The European Court of Justice (“ECJ”) has given an important judgment in Case C-441/07P, Commission v Alrosa Company Ltd, clarifying that commitments decisions under Article 9 of Regulation 1/2003 can be wider in scope than the remedies which the European Commission could impose in an infringement decision following a full length investigation. It gave judgment upholding the appeal by the European Commission against a judgment of the European General Court (formerly the European Court of First Instance) finding infringements of Articles 101 and 102 TFEU concerning the purchasing of rough diamonds by De Beers, thereby reinstating the Commission’s decision to accept commitments.
In 2003, the European Commission pursued an investigation on possible abuse of dominant position by De Beers in the worldwide rough diamond market and possible infringement of Article 101 TFEU by De Beers and Alrosa, a significant Russian competitor of De Beers. The Commission considered that De Beers, in entering into a trade agreement with its largest competitor, Alrosa, would gain control over significant volumes of rough diamonds. Moreover the agreement between the parties to sell and purchase 50% of Alrosa’s supplies was considered by the Commission to have the effect of eliminating Alrosa as a competitor of De Beers outside Russia.
The Commission adopted a decision accepting commitments proposed by De Beers whereby it would terminate its purchases of rough diamonds from Alrosa from 2009 and would, during 2006-2008, phase out its purchases from Alrosa from USD 600 million in 2006 to USD 400 million in 2008. Alrosa’s appeal against this decision was upheld by the European General Court, overturning the Commission’s decision. The European General Court found the Commission’s decision breached the principle of proportionality, which applies even where commitments have been offered voluntarily. The General Court considered the commitments disproportionate in that the Commission had failed to consider less onerous alternative solutions.
The Commission appealed against the judgment of the European General Court to the full ECJ, which resulted in a judgment (of 29 June 2010) annulling the European General Court’s judgment and reinstating the commitments decision of the Commission. The ECJ held that although commitments decisions and full infringement decisions are both subject to the principle of proportionality, the application of the principle differs according to the type of decision. The ECJ considered that undertakings which offer commitments on the basis of Article 9 of Regulation 1/2003 consciously accept that the concessions they make may go beyond the measures that the Commission could impose if it were to adopt a full infringement decision (under Article 7 of Regulation 1/2003). The advantage to the undertaking in making such commitments is that it avoids a decision finding that legally there has been an infringement, and thereby avoids a possible fine for infringement of the EU competition rules.
The ECJ held that the application of the principle of proportionality in the context of Article 9 commitment decisions is limited to verifying that the commitment in question addressed the concerns that the Commission has identified to the undertaking in question. Therefore the General Court was wrong to hold that the Article 9 commitments decision was disproportionate on the basis that such a decision would have been disproportionate if adopted as the full infringement decision. The ECJ held that the General Court could only have held the Commission’s assessment to be manifestly erroneous, if it had found that the Commission’s conclusion was obviously unfounded, having regard to the facts. Instead, the General Court had substituted its own assessment for that of the Commission. This had amounted to an interference of the Commission’s discretion as opposed to a review of the lawfulness of the Commission’s assessment. This on its own would have justified setting aside the General Court’s judgment.