Facilitation, facilitation, facilitation: the General Court’s ICAP judgment

The General Court’s November 2017 judgment is not such welcome news to ICAP as it might first appear. ICAP’s appeal against a 2015 infringement decision was successful insofar as the fines imposed on it will now be trimmed, but in the main the General Court supported the European Commission’s substantive findings. These include the conclusion that ICAP acted as a facilitator to the Yen LIBOR cartel - a useful reminder that an undertaking needn’t benefit directly from an anti-competitive agreement to find itself liable in the eyes of the (competition) law.

Background

In a February 2015 decision (the Decision) the European Commission (the Commission) held that ICAP participated in infringements of Article 101 TFEU in connection with the manipulation of the London Interbank Offered Rate (LIBOR) and the Tokyo Interbank Offered Rate (TIBOR) on the Japanese Yen interest rate derivatives market. ICAP was found to have "facilitated" six instances of coordination, each constituting a separate infringement. ICAP did so through a daily spreadsheet providing Yen LIBOR rates, which it circulated to participants in the cash deposit Japanese Yen active market. The Commission found that the contents of the spreadsheet had a decisive influence over the conduct of banks when circulating their rate submissions.

A December 2013 settlement decision, adopted by the Commission against five banks1, R. P. Martin Holdings and Martin Brokers (UK), found those parties liable for the six infringements. ICAP refused to participate in that settlement procedure and was ultimately fined €14.9m in the Decision for its role in the cartel. To reach this figure, the Commission departed from its own fining guidelines, arguing that a fine based upon ICAP’s relevant brokerage fees would not reflect the gravity and nature of the infringement. ICAP appealed the Decision to the General Court (the Court).

The Court’s judgment

ICAP challenged the Commission’s legal working on two main grounds: (a) the Commission had misapplied and misinterpreted the concept of restriction or distortion of competition "by object" within the meaning of Article 101 TFEU; and (b) the Commission had misapplied the concept of "facilitation" to the facts of the case.

"By object" infringement

The Court revisited the case law covering "by object" infringements, being those forms of coordination which are, by their very nature, so likely to have negative effects as to render it unnecessary for the Commission to prove that they have actual effects on the market. The Court sided with the Commission, holding that inasmuch as the coordination of Yen LIBOR panel submissions was intended to influence the extent of payments due by or to the banks concerned, that coordination had clear anticompetitive object. The Court noted that it was not necessary to also determine whether the exchange of confidential information between banks in the course of their conduct also amounted to a by object infringement, but held in any event that it did.

Facilitation

ICAP argued that the "facilitation" test applied by the Commission was too broad and a novelty, breaching the principle of legal certainty. ICAP also disputed whether the Commission had met requisite evidentiary standards even by its own test. The Court, for its part, noted that the Article 101(1) prohibition is not directed only at parties who are active on the affected markets, but the Commission must show that a party intended to contribute by its own conduct to the common objectives of the infringing group. This may include "passive" participation (eg an undertaking attending meetings without publicly distancing itself from the cartel or reporting it to the authorities).

The Court examined whether the evidence relied upon by the Commission was sufficient to show that, in respect of each infringement, ICAP was aware that the banks had deliberately coordinated their submissions. The Court found that this had been proven in relation to all but one infringement: a 2008 coordination between UBS and RBS. Of the remaining infringements, however, the Court deemed that in only one had the Commission properly made out the duration of ICAP’s involvement. For the rest, the Court held that communications between ICAP and the other parties were at certain times too infrequent for the infringement to be characterised as "continuous", and/or the date range for the relevant infringement alleged by the Commission exceeded the period for which the Commission could prove ICAP’s involvement. The Court decided that ICAP remained liable in respect of five infringements, but on the basis of narrower time frames.

The Court had little time for ICAP’s complaint that the Commission’s "facilitation" test breached the principle of legal certainty. The Commission’s interpretation of the behaviour was thought by the Court to have been reasonably foreseeable at the time the offence was commissioned, particularly given the broad interpretation of the terms “agreement” and “concerted practice” within EU case law.

Procedural errors

Breach of ICAP’s right to the presumption of innocence

ICAP was named in the Commission’s 2013 settlement decision, which stated that ICAP had revised its submissions pursuant to direction from the banks and had disseminated misleading information to panel banks for yen LIBOR. While the settlement decision did not state that ICAP was in breach of competition law, the Court considered that could "easily be inferred" from the information within the settlement decision. This offended ICAP’s right to presumed innocence. Though critical of the Commission, the Court considered that the error had no impact on the content of the Decision and did not warrant its being quashed. The Court did suggest that future "hybrid" settlement decisions taken by the Commission would need to avoid trespassing upon a non-settling party’s right to a presumption of innocence. The Commission should potentially delay the adoption of the settlement decision until the infringement decision is taken, or draft the settlement decision in a way to avoid implicating a non-settling party.

Failure to provide sufficient reasons for the fining methodology

ICAP contested the quantum of the fine on various grounds, including that of insufficient reasoning by the Commission. The Court was sympathetic, explaining that where the Commission decides to depart from its own fining guidelines it must provide a thorough explanation for its doing so. The Decision was not sufficiently reasoned as to allow ICAP to understand the justification for the methodology utilised by the Commission, nor the weighting of factors considered by the Commission in levelling the fine. This insufficient reasoning vitiated that part of the decision imposing the fine, which was accordingly annulled by the Court.

Next steps

As ICAP had been successful in respect of a substantial part of its appeal, the Commission is required to bear its own costs, and must also pay three quarters of ICAP’s costs. The Commission will also need to recalculate the fine given to ICAP in light of the Court’s judgment then readopt its decision. The Commission has said it will “carefully analyse” those sections of the judgment finding fault with the Commission.

Comment

The Commission now has a headache as it is forced to reconsider its hybrid settlement procedure. Criticism of the settlement process will offer little comfort to ICAP, which has discovered that its right to a presumption of innocence was not trodden on quite firmly enough. It is a high hurdle for an undertaking to show that the Commission both (a) infringed its right to the presumption of innocence and (b) that breach had a material impact upon the Commission’s infringement decision, in order to strike down the decision. That an appellant must do more than point to a procedural error by the Commission to succeed in having a decision annulled is a point more recently reinforced in the European Court of Justice’s Intel decision.

1 Including UBS, which originally notified the Commission of the existence of the cartel under the Commission’s leniency notice.