Toshiba fails to convince European High Court that reduced level of participation in cartel warrants reduction of €61.4M fine
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Friday, July 7, 2017

Toshiba fails to convince European High Court that reduced level of participation in cartel warrants reduction of €61.4M fine

By Glenn Sulzer, J.D.

The European Court of Justice has upheld a €61.4 million fine (approximately $70 million) against Toshiba for its participation in a cartel that effectively divided the market share in Europe for gas insulated switchgear projects. The court rejected the contention that the fine did not accurately reflect Toshiba’s reduced level of culpability in the infringement compared to that of its European counterparts (Toshiba Corp. v. European Commission, July 6, 2017, Prechal, A.).

Toshiba, (independently and in a joint venture with Mitsubishi) participated in a cartel with European companies, which effectively controlled the market for gas insulated switchgear (GIS) projects in Europe and Japan. A "GQ Agreement," signed in 1988, established rules governing the allocation of worldwide GIS projects in order to maintain quotas reflecting historic market shares. Toshiba took part in a parallel "common understanding," pursuant to which GIS projects in Japan were reserved to Toshiba, in return for its agreement not to submit bids for GIS projects in Europe. Toshiba, however, did not participate in the GQ agreement, which arranged for the actual sharing of GIS projects.

In 2007, the European Commission found Toshiba guilty of infringement and assessed a fine of over €90 million. The judgment was upheld, but the fine was subsequently reduced by the General Court to €61.4 million, to equalize the treatment of Toshiba and the European participants. Toshiba, however, still objected to size of the fine and appealed.

The primary focus of the Court of Justice on appeal was Toshiba’s contention that the General Court erred in not finding that the European Commission infringed on the principle of equal treatment by not assessing a lower fee on Toshiba that reflected its relatively low level of culpability for the infringement. According to Toshiba, the Commission was required to examine the relative seriousness of the participation of each undertaking and to adjust the penalty to the individual conduct and specific characteristics of the relevant undertaking’s participation in the single and continuous infringement. Because it only agreed in the common understanding not to submit bids for GIS projects in Europe, Toshiba argued that it did not inflict the same harm on the European market as the European producers, who, under the GQ Agreement, actually allocated and shared EU projects though active collusion. Thus, as its contribution to the infringement was not comparable to that of the European undertakings, Toshiba averred, the assessed fine infringed on the principle of equal treatment.

The European Commission reasoned that the fact that Toshiba did not participate directly in all of the elements constituting the overall cartel did not absolve it from liability for the infringement. Toshiba, the Commission argued, must necessarily have known that: (1) collusion in which it was participating was part of an overall plan, and (2) the overall plan included all the constituent elements of the cartel.

The General Court concluded that Toshiba’s contribution to the infringement was comparable to that of the European undertakings, explaining that Toshiba’s participation in the common understanding was prerequisite to the implementation of the GQ agreement limiting competition. The Court of Justice agreed, stressing that, because Toshiba actually restricted operations in the European market, the fact that it did not participate in the GQ Agreement was irrelevant and did not render its conduct less serious than that of the European producers.

Accordingly Toshiba’s appeal was dismissed and the fine upheld. Adding to its financial liability, Toshiba was also ordered to pay the costs of the appeal.

The case is No. C-180/16P.

Companies: Toshiba Corp.

MainStory: TopStory Antitrust

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