Alliance One International Inc., v European Commission [2012] EUECJ C-593/11 (13 December 2012)

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(Appeal – Competition – Agreements, decisions or concerted practices – Italian market for the purchase and first processing of raw tobacco – Price-fixing and market-sharing – Attributability of unlawful conduct of subsidiaries to their parent companies – Presumption of innocence – Rights of the defence – Obligation to state reasons)

Alliance One International Inc., established in Danville, Virginia (United States), represented by G. Mastrantonio, avvocato,

European Commission, represented by E. Gippini Fournier, acting as Agent, with an address for service in Luxembourg,

1 By its appeal, Alliance One International Inc. (‘AOI’) seeks to have set aside the judgment of the General Court of the European Union of 9 September 2011 in Case T-25/06 Alliance One International v Commission [2011] ECR II-0000 (‘the judgment under appeal’), by which the General Court dismissed an action seeking, primarily, the partial annulment of Commission Decision 2006/901/EC of 20 October 2005 relating to a proceeding under Article 81(1) [EC] (Case COMP/C.38.281/B.2 – Raw tobacco – Italy) (OJ 2006 L 353, p. 45) (‘the contested decision’), and, in the alternative, a reduction in the amount of the fines imposed.

2 AOI is an American company which is the head of a group resulting from the merger of Standard Commercial Corp. (‘SCC’) and Dimon Inc. (‘Dimon’), completed on 13 May 2005, after the infringement at issue had come to an end.

3 During the period of that infringement, Transcatab SpA (‘Transcatab’) and Dimon Italia Srl (‘Dimon Italia’) were subsidiaries which were wholly owned by, respectively, SCC and Dimon, to which AOI is the legal successor. In September 2004, the shareholding in Dimon Italia was sold to four individuals with no connection to the Dimon group, and that company was renamed Mindo Srl.

4 On 20 October 2005, the European Commission adopted the contested decision. In Article 1(1) of that decision, it found that Transcatab, Deltafina SpA, Dimon Italia (referred to as Mindo Srl in the contested decision) and Romana Tabacchi SpA (collectively, ‘the processors’), as well as certain of their parent companies, including SCC, Dimon and Universal Corp., the parent company of Deltafina SpA, had, between 1995 and early 2002 (with the exception of Romana Tabacchi SpA, which had been involved in the cartel for a shorter period of time), engaged in several practices which constituted a single and continuous infringement of Article 81(1) EC.

5 In particular, as regards the liability of SCC and Dimon, the Commission relied on the presumption of actual exercise of decisive influence – arising from the parent companies’ 100% ownership of the share capital of their subsidiaries – over their subsidiaries and rejected the arguments and evidence produced by those companies with a view to rebutting that presumption.

6 The Commission also stated that, since the parent companies which controlled Transcatab and Dimon Italia during the infringement period had ceased to exist following their merger in the new entity AOI, that entity, as the legal successor of those two groups, was the addressee of the contested decision.

7 In order to determine, first, the starting amount of the fines to be imposed on Transcatab and Dimon Italia, the Commission, firstly, classified the processors’ infringement as very serious in so far as it related to the fixing of the purchase prices of varieties of raw tobacco in Italy and the sharing of the purchased quantities. Secondly, in order to ensure that the fine had a deterrent effect, the Commission applied a multiplying factor of 1.25 in respect of the fact that those companies belonged to multinational groups of considerable economic and financial strength. Thus, the starting amount of the fines imposed on those companies was set at EUR 12.5 million.

8 The Commission then increased that amount by 60% in respect of the duration of the infringement period of six years and four months, with the result that the basic amount of the fines imposed on those companies was set at EUR 20 million.

9 The Commission decided not to give Transcatab and Dimon Italia the benefit of attenuating circumstances.

10 Finally, the Commission, on the one hand,, limited the liability of Dimon Italia to 10% of its turnover for the most recent financial year and, on the other hand, reduced the fines imposed on Dimon Italia and Transcatab, by 50% and 30%, respectively, pursuant to the Commission notice on immunity from fines and reduction of fines in cartel cases (OJ 2002 C 45, p. 3), since those companies (a) were first and second, respectively, to have submitted evidence representing significant added value in relation to the evidence already in the Commission’s possession and (b) terminated their participation in the infringement on the date of the submission of that evidence.

11 Hence, the Commission, at Article 2(b) of the contested decision, set the final amount of the fine to be imposed on Dimon Italia and AOI at EUR 10 million, AOI being liable for the whole fine and Dimon Italia being jointly and severally liable for only EUR 3.99 million. At Article 2(c) of that decision, the Commission set the final amount of the fine to be imposed on Transcatab and AOI, jointly and severally, at EUR 14 million.

