|[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]|
England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Balmoral Tanks Ltd & Anor v Competition And Markets Authority  EWCA Civ 162 (15 February 2019)
Cite as:  EWCA Civ 162
[New search] [Context] [View without highlighting] [Printable PDF version] [Help]
ON APPEAL FROM THE COMPETITION APPEAL TRIBUNAL
Mrs Justice Rose, Dr Catherine Bell CB and Ms Margot Daly
 CAT 23
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE NEWEY
| (1) BALMORAL TANKS LIMITED
(2) BALMORAL GROUP HOLDINGS LIMITED
|- and -
|COMPETITION AND MARKETS AUTHORITY
Mr Rob Williams (instructed by CMA Legal) for the Respondent
Hearing date: 29 January 2019
Crown Copyright ©
Lord Justice Newey:
"between 29 April 2005 and 27 November 2012, and in the case of CST UK between 29 April 2005 and 2 May 2012, CST UK, Franklin Hodge, Kondea and Galglass participated in bid-rigging, price-fixing and market-sharing in relation to the supply of CGSTs in the UK. This took the form of an ongoing arrangement for the allocation of specific customers between them and not competing for business from customers allocated to another party. This was combined with an arrangement concerning benchmark levels of pricing and the maximum discounts to be offered to 'preferred' and 'non-preferred' customers, with the intention that each undertaking would win bids from those customers allocated to it and lose bids from customers allocated to its competitors, giving the appearance of competition where there was none."
"These arrangements," the CMA explained, "were agreed and reinforced in regular meetings attended by representatives of the Parties involved, as well as in bilateral exchanges concerning particular bids" (paragraph 1.3). The companies "agreed to allocate customers from as early as April 2005, in such a way that each undertaking would end up with an approximately equal share of CGST sales in the UK" (paragraph 3.12). The CMA thus decided that the companies had "participated in an agreement and/or concerted practice which had as its object the prevention, restriction or distortion of competition in relation to the supply of CGSTs in the UK, and thereby infringed the Chapter I prohibition and/or Article 101 [Treaty on the Functioning of the European Union – 'TFEU']" (paragraph 5.1).
"63. In particular amongst quotations the CMA relies on as evidence of the Information Exchange Infringement they include:
(1) Balmoral sharing its views on what pricing should be for specific tanks and that prices should move upwards … :
'AJ [i.e. Mr Joyce] … Reading between the lines, there will be a low price, maybe a proper market price on the 135, anything below £15,000 is stupid. Back up to where it should have been about £17,500, £18000. When we start getting below £15,000 and two big guys are battling over a Tyco at £14,600 and we're losing it at £14,600. It's bonkers.'
At the end of the meeting Mr Joyce explains that he found the discussion to be 'very positive'. Mr Snee then asks Mr Joyce 'So no mark 7 price at this stage, but do you want to try to squeeze the price and get up as quickly as we can?' Mr Joyce responds: 'Yes, like I say the mark 7 would be in, erm, within that band. Pushing that band up, the top end rather than the bottom.'
(2) Mr Joyce volunteered the current prices at which Balmoral Tanks is selling school tanks and 135m³ tanks … :
'AJ I will say that price is probably about .... the lowest one we did recently is about £9,500.
NS [i.e. Mr Snee] And that's what we thought. That's. .that's what we thought.
AJ The schools and the 135 are very similar £9,500, £10,500, £15,000 to 17,000.
CD [i.e. Mr Dean] I think £15,000 is far too low.
AJ No, but what I'm trying to say is …
AJ We're selling at that price, we're now below it, what I'm trying to get to say is you're hitting a level where you say, it's like GRP [i.e. glass reinforced plastic] tanks, we know the price in the market. And I say to somebody, we've been in the game so long, why would we not know the price, quote them this price, quote them that price? If we think we've a 35% market share in GRP you say to Norman that's nearly six out of ten orders that we lose. Why do we get upset if we lose one? We don't have it all, we've got to just make sure we're taking our share at the right price. I think with this it's like trying to push and get it stabilised. For me anyway, I get a much, much better feel for the way things are settling out you know.'
(3) The attendees provided each other with information about what their prices would be if asked to quote for a 135m³ tank in the future … :
'CD What would you quote a 135 now? Not Arriva but if it just came out now.
