On 28 January 2021, the European Court of Justice ("ECJ") upheld a ruling of the General Court finding that an information request issued by the EU Commission, as part of its investigation into Qualcomm's predatory pricing practices, did not breach the principles of necessity and proportionality.
What you need to know - key takeaways
- The EU Commission has broad powers of investigation under Regulation 1/2003 where it suspects there has been an infringement of competition law, including the power to issue legally binding information requests.
- The EU Commission may issue information requests after a statement of objections has been issued, for example, in order to adjust its assessment following responses received to the statement of objections from parties under investigation.
- Failure to comply with information requests may result in fines of up to 1% of an undertaking's global turnover and/or periodic penalty payments.
Background
In July 2019, the EU Commission fined Qualcomm EUR 242 million for predatory pricing in the global market for 3G (UMTS) baseband chipsets, with the aim of eliminating rival chipmaker Icera by selling chipsets at a loss (see our July 2019 newsletter).
As part of its investigation, the EU Commission issued an information request using its powers under Article 18 of Regulation 1/2003. In absence of a reply to that information request, the EU Commission adopted a decision ("Decision") requiring Qualcomm to disclose the required information within a prescribed time period or be subjected to a periodic fine of EUR 580,000 per day until the information request was complied with.
Qualcomm ultimately complied with the information request. However, Qualcomm also appealed the Decision to the General Court challenging, amongst other things, the necessity and proportionality of the request, including the fact that the request had been sent after the statement of objections was issued and covered periods outside the scope of the allegations as set out in the statement of objections. The General Court dismissed Qualcomm's appeal and Qualcomm appealed to the ECJ.
The ECJ's ruling
In dismissing the appeal, the ECJ emphasised that the statement of objections is provisional in nature and liable to change, with the ultimate decision regarding any infringement of competition law to be assessed based on the whole of the EU Commission's investigation. Furthermore, the EU Commission is entitled to request further information arising from observations submitted by parties in response to the statement of objections.
The ECJ also upheld the General Court's findings that the Decision was necessary and proportionate. In this regard, the ECJ observed that:
- the information request sought to take into account observations, submitted by Qualcomm in response to the statement of objections, that the EU Commission's methodology for establishing predatory pricing did not reflect prices actually paid by Qualcomm's customers. The information request sought to obtain data to address that issue; and
- the General Court correctly took into account the burden imposed by the Decision on Qualcomm, which required a large quantity of information to be provided in a specific format. The General Court accepted that complying with the Decision entailed a "significant workload", but was correct to conclude that the information request was not disproportionate, having regard to the needs of the investigation relating to the alleged infringement.
Comment
The ECJ's judgment in Qualcomm confirms the EU Commission's wide discretion in deciding what information is "necessary" to determine whether an alleged infringement has taken place. This can sometimes extend to onerous information requests in cases where the information is deemed necessary in light of the purpose of that investigation.
Qualcomm is continuing with its appeal of the EUR 242 million fine that was ultimately imposed as a result of the EU Commission's investigation (see our July 2019 newsletter), and has also appealed a separate EU Commission decision imposing a EUR 1 billion fine following an investigation into exclusionary practices for LTE baseband chipsets (see our February 2018 newsletter). Both cases are currently pending before the General Court.
With thanks to Hayden Dunnett of Ashurst for his contribution.
