General Court Allows the European Commission to Request Information Pre-Dating a Country’s Accession to the European Union

March 26, 2012

On March 22, 2012, the General Court ("Court") in Luxembourg delivered its Judgment in Slovak Telekom v Commission,[1] holding that the European Commission ("Commission") is entitled, for the purposes of advancing its investigation into alleged breaches of European competition laws, to request that a defendant provide it with information regarding its activities conducted prior to the accession of that defendant’s Member State (in this case, Slovakia) to the European Union with a view to assessing its compliance with European competition rules post accession.  This Judgment follows only a month after the Court of Justice of the European Union (the "CJEU"), had ruled in the Toshiba Case[2] that European competition rules cannot be applied retroactively to anti-competitive behavior in a Member State that has as yet not acceded to the EU during the period in which the infringing conduct occurred.

At first blush, therefore, the two precedents from different Courts in the EU ("EU") legal hierarchy do not appear to be wholly consistent with one another.

1.   Background

In 2009, the Commission conducted an inspection at Slovak Telekom’s business premises (in Slovakia) and, on April 14, 2009, informed the firm that competition law proceedings had been initiated against it for alleged infringements of Article 82 EC (now Article 102 TFEU) as a result of a number of Slovak Telekom’s business practices, including alleged discriminatory practices involving the bundling and tying of particular telecommunication services provided by Slovak Telekom. In order to advance its investigation, the Commission requested information from the firm pursuant to Article 18(1) and (2) of Regulation No.1/2003.

In responding to the Commission’s request, Slovak Telekom informed the Commission that the requested information extended to a period before the date of accession of Slovakia to the European Union and, as a result, the Commission had no jurisdiction to apply European competition laws to what was alleged to have been unlawful conduct before May 1, 2004 (i.e., the date of Slovakia’s accession).  Slovak Telekom noted that, as the Commission could not find an infringement for the period before May 1, 2004, nor could it request information relating to that period. It proposed to continue to provide the Commission with general information relating to its activities prior to May 1, 2004, but its responses, including more detailed data and calculations, were limited to its activities conducted after May 1, 2004.

In its reply, the Commission stated that there was no question, in the present case, of it concluding that an infringement of European competition rules had occurred in the period before May 1, 2004, but that the pre- May 1, 2004 information was relevant to the Commission’s assessment of Slovak Telekom’s conduct after that date.  The Commission therefore insisted that the requested pre-accession data be provided in its entirety.

In a further response, Slovak Telekom reiterated its original objections but submitted the requested data, whilst reserving its rights to oppose any use by the Commission of the pre-accession data and documents, including those obtained during the on-site inspection.

In July 2009, the Commission conducted a further inspection at Slovak Telekom’s business premises and went on to request further information relating to the pre-accession period.  Slovak Telekom responded that it had decided not to provide pre-accession data in relation to a number of questions set out in the Commission’s second request because, in its opinion, the Commission had no jurisdiction to request pre-accession information.

In responding to Slovak Telekom’s position, the Commission adopted two Decisions[3] confirming that its competence to request information should be limited to the period for which the Commission may legally find that an infringement of European competition laws has occurred and that, in order to have a full "factual knowledge" of the present case, it could request information relating to pre-accession data and behaviour.

By two applications dated November 13, 2009 and April 15, 2010 respectively, Slovak Telekom brought two actions before the General Court seeking the annulment of the Commission’s respective Decisions.

2.   Arguments relied on by Slovak Telekom

In support of its applications, Slovak Telekom alleged that, in requesting pre-accession information, the Commission had:

i.   committed an error of law in the application of Regulation No. 1/2003;

ii.   infringed the principle of the fairness of the proceedings; and

iii.   infringed the principle of proportionality.

Slovak Telekom also argued that there was no nexus between the infringement allegedly committed by the firm and the requested pre-accession information.