AJ Say somewhere between £15,000 and £17,000. I wouldn't say it's always £16,000 as it has been... Some of that will be a reaction that you think what you've been told as well what other people are at now, yeah, erm, so that's why I'm saying we have taken some at a decent price. We have taken some at £15,000...but they haven't all been at £15,000.
CD What if it was just a tender at the moment, I'm just enquiring with an order to place?
AJ A one off tank, I would be surprised if it is less than £16,000. I'd say some of these things you might quote GRP tanks where someone wants a package [?] I actually give them a price for the whole lot rather than individual tank prices then that's a better way of doing it as well they might say you are a bit out on that, you're ok on that [?].
CD If you're trying to do it as a package you should only quote them 1 price, not individual prices.
AJ then you get some buyer "Do it separate", give them a chance to go to other people [?] I mean it does depend on who they are and what they've said to theirs?
CD I just mean an everyday spring comes along, for a 135 tank cos at the moment I'd be quoting similar to...
AJ [finishes CD's sentence]... £17,500.
CD May be we'll start high. Because if you start at £15,000'.
(4) Discussion about price bands for schools tanks going forward, with Mr Snee indicating that for school tanks the band was £9,500 to £10,500, Mr Dean saying that £9,500 is reasonable with the list price being £10,100: …
'NS Cos that's kind of the target price that we were going for for schools in Scotland, was £10,100 but Barry said it in order to beat Balmoral, we're going to have to drop to around £9,900, that's what I've been told, I'm getting you straight.
AJ You see I've seen some at £10,200. I've seen £8,600 which is was a disaster.
NS Yeah we've not done £8,600
AJ I've seen below that £9,200 or £9,000 even that's low. £9,500, £10,500 is a target. If I hear anything from our guys that's anything above that will be exciting or below, that would be a concern …'
(5) Discussion about price bands for 135m³ tanks …
'NS … And the 135s? £14,650?
CD NO! [laughing],
AJ I've seen quite a few around about the £15,000 mark, so I'd say £15,000 to the £17,000 mark.
CD Well, I'd have thought a list price would have been £18,000 on a 135. That should be around about £17,000 that's with a ball-valve, with a ball valve should be about £18,000.'
(6) During the Meeting, Mr Dean provided Kondea's price lists showing the strong downward progression of pricing over recent years, with a 135m³ tank selling for £20,000 in January 2011, £21,000 in April 2011 but £19,000 in July 2011.
64. The CMA refers specifically to the discussions about future bids for contracts with Compco … :
'3.52 Earlier in the meeting, Franklin Hodge asks if Balmoral Tanks has sold any CGSTs to Compco, getting an indication of the level of sales in the market from its competitor. Mr Snee later tells the others that Franklin Hodge intends to bid to win future Compco contracts, telling Mr Joyce that Franklin Hodge will "bid close to but under" what Balmoral Tanks has offered. Mr Snee also gives a price range that Franklin Hodge will quote for school tanks on the future Compco contracts: "I'm going to have to go closer to the £9,500 than £10,500, on schools that's not because I'm trying to drag the price down, it's because I've got to try to open the door."
3.53 Mr Snee also discusses a recent pre-qualification bid Franklin Hodge has won for Hall & Kay and its intention not to reduce the price agreed with Hall & Kay " … come hell or high water. If someone rings up and says well they're a bit cheaper cos even Hall and Kay have gone through the process of trying to reduce, duck, instead of constantly going to Franklin Hodge. You must now get 3 prices but we have rigidly stuck to the price we agreed and we won't move off that, mainly for credibility reason, that kind of supports the point, I'm not going to move from that."
3.54 All attendees take an active role in discussing what should be the target price bands for future bids for schools and 135m³ tanks. Mr Snee summarises the position, once it is clear that Balmoral Tanks are not prepared to take part in customer allocation: "... Good. So coming back to where we were then, it's going to be a complicated picture isn't it, on the pricing front, this is like market sharing we going to have to manage it as best we can I suppose, is the conclusion we're coming to."
3.55 Mr Joyce responds: "We can always pick the phone up and have chat about it see where we are, make it quite clear where the bands are, if you go outside that band, on the low side then I'd like to think it won't be driven by us."'
