Banking and financial operators must be careful as regards the exchange of information and competition law compliance

PartiesJurisdictionFormationJudge RapporteurAdvocate GeneralSubject-matter
Non-contractual liabilityIcap plc,
Icap Management Services Ltd,
Icap New Zealand Ltd
European Commission
The General CourtSecond Chamber, Extended CompositionM. PrekCompetition Law - Article 101 TFEU - Anticompetitive agreements and concerted practices - Restriction of competition by object - Fine
KeywordsCompetition - Agreements, decisions and concerted practices - Yen interest rate derivatives sector - Decision finding six infringements of Article 101 TFEU and Article 53 of the EEA Agreement - Manipulation of the JPY LIBOR and Euroyen TIBOR interbank reference rates – Exchange of information - Restriction of competition by object - Participation of a broker in the infringements - ‘Hybrid’ settlement procedure - Principle of the presumption of innocence - Principle of sound administration - Fines - Basic amount - Exceptional adjustment - Obligation to state reasons
Significant pointsIn 2013, the Commission imposed fines of EUR 669.7 million in total, on the banks UBS, RBS, Deutsche Bank, Citigroup, JP Morgan and on the broker RP Martin for participating in cartels . The undertakings manipulated the London Interbank Offered Rate (LIBOR) and the Tokyo Interbank Offered Rate (TIBOR) interbank reference rates on the Japanese Yen interest rate derivatives market. The Commission revealed seven bilateral infringements from 2007 to 2010. The cartels consisted in discussions between traders on certain JPY submissions. Occasionally, the traders also exchanged commercially sensitive information relating to their trading positions or future JPY LIBOR submissions. Those submissions reflect the ‘average‘ rate from which panel bank could borrow funds. The companies admitted their involvement in the cartels, which allowed the Commission to settle the case.
In a later decision (in 2015), the broker Icap was found by the Commission to have facilitated the same conduct by serving as a conduit for collusive communications (in one of the instances) and by contacting other JPY LIBOR panel banks or disseminating information via manipulated daily ‘Run Thrus’ (in the remaining five instances). A spreadsheet circulated each business day by Icap to a number of financial institutions contained information on the prevailing borrowing rates for Japanese and offshore banks for all the JPY LIBOR tenors as well as a table entitled ‘suggested libors’, which consisted of suggested JPY LIBORs submissions for all tenors on the relevant business day.
In this case, the applicants sought the annulment of Commission’s decision and, alternatively, the reduction in the amount of the fines imposed upon them.

First, the applicant alleged errors in the interpretation by the Commission in its decision of the concept of restriction or distortion of competition ‘by object’ within the meaning of Article 101(1) TFEU.
In that regard, the General Court firstly recalled the judgment in Dole Fresh Fruit v Commission which affirmed that an exchange of information which removes uncertainty between participants as regards the timing, extent and details of the modifications to be adopted by the undertakings in their conduct on the market must be regarded as pursuing an anticompetitive object. There is no need for there to be a direct link between the conduct and consumer prices in order to find that a concerted practice has an anticompetitive object.
Secondly, the General Court took the view that, in the light of the significance of the impact of the level of the JPY LIBOR rates on the amount of the payments effected in respect of derivatives, the mere communication of information regarding the future submissions of a bank which is a member of the JPY LIBOR panel was capable of giving an advantage to the banks concerned. It indeed removed them from the application of normal competition on the Japanese Yen interest rate derivatives market.
Consequently, the General Court decided that the Commission did not commit any error of law or assessment in finding that the infringements alleged against Icap were restrictive of competition by their object.

Second, Icap challenged the Commission’s decision to impose a fine of EUR 14.96 million on it for its role as a facilitator of the cartels. It claimed that it was not aware of the collusion involving, amongst others, UBS/RBS 2008. The General Court recalled the judgement in Treuhand that obliged the Commission to demonstrate that an undertaking was aware of the actual conduct planned or put into effect by each of the banks concerned or could have reasonably foreseen it. The Court then concluded that there did not exist firm, precise and consistent evidence that Icap was aware of the bilateral cartel between UBS and RBS in 2008 and thus annulled the part of the Commission’s decision finding that Icap had participated in this bilateral cartel. However, the General Court agreed that the evidence underlying the Commission’s conclusions as regards the other cartels was sufficient to prove that Icap was aware or should have been aware of the unlawful collusion.

