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REPORT FOR THE HEARING *

(Competition - Cartels - European market for air freight - Agreements andconcerted practices relating to various elements of the price of air freight services

(introduction of fuel surcharges and security surcharges, refusal to pay acommission on surcharges) - Decision finding an infringement of Article 101

TFEU, Article 53 of the EEA Agreement and Article 8 of the Agreement betweenthe European Community and the Swiss Confederation on Air Transport)

In Case T-40/11,

Lan Airlines SA,

Lan Cargo SA,

established in Santiago (Chile), represented by B. Hartnett, Barrister, andO. Geiss, lawyer,

V

applicants,

European Commission, represented initially by S. Noe, N. von Lingen andG. Koleva, acting as Agents, assisted by G. Peretz, Barrister, and subsequently byA. Dawes and G. Koleva, acting as Agents, assisted by M. Peretz,

supported by

defendant,

Council of the European Union, represented by F. Florindo Gij6n and M. Simm,acting as Agents,

intervener,

APPLICATION for the annulment of Commission Decision C(2010) 7694 final of9 November 2010 relating to a proceeding under Article 101 TFEU, Article 53 ofthe EEA Agreement and Article 8 of the Agreement between the European

* Language of the case: English.

REPORT FOR THE HEARING - CASE T-40/11

Community and the Swiss Confederation on Air Transport (Case COMP/39258 -Airfreight) in so far as it relates to the applicants and, in the alternative, for areduction in the fine imposed on the applicants.

Background to the dispute

The applicants and the facts leading to the dispute

1 The applicants are Lan Airlines SA and its subsidiary Lan Cargo SA (respectively'LAN' and 'LAN Cargo' when referred to individually). The activity of LANCargo is the provision of air freight ('freight') services.

2 On 7 December 2005, the European Commission received an application forimmunity under the Commission notice of 19 February 2002 on immunity fromfines and reduction of fines in cartel cases (OJ 2002 C 45, p.3, 'the 2002Leniency Notice') on behalf of Deutsche Lufthansa AG and its subsidiaries,Lufthansa Cargo AG and Swiss International Air Lines AG (respectively,'Lufthansa', 'Lufthansa Cargo' and 'Swiss'). [confidentiali. 1

3 In the freight sector there are four different types of carrier: those whichexclusively operate all-cargo aircraft; those with 'belly space' cargo capacity onpassenger flights; those with both dedicated cargo aircraft and 'belly space' cargocapacity on passenger flights (combination airlines) and integrators with all-cargoaircraft providing both integrated express delivery services and general cargoservices.

4 No carrier is able to serve all major cargo destinations in the world with sufficientfrequency, and therefore agreements among carriers enabling them to increasetheir network coverage or improve their schedules have become common,including in the context of broader commercial alliances between airlines('alliances').

5 Carriers introduced the FSC in response to rising fuel costs.

6 The SSC was introduced by carriers following the introduction of securitymeasures and a consequential increase in costs following the terrorist attacks of11 September 2001.

7 On 14 and 15 February 2006, the Commission carried out unannouncedinspections pursuant to Article 20 of Council Regulation (EC) No 112003 of16 December 2002 on the implementation of the rules on competition laid downin Articles [101] and [102] of the [Treaty on the Functioning of the EuropeanUnion] (OJ 2003 L 1, p. 1), inter alia, at LAN's premises.

Confidential information redacted.11 - 2

LAN AIRLINES AND LAN CARGO y COMMISSION

8 Following the inspections, several carriers, including the applicants, madeapplications under the 2002 Leniency Notice.

9 After sending several requests for information, the Commission addressed astatement of objections to several carriers, including the applicants ('the Statementof Objections'). [confidential]. The Statement of Objections was notified to theaddressees on 19 December 2007 and the addressees made written submissions inreply. An oral hearing was held from 30 June to 4 July 2008.

10 On 9 November 2010, the Commission adopted Decision C (2010) 7694 finalrelating to a proceeding under Article 101 TFEU, Article 53 of the EEAAgreement and Article 8 of the Agreement between the European Community andthe Swiss Confederation on Air Transport (Case COMP/39258 - Airfreight) ('thecontested decision'). By Article 7 thereof, the contested decision was addressed to21 carriers ('the infringing carriers'), namely:

Air Canada;

Air France-KLM;

Societe Air France ('Air France');

KLMN.V.;

British Airways Plc;

Cargolux Airlines International SA ('Cargolux ');

Cathay Pacific Airways Ltd;

Japan Airlines Corporation;

Japan Airlines International Co, Ltd;

LAN;

LAN Cargo;

Lufthansa Cargo;

Lufthansa;

Swiss;

Martinair Holland NV ('Martinair');

Qantas Airways Limited ('Qantas');

SAS AB;11 - 3

REPORT FOR THE HEARING- CASE T-40/11

SAS Cargo Group NS ('SAS Cargo');

Scandinavian Airlines System Denmark-Norway-Sweden ('ScandinavianAirlines') ;

Singapore Airlines Cargo Pte Ltd ('SAC');

Singapore Airlines Ltd.

11 In so far as concerns the other addressees of the Statement of Objections ('thenon-infringing carriers'), the objections provisionally made with regard to themwere abandoned.

The contested decision

12 The statement of reasons for the contested decision described a single andcontinuous infringement of Article 101 TFEU, Article 53 of the EEA Agreementand Article 8 of the Agreement between the European Community and the SwissConfederation on Air Transport ('the Swiss Agreement') covering the EEAterritory and Switzerland by which the incriminated carriers had coordinated theirpricing behaviour in the provision of freight services.

13 According to the Commission, the investigations uncovered a single, complex andmultiform infringement that comprised both agreements and concerted practicesarising through numerous and repeated bilateral and multilateral contacts over along period of time among the incriminated carriers regarding the conduct whichthey had decided on, intended to adopt, or contemplated adopting with regard tovarious elements of the charges for freight services. The Commission states that,while those contacts took place at various levels within the carriers concerned,took various forms and, in some instances, related to various geographical areas,they revealed a network of contacts among the carriers the common objective ofwhich was to coordinate their pricing behaviour and/or reduce uncertainty withregard to pricing policy ('the cartel ').

14 The cartel allegedly included the coordinated application of the FSC and the SSCand coordination of the non-payment of Commission on surcharge ('the non-payment of Commission') to freight forwarders, which generally organise theintegrated transport of goods on behalf of shippers. According to the contesteddecision, the objective of the coordinated application of the FSC was to ensurethat carriers throughout the world imposed a flat-rate surcharge per kilogrammefor all relevant shipments. A complex network of mainly bilateral contacts amongcarriers was established in order to coordinate and monitor the application of theFSC, the precise date of application often being decided, according to theCommission, at local level, with the principal local provider of freight servicesgenerally taking the lead and the others following. That coordinated approach wasextended to the SSC and to the non-payment of commission, with the result that

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LAN AIRLINES AND LAN CARGO v COMMISSION

the latter became net revenue for the carriers and created an additional incentivefor them to continue with the coordination relating to the surcharges.

15 According to the contested decision, the cartel began on 7 December 1999 andcontinued until 14 February 2006. In the case of Lufthansa and its subsidiariesLufthansa Cargo and Swiss, it came to an end on the date of their application forimmunity, that is to say, on 7 December 2005. The Commission considers that thecartel infringed Article 101 TFEU, Article 53 of the EEA Agreement and Article 8of the Swiss Agreement as follows:

Article 101 TFEU from 7 December 1999 to 14 February 2006 in so far asconcerns routes between airports within the European Union ('intra-EUroutes');

Article 101 TFEU from 1May 2004 to 14 February 2006 in so far asconcerns routes between airports within the European Union and airports inthird countries with the exception of Switzerland ('EU-third countryroutes');

Article 53 of the EEA Agreement from 7 December 1999 to 14 February2006 in so far as concerns routes between airports in countries which arecontracting parties to the EEA Agreement but are not EU Member Statesand between such airports and airports within the European Union ('intra-EEA routes excluding intra-EU routes');

Article 53 of the EEA Agreement from 19 May 2005 to 14 February 2006 inso far as concerns routes between airports in countries which are contractingparties to the EEA Agreement but are not EU Member States and airports inthird countries ('non-EU EEA-third country routes');

Article 8 of the Swiss Agreement from 1 June 2002 to 14 February 2006 inso far as concerns routes between airports within the European Union andSwiss airports (,EU-Swiss routes').

16 In so far as the applicants are concerned, the Commission found that the durationof their infringement was from 1May 2004 to 14 February 2006.