3.   General Court’s Judgment

First Plea

The Court held that no error of law had occurred, noting that Article 18(1) of Regulation No. 1/2003 grants the Commission broad powers of investigation and review and, as a result of these powers the Commission should be empowered, as reflected in the preamble to Regulation No.1/2003,[4] to require that such information be supplied to it as is necessary to detect any abuse of European competition laws.  According to the Court, and consistent with existing case-law,[5] the term "necessary information" must be interpreted according to the objectives being pursued by the Commission in light of the powers of investigation have been conferred upon it. The Court explained that a correlation must exist between the information requested and the putative infringement; since at the relevant stage in the proceedings the request could legitimately be regarded as being connected with the putative infringement, the Commission could reasonably suppose that the requested pre-accession information could be helpful in its determination of whether the alleged infringement of European competition law had taken place. 

Second Plea

In requesting pre-accession information, the Court held that the Commission had not breached the principle of good administration by adopting Decisions to request "all necessary information" from Slovak Telekom. In fact, the Court held that the Commission has a duty to examine carefully and impartially all of the relevant aspects of the individual case required for it to be able to adopt a Decision with the requisite level of diligence, based on all of the information which might objectively influence its decision. The Court found that the request for pre-accession information was necessary so as to ensure the Commission complied with this duty and was not, therefore, in breach of the principle of good administration.

Third Plea

The Court held that, because pre-accession information was necessary, and the Commission had repeatedly communicated to Slovak Telekom the basis upon which it believed the requested information to be necessary to advance its investigation in order to ensure that it was aware of all relevant information in relation to the alleged breaches of European competition laws, the Commission had not breached the fundamental principle of domestic inviolability, which requires that the Commission does not exercise its investigative powers beyond what is necessary. Further, the Court held that Slovak Telekom had failed to demonstrate that the principle of proportionality had been infringed as a result of the fact that the requested information covered a period which was approximately up to one and a half years prior to Slovakia’s accession to the European Union.

The Court also rejected Slovak Telekom’s argument that there was no nexus between the alleged infringement and the requested pre-accession information, holding that the information, irrespective of the fact it pre-dated the alleged period of infringement, could, for example, enable the Commission to define the relevant markets at issue so as to determine whether the firm holds (or has held) a dominant position on those markets and/or to assess the gravity of the alleged infringement.

Conclusions

The Slovak Telekom Judgment clearly indicates that the Court will allow the Commission, in the exercise of its competition jurisdiction, to obtain information which relates to the period prior to a country’s accession to the European Union, to the extent that it is necessary to enable the Commission to establish whether an infringement has occurred. The Commission made it clear to Slovak Telekom that it was not alleging a breach of European competition law prior to Slovakia’s accession to the European Union — at face value consistent with the Toshiba precedent of the CJEU — but that the requested information was necessary so as to establish whether the firm had committed a competition law infringement after the date of accession.

In so holding, the Court continues to uphold the Commission’s very broad investigation powers in the exercise of its competition law jurisdiction. These powers allow it to request, where necessary, information relating to a period pre-dating the period of the alleged infringement[6] and the recognition that those powers of investigation are also not limited merely to conduct occurring after accession to the European Union.[7] What the Court has failed to explore, however, are the practical limits to such information–gathering powers. It is difficult in, practical terms, to determine where the cut-off point lies for information which is "necessary" to an investigation, as opposed to information that is not relevant. It is also difficult to determine how far back in time the Commission can seek information without such a request being deemed to be disproportionate (one and a half years in Slovak Telekom was held to be acceptable). What remains unclear is how far the Commission can go back in time under the Slovak Telekom precedent and the various types of subject-matter that is considered to be relevant, in its requests for pre-accession information, given that the Commission’s information-gathering powers appear to be rather open-ended. Parties who are subject to extensive information requests from the Commission are left none the wiser after the Court’s Judgment as to exact scope of the what constitutes "necessary information" and what can be done to prevent the Commission from undertaking an unnecessary fishing expedition.  If the CJEU’s Judgment in Toshiba is to mean anything,[8] we need to ask how information pre-dating accession can be useful to the Commission in circumstances other than the establishment of an offence. Given the Commission’s sweeping fining powers, practitioners may find it difficult to imagine how matters material to an offence (as opposed to preliminary issues such as the definition of a relevant market or the measurement of market powers) discovered in pre-accession times will not colour the Commission’s appraisal of guilt — and hence the gravity of the fine imposed — as it relates to a post-accession finding.