On January 19th 2010, the Paris Court of Appeal gave its ruling in a cartel appeal, slashing fines imposed by the French Competition Authority on steel companies by almost EUR 500 million.
By way of background, on 16 December 2008, the Authority condemned 11 undertakings for cartel activities, which took place over nearly 5 years, involving price fixing and market sharing. The steel companies appealed the amount of the fines imposed by the Authority. In its ruling, the Court responded by reducing the contested amount from EUR 575 million to EUR 75 million.
The decision to reduce the fine was based on three main factors.
Firstly, the Court appeared to attempt to temper the position of the Authority on the seriousness of the offence (regardless of the fact that it was an acknowledged price fixing and market sharing cartel).
Secondly, the Court considered that the economic harm was not as important as had been made out by the Authority, considering it to be “certain but moderate”. Thirdly, the Court found that the Authority had failed to individualize the various fines imposed and had failed to take sufficient account of the various mitigating factors that should have led it to set much lower fines. In particular, the Court considered that the Authority had failed to consider the major effect that the crisis in the steel industry had on the undertakings concerned.
With this decision, the Court seems to have attempted to change the method of calculating fines. The message being sent is that the Authority should have set a more moderate fine, departing as much as possible from the maximum amount set down by law. In addition, the Court appears to have ruled that the Authority ought to look at all possible factors that could lead to a reduction of the fine.
The decision has sparked criticism from the Authority, which has called the judgment “stupefying”, claiming that this cartel is “the most important, the most sophisticated and the most serious in the entire history of the Authority”. The regulator is worried that if the companies are dealt with so leniently then it will not serve as a deterrent for future malpractice. Indeed, the effect of the decision appears to be to justify crisis cartels, as well as calling into question the overall policy that high fines have a deterrent effect.