17 As regards its determination of the fine to be imposed, the Commission states thatit took into account the gravity and duration of the infringement as well asaggravating and mitigating circumstances. It referred in this connection to theGuidelines on the method of setting fines imposed pursuant to Article 23(2)(a) ofRegulation No 112003(OJ 2006 C 210, p. 2, 'the 2006 Guidelines').

18 The Commission states that the basic amount of the fine consists of a proportionof up to 30% of the value of the undertaking'S sales, depending on the degree ofgravity of the infringement ('the basic percentage') multiplied by the number of

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years of its participation in the infringement, to which an additional amount ofbetween 15% and 25% of the value of sales ('the additional amount') is added.

19 The value of sales was determined by adding together, for the year 2005, thatbeing the last full year of the infringement, turnover from flights to or from theEU/EEA ('inbound flights' and 'outbound flights' respectively) on intra-EUroutes and intra-EEA routes excluding intra-EU routes (together referred to as'intra-EEA routes'), on EU-Swiss routes, on non-EU EEA-third country routesand on EU-third country routes (the latter two together referred to as 'EEA-thirdcountry routes').

20 Taking into account the nature of the infringement (horizontal price fixingagreements), the combined market share of the incriminated carriers (34%), thegeographic scope of the cartel (worldwide) and the fact that the cartel had actuallybeen implemented, the Commission set the basic percentage at 16%.

21 In the applicants' case, the duration of their participation in the infringement, inrelation to EU-third country routes, from I May 2004 to 14 February 2006, wasestablished as one year and nine months, giving rise to a multiplier of 1 9/12;

22 The Commission then decided that, given the specific circumstances of the caseand taking into account the criteria set out in paragraph 20 above, the additionalamount should be set at 16% of the value of sales.

23 Consequently, in the applicants' case, the basic amount of [conjidential] was set at[corifidential] for each of them, after a reduction of 50% ('the general 50%reduction') to reflect the fact that some of the services relating to inbound andoutbound flights were performed outside the territory covered by the EEAAgreement and that part of the harm was therefore likely to have occurred outsidethat territory.

24 In accordance with point 29 of the 2006 Guidelines, the Commission applied afurther reduction of 10% in the case of the applicants on the ground that theirinvolvement in the infringement was limited. After adjustment, the fine calculatedfor the applicants was therefore fixed at [conjidential].

25 Finally, the Commission took into account the applicants' contribution in thecontext of their leniency application and applied a reduction of 20% to the fine,resulting in the final amount of the fine imposed on the applicants by the contesteddecision being EUR 8 220 000.

26 The operative part of the contested decision, in so far as it relates to this dispute,reads as follows:

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LAN AIRLINES AND LAN CARGO v COMMISSION

Article 2

The following undertakings infringed Article 101 of the TFEU by participating inan infringement that comprised both agreements and concerted practices throughwhich they coordinated various elements of price to be charged for airfreightservices on routes between airports within the European Union and airportsoutside the EEA, for the following periods:

j) [LAN] from 1May 2004 to 14 February 2006;

k) [LAN Cargo] from 1May 2004 to 14 February 2006;

Article 5

For the infringements referred to in Articles 1 to 4 [of the contested decision], thefollowing fines are imposed:

i) [LAN] and [LAN Cargo] jointly and severally: EUR 8 220 000;

Procedure and forms of order sought by the parties

27 By application lodged at the Registry of the General Court on 24 January 2011,the applicants brought the present action. The Commission lodged its defence on1 June 2011.

28 By document lodged at the Registry of the General Court on 3 March 2011, theCouncil of the European Union applied for leave to intervene in support of theform of order sought by the Commission. By order of the President of the SixthChamber of 25 July 2011, leave to intervene was granted.

29 By document lodged at the Registry of the General Court on 21 April 2011,Schenker AG sought leave to intervene in support of the Commission.

30 By document lodged on 21 April 2011, the applicants requested confidentialityvis-a-vis the Council as regards certain passages of the application. By document

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REPORT FOR THE HEARING - CASE T-40/11

lodged on 17 June 2011, the applicants requested confidentiality VIs-a-VISSchenker as regards certain passages of the application. By document lodged on11 July 2011, the applicants requested confidentiality vis-a-vis the Council andSchenker as regards certain passages of the defence.

31 By decision of 24 June 2011, the General Court decided, in accordance withArticle 47(1) of its Rules of Procedure, that a second exchange of pleadings wasunnecessary. A subsequent application for a second exchange of pleadings, madeby the applicant on 12 July 2011 pursuant to that same article, was not granted.

32 By order of25 July 2011, the President of the Sixth Chamber of the General Courtgranted the Council leave to intervene. He also ruled on the Council'scommunication of non-confidential procedural documents and reserved ruling onthe application for confidentiality having given the intervener a time-limit forsubmitting any objections to that application.

33 By order of 27 September 2011, the President of the Sixth Chamber of theGeneral Court rejected the application made by Schenker to intervene. On21 November 2011, Schenker AG lodged an appeal against that order at the Courtof Justice. The action was registered under case number C-600111 P(I).

34 By decision of the President of the General Court of 1 December 2011, one of thejudges of the Sixth Chamber of the General Court, to which the Judge-Rapporteurwas assigned, was replaced by another judge.

35 By order of the President of the Sixth Chamber of the General Court of24 January2012, the proceedings in the present case were stayed until a final decision hadbeen made in case C-600/11 P(I). By order of 8 June 2012, the Court dismissedthe appeal lodged by Schenker AG. The proceedings in the present case resumedon that same date.

36 By decision of the President of the General Court of 17 January 2013, the Judge-Rapporteur was replaced by a new judge and the present case was assigned to anew Judge-Rapporteur sitting in the Sixth Chamber.

37 Following a request made by the General Court in the context of measures oforganisation of procedure provided for in Article 64 of the Rules of Procedure ofthe General Court, the applicants submitted, by document lodged at the Registryof the General Court on 10 June 2013, observations on the defence. By documentlodged at the Registry of the General Court on 27 September 2013, theCommission submitted its observations on those observations.

38 Following a change in the composition of the Chambers of the General Court, theJudge-Rapporteur was assigned to the First Chamber, to which, on 2 October2013, the present case was therefore allocated.

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39 By document lodged on 17 October 2013, the applicants requested confidentialityvis-a-vis the Council as regards certain passages of the Commission'sobservations.

40 The applicants claim that the General Court should:

annul the contested decision in as far as it concerns the applicants;

in the alternative, reduce the fine imposed on them;

order the Commission to pay the costs.

41 The Commission contends that the General Court should:

dismiss the action;

order the applicants to pay the costs.

42 The Council contends that the General Court should:

dismiss the application.

Pleas in law and arguments of the parties

43 The applicants put forward six pleas in support of their action, which theCommission contests. They are as follows:

first, errors of fact and law in relation to Article 101 TFEU and theapplicants' involvement in a single and continuous infringement;

second, breach of the rights of the defence;

third, breach of the principles of equal treatment, individual liability andproportionality in determining the basic amount of the fine;

fourth, breach of the principle of equal treatment and the duty to statereasons in connection with the adjustment of the basic amount of the fine;

fifth, breach of the duty to state reasons in connection with the exclusion ofthe non-incriminated carriers from the objections;

sixth, breach of the applicants' right to a fair trial.

Thefirst plea, alleging errors offact and law in relation to Article 101 TFEU andthe applicants' involvement in a single and continuous infringement

44 The applicants argue that it is clear from the case-law that it is incumbent on theCommission to adduce evidence that is sufficiently precise and consistent to

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provide the basis for the firm conviction that the collusion in which LAN Cargoparticipated was part of an overall plan, that LAN Cargo knew or must haveknown of such overall plan, and that LAN Cargo intended to contribute by its ownconduct to the common objectives pursued by all the participants and wasprepared to take the risk, and that the Commission failed to do so.

45 First, the applicants submit that there is no evidence that LAN Cargo knew orought to have been aware of the existence of a cartel that went beyond itsagreements with Lufthansa. The applicants refer to recitals 756, 759 and 884 ofthe contested decision and consider that the majority of the evidence mentioned iscommunications between LAN Cargo and its partners, Lufthansa and AmericanAirlines. While the applicants do not dispute having entered into an agreement orconcerted practice with Lufthansa in relation to the FSC that arguably wentbeyond what was permissible in the context of a capacity-sharing agreement, thatis distinct from the offence alleged by the Commission.

46 The applicants dispute having had bilateral or multilateral discussions with othercarriers at Frankfurt-am-Main airport. The e-mails cited to that effect at recitals481 and 756 of the contested decision should not form the basis for theCommission's submissions, since they involved local employees who played nopart in the imposition of the FSC by LAN Cargo.

