Abuse of dominant position, commitments and proportionality: Case T-170/06

If the Commission intends to take a decision requiring an infringement of the antitrust rules by one or several undertakings be brought to an end, it may, under Article 9 of Regulation 1/2003, accept commitments offered by that or those undertakings concerned to meet the Commission's concerns. Article 9 of Regulation 1/2003 requires that the Commission make a preliminary assessment of the infringement and that it adopts a decision rendering those commitments binding.

In its judgment in Case T-170/06 Alrosa Co. Ltd. v. Commission the Court of First Instance confirms that the Commission must ensure that the commitments offered are proportionate to remedy the breach of the rules it alleges and that the Commission must hear all the undertakings affected directly by the commitments in question. If the commitments are disproportionate and if the Commission fails to hear the interested parties properly, the Court of First Instance will annul the decision taken pursuant to Article 9. And that is what the Court of First Instance did in this case.

What happened? The Commission launched an investigation into the number one producer and supplier of diamonds, De Beers. That undertaking had an agreement with Alrosa, a Russian company and the number two producer and supplier of diamonds. De Beers and Alrosa notified their agreement to the Commission (in 2002, before Regulation 1/2003 came into force).

The Commission then opened two sets of proceedings. The first was based on Article 81 EC, investigating both De Beers and Alrosa. The second investigated a possible abuse of a dominant position contrary to Article 82 EC and concerned De Beers alone.

De Beers and Alrosa proposed joint commitments in 2004 to the Commission which entailed a reduction in the sales of rough diamonds by Alrosa to De Beers.

In early 2006, De Beers on its own offered new commitments to the Commission in the context of the Article 82 EC investigation directed against it. Those fresh commitments involved a gradual reduction of quantities it would purchase from Alrosa until 2009 and the definitive end to all purchases from Alrosa from then on. The Commission invited Alrosa to comment on the commitments proposed by De Beers. Then the Commission adopted its decision 2006/520 of February 22nd 2006 making binding the individual commitments proposed by De Beers. Thus, Alrosa would be effectively cut off from De Beers from 2009.

Alrosa then challenged decision 2006/520 before the Court of First Instance. It won.

The Court of First Instance held that decision 2006/520 was disproportionate. It held that in the circumstances of the case, the complete and total end to all commercial relations between De Beers and Alrosa was manifestly disproportionate. It was only in exceptional circumstances, such as the existence of a possible collective dominant position, that an end to the contractual freedom of the parties could be justified. In this case, the Commission did not allege or find that there was collective dominance: Only De Beers held a dominant position. The Court held that the Commission could not simply accept the commitment offered by De Beers at face value but was required to examine it and see if alternative solutions more respectful of contractual freedom existed.

The judgment clarifies one point about the extent to which the Commission must set out its concerns regarding the antitrust infringement in a decision based on Article 9 of Regulation 1/2003. The Court states that the Commission need not formally establish the existence of the infringement. But it must establish the reality of the antitrust concerns in such a way that the proportionality of the commitments offered can be evaluated and reviewed by the Court.

The Court of First Instance also held that the Commission had committed a procedural irregularity by not giving Alrosa a full and proper opportunity to be heard on the individual commitments proposed by De Beers alone.