Third, Icap also disputed its role in the cartels. The General Court agreed with the Commission, however, that Icap had contributed to the common objectives of those cartels. Its awareness of the anticompetitive conduct – apart from as regards UBS – and its assistance in putting this into effect sufficed in order to find that Icap had infringed competition law. Notably, the General Court considered that the Commission had not infringed the principle of legal certainty in its application of the ‘facilitation’ test (above). Firstly, Icap, which as a professional operator is used to having to proceed with a high degree of caution when pursuing its occupation, should have expected, if necessary after taking appropriate legal advice, its conduct to be declared incompatible with the EU competition rules. Secondly, its participation for some of the infringements concerned was significant. In so far as JPY LIBOR rates are calculated on the basis of the submissions of the panel members, the influence exerted by Icap over its customers which were members of that panel via the daily spreadsheet referred to above made it possible to amplify the manipulations of those rates to a much greater extent than if those manipulations had remained confined only to the submissions of the two banks concerned by each of those infringements.

Fourth, Icap argued that the Commission had not proven the continuous nature of the infringement periods that it claimed. In this regard, the General Court found that the Commission had indeed failed to justify the duration of three of the cartels in which Icap was deemed to have participated: namely the UBS/RBS 2007 cartel after 22 August 2007, the Citi/RBS cartel between 5 March and 27 April 2010 and the Citi/UBS cartel between April and 18 May 2010. In its assessment, the General Court took into account the fact that JPY LIBOR rates are set on a daily basis and, therefore, that the effects of manipulating those rates are limited in time and that the manipulation needs to be repeated in order for those effects to continue.

Fifth, Icap claimed that its right to an impartial procedure under the Charter of Fundamental Rights was violated. The General Court underlined that where there are ‘hybrid’ settlement procedures (i.e. some undertakings agree to settle whilst others don’t) the Commission must find a way to respect the presumption of innocence of the undertakings which have decided not to enter into a settlement. This is a fundamental right enshrined in the Charter of Fundamental Rights. The Commission infringed the presumption of Icap’s innocence in its 2013 settlement decision by already considering in that decision that Icap was liable in respect of the ‘facilitation’ of the infringement concerned. Nevertheless, this breach by the Commission did not have an impact on the content and therefore the legality of the challenged decision in 2015.

Finally, the General Court underlined that the Commission did not sufficiently explain in its decision the methodology applied in order to determine the amount of the fines. This involves indicating the factors which enabled to determine the gravity of the infringement and its duration and weighting and assessing those factors. The General Court annulled the part of the decision setting the fines because the Commission did not explain why it chose to apply a certain method and only gave a general statement as regards the gravity, duration and nature of Icap’s infringement. Such limited reasoning did not permit an undertaking to understand the fine calculation nor a Court to legally review the decision and thus infringed the principle of due reasoning of decisions taken by EU institutions.
Noteworthy1) This judgment is extremely interesting as regards the question of the anticompetitive exchange of information between operators in the banking and financial sector. It provides a useful reminder that certain information exchanged between undertakings may be so sensitive from a competitive standpoint that its transmission constitutes an infringement of competition law by object (meaning there is no need to prove the anticompetitive effect; it is presumed). Banks, financial operators and insurance companies must be careful, therefore, that any information they exchange between themselves is lawful, notably in the context of forms of horizontal cooperations.

2) The General Court also applied the principles laid down in the Treuhand judgment as regards undertakings which act as intermediaries between cartelists and facilitate the cartel. Such undertakings violate competition law only where they are aware or should reasonably be aware that the information that they transfer is used to put a cartel into effect. In this case, Icap’s role had actually enabled the cartel to be much more effective by making information available to more undertakings involved in the cartel than would otherwise have been the case.

3) In addition, the General Court has continued to review Commission Article 101 TFEU decisions in an extremely strict way. For instance, the Court highlighted that the Commission must respect the presumption of innocence of undertakings which have decided not to enter into a settlement procedure during the entire procedure leading to the final decision. A settlement decision cannot indicate that an undertaking not party to that decision and which has not had the chance to defend itself has infringed competition law. Likewise, the Commission must explain in its decision the methodology applied for calculating fines and how it assesses different factors in that calculation.