65. On price bands, the CMA concludes from the Transcript that:
'3.57 Mr Joyce explains in this exchange what would be "a target" price for school tanks and later in the meeting states "that's why I think you've got to have the bands to work with, to keep as the market price there is a market price for everything give or take. [?] if you're feeling a bit hungry you'll go here and if you're feeling a bit flush and you're not under pressure then you might squeeze it up, but if you take everyone low it's a disaster, you've got to have a mixture of jobs [?]." He notes with regard to a price that Mr Snee is proposing to bid for a future contract: "If it's falling out of the bands, that's the concern". Mr Joyce goes on to state that the parties to the information exchange should be aiming for prices at the higher end: "Better near the top of the band than the bottom of the band for sure. [inaudible]. Somehow that's the area the target price."
3.58 Mr Snee notes towards the end of the discussion: "So in summary then we've got some agreement on bands..." None of the attendees register any dissent to this assertion.'"
"confirms that Balmoral Tanks was not prepared to take part in market sharing or the customer allocation arrangements in place between the parties to the main cartel, feeds back the pricing information obtained from Balmoral and then instructs his staff to revise the Compco bid, so as just to undercut Balmoral but without discounting heavily".
The CMA went on to say (in paragraph 3.66):
"Later the same day Franklin Hodge submits a revised bid to Compco, which shows the 135m³ tanks … being offered at a revised price of £15,850, as suggested by Mr Snee on his calls … following the discussion with Balmoral Tanks. This job was ultimately won by Balmoral, who submitted a bid of £14,900 (£100 below the lower end of the band discussed for 135m³ tanks) on 13 July 2012."
"126. Having ourselves assessed the evidence relied on by the CMA we are entirely satisfied that Balmoral was party to the infringement identified in the Information Exchange Decision. Mr Joyce went to the Meeting knowing or suspecting that the discussion was very likely to trespass into problematic areas and that was confirmed soon after the discussion started when he was told that the others were party to a customer sharing arrangement. However reluctantly, Mr Joyce was then drawn into a conversation about pricing with Balmoral's competitors which went well beyond a discussion of general market conditions or historic prices. He must have realised why Mr Snee and Mr Dean were pressing him for Balmoral pricing information and why they were disclosing to him their pricing information. He must have realised when he told them at the start that he trusted them and that they could be frank with each other; when he started noting down the prices for different tanks that they were discussing and when he answered direct questions about how Balmoral would respond to future requests for quotes that the others would rely on this information and that they would hope that he would abide by that information so that prices could stabilise and perhaps increase.
127. What appears to us from the recording of the Meeting was that Mr Joyce was seeking to reassure Mr Snee and Mr Dean that although Balmoral would not join the Main Cartel, it would charge prices that would not render the continuation by the others of the Cartel entirely impossible. Those hopes that he engendered were not fulfilled and we accept that Franklin Hodge and Kondea realised soon after that the game was up and there was no point, after the Meeting, complaining further to Balmoral about its pricing. Applying the case law which establishes where the line is to be drawn between innocuous discussion and infringement, we are in no doubt that the conduct here was an infringement. We therefore dismiss Balmoral's appeal on liability."
"But in our judgment there were two strands to the Meeting – the continuing attempts to recruit Balmoral to the Main Cartel and the discussion of prices. This was not a situation where Mr Joyce was the passive recipient of information as part of Mr Snee's and Mr Dean's attempts to recruit Balmoral. Mr Joyce provided information himself about Balmoral's prices and at one point in the meeting directly asked Mr Dean to tell him the price that Kondea had quoted for a particular contract."
The CAT also agreed (in paragraphs 87-88) with this conclusion of the CMA:
"Although Mr Joyce made it clear during the meeting that he did not want to participate in the customer allocation arrangements between the parties, other comments made by Mr Joyce during the meeting show that his objective when discussing prices was for prices to stabilise towards the higher end of the bands being discussed at the meeting. Mr Joyce noted during the meeting that: 'the thing for me is to get it stabilised because if we keep going even lower from my point of view as well, we're hitting rock bottom rather quickly'. He then later notes: 'Better near the top of the band than the bottom of the band for sure.' In addition, when asked by Mr Snee if Balmoral Tanks 'want to try to squeeze the price and get up as quickly as you can?', Mr Joyce answered, 'Yes... Pushing that band up, the top end rather than the bottom'. Mr Joyce also said in interview that Balmoral Tanks was trying to avoid a 'price war'."
