Cartel Penalties Won’t Bend to Bad Legal Advice

     (CN) – An Austrian shipping association that got the “all clear” from its lawyers over antitrust concerns could still face fines from regulators, the EU’s high court ruled Tuesday.
     Schenker & Co. joined forces with 30 other freight companies to form a special interest group – known as SSK – in 1994. The group wanted to obtain more favorable road and rail freight rates for shippers and consumers, and believed that all would benefit from fair competition if it created a level playing field for members.
     Austria’s antitrust court declared in 1996, however, that SSK qualified as a minor cartel under Austrian law. SSK then sought consultation, and a law firm specializing in such cases told it that the minor player status did not violate any law.
     But in 2007, the European Commission launched an investigation of SSK and conducted unannounced inspections of several of the group’s members. The agency eventually determined that some of SSK’s practices violated the EU’s antitrust laws.
     A high regional court in Vienna weighed in, finding that price-fixing between SSK members did not violate EU law since their actions had no effect on trade between European countries. That court also noted that the group had conducted its business in reliance on both the order of the antitrust court and legal advice from its consultant.
     As the case against SSK progressed through the Austrian courts, the country’s own regulators testified that Schenker & Co. had cooperated with authorities throughout the investigation and had applied for leniency. The agency lobbied for a finding that the companies should not be fined for their actions even though Austrian and EU antitrust laws had been violated.
     Eventually, SSK found itself before the Austrian Supreme Court. In an attempt to sort out the mess, that court asked the EU high court whether SSK might escape penalties because it relied on bad legal advice during its formation.
     The Luxembourg-based Court of Justice held Tuesday that infringements of EU law – whether committed intentionally or negligently – must still be punished.
     “The fact that the undertaking concerned has characterized wrongly in law its conduct upon which the finding of the infringement is based cannot have the effect of exempting it from imposition of a fine in so far as it could not be unaware of the anti-competitive nature of that conduct,” the court wrote. “It is apparent that the members of the SSK coordinated their behavior in relation to their tariffs for domestic consolidated consignment transport throughout Austria. Undertakings which directly coordinate their behavior in respect of their selling prices quite evidently cannot be unaware of the anti-competitive nature of their conduct.”
     Furthermore, while national authorities can decide against fines in exceptional situations, an ineffective assistance defense is not one of them, the justices added.
     The court also noted that EU law does not specifically address national leniency programs, but advised Austrian authorities to model theirs after the European Commission’s investigational tools to avoid conflicts of law.
     “In the case of the commission’s power to reduce fines under its own leniency program, it is apparent from the court’s case law that a reduction of a fine for cooperation on the part of undertakings participating in infringements of European Union competition law is justified only if such cooperation makes it easier for the commission to carry out its task of finding an infringement and, where relevant, of bringing it to an end, whilst the undertaking’s conduct must also reveal a genuine spirit of cooperation,” the justices wrote, handing the case back to the Austrian Supreme Court for a final ruling.
     “As regards immunity from or not imposing a fine, in order for such treatment – which is moreover at issue in the main proceedings – not to undermine the effective and uniform application of [EU law] it can be accorded in strictly exceptional situations only, such as where an undertaking’s cooperation has been decisive in detecting and actually suppressing the cartel,” they concluded.

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