12 By application lodged at the Registry of the General Court on 24 January 2006, AOI brought an action, principally, for the partial annulment and, in the alternative, the alteration of the contested decision.

13 In support of its action, AOI put forward three pleas in law, the first of which, raised by way of principal claim, alleged breach of the rules governing the imputability to a parent company of the infringements committed by its subsidiary as well as breach of the rights of the defence. The General Court’s findings regarding the second and third pleas are not the subject of the present appeal.

14 The General Court dismissed that action in its entirety and ordered AOI to pay the costs.

– reduce the fines imposed on Transcatab and Dimon Italia so that they do not exceed 10% of their respective turnovers in the last financial year and that they take into account the fact that the multiplying factor based on the size of the group is not applicable; and

16 The Commission requests the Court to dismiss the appeal and to order AOI to pay the costs.

17 By order of the President of the Court of 6 August 2012, the present case was joined with Case C-654/11 P for the purposes of the oral procedure and the judgment.

18 However, under Article 181 of its Rules of Procedure, where an appeal is, in whole or in part, manifestly inadmissible or manifestly unfounded, the Court may at any time, acting on a proposal from the Judge-Rapporteur and after hearing the Advocate General, dismiss the appeal by reasoned order without opening the oral procedure. It is appropriate to apply that provision in the present case.

19 AOI puts forward two grounds in support of its appeal. By the first ground, AOI claims an infringement of Article 296 TFEU as well as of Articles 48 and 49 of the Charter of Fundamental Rights of the European Union and, more generally, of fundamental rights. The second ground of appeal alleges breach of the rights of defence, of the general principles relating to the burden of proof and of the procedural rules of evidence.

20 The first ground of appeal is divided into two limbs. By the first limb, AOI criticises the General Court for having infringed Article 296 TFEU. By the second limb, AOI complains that the General Court misinterpreted Articles 48 and 49 of the Charter of Fundamental Rights and the principle of individual liability.

21 In the context of the first limb of the first ground of appeal, AOI alleges a failure to state reasons, resulting in ‘[lacking], insufficient, contradictory’ reasoning and a distortion of the facts.

22 That limb concerns, firstly, the manner in which the General Court examined and rejected the evidence submitted in order to rebut the presumption that parent companies exercise decisive influence over the actions of their subsidiaries. The objective of that evidence was to demonstrate, first, that the subsidiaries had their own resources and local management, second, that Transcatab had an independent Board of Directors as well as an independent CEO with a very broad range of powers and, finally, that Dimon Italia also had such a Board of Directors.

23 Secondly, AOI claims that the General Court failed to state the grounds on which it rejected AOI’s arguments concerning the irrelevance of certain documents used by the Commission in order to establish the existence of ‘lines of communication’ between Transcatab and SCC and that it erred in its assessment of the evidence regarding the existence of ‘lines of communication’ between Dimon Italia and Dimon.

24 Those points of criticism relate to paragraphs 130 to 132, 137 to 139, 142 to 144, 152 and 154 of the judgment under appeal.

25 The Commission contests the admissibility and the merits of the first limb of the first ground of appeal.

26 It must be pointed out that the first limb of the first ground of appeal is expressed in a confused manner. Furthermore, even though breach of the obligation to state reasons is pleaded, AOI’s arguments appear to relate more to a contestation of the assessment of the facts made by the General Court.

27 In so far as AOI contests the reasoning of the judgment under appeal, it must be pointed out, firstly, that, in the context of the appeal, the purpose of review by the Court of Justice is, inter alia, to consider whether the General Court addressed, to the requisite legal standard, all the arguments raised by the appellant and, secondly, that the plea alleging that the General Court failed to rule on arguments relied on at first instance amounts essentially to relying on a breach of the obligation to state reasons which derives from Article 36 of the Statute of the Court of Justice, applicable to the General Court by virtue of the first paragraph of Article 53 of that Statute, and from Article 81 of the Rules of Procedure of the General Court (see order of 31 March 2011 in Case C-367/10 P EMC Development v Commission, paragraph 46 and the case-law cited).

28 In that regard, it is clear from settled case-law that the Court of Justice does not require the General Court to provide an account which follows exhaustively and one-by-one all the arguments put forward by the parties to the case and that the General Court’s reasoning may therefore be implicit on condition that it enables the persons concerned to know why it has not upheld their arguments and provides the Court of Justice with sufficient material for it to exercise its power of review (see order of 15 June 2012 in Case C-493/11 P United Technologies v Commission, paragraph 48).