"It is an appropriate amount given the nature of the infringement, the need to send a clear signal to other undertakings of the dangers of casual discussions about price but also given the very positive effect Balmoral had on this market by its decision to compete vigorously on price and to cooperate with the CMA in its investigation of the Main Cartel."
The legal framework
"The following shall be prohibited as incompatible with the internal market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the internal market, and in particular those which:
(a) directly or indirectly fix purchase or selling prices or any other trading conditions;
(b) limit or control production, markets, technical development, or investment;
(c) share markets or sources of supply;
(d) apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;
(e) make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts."
"(1) Subject to section 3, agreements between undertakings, decisions by associations of undertakings or concerted practices which—
(a) may affect trade within the United Kingdom, and
(b) have as their object or effect the prevention, restriction or distortion of competition within the United Kingdom,
are prohibited unless they are exempt in accordance with the provisions of this Part.
(2) Subsection (1) applies, in particular, to agreements, decisions or practices which—
(a) directly or indirectly fix purchase or selling prices or any other trading conditions;
(b) limit or control production, markets, technical development or investment;
(c) share markets or sources of supply;
(d) apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;
(e) make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts …."
"it must act (so far as is compatible with the provisions of this Part and whether or not it would otherwise be required to do so) with a view to securing that there is no inconsistency between—
(a) the principles applied, and decision reached, by the court in determining that question; and
(b) the principles laid down by the Treaty and the European Court, and any relevant decision of that Court, as applicable at that time in determining any corresponding question arising in EU law."
"a form of co-ordination between undertakings which, without going so far as to amount to an agreement properly so called, knowingly substitutes a practical co-operation between them for the risks of competition".
" The criteria of co-ordination and co-operation laid down by the case law of the Court, which in no way require the working out of an actual plan, must be understood in the light of the concept inherent in the provisions of the Treaty relating to competition that each economic operator must determine independently the policy which he intends to adopt on the Common Market, including the choice of the persons and undertakings to which he makes offers or sells.
 Although it is correct to say that this requirement of independence does not deprive economic operators of the right to adapt themselves intelligently to the existing and anticipated conduct of their competitors, it does however strictly preclude any direct or indirect contact between such operators, the object or effect whereof is either to influence the conduct on the market of an actual or potential competitor or to disclose to such a competitor the course of conduct which they themselves have decided to adopt or contemplate adopting on the market."
Accordingly, "the exchange of information between competitors is liable to be incompatible with the competition rules if it reduces or removes the degree of uncertainty as to the operation of the market in question, with the result that competition between undertakings is restricted" (Case C-8/08 T-Mobile Netherlands BV v Raad van bestuur van de Nederlandse Mededingingsautoriteit  Bus LR 158, at paragraph 35 of the judgment).
"59. … Depending on the structure of the market, the possibility cannot be ruled out that a meeting on a single occasion between competitors … may, in principle, constitute a sufficient basis for the participating undertakings to concert their market conduct and thus successfully substitute practical co-operation between them for competition and the risks that that entails.
60. … [T]he number, frequency, and form of meetings between competitors needed to concert their market conduct depend on both the subject matter of that concerted action and the particular market conditions. If the undertakings concerned establish a cartel with a complex system of concerted actions in relation to a multiplicity of aspects of their market conduct, regular meetings over a long period may be necessary. If, on the other hand, … the objective of the exercise is only to concert action on a selective basis in relation to a one-off alteration in market conduct with reference simply to one parameter of competition, a single meeting between competitors may constitute a sufficient basis on which to implement the anti-competitive object which the participating undertakings aim to achieve.
61. In those circumstances, what matters is not so much the number of meetings held between the participating undertakings as whether the meeting or meetings which took place afforded them the opportunity to take account of the information exchanged with their competitors in order to determine their conduct on the market in question and knowingly substitute practical co-operation between them for the risks of competition. Where it can be established that such undertakings successfully concerted with one another and remained active on the market, they may justifiably be called on to adduce evidence that that concerted action did not have any effect on their conduct on the market in question."
