by taking into account, in particular, the submission concerning Elf Aquitaine’s status as a non-operational holding company (paragraph 76), the assertion that Atofina never implemented, a specific policy of reporting to Elf Aquitaine on the MCAA market (paragraph 78), the submission that MCAA activity within the Elf Aquitaine group was minor (paragraph 79) and the fact that the two companies operated in separate markets and did not supply customers (paragraph 80).

Therefore the third ground of appeal, claiming infringement of the principle of equal treatment and the right to a fair hearing, cannot succeed in any case.

Fourth ground of appeal: infringement of the principle of proportionality

According to the applicant, the General Court infringed the principle of proportionality in upholding the calculation method used by the Commission to determine the component of the fine relating to Arkema’s repeated infringement. That method means that Arkema’s turnover is taken into account twice in calculating the respective bases to which the multipliers used for Elf Aquitaine and Arkema as a deterrent are applied. The General Court did not dispute that the turnover was taken into account twice, but justified it on the basis of the Commission’s requirement to adhere to the calculation method laid down by the Guidelines, thus imparting to them ‘an absolute binding force’ which they do not have.

At paragraph 198 of the judgment under appeal, the General Court states that it is clear from the decision that, at the time of the infringement, Elf Atochem had already been the subject of an earlier Commission decision in a cartel case, at a time when Atofina was not controlled by Elf Aquitaine (see paragraph 4 above). For that reason the Commission found that in the case of Elf Atochem there was repeated infringement which was an aggravating circumstance and increased the basic fine to be imposed by 50 %.^(*) In order to ‘isolate’ that component of the penalty, the Commission adopted the following method of calculation, set out in the footnote on page 222 of the decision and at paragraph 199 of the judgment under appeal:

‘The increase for recidivism applies only to Atofina (Atochem) and not to its parent company, Elf Aquitaine, as the latter was not in control of Atofina at the time of the infringement. The multiplying factor applied to Elf, namely 2.5 is not included in the calculation. Instead a multiplying factor of 1.5, which would have been applied had Atofina been the sole addressee of the Decision (given its worldwide turnover of EUR 17.8 thousand million), will be used for the purposes of calculating recidivism. A separate fine will accordingly be addressed to Atofina alone for this amount’.

At paragraph 203 of the judgment under appeal, the General Court sets out as follows the Commission’s calculation of the hypothetical basic amount to which the 50 % increase was applied on account of Atofina’s repeated infringement:

‘12 million (starting amount) x 1.5 (deterrent multiplier, fixed by reference to Arkema’s turnover) = 18 million + (18 million x 150 %) (increase for duration of infringement) = EUR 45 million’.

After that amount is adjusted by the increase for recidivism and the 40 % reduction on the basis of the Leniency Notice, the fine which was finally imposed on Arkema pursuant to Article 2(d) of the decision was EUR 13.5 million.

It must be observed, first, that contrary to what the applicant appears to believe, Arkema’s turnover was not taken into account in calculating the ‘bases’ to which the Commission applied the multipliers used as deterrents for, respectively, Elf Aquitaine/Arkema^(*) and for Arkema alone, but in determining the multipliers themselves. As appears from paragraph 279 et seq. of the decision, the starting amount of the fine imposed on Elf Aquitaine/Arkema and of the increase for repeated infringement on the part of Atofina (EUR 12 million) was calculated by taking account of the gravity of the infringement and the respective weight of the companies which took part in it, estimated on the basis of their market shares. Multipliers were applied to the starting amount to ensure that the fine had a sufficient deterrent effect. For Arkema/Elf Aquitaine, the factor was set at 2.5 to take account of its worldwide turnover of EUR 84.5 thousand million (paragraphs 299 and 300 of the decision), whereas a lower factor of 1.5 was set for the deterrent increase applied to Arkema alone, in view of its worldwide turnover of EUR 17.8 thousand million (footnote 222 of the decision).

Next, as the General Court notes at paragraph 201 of the judgment under appeal, ‘according to paragraphs 2 and 3 of the Guidelines, the Commission, having determined the basic amount of the fine taking into account the gravity and duration of the infringement, subsequently increases or decreases that amount, as appropriate, according to aggravating or extenuating circumstances’. The resulting adjustments to the basic amount are normally a percentage of that amount (an increase of 50 % of the basic amount for repeated infringement and a reduction of 40 % for leniency in the applicant’s case). Consequently the overall outcome of increases and reductions may vary in real terms, depending on all the factors which are taken into consideration in determining the basic amount and, therefore, not only on the company’s financial capacity (turnover), but also on the part it plays in the market in question (market shares) and, generally, the gravity and duration of the infringement.

Consequently, to agree with the applicant’s reasoning would mean asserting that any increase on the ground of aggravating circumstances takes the form of counting twice the different components of the basic amount, which could not be accepted.

Furthermore, the method used in the present case by the Commission, which recalculated the basic amount for Arkema alone, aimed to avoid account being taken, for calculating an increase in the fine for which Atofina alone was liable, of a component (the multiplier applied to Arkema/Elf Aquitaine) which did not reflect the true situation of that company. Such a method, which has the effect of neutralising, in relation to Arkema, the increase in the basic amount due to the greater financial capacity of Arkema/Elf Aquitaine, does not seem to me objectionable in itself.

With regard to the choice of multipliers used as a deterrent respectively for Arkema/Elf Aquitaine and for Arkema alone, I observe that the applicant does not dispute the manner in which they were arrived at or their level and, in essence, the applicant merely asserts that, as a result of using them, its turnover was taken into account twice.^(*)

I therefore consider that there is no factual basis for the complaint of an infringement of the principle of proportionality or the complaint that the General Court erred in law in interpreting the Commission Guidelines as having absolute binding force.

Consequently, in my view the fourth ground of appeal must be dismissed in its entirety as unfounded.