29 At paragraphs 129 to 170 of the judgment under appeal, the General Court replied to each of the arguments put forward by AOI at first instance. The responses provided by the General Court are clear and unequivocal and disclose the matters which it found persuasive in arriving at its conclusion. The fact that the General Court, on the merits, arrived at a different conclusion from that of that company cannot in itself vitiate the judgment under appeal on the ground of failure to state reasons (see, by analogy, Case C-362/05 P Wunenburger v Commission [2007] ECR I-4333, paragraph 80).

30 As regards AOI’s argument that the General Court contradicted itself at paragraphs 138 and 139 of the judgment under appeal by simultaneously confirming that the delegation of powers granted to the CEO of Transcatab was not ‘at all uncommon’ and was ‘not credible’, it must be noted that that allegation results from a manifestly erroneous reading of the judgment under appeal. Firstly, the General Court found that it is not in any way unusual for a parent company to delegate the management of its subsidiary to the CEO of that subsidiary and that the fact that that CEO, in himself, had considerable powers might demonstrate that the parent company wished to simplify the exercise of its control over its subsidiary, specifically by concentrating all the powers in the hands of ‘a man [it] trust[s]’. Secondly, the General Court considered that it was not credible that a parent company would permit all the powers of a subsidiary to be delegated to a single CEO who, in practice, did not make that parent company aware of his acts. Consequently, there is no contradiction between those two statements.

31 Furthermore, notwithstanding AOI’s claims, there is no contraction in paragraph 131 of the judgment under appeal. By that paragraph, the General Court found that the subsidiaries concentrated on the purchase of raw tobacco and that the parent companies often acquired and marketed the processed tobacco, and it drew from this the conclusion that the groups concerned were vertically integrated.

32 It follows that, in so far as AOI submits that the General Court breached its duty to give reasons, that company’s arguments are manifestly unfounded.

33 In so far as AOI seeks to call into question the merits of the General Court’s reasoning in the judgment under appeal, it must be held that the paragraphs of that judgment that are challenged comprise factual assessments which cannot be reviewed by the Court of Justice in the context of an appeal. Such an argument is therefore manifestly inadmissible.

34 In that regard, it must be recalled that, according to settled case-law of the Court, it is clear from Article 256 TFEU and from the first paragraph of Article 58 of the Statute of the Court of Justice that the General Court has exclusive jurisdiction, first, to find the facts, except where the substantive inaccuracy of its findings is apparent from the documents submitted to it, and, second, to assess those facts. When the General Court has found or assessed the facts, the Court of Justice has jurisdiction under Article 256 TFEU to review the legal characterisation of those facts by the General Court and to review the legal conclusions which it has drawn from them (see judgment of 19 July 2012 in Joined Cases C-628/10 P and C-14/11 P Alliance One International and Standard Commercial Tobacco v Commission [2012] ECR I-0000, paragraph 84 and the case-law cited).

35 Therefore, inasmuch as, firstly, by the arguments thus relied on, AOI is in fact seeking a fresh assessment of the facts and, secondly, has in no way explained how the General Court distorted the evidence, those arguments must be rejected as inadmissible.

36 In the light of the foregoing, the first limb of the first ground of appeal must be rejected as being manifestly unfounded and, since, by that limb, AOI seeks to challenge the appraisal of the facts by the General Court, as being manifestly inadmissible.

37 By the second limb of the first ground of appeal, AOI contests the application made by the General Court of the presumption of actual exercise of decisive influence, which, according to that company, infringes the principle of the presumption of innocence as well as the principles of legality and individual liability.

38 The Commission contests the admissibility and the merits of the second limb of the first ground of appeal.

39 It must be pointed out, as correctly submitted by the Commission, that the argument alleging a breach of fundamental rights, advanced by AOI in the context of the second limb, was not raised before the General Court.

40 In accordance with settled case-law, however, to allow a party to put forward for the first time before the Court of Justice a plea in law which it has not raised before the General Court would in effect allow that party to bring before the Court a wider case than that heard by the General Court. In an appeal, the Court’s jurisdiction is, as a general rule, confined to a review of the assessment by the General Court of the pleas argued before it (see Alliance One International and Standard Commercial Tobacco v Commission, paragraph 111 and the case-law cited).

41 In any event, it must be pointed out that AOI claimed before the General Court that, in order to attribute to a parent company liability for the actions of its subsidiary, the onus was on the Commission to prove that that parent company was involved in the actions of its subsidiary.

42 The General Court did not err in law when it referred, in paragraphs 84 and 85 of the judgment under appeal, to the settled case-law according to which the conduct of a subsidiary may be imputed to the parent company in particular where, although it has a separate legal personality, that subsidiary does not decide independently upon its own conduct on the market, but carries out, in all material respects, the instructions given to it by the parent company, having regard in particular to the economic, organisational and legal links between those two legal entities. In such a situation, since the parent company and its subsidiary form a single economic unit and therefore form a single undertaking for the purposes of Article 81 EC, the Commission may address a decision imposing fines on the parent company, without having to establish the personal involvement of the latter in the infringement (see Alliance One International and Standard Commercial Tobacco v Commission, paragraphs 43 and 44 and the case-law cited).

43 The Court has made it clear that, in the particular case of a parent company having a 100% shareholding in a subsidiary which has infringed the European Union’s rules on competition, that parent company is able to exercise decisive influence over the conduct of its subsidiary, and there is a rebuttable presumption that the parent company does in fact exercise such influence (see Alliance One International and Standard Commercial Tobacco v Commission, paragraph 46 and the case-law cited).

44 In that regard, it is for entities wishing to rebut the presumption of actual exercise of decisive influence to provide any evidence relating to the economic, organisational and legal links between the subsidiary in question and the parent company which in their view is capable of demonstrating that they do not constitute a single economic entity (see Case C-521/09 P Elf Aquitaine v Commission [2011] ECR I-0000, paragraph 65).

45 The mere fact that an entity does not provide, in a given case, evidence capable of rebutting the presumption of actual exercise of decisive influence does not mean that that presumption cannot, in any event, be rebutted (see Elf Aquitaine v Commission, paragraph 66).

46 Consequently, the second limb of the first ground of appeal must be rejected as inadmissible and, in any event, unfounded.

47 It follows from all of the foregoing considerations that the first ground of appeal must be dismissed as being, in part, manifestly inadmissible and, in part, manifestly unfounded.

48 AOI claims, firstly, that the General Court did not carry out a satisfactory analysis of its pleas concerning the inadmissibility of the documents not referred to in the statement of objections which the Commission used in the contested decision as evidence of the existence of ‘lines of communication’. Secondly, it takes the view that those new documents were admitted in breach, as far as the parent companies are concerned, of the rights of defence and, in any event, on the basis of a misapplication of the principles governing the burden of proof.

49 The Commission contests the admissibility and the merits of this ground of appeal.

50 Firstly, it must be observed that the General Court provided, to the requisite legal standard, reasons for its judgment in holding, firstly, at paragraph 185 of that judgment, that, in order to justify attributing to the parent companies liability for the conduct of their subsidiaries, the Commission was entitled, in principle, to limit itself to establishing the ownership of the entire capital of the subsidiaries by their parent companies, but that it was required to adopt a position on the arguments relied on by the parties in reply to the statement of objections, and, secondly, at paragraph 186 of that judgment, that, as it did not involve evidence establishing the liability of the parent companies, the assessment of those documents was not capable of affecting the efficacy of the exercise, by those companies, of the rights of defence.

51 Secondly, the General Court was right to point out, at paragraph 185 of the judgment under appeal, that, in order to justify attributing to the parent companies liability for the conduct of their subsidiaries, the Commission was entitled, in principle, to limit itself to establishing the ownership of the entire capital of the subsidiaries by their parent companies. As follows from the case-law referred to at paragraph 44 of the present order, it was for AOI to provide any evidence which in its view was capable of rebutting the presumption of actual exercise of decisive influence. Therefore, as the documents referred to by that company do not constitute evidence designed to establish the liability of the parent companies, the General Court did not err in law in holding, at paragraph 186 of the judgment under appeal, that the assessment of those documents, included in the administrative file, was not capable of affecting the efficacy of the exercise, by SCC and Dimon, of the rights of defence, especially as those companies had access to those documents, which were, in any event, already in their possession during the administrative procedure.

52 It follows from this that the second ground of appeal, which is manifestly unfounded, must be rejected.

53 In the light of all the foregoing considerations, the appeal must be dismissed as being, in part, manifestly inadmissible and, in part, manifestly unfounded.

54 Under Article 138(1) of the Rules of Procedure of the Court of Justice, which applies to appeal proceedings by virtue of Article 184(1) thereof, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings.

55 Since the Commission has applied for costs to be awarded against AOI, and as the latter has been unsuccessful, AOI must be ordered to pay the costs.

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