"AG180. In the case law of the court, the concept of single and continuous infringement has been employed, in particular, in the context of art.101 TFEU to capture several elements of anti-competitive conduct under the umbrella of one single and continuous infringement for the purposes of enforcement. In that regard, the underlying rationale is to ensure effective enforcement in cases where infringements are composed of a complex of anti-competitive practices that can take different forms and even evolve over time.
AG181. In other words, the aim is to avoid the unfortunate enforcement outcome where various agreements and concerted practices under art.101 TFEU, which in reality form part of an overall plan to restrict competition, are treated separately. For that reason, recourse to the concept of single and continuous infringement tempers the burden of proof generally weighing on enforcement authorities regarding the need to prove the continuous nature of the anti-competitive practices scrutinised. More particularly, where a complex of agreements and practices have been implemented over a long period of time, it is not unusual that changes in the scope, form and participants to those agreements and/or practices have taken place during the relevant time period. Without the assistance of the concept of single and continuous infringement, the Commission would have to meet a higher evidentiary threshold. It would need to identify and prove the existence of several distinct anti-competitive agreements and/or concerted practices as well as identify the parties involved in each of them separately. Treating the impugned practices separately could also in some cases result in a time-bar of older agreements and/or concerted practices. That would make enforcement less efficient.
AG182. The concept of single and continuous infringement thus constitutes a procedural rule."
"intended to contribute by its own conduct to the common objectives pursued by all the participants and that it was aware of the actual conduct planned or put into effect by other undertakings in pursuit of the same objectives or that it could reasonably have foreseen it and that it was prepared to take the risk".
"In particular, clear wording of the operative part of a decision finding an infringement of the competition rules must allow the national courts to understand the scope of that infringement and to identify the persons liable, in order to be able to draw the necessary inferences as regards claims for damages brought by persons harmed by that infringement."
The grounds of appeal
i) The CAT failed to recognise that the CMA's Information Exchange Decision is inconsistent with its Main Cartel Decision and, the latter having become final, the former cannot stand;
ii) The CAT adopted an impermissibly strict approach to the test for "object" infringement in the context of information exchanges;
iii) The CAT failed to undertake necessary analysis on uncertainty reduction; and
iv) The CAT erred in law in concluding that it was open to the CMA to impose a fine on Balmoral, and only Balmoral, for its role in the information exchange infringement.
Ground (i): Inconsistency
Ground (ii): The legal test
"While it is correct to say that this requirement of independence does not deprive economic operators of the right to adapt themselves intelligently to the existing or anticipated conduct of their competitors, it does, none the less, strictly preclude any direct or indirect contact between such operators by which an undertaking may influence the conduct on the market of its actual or potential competitors or disclose to them its decisions or intentions concerning its own conduct on the market where the object or effect of such contact is to create conditions of competition which do not correspond to the normal conditions of the market in question, regard being had to the nature of the products or services offered, the size and number of the undertakings involved and the volume of that market."
Ground (iii): Uncertainty reduction
Ground (iv): Penalty
"the principle of equal treatment, according to which it is prohibited to treat similar situations differently and different situations in the same way unless such treatment is objectively justified".
"not imposed an additional penalty on the Settling Parties in respect of their participation in the information exchange infringement taking into account the particular circumstances of the case".
"We were initially concerned by the fact that the other participants in the Information Exchange Infringement had not been subject to any fine at all even though the CMA treated that infringement as separate from the Main Cartel. However Mr Williams reminded us that section 36(7A) of the Competition Act provides that in fixing a penalty the CMA must have regard to the need for deterrence on the undertaking concerned and on others. The question for the CMA when considering whether to impose a penalty on Franklin Hodge, Galglass and Kondea for the Information Exchange Infringement was whether it was necessary to impose a fine in addition to the fine imposed by the Main Cartel Decision for the statutory purposes, including deterrence. The CMA was, we accept, entitled to conclude that it could not justify imposing an additional fine on the Main Cartel members for their participation in the Information Exchange infringement, applying the statutory test."
The Chancellor of the High Court: