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A bittersweet victory for Infineon: three takeaways from the ECJ’s recent judgment

In 2017, almost one in five General Court judgments were set aside by the ECJ. The success rate in cartel cases is likely to be even lower as the ECJ historically dismisses such appeals. In a rare judgment handed down last week, however, the ECJ ordered a remittal hearing back to the General Court for Infineon’s appeal. In an extra twist, the remittal relates only to the level of the fine levied on the cartelist. What impact does the ECJ’s judgment have for follow-on damages claims?

The ECJ’s judgment

The roots of the appeal can be traced back to the Commission’s 2014 infringement decision which held four producers of smart card chips liable for participating in a two-year long cartel. Infineon, the recipient of the largest fine at €82.7m, and Phillips were unsuccessful in appealing their decisions to the General Court in 2016. However, the ECJ has partially allowed Infineon’s appeal – therefore following the opinion of AG Wathelet earlier this year that Infineon’s case should be re-heard by the General Court.  Conversely, and in accordance with the usual practice of the ECJ, Phillips’s appeal was dismissed in its entirety.

The Commission acknowledged Infineon’s limited participation in the cartel by holding Infineon liable only for the unlawful contacts for a shorter period between September 2003 and March 2005. Although the ECJ acknowledged that the General Court was not required to examine all of the bilateral contacts to establish Infineon’s involvement in the cartel, the ECJ nevertheless held that the court should have examined all eleven bilateral contacts involving Infineon – as opposed to only five – to  demonstrate that the fine was appropriately levied and thus commensurate with the gravity of Infineon’s participation in the cartel. 

Crucially, however, the ECJ has not annulled the findings of the Commission regarding Infineon’s participation in the cartel itself. The General Court’s task is now limited to assessing the proportionality of the fine and to determine whether a reduction to the fine is necessary by examining all eleven bilateral contacts. The ECJ judgment raises three key takeaways:

Takeaway one: Will the judgment cause delay to follow-on claims?

A key principle in follow-on claims is that, pursuant to the ECJ’s Masterfoods judgment, a claim relying upon an infringement decision so as to establish liability should not proceed to trial in circumstances where “the outcome of the dispute before the national court depends on the validity of the Commission decision” given that the duty of sincere cooperation should prevent the national court from “reaching a decision that runs counter to that of the Commission by the Community Courts […]”. It should be noted that a claim may proceed up to the point of trial; an appeal by the addressees of a decision is not a bar to launching a claim for damages. 

In Infineon’s case, the ECJ has ordered the General Court to rehear arguments on the level of fine to be imposed on Infineon to see whether a reduction is necessary. This results in a reduced risk of an irreconcilable judgment compared to the scenario in which an appeal is allowed so that the Commission’s decision is annulled. It therefore seems likely that a Masterfoods stay would not apply to any claims that are approaching trial in the circumstances where the ECJ has permitted an appeal but which does not go to the validity of the Commission’s decision. A trial in an on-going follow-on damages claim by Vodafone was provisionally listed for 2019 pending the ECJ’s judgment. Given what has been said above, it would seem unlikely that trial will be delayed beyond 2019 by virtue of the ECJ’s judgment alone. This should be welcome news to Vodafone and to claimants generally, particularly since Infineon’s appeal has lasted more than four years so far.

Takeaway two: Will the remittal provide clarity for contribution claims?

A further key principle underpinning follow-on claims is that the cartelists are jointly and severally liable for the infringement. The level of the fine imposed by the Commission does not alter the level of damages that may be pursued by claimants on a follow-on basis. Insofar as the gravity of Infineon’s participation is to be re-assessed by the General Court, albeit for purposes of assessing the Commission’s fine, then this could be relevant to contribution claims in the context of follow-on damages where the test surrounds what is “just and equitable having regard to the extent of that person’s responsibility for the damage in question”. Although it remains to be seen how the Courts of England and Wales will assess contribution in a claim for follow-on damages, the General Court’s judgment on the remitted issue could yet be relevant if gravity is considered to be a relevant factor when applying the test.

Takeaway three: And Brexit?

Finally, the ECJ’s judgment also raises a wider issue, namely whether, in a post-Brexit world – and in a scenario where Commission decisions may continue to be relied upon as highly persuasive proof of liability (as opposed to the existing ‘binding’ standard) for follow-on damages claims but where the duty of sincere cooperation has fallen away: could this lead to the UK being a ‘fast-track’ jurisdiction?

Such a ‘fast-track’ jurisdiction would allow claims to progress to trial notwithstanding any appeals to the European Courts, and thus would prevent cartelists who are appealing a decision to use the appeals process as a delay tactic, given that the Masterfoods stay would no longer apply. However, until we are clearer upon the form that Brexit may take, it remains to be seen whether the ECJ’s short-term efforts to alleviate the clogged-up appeals process, by increasing the number of judges to 56 by 2019, will allow claimants to progress follow-on claims expeditiously and therefore enable them to obtain damages as a result of unlawful conduct sooner rather than later.

Related Lawyers: Luke Grimes
Related Practice Areas: Competition Litigation
Tags: competition, follow-on damages, cartels