Court upholds EC’s global reach on cartels

Judgment signals bad news for electronic goods manufacturers, airlines and car component makers fighting similar battles.

The European Commission won a far-reaching victory Thursday in the European Court of Justice, which upheld its ability to impose sweeping fines inside global cartels.

The verdict was a defeat for InnoLux, a Taiwanese electronics manufacturer, that appealed a €288 million fine for participating in cartel that fixed the price of LCD glass panels for TVs and computer screens.

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The ruling also was a blow for a variety of companies seeking to over-turn their own cartel fines, including TV manufacturers fined €1.47 billion over issues involving cathode ray tubes, airlines fined €800 million for colluding on the price of air freight, and computer manufacturers involved in an investigation for fixing the price of disk drives.

The case decided Thursday stemmed from a 2010 decision that slapped six electronics manufacturers, including InnoLux, with a total of €648 million in fines. The Commission proved their managers met in Taiwanese hotels to set prices and exchange information, distorting the market and hurting consumers.

The problem for the Commission was that some members of the cartels did not sell LCD screens in Europe. The Commission normally bases its fines on the volume of direct sales into the 28 member countries.

However, in this case, companies like Innolux took the LCD panels made elsewhere and assembled them into TVs, computers, and the like, and then sold them in Europe.

This made it difficult to calculate the cartel’s financial damage.

To approximate the impact, the Commission estimated the value of the price-fixed component within the finished product.

This new precedent was widely opposed by the companies and their lawyers. Even Melchior Wathelet, the court’s advocate-general, supported their side last year, saying the Commission had overreached its jurisdiction.

That sparked a flurry of exchanges between the Commission, judges and parties in other cartel cases.

Thursday’s judgment should be the last word.

“Europe’s top court essentially [handed] the EU the power to extend its territorial reach beyond Europe when enforcing its anti-cartel laws,” said Peter Camesasca, an antitrust partner at Covington and Burling.