(Competition Agreements, decisions and concerted practices Market for video games consoles and games cartridges compatible with Nintendo games consoles Decision finding an infringement of Article 81 EC Limitation of parallel exports Attributability of the infringement Fines Differential treatment Deterrent effect Duration of the infringement Attenuating circumstances Cooperation during the administrative procedure)
1. The undertakings involved
- Nintendo Co., Ltd ('NCL' or 'Nintendo'), a publicly quoted company whose registered office is in Kyoto (Japan), is the head of the Nintendo group of companies, which specialise in the production and distribution of video game consoles and game cartridges for use with those consoles.
- Nintendo's business in the European Economic Area (EEA) is conducted, in certain territories, by wholly owned subsidiaries, of which the main one is Nintendo of Europe GmbH ('NOE' or 'Nintendo'). At the material time, NOE coordinated certain business activities of Nintendo in Europe and was its exclusive distributor for Germany.
- In other sales territories, Nintendo appointed exclusive independent distributors. Thus, The Games Ltd, a trading division of John Menzies Distribution Ltd, a wholly owned subsidiary of John Menzies plc, became Nintendo's exclusive distributor for the United Kingdom and Ireland in August 1995 and remained so until 31 December 1997 at least.
- Itochu Hellas EPE, a subsidiary wholly owned, directly or indirectly, by the applicant, Itochu Corp. (a company which has its registered office and is established in Japan) or by its subsidiaries (which include Itochu Europe) was, for its part, Nintendo's exclusive independent distributor for Greece from 14 May 1991 until 28 February 1997.
2. Administrative procedure
Investigation into the video games sector (Case IV/35.587 PO Video Games)
- In March 1995, the Commission opened an investigation into the video games industry (Case IV/35.587 PO Video Games). During that inquiry, on 26 June and 19 September 1995 the Commission sent requests for information to Nintendo under Article 11 of Regulation No 17 of the Council of 6 February 1962, First Regulation implementing Articles [81 EC] and [82 EC] (OJ, English Special Edition 1971 (III), p. 1035) in order to obtain information relating in particular to its distributors and subsidiaries, the formal distribution agreements with those undertakings and its general sales conditions. NOE replied to those requests by letters dated 31 July and 26 September 1995.
Additional investigation relating specifically to Nintendo's distribution system (Case IV/35.706 PO Nintendo Distribution)
- As a result of its preliminary findings, in September 1995 the Commission opened an additional investigation specifically into the distribution system of Nintendo (Case IV/35.706 PO Nintendo Distribution).
- In the course of that investigation, on 9 October 1995 the Commission sent Nintendo a request for information. A number of meetings relating to Nintendo's distribution policy were held between Nintendo representatives and the Commission. Nintendo also provided various versions of the agreements concluded by it with certain of its distributors.
Inquiry following the complaint lodged by Omega Electro BV (Case IV/36.321 Omega Nintendo)
- On 26 November 1996, Omega Electro, a company active in the import and sale of electronic games, lodged a complaint under Article 3(2)(b) of Regulation No 17 that primarily concerned the distribution of Nintendo game cartridges and consoles, on the ground inter alia that Nintendo was hindering parallel trade and was operating a resale price maintenance policy in the Netherlands. Following that complaint, the Commission extended its investigation (Case IV/36.321 Omega Nintendo). On 7 March 1997, it sent a request for information to Nintendo and John Menzies. In its reply of 16 May 1997, Nintendo admitted that some of its distribution agreements and some of its general terms had contained certain restrictions on parallel trade within the EEA. In October 1997, the Commission sent John Menzies a fresh request for information, to which the latter replied on 1 December 1997, providing certain information on the restrictive agreements.
- By letter of 23 December 1997, Nintendo indicated to the Commission that it had become aware of 'a serious issue in relation to parallel trade within the Community' and expressed the wish to cooperate with the Commission.
- On 13 January 1998, John Menzies provided further information. On 21 January, 1 April and 15 May 1998, Nintendo forwarded several hundred documents to the Commission. On 15 December 1998, a meeting was held between the Commission and Nintendo representatives at which the question of possibly granting compensation to third parties injured by the restrictive agreements was discussed.
- Following its admission, Nintendo also took measures designed to ensure future compliance with Community law and offered financial compensation to the third parties which had suffered financial harm as a result of its activities.
- By letter of 9 June 1999, the Commission asked Itochu Hellas to inform it whether the documents in the Commission files concerning it contained confidential data. In that letter, it was also stated that the Commission was considering opening formal proceedings against certain companies, including Itochu Hellas.
- On 26 April 2000, the Commission sent a statement of objections to Nintendo and the other undertakings concerned, in particular to Itochu with a copy to Itochu Hellas, for infringement of Article 81(1) EC and Article 53(1) of the EEA Agreement ('the EEA Agreement'). Nintendo and the other undertakings concerned submitted written observations in response to the Commission's statement of objections, in which Nintendo and a number of those undertakings requested the application of the Commission Notice of 18 July 1996 on the non-imposition or reduction of fines in cartel cases (OJ 1996 C 207, p. 4; 'the Leniency Notice'). None of the parties asked for a formal hearing to be held. Nintendo did not substantially contest the facts set out in the statement of objections.
- A reply to the statement of objections was sent to the Commission on behalf of Itochu and Itochu Hellas on 28 July 2000. It was stated in particular that, since Itochu did not exercise any control over the activities of Itochu Hellas, Itochu should be disregarded for the purposes of the procedure.
- On 31 October 2001, the Commission sent to Itochu Europe a request for information concerning in particular the articles of incorporation and internal functioning of Itochu Hellas and Itochu Europe. A reply was sent on behalf of those companies by letter dated 26 November 2001. By letter dated 9 September 2002, the Commission sent Itochu a request relating in particular to the latter's annual report. A reply was sent by letter of 27 September 2002.
3. The contested decision
- On 30 October 2002, the Commission adopted Decision 2003/675/EC relating to a proceeding pursuant to Article 81 [EC] and Article 53 of the EEA Agreement (COMP/35.587 PO Video Games, COMP/35.706 PO Nintendo Distribution and COMP/36.321 Omega Nintendo) (OJ 2003 L 255, p. 33) ('the Decision'). The Decision was notified to Itochu on 11 November 2002.
- The Decision includes in particular the following provisions:
'Article 1
The following undertakings have infringed Article 81(1) [EC] and Article 53(1) of the EEA Agreement by participating, for the periods indicated, in a complex of agreements and concerted practices in the markets for game consoles and game cartridges compatible with Nintendo manufactured game consoles with the object and effect of restricting parallel exports in Nintendo game consoles and cartridges:
...
Itochu ..., from 16 December 1991 to 28 February 1997,
...
Article 3
The following fines are imposed on the undertakings listed in Article 1 in respect of the infringement referred to therein:
...
Itochu ..., a fine of EUR 4.5 million,
...
Article 5
This Decision is addressed to:
...
Itochu ...
...'
- For the purpose of calculating the fines, the Commission applied in its Decision the method set out in the Guidelines on the method of setting fines imposed pursuant to Article 15(2) of Regulation No 17 and Article 65(5) [CS] (OJ 1998 C 9, p. 3) ('the Guidelines'). On the other hand, it decided not to apply the Leniency Notice because of the vertical nature of the infringement.
- First, the Commission determined the basic amount of the fines according to the gravity and duration of the infringement.
- In that connection, the Commission took the view that the undertakings concerned had committed a very serious infringement, in view of its nature, its actual impact on the market and the size of the relevant geographical market.
- Next, the Commission considered that because the single and continuous infringement concerned several undertakings of extremely different sizes it was necessary to treat the undertakings concerned differently in order to take account of the specific weight of each undertaking and, consequently, the real impact of its offending conduct on competition. To that end, the undertakings concerned were divided into three groups according to the relative importance of each undertaking with regard to Nintendo, as distributor of the relevant products in the EEA. The comparison was made by reference to each undertaking's share in the total volume of Nintendo games consoles and cartridges purchased for distribution in the EEA in 1997, the last year of the existence of the infringement. On that basis, Nintendo alone was placed in the first group, whereas John Menzies was alone in the second group. For those undertakings, the Commission set the preliminary starting amount for gravity of the infringement at EUR 23 million in the case of Nintendo and EUR 8 million in the case of John Menzies. For Itochu and the other undertakings concerned, a preliminary starting amount of EUR 1 million was decided upon.
- Moreover, in order to ensure that the fine had a sufficiently deterrent effect, on the one hand, and in order to take account of the size and overall resources of Nintendo, John Menzies and Itochu, on the other hand, the Commission increased those starting amounts. More specifically in Nintendo's case, the Commission considered that, apart from its size, it being significantly smaller than Itochu, account had to be taken of the fact that it was the manufacturer of the products involved in the infringement. In view of those factors, the Commission increased by a factor of 3 the amounts set for Nintendo and Itochu, and a factor of 1.25 for John Menzies, so that the starting amounts were set at EUR 69 million in the case of Nintendo, EUR 10 million in the case of John Menzies and EUR 3 million in the case of Itochu.
- As regards the duration of the infringement committed by each undertaking, the starting amount was increased by 10% a year, giving an increase of 50% for Itochu.
- Consequently, the Commission set the basic amount of the fine imposed on Itochu at EUR 4.5 million.
