Background: The European Court of Justice ruled that in antitrust proceedings, the European Commission may rely on the fortuitous conveyance of evidence by a national tax authority.
The Result: This ruling sets the stage for information sharing that capitalizes on cooperation between the European Commission and national authorities (whether in the field of competition or in other areas).
Looking Ahead: Companies will have even greater incentives for a comprehensive legal compliance system, given the confirmed legitimacy of a more extensive use of information sharing between EU and national authorities.
The European Court of Justice ("CoJ") has upheld the European Commission's use of evidence transmitted by a national authority other than a Member State competition authority in a cartel investigation. The CoJ ruled on April 27, 2017, that the national authority properly transmitted such evidence under national law and that, in particular, nothing under EU competition rules impeded such transfer (Case C-469/15 P, FSL Holdings NV, Firma Léon Van Parys NV, and Pacific Fruit Company Italy SpA ("Pacific Fruit Group") v. European Commission).
This ruling arises from the Commission's investigation of anticompetitive practices relating to the exchange of price-related information of bananas in northern Europe (northern European investigation), commenced in 2005.
In the context of the northern European investigation, the Commission received documents in July 2007 relating to the alleged anticompetitive practices from the police section of the Italian tax authority, which was conducting a national tax investigation. The documents, found when inspecting the office and home of an employee of Pacific Fruit Company Italy SpA, implicated anticompetitive practices occurring in southern Europe.
In 2007, following receipt of such information, the Commission carried out dawn raids at banana importers' offices in Spain and Italy and found two pages of the same notes already transmitted by the Italian tax authority. Following its investigation of anticompetitive practices in southern Europe (southern European investigation), the Commission issued a decision in 2011 that fined Pacific Fruit Group €8,919,000 for coordinating their price strategy in Greece, Italy, and Portugal, as well as exchanging information on future market pricing conduct.
Commission May Rely on Evidence Properly Transmitted by a National Noncompetition Authority
Pacific Fruit Group appealed the Commission's decision before the European General Court, specifically challenging the Commission's use of the documents transmitted by the Italian tax authority.
While the General Court reduced the fine, due to interruption of the infringement for a limited period, it otherwise upheld the rest of the decision (as set out below). In 2015, Pacific Fruit Group appealed to the CoJ, contesting the use of evidence transmitted by a national authority.
The CoJ fully upheld the General Court, dismissing Pacific Fruit Group's claim that the European Commission unlawfully used evidence transmitted by the Italian tax authority. The findings of the CoJ are outlined below.
Proper Transfer of Evidence by National Authorities Under National Law. Pacific Fruit Group asserted that the transmission of the evidence must comply with not only national law, but also EU law. However, the CoJ upheld the General Court's finding that (i) national law governs when national authorities transmit information to the Commission obtained in application of national criminal law, and (ii) the EU courts have no jurisdiction to rule on the lawfulness of a measure adopted by a national authority under national law.
The CoJ referred to the General Court's findings that the police section of the Italian tax authority had properly provided the documents to the Commission. These documents were transmitted after Rome's public prosecutor had authorized the internal transfer of such evidence from the Italian tax authority's police section to its market protection section (dedicated to protecting competition in Italy). Therefore, the public prosecutor must have known that he was authorizing the use of such documents for the purposes of a competition investigation. The public prosecutor subsequently responded to a European Commission request to confirm that the Commission could communicate the evidence to the parties without prejudicing the national investigation in Italy.
The Commission May Use Information Collected by a Noncompetition Authority for Another Purpose. The CoJ further rejected Pacific Fruit Group's interpretation of the EU competition rules that evidence shall only be used in relation to the subject matter for which it was collected by the national authority (see Article 12(2) of Regulation 1/2003 on information exchange between the Commission and national competition authorities, which provides that "[i]nformation exchanged shall only be used in evidence for the purpose of applying [Article 101 or 102 TFEU] and in respect of the subject-matter for which it was collected by the transmitting authority").
Pacific Fruit Group contended that, under such provision, the Commission must assess whether documents transmitted are used only in relation to the national authority's purpose in collecting such information. Therefore, it argued that the disputed documents should have been used only as evidence in a national tax investigation, as they were collected for such purpose, and not for a competition investigation.
