Analysis: “Recylex v Commission – The Court of Justice reduces the scope of potential strategies for leniency applicants to increase the amount of fine reductions” by Jokin Beltrán de Lubiano
In 2017, the European Commission found that four companies (JCI, Recylex, Campine and Eco-Bat) had engaged in an illegal cartel in the market of car battery-recycling. In investigating this cartel, the Commission was supported by the leniency submissions of all these companies. In particular, JCI was the first to self-incriminate and report the cartel to the Commission, and therefore full immunity for the fine was granted under the 2006 Leniency Notice. This led to inspections at the premises of the other companies, after which Eco-Bat and Recylex also filed for leniency. The Commission granted them a 50% (Eco-Bat) and 30% (Recylex) reduction of the fine. Campine also submitted a leniency application, which was rejected as it did not provide added value to the Commission’s investigation.
The judgment handed down by the Court of Justice on 3 June 2021 in Recylex v Commission (C-563/19 P) deals with the effect that this company’s leniency application should have on the fine ultimately imposed by the Commission. In short, Recylex argued that – in addition to the 30% reduction that it had already obtained – it was entitled to: (i) partial immunity (a 100% reduction) of the amount of the fine linked to ‘additional facts’ which were proved through its leniency application; and (ii) taking up Eco-Bat’s position in the ‘leniency ranking’ as the first applicant for a reduction, which would therefore result in a reduction of the fine in the 50 to 30% bracket (instead of a reduction in the 30 to 20% bracket). The General Court refused Recylex’s pleas, and Recylex appealed to the Court of Justice.
The first part of the appeal revolved around the requirements to establish “additional facts” by an applicant for a reduction in fine. Under the 2006 Leniency Notice, if those additional facts would lead to an increase in the total amount of the fine (either because they increase the duration of the infringement or its gravity), the reduction applicant is entitled to immunity for such increase (the fine is assessed as if those additional facts did not exist). This rule attempts to maintain an incentive in cooperation, as otherwise the rise of the fine resulting from an increased length or gravity could overcome any reduction obtained through the leniency application. In this case, Recylex argued that the evidentiary materials submitted to the Commission allowed the competition watchdog to establish a meeting between the investigated companies in 2009 and the extension of the cartel’s scope to France. While there were already certain indications of this meeting and the territorial scope of the cartel in the Commission’s case file, in Recylex’s view, this was not enough to establish these facts to the requisite legal standard. Therefore, the leniency application had, in fact, established these ‘additional facts’ and Recylex would have been entitled to partial immunity for them.
The Court rejected this plea. It found that the ‘additional facts’ must be ‘new’ to the Commission, and that it does not suffice that they merely strengthen the evidence already gathered by the Commission. Therefore, it is not necessary to compare the evidential value of the information already held by the Commission and the new elements provided by the leniency applicant. Here, since the Commission was already aware of this meeting and territorial scope, then, Recylex was not entitled to partial immunity on account of the supplementary evidence provided in its application.
The second part of the appeal concerned Recylex and Eco-Bat’s ‘leniency’ ranking. Eco-Bat’s application came first, which therefore placed this company in the 30-50% reduction bracket. Recylex’s application came second and was therefore entitled to a 20-30% reduction. In Recylex’s view, however, Eco-Bat did not cooperate adequately with the Commission during the investigation. Therefore, as full cooperation is a condition to obtain any leniency benefit, Eco-Bat’s leniency application should have been rejected by the Commission, which would allow Recylex to take over Eco-Bat’s position and consequently a higher reduction in fine.
The Court also rejected this ground of appeal. According to the judgment, even if it were true that Eco-Bat did not meet its cooperation duties in the investigation, this would not mean that Recylex could take up its ranking position and gain a higher reduction percentage. First, the Court notes that nothing in the Leniency Notice supports this position. Second, the Court concludes that the overall objective of the Leniency Notice is to create a ‘climate of uncertainty within cartels’, and to that effect it is paramount to incentivise speed in the leniency process. It seems that the Court does not want to create any potential motivation to strategically withhold a leniency application.
The strategies pursued by Recylex in this case are common in leniency applicants which are determined to reduce the very substantial liability that a cartel finding entails. With this judgment, the Court of Justice has closed the door to such possibilities, which also means that the incentives to file for leniency will be reduced when there is no certainty that the application will be the first one.
Jokin Beltrán de Lubiano is an EU & Competition law Associate at an international law firm.