- Second, with regard to aggravating circumstances, the basic amount of the fine imposed on Nintendo was increased, first, by 50% on the ground that it had been the leader and instigator of the infringement and, second, by 25% because it had continued the infringement after the Commission started its investigation in June 1995. The basic amount of the fine imposed on John Menzies was increased by 20% corresponding, first, to an increase of 10% to take account of the fact that it continued the infringement after the start of the Commission investigation and, second, an increase of 10% because of its refusal to cooperate with the Commission.
- Third, when considering attenuating circumstances, the Commission considered that it was justified to reduce the fine imposed on one of the undertakings concerned, namely Concentra Produtos para crianças SA ('Concentra'), Nintendo's exclusive distributor for Portugal, by reason of its exclusively passive role in the infringement during most of the period in question. The Commission then granted Nintendo a reduction of EUR 300 000 to take account of the financial compensation offered by that undertaking to third parties harmed by the restrictive agreements who had been identified in the statement of objections. Finally, reductions of 40% and 25% respectively were granted to John Menzies and Nintendo for their effective cooperation with the Commission. However, no attenuating circumstances were established in the case of the other undertakings concerned.
Procedure and forms of order sought
- By application lodged at the Registry of the Court of First Instance on 16 January 2003, the applicant brought the present action.
- Upon hearing the report of the Judge Rapporteur, the Court (Eighth Chamber) decided to open the oral procedure.
- The parties presented their oral arguments and their replies to oral questions put by the Court at the hearing on 20 May 2008.
- The applicant claims that the Court of First Instance should:
annul Articles 1, 3 and 5 of the Decision, in so far as they find an infringement of Article 81(1) EC by the applicant, impose a fine upon it and address the Decision to it, or, in the alternative, substantially reduce that fine;
order the Commission to pay the costs.
- The Commission contends that the Court of First Instance should:
dismiss the application;
order the applicant to pay the costs.
Law
- The applicant seeks, primarily, partial annulment of the Decision and, in the alternative, cancellation or reduction of the fine imposed on it.
1. The claim for partial annulment of the Decision
Arguments of the parties
- In support of its claim for annulment, the applicant puts forward a single plea, alleging that the Decision is wrong in law in that it is addressed to the applicant. It claims that it cannot be held responsible for the infringement committed in this case by Itochu Hellas and, therefore, be made an addressee of the Decision.
- It claims, in the first place, that it is a Japanese 'general trading company' (sogo shosha), whose business is mainly focused on the Japanese market. The decentralised nature of its organisation means that its subsidiaries operate independently. In this case, it should be emphasised that only Itochu Hellas concluded an exclusive distribution agreement and exchanged correspondence with NCL. Moreover, Itochu directly holds only a minimal amount of Itochu Hellas's shares. Similarly, Itochu Hellas's turnover represents only 0.004% of the consolidated turnover of Itochu in 1997. Finally, Itochu does not exercise authority over or supervise the business of Itochu Hellas.
- According to the applicant, in order to hold a parent company liable for the acts of its subsidiary, the Commission must prove that the former exerted decisive influence over the latter. It is clear from the judgment in Case C-286/98 P Stora Kopparbergs Bergslags v Commission [2000] ECR I-9925, and from the Opinion of Advocate General Mischo in that case (ECR I-9928), that the mere fact that a subsidiary is owned by a parent company is not alone sufficient to establish the parent company's responsibility.
- It is incumbent in particular on the Commission to produce evidence that the subsidiary does not act independently and to prove that the parent company has actually exercised control over that subsidiary 'in the context of the alleged infringement' (Case 48/69 Imperial Chemical Industries v Commission [1972] ECR 619, paragraph 131 et seq.). Since the mere existence of abstract control by the parent company is not sufficient, the Commission is not entitled to infer, at the risk of seriously undermining the rights of the defence, a presumption of control merely because Itochu Hellas is indirectly wholly-owned by Itochu.
- In this case, the Commission has not been able to present even limited indications of Itochu's participation in the infringement. In particular, it has been unable to produce any correspondence between Itochu Hellas and Itochu relating to Nintendo business.
- In that regard, first, the applicant submits that the Commission was wrong to state, in recital 360 of the Decision, that the reply to the statement of objections 'was submitted by Itochu ... on behalf of Itochu ... and Itochu Hellas'. It states that, in so far as the statement of objections was addressed to it, it was required to respond to it specifically in order to clarify the nature of its relationship with Itochu Hellas. In its submission, that reply was made in the exercise of its rights of defence.
- The applicant states that, if it had chosen not to reply to the statement of objections, that could have been interpreted as acceptance of the Commission's decision to make it an addressee. Thus, in Case T-354/94 Stora Kopparbergs Bergslags v Commission [1998] ECR II-2111, the Commission considered that the lack of comments regarding Stora's responsibility for its subsidiaries in its reply to the statement of objections was to be regarded as an effective admission of such responsibility.
- Second, the applicant maintains that the Commission was wrong to regard it as having been its sole interlocutor in the administrative procedure. It claims that, in Case T-354/94 Stora Kopparbergs Bergslags v Commission, paragraph 39 above (paragraphs 41 to 48), confirmed by the judgment in Case C-286/98 P Stora Kopparbergs Bergslags v Commission, paragraph 35 above (paragraphs 27 to 29), the Court of First Instance came to the conclusion that the applicant had presented itself as the Commission's sole interlocutor for the entire Stora group, relying essentially on two factors, namely, first, the fact that only one power of attorney had been given to represent Stora Kopparbergs Bergslags AB, the parent company, and its various subsidiaries, and, second, the fact that the parent company had never denied in the administrative procedure that it was the correct addressee of the Commission's correspondence or the statement of objections.
- However, those factors are manifestly absent in the present case.
- As regards the first factor, the applicant states, first of all, that Itochu Hellas and Itochu gave at the outset separate powers of attorney to their lawyers and gave them instructions independently and at different times. This clearly shows that, in contrast to the situation involved in Case C-286/98 P Stora Kopparbergs Bergslags v Commission, paragraph 39 above, Itochu never 'coordinated' correspondence sent by Itochu Hellas or by Itochu Europe to the Commission.
- As regards the second factor, the applicant claims that it continually contested the Commission's decision to send to it the documents relating to the alleged infringement. Thus, in the reply to the statement of objections, which marked the first opportunity it had to clarify the nature of its relations with Itochu Hellas, it clearly indicated that it could not be held responsible for the infringement and, therefore, be made an addressee of the Decision. The nature of the relationships between Itochu, Itochu Europe and Itochu Hellas was further made clear in various letters sent to the Commission, dated 26 November 2001 and 27 September 2002 (see paragraph 15 above).
- Third, the applicant maintains that, in the event of the Court of First Instance rejecting its argument that it did not act as the Commission's sole interlocutor during the administrative procedure or if the Court should conclude that it was under a duty to provide evidence of Itochu Hellas's independent conduct, reference should be made to the following factors. In the first place, it should be observed that Itochu, as a general trading company operating in a decentralised way, does not interfere in the day-to-day activities of its subsidiaries, who alone are responsible for their commercial policy and some of which, amongst them Itochu Hellas, employ substantial numbers of personnel. Similarly, Itochu Europe operates in a decentralised way and merely supervises the main activities and financial performance of its subsidiaries. Next, the business of selling and distributing games consoles and cartridges is far from a core business of Itochu Europe or Itochu. Moreover, it was Itochu Hellas and not Itochu which signed the distribution agreement with Nintendo. More generally, Itochu was never involved, closely or at a distance, in the negotiation, conclusion or performance of that distribution agreement. The restrictive provisions contained in that agreement are the only matters on which the Commission relied in concluding that an infringement had been committed by Itochu Hellas.
- In its reply, the applicant claims that, contrary to the Commission's allegation, the evidence provided by it is not new, since it was disclosed in its reply to the statement of objections. Moreover, as the Commission changed the arguments set out in the statement of objections, the applicant cannot be criticised for providing the Court with all the evidence needed to refute those allegations. In any event, that evidence should be taken into consideration, in so far as, in contrast to what is admitted in proceedings for examination of a notified State aid, it is for the Commission to compile the necessary evidence of the applicant's participation in the infringement.
- The Commission contests all the applicant's arguments. It states, in essence, that, in this case, it is undisputed that Itochu Hellas is, albeit indirectly, a wholly owned subsidiary of Itochu. The Commission was therefore entitled to presume that the parent company, Itochu, in fact exerted decisive influence over the commercial policy of its subsidiary Itochu Hellas and, therefore, to impute responsibility to it for the offending behaviour (recital 355 of the Decision). Moreover, the applicant has not produced sufficient evidence to rebut that presumption.
Findings of the Court
- It should be recalled that under Community competition law different companies belonging to the same group form an economic unit and therefore an undertaking within the meaning of Articles 81 EC and 82 EC if the companies concerned do not independently determine their own conduct on the market (Case T-203/01 Michelin v Commission [2003] ECR II-4071, paragraph 290).
- The fact that a subsidiary has separate legal personality is not sufficient to exclude the possibility of its conduct being imputed to the parent company, especially where the subsidiary does not independently determine its own conduct on the market, but carries out, in all material respects, the instructions given to it by the parent company (Imperial Chemical Industries v Commission, paragraph 36 above, paragraphs 132 and 133; Case 52/69 Geigy v Commission [1972] ECR 787, paragraph 44; Case 53/69 Sandoz v Commission [1972] ECR 845, paragraph 13; and Case 6/72 Europemballage and Continental Can v Commission [1973] ECR 215, paragraph 15).
