Previous business/academic article Next business/academic article
Academic Articles Awards > Procedure

Administrative and Judicial Discretion in Setting Fines

Lukas Solek, World Competition: Law and Economics Review, Volume 38, pp. 547-570, 2015

See Lukas Solek's resume

Article 23(2) of Regulation 1/2003 accords the European Commission a broad discretion in fining undertakings for their anti-competitive behaviour. Nevertheless, the European Commission still occasionally exceeds its broad discretion in order to reach its fining policy objective of a ‘sufficiently deterrent effect’. This overstepping arises particularly in the context of the personal scope of EU competition law, namely in defining the undertaking. Notwithstanding its broad discretionary powers to set fines, the European Commission is nevertheless bound by strict rules in establishing parental liability for the purposes of defining an undertaking. However, these rules are often and unjustifiably disregarded in situations where the European Commission is looking to increase the deterrent effect of a fine. Although achieving a ‘sufficiently deterrent effect’ is key to the European Commission’s fining policy objectives, it is hard to argue that this can or should be pursued ultra vires, in apparent disregard of the established rules. By way of example, the European Commission will include or exclude intra-group sales made by undertakings without establishing whether the relevant parent company and subsidiary form a single undertaking and reflect the economic importance of the infringement and the relative weight of the parent company participating in the infringement. Likewise, the European Commission will increase fines imposed on a parent company based on recidivism, even though it is only its subsidiary which has committed and been fined for the past infringement. Similarly, the European Commission will apply a single 10% ceiling of the group’s turnover to cap the fine for the cartel participant for a violation occurring prior to its acquisition by the group.

Download our brochure