The CoJ, however, noted that Regulation 1/2003 seeks to enhance cooperation between competition authorities at the EU and national levels by facilitating the exchange of information, including confidential information. With this in mind, the CoJ found that Regulation 1/2003 (Article 12 (2)) did not create a more general rule prohibiting the Commission from using information transmitted by national authorities other than the Member States' competition authorities, solely because such information had been obtained for other purposes. The CoJ found that such a rule would unduly burden the Commission's role in overseeing the enforcement of EU competition law.
As further noted by Advocate General J. Kokott in her opinion delivered on November 27, 2016, the existence of an antitrust offense can be demonstrated by any appropriate evidence. EU law has no general principle such that competition authorities may rely only on certain forms of evidence or take into account only evidence from certain sources. A prohibition on the reuse of evidence for purposes other than why it was originally gathered can only arise where EU or national law sets out an express intended purpose for a particular item of evidence, such as under the above-referred Regulation 1/2003, Article 12 (2) (evidence exchanged between European competition authorities) and Article 28 (1) (evidence gathered by the Commission in the course of antitrust proceedings and covered by professional secrecy). These safeguards are to prevent evidence, gathered by a competition authority for the specific purpose of antitrust law, from subsequent use against companies in other proceedings with stricter standards of procedural law, e.g., in criminal law proceedings. Such restriction, however, cannot exceed what is necessary to protect the rights of defense and professional secrecy.
In this respect, in 1989, the CoJ rejected claims that the Commission improperly used information obtained in a dawn raid to initiate a subsequent dawn raid concerning a different subject matter. The CoJ found that the Commission cannot be barred from initiating an inquiry in order to verify or supplement information obtained during a previous investigation, if such information indicates the existence of anticompetitive conduct (Case 85/87, Dow Benelux v. Commission, 17 October 1989, para. 19).
No Violation of Fundamental Principles of EU Law. Pacific Fruit Group further argued that the Commission violated its rights of defense in taking over two years to inform it that the Italian tax authority had transmitted such evidence, which then led to the Commission's initiation of the southern European investigation.
In dismissing this claim, the CoJ recalled that access to the file is triggered only upon the Commission's issuance of a statement of objections, which sets out all essential elements of the Commission's case. Receipt of the statement of objections, combined with access to evidence, ensures that the rights of defense are fully observed.
The Commission was not required to inform Pacific Fruit Group of the disputed evidence prior to issuing the statement of objections. Such an obligation would endanger the effectiveness of the Commission's investigation. As noted by the General Court, if parties learned about evidence in the Commission's possession during its initial investigation stage, this could lead to concealing other related information.
Furthermore, the CoJ noted that Pacific Fruit Group had not explained why lack of knowledge about such documents would have affected its ability to defend itself following notification of the statement of objections.
The CoJ judgment sets the stage for information sharing that capitalizes on cooperation between the Commission and national authorities (whether in the field of competition or in other areas). Indeed, in the field of antitrust, the European Commission's ability to use information and evidence obtained from national authorities touches on one of the central building blocks of the modernized system for the enforcement of competition law, as reminded in the Advocate General's opinion.
In light of the confirmed legitimacy of a more extensive use of information sharing amongst EU and national authorities, companies will have even greater incentives for a comprehensive legal compliance system. Indeed, as in the present case, a domestic noncompetition inspection (targeting tax evasion, money laundering, insider trading, etc.) may well open the door to a full-blown EU antitrust investigation and hefty consequent fines.
Three Key Takeaways
EU law has no general principle that requires competition authorities to rely on only certain forms of evidence or evidence from certain sources.
Companies cannot expect that evidence will be shielded from antitrust scrutiny when taken by a national noncompetition authority for purposes unrelated to competition enforcement. Such authority may communicate this evidence to the EU competition authority, as long as such information is properly transferred.
Affirming that information exchange between national and EU authorities is primordial to the effective application of EU competition law, this ruling will serve to bolster and perhaps even inspire greater cooperation and information sharing amongst enforcement authorities across different sectors.