- In the specific case of a parent company holding 100% of the capital of a subsidiary which has committed an infringement, the Court of Justice stated in Case 107/82 AEG-Telefunken v Commission [1983] ECR 3151, paragraph 50, that it was not necessary to ascertain whether that company had in actual fact influenced the commercial policy of its subsidiary, in so far as that subsidiary necessarily follows the policy laid down by the same bodies as, under its statutes, determine the parent company's policy. In such a case, there is a simple presumption that the parent company exercises decisive influence over the conduct of its subsidiary. It is thus for a parent company which disputes before the Community judicature a Commission decision fining it for the conduct of its subsidiary to rebut that presumption by adducing evidence to establish that its subsidiary was independent (Case T-314/01 Avebe v Commission [2006] ECR II-3085, paragraph 136; see also, to that effect, Case C-286/98 P Stora Kopparbergs Bergslags v Commission, paragraph 35 above, paragraph 29).
- Whilst, as the applicant claims, it is true that at paragraphs 28 and 29 of the judgment in Case C-285/98 P Stora Kopparbergs Bergslags v Commission, paragraph 35 above, the Court of Justice referred, as well as to the fact that the parent company owned 100% of the capital of the subsidiary, to other circumstances, such as the fact that it was not disputed that the parent company exercised influence over the commercial policy of its subsidiary or that both companies were jointly represented during the administrative procedure, the fact remains that those circumstances were mentioned by the Court of Justice for the sole purpose of identifying all the elements on which the Court of First Instance had based its reasoning before concluding that that reasoning was not based solely on the fact that the parent company held the entire capital of its subsidiary. Accordingly, the fact that the Court of Justice upheld the findings of the Court of First Instance in that case cannot have the consequence that the principle laid down in paragraph 50 of AEG v Commission, paragraph 49 above, is amended.
- That being so, it is sufficient for the Commission to show that the entire capital of a subsidiary is held by the parent company in order to conclude that the parent company exercises decisive influence over its commercial policy. The Commission will then be able to hold the parent company jointly and severally liable for payment of the fine imposed on the subsidiary, unless the parent company proves that the subsidiary does not, in essence, comply with the instructions which it issues and, as a consequence, acts autonomously on the market.
- In the present case, it is common ground that during the relevant period, which ran from 16 December 1991 to 28 February 1997, the applicant directly or indirectly held 100% of Itochu Hellas's capital.
- Accordingly, the Commission was entitled to presume that Itochu did indeed exercise decisive influence over the commercial policy of Itochu Hellas. It is therefore for the applicant, on the basis of the foregoing considerations, to adduce evidence to show that its subsidiary determined its commercial policy autonomously in such a way that it and the applicant do not constitute a single economic entity and therefore a single undertaking for the purposes of Article 81 EC.
- In that connection, the applicant submitted that the reply to the statement of objections had been principally given on behalf of Itochu Hellas, that it did not present itself as the Commission's sole interlocutor, that in its position as a general trading group it did not intervene directly in the business activities of its subsidiaries (and even less in those of its indirect subsidiaries such as Itochu Hellas), that the sale and distribution of the products in question in this case were not its principal business activity, that it was never involved in the negotiation, conclusion or implementation of the exclusive distribution agreement concluded between Itochu Hellas and Nintendo and, lastly, that Itochu Hellas employed a large number of local employees.
- Those arguments essentially relate, on the one hand, to the applicant's conduct during the administrative procedure and, on the other hand, to the organisation and operation of the Itochu group.
- As regards, first, the arguments relating to the administrative procedure, they must be declared irrelevant. The fact assuming that it were established that the applicant did not present itself as the Commission's sole interlocutor during that procedure and that it continually contested the Commission's decision to send to it the documents in question is not capable of rebutting the abovementioned presumption. In keeping with the approach followed in Case C-286/98 P Stora Kopparbergs Bergslags v Commission, paragraph 35 above, the considerations relating to the applicant's conduct during the administrative procedure, set out in recital 361 of the Decision, are superfluous and serve merely to substantiate the conclusion reached by the Commission with regard to the imputability of Itochu Hellas's offending conduct and, therefore, to the choice of addressee of the Decision.
- As regards, second, the arguments based on the organisation and operation of the Itochu group, which is formed of a Japanese general trading company allegedly characterised by a decentralised and independent organisation of the business of its subsidiaries and sub'subsidiaries, they must also be rejected since the applicant has not adduced any specific evidence in support of that claim, apart from the irrelevant fact that Itochu Hellas employs a large number of local employees.
- Further, no account can be taken of the fact that the applicant was never involved in the negotiation, conclusion or implementation of the distribution agreement concluded with Nintendo or of the fact that Itochu Hellas had, with respect to the Nintendo products, developed a business separate from the core business of the Itochu group. There is no requirement, in order to impute to a parent company the acts undertaken by its subsidiary, to prove that that parent company was directly involved in, or was aware of, the offending conduct. It is not because the parent company instigated its subsidiary to commit the infringement or, a fortiori, because the parent company is involved in the infringement, but because they constitute a single undertaking for the purpose of Article 81 EC that the Commission is able to address the decision imposing fines to the parent company of a group of companies. In this instance, the applicant merely asserts that it was not aware of Itochu Hellas's activities and denies having actively supported them, but does not adduce the slightest evidence that it did not exert decisive influence over Itochu Hellas's conduct or any evidence with regard to the latter's independence.
- It follows that the applicant has not adduced sufficient evidence to rebut the presumption that it in fact exercised decisive influence over the conduct of its subsidiary Itochu Hellas.
- This plea must therefore be rejected.
2. The claim for cancellation or reduction of the amount of the fine
- In support of its claim for cancellation or reduction of the fine imposed on it, the applicant puts forward six pleas in law. The first alleges breach of the obligation to state reasons provided for in Article 253 EC and of the principles of equal treatment and proportionality, in that Itochu Hellas received, by reason of the differential treatment applied by the Commission, a proportionally higher fine than those imposed on the other addressees of the Decision. The second plea alleges breach of the principles of proportionality and equal treatment, in that the Commission increased the amount of the fine imposed on Itochu for deterrence. In its third plea, the applicant submits that the Commission committed a manifest error of assessment and breached the principle of proportionality by increasing the amount of the fine imposed on Itochu by 50% in respect of the duration of the infringement. The fourth plea alleges breach of the obligation to state reasons and of the principles of equal treatment and proportionality, in that the Commission failed, without due justification, to take account of certain attenuating circumstances. The fifth plea alleges infringement of Article 15(2) of Regulation No 17, in that the Commission imposed a fine which exceeded 10% of Itochu Hellas's turnover for the previous year. Finally, by its sixth plea, the applicant submits that the Commission breached the rights of the defence.
- Before embarking on an examination of the pleas put forward by the applicant, it should be pointed out that it is clear from recitals 366 to 464 of the Decision that the fines imposed by the Commission in respect of the infringements of Article 81(1) EC and Article 53(1) of the EEA Agreement were imposed pursuant to Article 15(2) of Regulation No 17 and that the Commission, as it expressly confirmed, applied the method set out in the Guidelines when it set the fines.
- Although the Guidelines may not be regarded as rules of law which the administration is always bound to observe, they nevertheless form rules of practice from which the administration may not depart in an individual case without giving reasons that are compatible with the principle of equal treatment (see Case C-397/03 P ArcherDaniels Midland and Archer Daniels Midland Ingredients v Commission [2006] ECR I-4429, paragraph 91, and the case-law cited).
The first plea: breach of the obligation to state reasons and of the principles of equal treatment and proportionality in respect of the differential treatment applied by the Commission
Arguments of the parties
- First, the applicant complains that the Commission did not give the exact figures on the basis of which it divided the undertakings into three categories. In particular, the Commission omits to state the amounts and respective shares of Nintendo product sales within the EEA in 1997 of each of the undertakings concerned, with the exception of those of Nintendo and John Menzies. The applicant was therefore deprived of any opportunity to exercise its rights of defence and check whether the differential treatment applied by the Commission was well founded. As a result, the Commission infringed the obligation to state reasons provided for in Article 253 EC.
- In its reply, the applicant states that it is clear from the case-law that it is incumbent upon the Commission to justify the choice of thresholds between the different categories it applied. It also adds that the belated disclosure, in the Commission's defence, of the market share attributed to Itochu Hellas cannot be taken into consideration in examining whether Itochu's rights of defence were observed by the Commission.
- Second, the applicant maintains that the Commission breached the principles of equal treatment and of proportionality. The sparse figures provided by the Commission show that Itochu Hellas's market share was less than 0.5%. By placing the applicant in the same category as other distributors involved, although their respective situations within the relevant market were significantly different, the Commission failed to take account of the specific weight of the undertakings concerned.
- In its reply, the applicant states that the margin of discretion available to the Commission when fixing the amount of fines is not unlimited, since the Commission is required to comply with general principles of law. Consequently, when it decides to apply differential treatment, the Commission is required to observe the principles of equal treatment and proportionality. Moreover, differential treatment should at least reflect the real impact of the undertaking's conduct on competition. It was disproportionate for the Commission to place the six remaining companies in a single category. The Commission should have considered a fourth category for the smallest undertakings and applied a starting point below EUR 1 million for that category. The relative difference in size, by comparison with Nintendo, between John Menzies and the largest undertaking in the third category is much less than the difference between the latter and Itochu Hellas.
- The Commission contests all of the arguments put forward by the applicant.
Findings of the Court
- According to the method laid down by the Guidelines, the Commission takes as the starting point for calculating the amount of the fines to be imposed on the undertakings concerned an amount determined by reference to the gravity of the infringement. In assessing the gravity of the infringement, account must be taken of its nature, its actual impact on the market, where this can be measured, and the size of the relevant geographic market (Section 1 A, first paragraph). Within that context, infringements are put into one of three categories, namely 'minor infringements', for which the likely fine will be between EUR 1 000 and EUR 1 000 000, 'serious infringements', for which the likely fine will be between EUR 1 000 000 and EUR 20 000 000, and 'very serious infringements', for which the likely fine will be above EUR 20 000 000 (Section 1 A, second paragraph, first to third indents). Within each of these categories, the proposed scale of fines makes it possible, according to the Guidelines, to apply differential treatment to undertakings according to the nature of the infringements committed (Section 1 A, third paragraph). It is also necessary, according to the Guidelines, to take account of the effective economic capacity of offenders to cause significant damage to other operators, in particular consumers, and to set the fine at a level which ensures that it has a sufficiently deterrent effect (Section 1 A, fourth paragraph).
- Within each of the three categories of infringement thus defined, it may be necessary, according to the Guidelines, to apply weightings in certain cases to the amounts determined in order to take account of the specific weight and, therefore, the real impact of the offending conduct of each undertaking on competition, particularly where there is considerable disparity between the sizes of the undertakings committing infringements of the same type and, consequently, to adjust the starting point for the basic amount according to the specific nature of each undertaking (Section 1 A, sixth paragraph).
- In this instance, the applicant disputes neither the very serious nature of the infringement in question nor the findings on which the Commission relied to conclude that that infringement was very serious, findings which concern the nature of that infringement, its actual impact on the market and the size of the relevant geographic market (recitals 374 to 384 of the Decision). Nor does the applicant call into question the principle itself of dividing the members of a cartel into several categories. However, it complains, first, that the Commission infringed the principles of equal treatment and proportionality by placing it in the same category as other larger undertakings and, second, failed in its obligation to state reasons on that point.
- With respect to the complaint alleging infringement of the principles of equal treatment and proportionality in the classification by categories, the applicant asserts in essence that, by placing it in the same category as other distributors involved, although their respective situations within the relevant market were significantly different, the Commission failed to take account of the specific weight of the undertakings concerned. It states that differential treatment should at least reflect the real impact of the undertaking's conduct on competition and that the Commission should have considered a fourth category for the smallest undertakings, of which it is one, and applied a starting point below EUR 1 million for that category.
- In that connection, the Court recalls that the method of dividing the members of a cartel into categories in order to apply differential treatment when setting the starting amounts of the fines, the principle of which has been approved by decisions of the Court of First Instance even though it ignores the differences in size between undertakings in the same category, results in a flat'rate starting amount for all the undertakings in the same category (see Case T-26/02 Daiichi Pharmaceutical v Commission [2006] ECR II-713, paragraph 83 and the case-law cited).
- It is true that such a division into categories must comply with the principle of equal treatment, which prohibits similar situations from being treated differently and different situations from being treated in the same way, unless such treatment is objectively justified. Furthermore, according to the case-law, the amount of the fine must at least be proportionate in relation to the factors taken into account in the assessment of the gravity of the infringement. In order to ascertain whether a division of the members of a cartel into categories is in keeping with the principles of equal treatment and proportionality, the Court, as part of its review of the lawfulness of the exercise of the Commission's discretion in the matter, must none the less confine itself to checking that the division is coherent and objectively justified and not immediately substitute its own assessment for that of the Commission (Daiichi Pharmaceutical v Commission, paragraph 73 above, paragraphs 84 and 85).
- In this instance, the Commission considered that the 'undertakings concerned [could] in principle be divided into three groups established according to the relative importance of each firm with regard to Nintendo ... as a distributor of the products (and those products only) in the EEA measured on the basis of each Party's share in the total volume of Nintendo game consoles and cartridges purchased for distribution in the EEA in the year 1997, the last year of the existence of the infringement' (recital 386 of the Decision). Nintendo (whose market share was estimated at [confidential] (1) %) and John Menzies (with a market share of [confidential] %) were thus each placed in the first and second group respectively. The other undertakings concerned (with market shares ranging from [confidential] to [confidential] %), including Itochu, were placed in the third category.
- The Commission's decision to place in the same group the undertakings having a market share in the distribution of the relevant products lower than [confidential] % cannot be qualified as arbitrary and does not exceed the limits of the broad discretion which it has in that regard.
- The fact that the starting amounts relating to each of the categories are not strictly proportionate to the respective market shares of the undertakings concerned cannot be censured since it is merely the result of the system of division by categories and the setting of a flat-rate amount that it entails. It should be pointed out that, even if the effect of the division into groups is that certain undertakings are allocated the same basic amount even though they differ in size, the difference in treatment is objectively justified by the greater importance attached to the nature of the infringement than to the size of the undertakings in the assessment of the gravity of the infringement (see Case T-213/00 CMA CGM and Others v Commission [2003] ECR II-913, paragraph 411 and the case'law cited).
- In the present case, whilst there are admittedly differences in relative terms between the market shares held by the undertakings placed in the same group, those differences are not, in absolute terms, of such importance that they justified placing the applicant in a different group. In particular, the method adopted by the Commission did not produce a grossly distorted picture of the markets in question (see, to that effect, Case T-15/02 BASF v Commission [2006] ECR II-497, paragraph 159). The market in question, namely the market for distribution of Nintendo products was dominated by Nintendo and its subsidiaries at the material time. With the exception of John Menzies, independent distributors occupied only a relatively modest position in the distribution system in question (see recitals 388 to 390 of the Decision).
- Contrary to what the applicant asserts, the Commission was not required to differentiate any further between the undertakings in question by reference to their market share in the distribution of the products in question. Since, as is clear from the considerations set out above, the approach adopted by the Commission is not incoherent or without objective justification, and in the light of the greater importance which must be attached to the gravity of the infringement, it is irrelevant whether, as the applicant submits, a division of the members into four categories, as opposed to three, would have better reflected the relative weight of the undertakings concerned.
- Further, the applicant cannot claim that the fine imposed on it was disproportionate in view of the limited impact of its conduct on the market, since, as was pointed out at paragraph 70 above and as is apparent from recitals 385 to 390 of the Decision, account was taken, in the context of differential treatment, of the applicant's specific weight in the total volume of Nintendo game consoles and cartridges purchased for distribution in the EEA in the year 1997 and, accordingly, of the real impact of its offending conduct on competition.
- It must therefore be concluded that the existence of considerable relative differences between the market shares of the undertakings belonging to the last category, which is inherent in the system of division by categories and in the setting of a flat'rate amount that it entails, is objectively justified. The usefulness of the Commission's right to classify undertakings into categories would be considerably diminished if any difference between market shares that is considerable in relative terms, albeit corresponding to a very small difference in terms of percentage points, precluded the placing of different undertakings in the same category.
- As for the complaint alleging infringement of the obligation to state reasons with regard to the division into categories, it is apparent from settled case'law that, as regards the determination of fines for infringements of competition law, the Commission fulfils its obligation to state reasons where it indicates in its decision the factors on the basis of which the gravity and duration of the infringement were assessed, and it is not required to include in it a more detailed account or the figures relating to the method of calculating the fines (see, to that effect, Case C-279/98 P Cascades v Commission [2000] ECR I-9693, paragraphs 38 to 47; Joined Cases T-191/98, T-212/98 to T-214/98 Atlantic Container Line and Others v Commission [2003] ECR II-3275, paragraphs 1522 and 1523). Statements of figures relating to the calculation of the fines, however useful such figures may be, are not essential to compliance with the obligation to state reasons (see Case C-182/99 P Salzgitter v Commission [2003] ECR I-10761, paragraph 75 and the case-law cited).
- In the present case, the Commission clearly set out in the Decision the matters taken into account in order to assess the gravity of the infringement (see recital 373 et seq.), and, amongst them, the calculation factors used to divide them into categories. The fact that the Commission omitted to indicate separately the market shares of each of the undertakings placed in the third category did not prevent the applicant from contesting that aspect of the contested decision in detail. It follows that the Commission did not breach its obligation to state reasons in relation to the division into categories.
- In the light of all the foregoing considerations, this plea must be rejected.
The second plea: breach of the principles of proportionality and equal treatment regarding increase of the starting amount of the fine for deterrence
Arguments of the parties
- The applicant claims that the Commission breached the principles of proportionality and equal treatment by deciding that it was appropriate to multiply by three the starting amount of the fine imposed on it in order to ensure deterrent effect.
- First, it submits that, apart from the fact that the Commission was not entitled, by reason of the applicant's status as a parent company, to impose a fine on it and, therefore, to refer to its size and overall resources, there was no reason to increase that amount as Itochu Hellas's turnover was very low. According to the fourth indent of the second paragraph of Section 1 A of the Guidelines, the Commission should have assessed whether the size and overall resources of Itochu Hellas, and not those of Itochu, justified an increase of the starting amount of the fine for deterrence. Itochu Hellas's turnover, as indicated in the statement of objections, was, in relative terms, much smaller than that of the other undertakings concerned and the turnover has decreased significantly since 1997. The Commission should thus have taken account of the fact, mentioned in the reply to the statement of objections, that Itochu Hellas had not operated as Nintendo's distributor since 1997.
- Second, and in the alternative, the applicant submits, in the event of the Court of First Instance considering that the Commission was right to address the Decision to Itochu, that the increase by a factor of three of the starting amount of the fine imposed on Itochu also breached the principles of equal treatment and proportionality. It observes, in that connection, that the Commission applied the same multiplication factor to Nintendo, in order to take account not only of its size and overall resources but also of its role as manufacturer of the relevant products and, therefore, as the 'natural leader' of the infringement. Moreover, the Commission decided to apply a multiplication factor of only 1.25 to John Menzies, even though that distributor, unlike Itochu Hellas, had played a very important active role in the infringement. Finally, the Commission did not take account of the decentralised structure of Itochu, even though a multiplication factor for deterrence should be applied only in cases where the parent company has effectively participated in the infringement. It states that, in view of its being a general trading company, the distribution of Nintendo products never formed part of its business activities and it was never involved in correspondence relating to that distribution activity. That factor sets it far apart from the other addressees of the Decision.
- The Commission contends that all of the complaints put forward by the applicant must be dismissed.
Findings of the Court
- As regards the first part of this plea, it must be stated that it is based on the premiss that the Commission was wrong to address the Decision to Itochu. Itochu indeed implicitly admitted that the examination of that part of the plea which is based on the assumption that the Commission ought to have assessed whether the size and overall resources of Itochu Hellas, and not of Itochu, justified an increase of the amount of the fine for deterrence is not necessary if the Court were to hold that the Commission did not err in law by addressing the Decision to Itochu.
- Since the plea put forward in support of the partial annulment of the Decision was rejected, there is no longer any need to examine that part, which is ineffective.
- As regards the second part of the second plea, the Commission is essentially criticised for having infringed the principles of equal treatment and proportionality by applying, in order to ensure that the fines had a deterrent effect, first, the same multiplier to Itochu and to Nintendo, even though their respective roles in the alleged infringement were appreciably different, and, second, a much lower multiplier to John Menzies, even though the latter had played an important active role in that infringement.
- In that connection, the Court recalls that the Commission's power to impose fines on undertakings which intentionally or negligently commit an infringement of Article 81(1) EC or Article 82 EC is one of the means conferred on the Commission in order to enable it to carry out the task of supervision entrusted to it by Community law. That task encompasses the duty to pursue a general policy to apply, in competition matters, the principles laid down by the Treaty and to guide the conduct of undertakings in the light of those principles (Joined Cases 100/80 t-103/80 Musique diffusion française and Others v Commission [1983] ECR 1825, paragraph 105, and Case T-43/02 Jungbunzlauer v Commission [2006] ECR II-3435, paragraph 297).
- It follows that the Commission has the power to decide the level of fines in order to reinforce their deterrent effect when infringements of a particular type, although established as being unlawful at the outset of Community competition policy, are still relatively frequent on account of the profit that certain of the undertakings concerned are able to derive from them (Musique diffusion française and Others v Commission, paragraph 92 above, paragraph 108, and Jungbunzlauer v Commission, paragraph 92 above, paragraph 298). Since the objective of deterrence relates to the conduct of undertakings within the Community or the EEA, the deterrence factor is assessed by taking into account a large number of factors and not merely the particular situation of the undertaking concerned (Case C-289/04 P Showa Denko v Commission [2006] ECR I-5859, paragraph 23; see also, to that effect, Jungbunzlauer v Commission, paragraph 92 above, paragraph 300).
- Accordingly, the applicant may not rely on the differences between the respective roles of the undertakings in question in the infringement in order to deny that the increase of the fines with a view to their deterrent effect was equitable and proportionate.
- Moreover, contrary to what the applicant claims, there is nothing in the Decision to indicate that the Commission referred exclusively to the role actually played by each of the participants in the infringement when it determined the deterrent factor of the fines.
- In this instance, the Commission considered it necessary to increase the starting amount of the fine imposed on certain undertakings, namely Nintendo, John Menzies and Itochu, in order to take account of their size and overall resources. The starting amounts of the fines imposed on Nintendo and Itochu were therefore multiplied by 3. The multiplier applied to the fine imposed on John Menzies was set at 1.25.
- The application of a multiplier of 3 to the starting amounts of the fines imposed on Nintendo and Itochu respectively is reasoned thus at recitals 393 to 395 of the Decision:
'In the present case, in the cases of Nintendo ..., John Menzies ... and Itochu ..., the appropriate starting point of the fine requires further upwards adjustment to take account of their size and overall resources.
Itochu ... has argued that, as it has meanwhile ceased to be a distributor of the products, there would be no grounds to increase its fine on the ground of deterrence ... However, deterrence has to be ensured whether or not the undertaking, after the end of the infringement, maintained or not bilateral relations with other participants to the infringement.
It is particularly necessary to ensure sufficient deterrence as regards Nintendo ... as, apart from its size (which is significantly smaller than [Itochu's]), also account must be taken of the fact that it is the manufacturer of the products subject of the infringement ...'
- Those passages make it clear that, although the Commission referred to the fact that Nintendo was the manufacturer of the products, and thus to a characteristic of Nintendo that was unrelated to its actual role in the infringement in question, the Commission did in fact focus on the size of the undertakings, in particular on the very large size of Itochu.
- It follows from all those considerations that this plea must be rejected.
The third plea: manifest error of assessment and breach of the principle of proportionality in so far as the fine was increased by reference to the duration of the infringement
Arguments of the parties
- First, the applicant claims that the Commission was not entitled, in the case of Itochu Hellas, to consider that the infringement had commenced on the effective date of the distribution agreement concluded with Nintendo, namely 16 December 1991, and had continued until the expiry date of that contract, namely 28 February 1997. The Commission should, instead, have determined the period for which the alleged practices, involving Itochu Hellas, were carried on.
- According to the applicant, the Commission based its 'formalistic approach' on certain provisions of the distribution agreement which, in its view, first, provided that Itochu Hellas could sell the products in question only to dealers established in Greece and approved by Nintendo and, second, also restricted parallel exports within the EEA by Itochu Hellas's customers. However, in the reply to the statement of objections, ample evidence was brought to the attention of the Commission indicating that those clauses were not implemented by the parties. In particular, Itochu Hellas argued in that regard that, first, Nintendo had never approved or intervened in Itochu Hellas's appointment of its dealers, next, Itochu Hellas had not imposed any export restrictions on its approximately 300 customers and/or dealers and, lastly, had itself engaged in parallel trade by trying to obtain products from alternative sources and by selling some Nintendo products to customers outside Greece. The applicant states, in its reply, that it also indicated in its reply to the statement of objections that the Commission could not just consider the terms of the distribution agreement.
- The applicant also maintains that, properly speaking, there was no 'agreement' between Itochu Hellas and Nintendo on those restrictive clauses because there was no concurrence of wills of both companies. The Commission should have examined at what time Itochu Hellas engaged or envisaged engaging in restrictive practices, as it did for the distributor Nortec AE. In its reply, the applicant contended that the conditions of the distribution agreement had been imposed on it by Nintendo. Nintendo's conduct was therefore unilateral and it is incumbent upon the Commission to establish the existence of acquiescence, express or implied, by Itochu Hellas (Case T-41/96 Bayer v Commission [2000] ECR II-3383, paragraphs 71 and 72).
- It is also apparent from Section 1 B of the Guidelines that the Commission is entitled to increase the starting amount of the fine on account of duration of the infringement only to the extent to which that increase is targeted at restrictions having a long, harmful impact on consumers. Therefore, if, for a certain period, the infringement had no adverse impact on consumers, no increase of that amount is justified on account of duration.
- In this case, the Commission was not in a position to provide the least evidence of Itochu Hellas's participation in the 'plan' conceived by Nintendo to combat parallel trade, except for certain incidents in 1996 and an isolated case in 1993. The period of the infringement, as far as Itochu Hellas is concerned, is therefore much shorter than that found in the Decision.
- Second, and in the alternative, the applicant argues that the Commission should, at the very least and in accordance with the principle of proportionality, have taken account of Itochu Hellas's passive role in the alleged infringement or at least of the fact that the period of the alleged infringement, from December 1991 to February 1997, included long periods during which Itochu Hellas was not involved and played a passive role in the alleged infringement. The applicant therefore suggests that, if the Commission contends that the infringement lasted more than one year, it should increase the starting amount of Itochu's fine, on account of duration, by less than 10% (for example 5%), because of the passive role played by Itochu Hellas. That approach would be consistent with the Commission's practice in the 'Volkswagen' and 'pre-insulated pipe' cases (respectively, Commission Decision 98/273/EC of 28 January 1998 relating to a proceeding under Article [81 EC] (Case No IV/35.733 VW) (OJ 1998 L 124, p. 60), and Commission Decision 1999/60/EC of 21 October 1998 relating to a proceeding under Article [81 EC] (Case No IV/35.691/E-4 pre-insulated pipe cartel) (OJ 1999 L 24, p. 1)). In the further alternative, the Commission should, at the very least, apply a smaller percentage increase on account of duration for those years in which the alleged infringement was very sporadic or even non-existent. Such a percentage should, in any event, be applied at least for the periods for which the Commission provided no evidence of Itochu Hellas's participation in the alleged infringement (that is to say, for the period to April-May 1995 and from May 1996 until February 1997). The applicant also states that, during the latter period, Itochu Hellas's employees involved in the distribution of Nintendo products had left the undertaking and that Nintendo was already considering terminating the agreement with Itochu Hellas.
- The Commission contests all the arguments put forward by the applicant.
Findings of the Court
- This plea is essentially broken down into two parts. In the first part, the applicant claims that the Commission made a manifest error of assessment by asserting that it had participated in the alleged infringement from 16 December 1991 until 28 February 1997 and by deciding that it was necessary to increase the starting amount by 50% under the first paragraph of Section 1 B of the Guidelines. In the second part, put forward in the alternative, the applicant claims that the Commission ought to have applied a rate of increase of less than 10% per year of infringement in view of Itochu Hellas's passive role and the long periods during which it was not involved in the infringement. By failing to do so, the Commission is alleged to have infringed the principle of proportionality.
The first part: manifest error of assessment in the determination of the period during which the applicant participated in the infringement
- It should be noted at the outset that the applicant put forward the plea relating to the duration of the infringement only in the alternative, in support of its claim for cancellation or reduction of the fine imposed on it. Nevertheless, the applicant's written pleadings show that it is essentially contesting the legality of the Decision inasmuch as it finds, as Article 1 of its operative part states, that the infringement took place over the period from 16 December 1991 until 28 February 1997. It should also be noted that, in its written pleadings, the applicant expressly sought annulment of Article 1 of the Decision. In the light of the foregoing, it should therefore be held that, by the present plea, the applicant seeks not only the cancellation or reduction of the fine but also the partial annulment of the Decision, in particular Article 1 of its operative part, in that the Commission wrongly held there that the infringement lasted from 16 December 1991 until 28 February 1997 (see, to that effect, Case T-38/02 Groupe Danone v Commission [2005] ECR II-4407, paragraphs 210 to 213).
- As regards the determination of the infringement period, it should be recalled that under the last subparagraph of Article 15(2) of Regulation No 17, in fixing the amount of the fine regard must be had not only to the gravity of the infringement but also to its duration. In that connection, it should also be recalled that Article 81(1) EC prohibits agreements which have as their object or effect the restriction or distortion of competition within the common market. Thus, where an agreement with an anti-competitive object is not implemented, it is nevertheless necessary to take account of the period during which the agreement existed, that is, the time between the date on which it was entered into and the date on which it was terminated (CMA CGM and Others v Commission, paragraph 77 above, paragraph 280, and Joined Cases T-49/02 to T-51/02 Brasserie nationale and Others v Commission [2005] ECR II-3033, paragraph 185).
- In the present case, it is not disputed that Itochu Hellas concluded with Nintendo a distribution agreement designed to limit parallel trade. Since the infringement was established on the basis of that agreement, the Commission was entitled to consider that the infringement period corresponded to the duration of that agreement.
- The Commission thus observed, at recital 351 of the Decision, that Itochu Hellas's participation in the infringement lasted from 16 December 1991 (date of signature of the distribution agreement) until 28 February 1997 (date on which the distributorship came to an end), that is, five years and two months.
- Accordingly, contrary to what the applicant submits, the fact even if it were established that the provisions of the agreement were not implemented during long periods is of no relevance whatsoever when determining the infringement period.
- Furthermore, the applicant cannot in that connection claim that Nortec benefited from more favourable treatment on the ground that, even though Nortec had concluded a distribution agreement with Nintendo, the Commission decided to take account of the actual period during which it had participated in the infringement. The distribution agreement concluded between Nintendo and Nortec did not contain, unlike the one concluded between Nintendo and Itochu Hellas, which expressly restricted the ability to parallel export the products in question (see recital 264 of the Decision), any clauses restricting competition. The Commission therefore relied, in order to establish Nortec's participation in the infringement in question, not on the terms of any distribution agreement but on a series of letters that it exchanged with Nintendo.
- Nor can the applicant rely on the fact that the terms of the agreement were imposed on Itochu Hellas inasmuch as it had no choice but to accept them. The applicant has failed to explain how that should have an influence on the determination of the period during which it participated in the infringement. Further, the applicant could have reported any pressure brought to bear on it to the competent authorities and made a complaint to the Commission under Article 3 of Regulation No 17 rather than participate in the activities in question (see, to that effect, Case T-17/99 KE KELIT v Commission [2002] ECR II-1647, paragraph 50, and Case T-62/02 Union Pigments v Commission [2005] ECR II-5057, paragraph 63).
- Further, the assessment of any passive role played by Itochu must be carried out at the stage of the examination of attenuating circumstances.
- As regards Itochu's other arguments, based on the alleged lack of harmful effects of the infringement, they concern in reality the examination of the intrinsic gravity of the infringement and not that of its duration. Contrary to what the applicant claims, Section 1 B of the Guidelines, according to which '[g]enerally speaking, the increase in the fine for long-term infringements represents a considerable strengthening of the previous practice with a view to imposing effective sanctions on restrictions which have had a harmful impact on consumers over a long period', does not make an increase for duration conditional on proof that the infringement in question had a negative and long'term impact on consumers.
- It follows from all those considerations that the first part of this plea must fail.
The second part: infringement of the principle of proportionality when setting the rate of increase per year of infringement
- In accordance with Section 1 B of the Guidelines, the Commission may, in respect of long'term infringements (over five years), apply an increase of up to 10% per year of infringement in the amount set to reflect the gravity of the infringement.
- In the present case, the Commission found, at recital 403 of the Decision, that the applicant had participated in an infringement for a period of five years and two months, a 'long duration' within the meaning of the Guidelines, and it increased the fine on account of duration by 50%. In so doing, the Commission complied with the rules which it imposed on itself in the Guidelines. Moreover, in the light of the duration of the infringement, that increase of 50% is not manifestly disproportionate in the present case.
- The mere fact that the Commission has reserved for itself a possibility of applying an increase of up to 10% per year of infringement in no way obliges it to set that rate according to the intensity of the infringement or the varying degrees of involvement of each of the offenders.
- First of all, it cannot be argued that the Commission ought to have applied a lower rate of increase in view of the fact that the applicant played only a passive role in the infringement or, at the very least, of the fact that the conduct alleged against the applicant was sporadic or even rare. It should be noted that, according to the method set out in the Guidelines, the evaluation of the relative gravity of the participation in the infringement of each of the undertakings concerned, in the light in particular of their activeness or passivity, is carried out at the stage when aggravating and attenuating circumstances are taken into account in accordance with Sections 2 and 3 of the Guidelines (see, to that effect, Case T-224/00 Archer Daniels Midland and Archer Daniels Midland Ingredients v Commission [2003] ECR II-2597, paragraph 265).
- In this instance, when it examined attenuating circumstances, the Commission specifically, and in compliance with the method set out in the Guidelines, examined whether the applicant had played a passive role.
- As regards, next, the assertion that, since the infringement which the applicant is alleged to have committed was of very variable intensity, the Commission was required to apply a significantly lower level of increase, at least in respect of a part of the period taken into account, it is sufficient to point out that an increase in the fine by reference to the duration of the infringement is not limited to a situation in which there is a direct relation between the duration and serious harm caused to the Community objectives referred to in the competition rules (Joined Cases T-202/98, T-204/98 and T-207/98 Tate & Lyle and Others v Commission [2001] ECR II-2035, paragraph 106, and Michelin v Commission, paragraph 47 above, paragraph 278).
- Regarding the reference made by the applicant to the Commission decisions taken in the Volkswagen and pre-insulated pipe cases respectively, it is sufficient to recall that, according to settled case'law, the Commission's practice in previous decisions cannot itself serve as a legal framework for the imposition of fines in competition matters and decisions in other cases can give only an indication for the purpose of determining whether there might be discrimination, since the facts of those cases, such as markets, products, the undertakings and periods concerned, are not likely to be the same (Case C-167/04 P JCB Service v Commission [2006] ECR I-8935, paragraphs 201 and 205, and Case C-76/06 P Britannia Alloys & Chemicals v Commission [2007] ECR I-4405, paragraph 60).
- It follows from all those considerations that the plea relating to the increase of the amount of the fine for duration must be rejected as unfounded.
The fourth plea: breach of the obligation to state reasons and of the principles of equal treatment and proportionality because of the failure to take account of certain attenuating circumstances
Arguments of the parties
- First, the applicant claims that, by not reducing the fine imposed on it on account of Itochu Hellas's passive role in the alleged infringement, without proper justification, the Commission infringed Article 253 EC. Moreover, by accepting that attenuating circumstance in relation to Concentra and not in relation to Itochu, the Commission breached the principle of equal treatment.
- The applicant maintains, first of all, that, if it were to be held that it was a proper addressee of the Decision, it would be important to take account of its exclusively passive role in the infringement. The applicant then observes that Itochu Hellas had declared, in its reply to the statement of objections, that the Commission's file contained only very limited evidence concerning its participation in the alleged infringement. In that regard, Itochu Hellas, as a very small distributor of Nintendo products in the EEA, was a minor player in the overall scheme conceived by Nintendo to combat parallel trade.
- Moreover, the role played by Itochu Hellas was, according to the applicant, at least as passive as that played by Concentra. However, the Commission reduced the basic amount of Concentra's fine by 50% on account of that passivity (recitals 212, 213 and 421 to the Decision). According to the applicant, Itochu Hellas only informed Nintendo of the existence of parallel trade, just as Concentra did. The only distinguishing element the Commission relies on is that Itochu Hellas reported to Nintendo 'in the expectation that NOE would address this problem'. Such 'expectation', as identified by the Commission, cannot be considered evidence that Itochu Hellas played an active role in the infringement.
- In that regard, it should be borne in mind that the distribution agreement concluded by Itochu Hellas with Nintendo was a standard agreement and there was no scope to negotiate the terms of that agreement. Therefore, the situation of Nintendo's independent dealers, in particular that of Itochu Hellas, which had no choice other than to consent to that agreement, should be distinguished from that of the dealers with which Joined Cases 32/78, 36/78 t-82/78 BMW Belgium and Others v Commission [1979] ECR 2435 was concerned. The applicant states that, in view of Nintendo's position in Greece and the risks of losses that it might incur, Itochu Hellas had no choice but to accept the terms of the distribution agreement. Thus, Nintendo business accounted for a predominant part of Itochu Hellas's business from 1991 to 1996 and the loss thereof in 1997 seriously affected Itochu Hellas. When Nintendo terminated the agreement, in 1998-1999, its turnover shrank to 12-13% of its 1997 turnover.
- Second, the applicant maintains that the Commission infringed Article 253 EC by refusing, without proper justification, to take account of the fact that Itochu Hellas had not implemented the restrictive practices concerned. It states, first, that Itochu Hellas exported Nintendo products from Greece and that it made a number of sales in the EEA, notably in Spain. The disputed clause of the distribution agreement, under which Itochu Hellas could sell only to dealers established in Greece approved by Nintendo, was never decided upon or implemented. In practice, Nintendo itself never intervened in the selection or appointment of Itochu Hellas's dealers and never commented on that matter. The applicant then submits that it is apparent from the Commission's file that there was a continuous and significant volume of parallel imports into Greece during the period of the alleged infringement. That is evidence of the fact that Itochu Hellas did not oppose parallel trade in Nintendo products. Finally, it also denies having tried to exploit the infringement for its own benefit, as is evidenced by the losses suffered by it during the relevant period.
- The Commission disputes all the complaints put forward by the applicant.
Findings of the Court
- In the present case, it is necessary to examine whether the Commission was entitled, without infringing the obligation to state reasons, to refuse, first, to recognise that the applicant had played a passive role in the infringement and, second, to conclude that it had not implemented that infringement.
The passive nature of the role played by the applicant in the infringement
- It must be held at the outset that, in so far as the applicant's arguments seek to contest Itochu's personal involvement in the cartel, they must be rejected, following the examination of the plea put forward in support of the claim for partial annulment of the Decision.
- Further, as is apparent from the case'law, where an infringement has been committed by several undertakings, it is appropriate to consider the relative gravity of the participation of each of them (Joined Cases 40/73 t-48/73, 50/73, 54/73 t-56/73, 111/73, 113/73 and 114/73 Suiker Unie and Others v Commission [1975] ECR 1663, paragraph 623, and Case C-49/92 P Commission v Anic Partecipazioni [1999] ECR I-4125, paragraph 150) in order to determine whether there are any aggravating or attenuating circumstances relating to them.
- In particular, in accordance with the first indent of Section 3 of the Guidelines, 'an exclusively passive or follow-my-leader' role in the infringement may, where it is established, constitute an attenuating circumstance. A passive role implies that the undertaking adopts a 'low profile', that is to say, not actively participate in the creation of any anti-competitive agreements (Case T-220/00 Cheil Jedang v Commission [2003] ECR II-2473, paragraph 167).
- In the present case, the applicant essentially claims that Itochu Hellas was only a minor player in the overall scheme for limiting parallel imports conceived by Nintendo and that its role was at least as passive as that of Concentra. It further submits that, in view of its economic situation, Itochu Hellas was not in a position to refuse the terms of the distribution agreement imposed on it by Nintendo.
- In that respect, first, it must be stated that, since Itochu Hellas did indeed conclude the distribution agreement in question and therefore gave its formal agreement to the principle of a limitation of parallel trade, the applicant cannot claim that it played only a passive role in the infringement.
- As regards, second, the claim that it was only a minor player in the scheme for limiting parallel imports, it should be noted that, as the Commission stated in recitals 206 and 429 of the Decision, Itochu Hellas on several occasions spontaneously communicated to Nintendo information regarding parallel imports into its territory. In so doing, it participated in the scheme put in place by Nintendo and its conduct reveals at the very least a favourable and active attitude regarding monitoring of the restrictive agreement. The fact that Itochu Hellas did not prevent or attempt to prevent parallel imports of the products in question does not in any case constitute evidence of 'exclusively' passive participation by it in the infringement in question. Such conduct, if established, demonstrates only less zeal in the conduct of the cartel and does not call in question the applicant's full involvement in it (see, to that effect, Case T-48/02 Brouwerij Haacht v Commission [2005] ECR II-5259, paragraph 80). Consequently, it is not sufficient that the undertaking concerned adopted a 'low profile' during certain periods or in relation to certain provisions of the agreement.
- Nor can the applicant rely on the argument that Itochu Hellas was compelled to conclude the distribution agreement in order to claim the benefit of attenuating circumstances. Even if it were shown that Nintendo imposed the terms of the distribution agreement, which is far from established, the fact remains that, by communicating information on parallel trade, it complied with that agreement without taking an exclusively passive or follow-my-leader role in the infringement.
- In any event, even if it is accepted that the applicant was compelled to conclude the distribution agreement in question, given the bonds of economic dependency characterising its relationship with Nintendo, it cannot rely on that fact, since it could have reported that pressure to the competent authorities and made a complaint to the Commission under Article 3 of Regulation No 17 rather than participate in the activities in question (see the case'law cited at paragraph 114 above).
- As regards, moreover, the complaint that the Commission infringed the principle of equal treatment by according the benefit of the attenuating circumstance for an exclusively passive role to Concentra and not to the applicant, it must also be rejected. It is clear from the Commission's factual findings, which were not contested by the applicant, that the roles played by those two undertakings in the infringement were not comparable. Although they both spontaneously communicated to Nintendo information on parallel trade of Nintendo products and requested its assistance in this regard, it must be stated that the correspondence between Nintendo and Concentra, which was exchanged on four occasions between January 1996 and November 1997, was more sporadic than that exchanged between Nintendo and Itochu (see recitals 206, 212 and 213 of the Decision). In addition and above all, it is apparent from the facts related by the Commission that Itochu provided Nintendo with specific information regarding the incidence and origin of parallel trade and that Itochu's correspondence made it possible, on one occasion at least, to put an end to parallel exports from the United Kingdom (see recitals 206 and 429 of the Decision). The Commission was therefore entitled to distinguish the role played by the applicant in the infringement from that played by Concentra and, accordingly, grant a reduction of the fine for the attenuating circumstance of a passive role in the infringement only to Concentra.
- As regards, lastly, the complaint alleging breach of the obligation to state reasons, it is appropriate, first of all, to refer to the case-law cited at paragraph 82 above and then to observe that, when refusing the applicant the benefit of the attenuating circumstance on which it relied, the Commission set out in the Decision (see recitals 427 to 429) the considerations on which it decided not to find an attenuating circumstance for the applicant's exclusively passive or follow-my-leader role in that regard. Accordingly, it did not in any way breach its obligation to state reasons on that point.
- It must therefore be concluded that the Commission was correct to reject the attenuating circumstance pleaded and that it provided sufficient reasons for doing so. The first part of this plea must therefore be rejected.
The implementation in practice of the infringement by the applicant
- According to the second indent of Section 3 of the Guidelines, 'non-implementation in practice of the offending agreements or practices' may also amount to an attenuating circumstance.
- It is clear from the case'law that the Commission is not required to recognise the existence of an attenuating circumstance consisting of non-implementation of a restrictive agreement unless the undertaking relying on that circumstance is able to show that it clearly and substantially opposed the implementation of the agreement, to the point of disrupting the very functioning of it, and that it did not give the appearance of adhering to the agreement and thereby incite other undertakings to implement the agreement in question. It would be too easy for undertakings to reduce the risk of being required to pay a heavy fine if they were able to take advantage of an unlawful agreement and then benefit from a reduction in the fine on the ground that they had played only a limited role in implementing the infringement, when their attitude encouraged other undertakings to act in a way that was more harmful to competition (Case T-44/00 Mannesmannröhren-Werke v Commission [2004] ECR II-2223, paragraphs 277 and 278).
- The Court cannot conclude from the circumstances advanced by the applicant in the framework of this part of the plea that the applicant clearly and substantially departed from the agreement entered into with Nintendo to the point of disrupting the operation of it.
- Similarly, Itochu cannot reasonably argue that it did not attempt to benefit from the infringement, since it suffered losses and encountered economic difficulties during the infringement period. Apart from the fact that the Commission is not required to take account of such factors when assessing whether there are any attenuating circumstances (see, to that effect, concerning cartels, Joined Cases T-236/01, T-239/01, T-244/01 to T-246/01, T-251/01 and T-252/01 Tokai Carbon and Others v Commission [2004] ECR II-1181, paragraph 345), it has not been established that those alleged difficulties were connected with the non-implementation in practice of the measures in question. In particular, it should be observed that the applicant itself admitted, in its reply to the statement of objections, that the mediocre performance recorded by Itochu Hellas during the infringement period was explained by a series of factors which were unrelated to the implementation of the agreement that it had concluded with Nintendo.
- As regards further the complaint alleging breach of the obligation to state reasons, it is appropriate, first of all, to refer to the case-law cited at paragraph 82 above and then to observe that, when refusing the applicant the benefit of the attenuating circumstance claimed, the Commission set out in the Decision (see recitals 434 to 437) the considerations on which it decided not to find an attenuating circumstance for the applicant's non'implementation of the agreement in question. Accordingly, it did not in any way breach its obligation to state reasons on that point.
- In those circumstances, Itochu cannot benefit from a reduction of the amount of the fine in respect of that attenuating circumstance either.
- In the light of all those considerations, this plea must be rejected as unfounded.
The fifth plea: infringement of Article 15(2) of Regulation No 17, on account of the setting of a fine exceeding the limit of 10% of the turnover for the previous financial year
Arguments of the parties
- The applicant maintains that the Commission infringed Article 15(2) of Regulation No 17, in that the Decision imposes a fine exceeding 10% of Itochu Hellas's turnover for the year prior to the adoption of the Decision. It asserts that the Decision should have been addressed to Itochu Hellas and that any fine should have been imposed on that company. The threshold of 10% should therefore have been evaluated in the light of Itochu Hellas's turnover for 2001, which was EUR 423 475. By imposing a fine of EUR 4.5 million, which corresponds to more than 50% of the annual turnover figures of Itochu Hellas since 1991, except 1994, the Commission disregarded that threshold. The applicant therefore asks the Court to reduce the fine imposed on it by Article 3 of the Decision to an amount not exceeding EUR 42 348, being the equivalent of 10% of Itochu Hellas's turnover for 2001.
- In its reply, the applicant disputes the Commission's argument that the present plea contradicts the plea concerning incorrect imputation of the infringement to the applicant with regard to the relief sought. It submits that the Court can decide not to annul the Decision but to reassess the amount of the fine, taking account of Itochu Hellas's market position. The present plea is therefore put forward in the alternative, in the event that the Court does not annul the Decision as requested in its first head of claim.
- The Commission contends that this plea must be rejected.
Findings of the Court
- Article 15(2) of Regulation No 17 provides that the fines imposed by the Commission on undertakings which have infringed Article 81 EC or Article 82 EC may not exceed -10% of the turnover in the preceding business year of each of the undertakings participating in the infringement'.
- In this instance, Itochu submits that the Commission should have set the amount of the fine by having regard to the turnover of Itochu Hellas, which is alone responsible for the infringement.
- As is clear from the examination of the first plea put forward by Itochu in support of its claim for partial annulment of the Decision, the Commission was right to address the Decision to Itochu inasmuch as it had to be held responsible for the infringement.
- Accordingly, this plea cannot be upheld, since, in applying the 10% ceiling, the Commission must take into account the turnover of the undertaking concerned, namely the undertaking to which the infringement was attributed and which was therefore declared responsible and notified of the decision imposing the fine (Case T-304/02 Hoek Loos v Commission [2006] ECR II-1887, paragraph 116; see also, to that effect, the judgment of 15 June 2005 in Joined Cases T-71/03, T-74/03, T-87/03 and T-91/03 Tokai Carbon and Others v Commission, not published in the ECR, paragraph 390).
- It follows from those considerations that this plea must be rejected.
The sixth plea: breach of the rights of the defence
Arguments of the parties
- The applicant claims that Itochu Hellas and Itochu understood from the wording of the statement of objections that the Commission had allegedly identified an infringement of Article 81(1) EC of both a vertical and a horizontal nature. When considering the horizontal aspect of the alleged infringement, the reply to the statement of objections, filed on behalf of Itochu Hellas and Itochu, was drafted keeping in mind the possible application of the Leniency Notice, the application of which is limited to cooperation with the Commission by undertakings involved in a secret, restrictive horizontal agreement.
- Accordingly, on several points, Itochu Hellas and Itochu chose, in their reply to the statement of objections, not to contest the Commission's interpretation of the facts. In doing so, they were not able to exercise their rights of defence to the fullest extent or, at least, adopted a course of defence which they might not have adopted if they had not been misled by the Commission. Thus, since Itochu Hellas has no document concerning the distribution of Nintendo products, its only means of cooperating with the Commission was by not substantially contesting the facts.
- The applicant submits that, by limiting the legal assessment of the infringement in the Decision to a restrictive vertical agreement, the Commission made it no longer possible for the undertakings involved to benefit from a reduction of the fine on the basis of the Leniency Notice. That unfair method infringes the rights of defence of the undertakings involved, since they might have developed a defence strategy different from that of merely not contesting the facts.
- According to the applicant, the result of that change of approach meant that Itochu cannot benefit from a 10% reduction of its fine, imposed on account of the conduct of Itochu Hellas in a vertical infringement, although it could have benefited from such reduction if it had been involved in a restrictive horizontal agreement. The applicant concludes from this that, if the Court of First Instance were to consider that the Commission had not infringed its rights of defence, Itochu should nevertheless benefit from a reduction of its fine of at least 10% because it did not substantially contest the facts set out in the Commission's statement of objections.
- In its reply, the applicant submits that, if, as argued by the Commission, any effective cooperation may be taken into account as an attenuating circumstance outside the context of the Leniency Notice, the resultant reduction of the amount of the fine is not subject to the same conditions. In particular, the Leniency Notice does not require that, to benefit from a reduction of the fine for not contesting the facts in question, such cooperation should be given in a situation where the statement of objections is based on a complex series of interrelating factual elements.
- The Commission objects that the applicant's allegations are both factually and legally flawed. The reduction of the amount of the fine sought by the applicant in respect of its alleged cooperation cannot in any event be accepted.
Findings of the Court
- It must first of all be observed that, contrary to what the applicant appears to suggest, it is in no way apparent from the statement of objections that, at the stage of the administrative procedure, the Commission had intended to limit its legal assessment to the horizontal aspect of the alleged infringement.
- In that connection, the fact that in the statement of objections the Commission referred to terminology and case'law relating to restrictive horizontal agreements could not, as such, have misled the applicant.
- Further, the applicant's reply to the statement of objections clearly shows that, in its own view, the alleged infringement concerned a relationship of a vertical nature.
- In addition, the fact that the Commission decided to abandon the complaints relating to the horizontal aspects of the infringement cannot in any event have worked against the applicant. In that connection, it should be recalled that the requirement that the statement of objections must be couched in terms that, albeit succinct, are sufficiently clear to enable the parties concerned properly to identify the conduct complained of by the Commission is observed where the decision does not allege that the persons concerned have committed infringements other than those referred to in the statement of objections and takes into consideration only facts on which the persons concerned have had the opportunity of making known their views.
- Where the statement of objections provides a clear indication of the nature of the infringement of competition law which the undertaking in question is alleged to have committed and the material facts relied on in that regard, that undertaking is in a position to reply to those allegations and to defend its rights. For the decision adopted by the Commission subsequently to categorise an economic agreement as 'vertical' or 'horizontal' does not constitute a fundamental alteration to the complaints set out in the statement of objections (Case T-325/01 DaimlerChrysler v Commission [2005] ECR II-3319, paragraphs 188, 189 and 192).
- Consequently, the Commission did not infringe the applicant's rights of defence by limiting the description of the infringement in the contested decision to the vertical aspects of that infringement.
- In any event, the change in the wording adopted by the Commission did not in any way deprive the applicant of having its cooperation taken into account, as it never requested the benefit of the Leniency Notice in accordance with Section E thereof and the effective cooperation of the undertakings in question was taken into account outside the scope of the Leniency Notice (see recitals 454 to 464 of the Decision).
- In the light of the foregoing, the applicant's last plea must also be rejected.
- It follows that the action must be dismissed in its entirety.
Costs
- Under Article 87(2) of the Rules of Procedure of the Court of First Instance, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party's pleadings. As the applicant has been unsuccessful, it must be ordered to pay the costs, as applied for by the Commission.
On those grounds,
THE COURT OF FIRST INSTANCE (Eighth Chamber)
hereby:
1. Dismisses the action;
2. Orders Itochu Corp. to pay the costs.
|
Martins Ribeiro
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Papasavvas
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Wahl
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Delivered in open court in Luxembourg on 30 April 2009.
[Signatures]
Table of contents
Background to the dispute
1. The undertakings involved
2. Administrative procedure
Investigation into the video games sector (Case IV/35.587 PO Video Games)
Additional investigation relating specifically to Nintendo's distribution system (Case IV/35.706 PO Nintendo Distribution)
Inquiry following the complaint lodged by Omega Electro BV (Case IV/36.321 Omega Nintendo)
3. The contested decision
Procedure and forms of order sought
Law
1. The claim for partial annulment of the Decision
Arguments of the parties
Findings of the Court
2. The claim for cancellation or reduction of the amount of the fine
The first plea: breach of the obligation to state reasons and of the principles of equal treatment and proportionality in respect of the differential treatment applied by the Commission
Arguments of the parties
Findings of the Court
The second plea: breach of the principles of proportionality and equal treatment regarding increase of the starting amount of the fine for deterrence
Arguments of the parties
Findings of the Court
The third plea: manifest error of assessment and breach of the principle of proportionality in so far as the fine was increased by reference to the duration of the infringement
Arguments of the parties
Findings of the Court
The first part: manifest error of assessment in the determination of the period during which the applicant participated in the infringement
The second part: infringement of the principle of proportionality when setting the rate of increase per year of infringement
The fourth plea: breach of the obligation to state reasons and of the principles of equal treatment and proportionality because of the failure to take account of certain attenuating circumstances
Arguments of the parties
Findings of the Court
The passive nature of the role played by the applicant in the infringement
The implementation in practice of the infringement by the applicant
The fifth plea: infringement of Article 15(2) of Regulation No 17, on account of the setting of a fine exceeding the limit of 10% of the turnover for the previous financial year
Arguments of the parties
Findings of the Court
The sixth plea: breach of the rights of the defence
Arguments of the parties
Findings of the Court
Costs
* Language of the case: English.
1 Confidential data omitted.