47 The applicants maintain that the e-mail referred to at recital 756 of the contesteddecision, by which American Airlines simultaneously forwarded to both LANCargo and another carrier a press release announcing an increase in its FSC, didnot signify to LAN Cargo either that American Airlines and the other carrier wereinvolved in any form of inappropriate contact, or that such contact could relate toa wider, common anti-competitive plan involving other carriers.

48 Equally, there is no communication with Lufthansa proving that the applicants hadany knowledge of a broader conspiracy. The Commission has treated thecommunications between LAN Cargo and Lufthansa and American Airlineswithout regard to the fact that they were made within the context of the allianceknown as Star Alliance ('Star Alliance') and that the rules of competition didtherefore not apply in full. The Commission's conclusion rests on just twostatements made by a Lufthansa employee, the first of which does not support thatconclusion and the second of which has been interpreted out of context and in adisproportionate way. In addition, the Commission based its arguments on receiptby LAN Cargo of press releases, which would be normal in the context of analliance. Even if the evidence in the contested decision shows that, from 1999, alarge number of carriers had hundreds of bilateral and multilateral contacts atheadquarter-level with competitors, it also shows that the applicants were notaware of the role of Lufthansa as the' centre' of a global cartel.

49 The applicants also maintain that there is no evidence to show that LAN Cargointended to participate in a broader cartel. They claim that the Commission

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ignored the third criterion constituting a single and continuous infringement,which would consist in establishing whether LAN Cargo intended to contribute byits own conduct to the common objectives pursued by all the participants andwhether it was prepared to take the risk. The existence of the capacity-sharingagreement within Star Alliance explains the exchange of communications aboutthe FSC and LAN Cargo would have had no incentive or desire to communicatewith other carriers on the subject of the FSC.

50 Finally, the applicants dispute the allegation that they were aware of discussionsconcerning the SSC and the non-payment of commission, as stated in recital 756of the contested decision. First, the e-mail of 11 February 2006 mentioned in thatrecital could not constitute sufficient evidence in that respect, since it refers to afee that had nothing to do with the SSC and, in any event, could not prove that theapplicants had any knowledge of the infringement prior to the date of the e-mail.Secondly, the applicants were unaware of the non-payment of commission. In thatrespect, the internal LAN Cargo e-mail and the correspondence between LANCargo and American Airlines forwarded within LAN Cargo, on which theCommission relies, are insufficient to prove the contrary.

51 The Commission notes from the outset that [confidential]. The fact that Lufthansaand the applicants were party to a capacity-sharing agreement does not make anydifference to [confidential]. The Commission observes that [co1ifzdential].

52 According to the Commission, the plea deals solely with the question of whetherthe Commission had a sufficient basis in fact for its finding that the applicantsparticipated in the single and continuous infringement [confidential].

53 The Commission submits that the evidence set out in the contested decisionsupports the conclusion that [confidentiaii. The Commission refers to recitals 756and 884 of the contested decision.

54 First, [confidentialt

55 Second, [co1ifzdential]

56 Third, the applicants' internal e-mails referred to at recitals 336 and 756 of thecontested decision are evidence of discussions between them and the carrier[confidential]. It is not relevant whether these discussions were direct or indirectand, [confidential]. It is therefore not necessary to show that the particularindividual within the undertaking who determined prices knew of a broaderconspiracy. [confidential].

57 Fourth, [co1ifzdential].

58 Fifth, [confidential].

59 Sixth, [confidentiats.

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60 Seventh, [confidential].

61 Eighth, [confidential].

62 Ninth, [confidential].

63 Additionally, the Commission maintains that the evidence set out in the contesteddecision is a sufficient basis for a finding that the applicants were aware or couldreasonably foresee that other carriers were involved in discussions relating to SSCand non-payment of commission.

64 In relation to the SSC, the Commission acknowledges that the contested decisionrecognised the applicants' limited participation and does not purport to find thatthey participated in the SSC fixing. [confidentialJ. However, based on theevidence referred to at recitals 623 and 1235 of the contested decision, theapplicants were aware or should have been aware that the coordination of pricingbehaviour did not only relate to the FSC but also extended to the SSC.

65 [confidential]

66 Finally, the Commission submits that, if the Court were minded to accept the firstplea, the contested decision should be annulled in part only, in accordance withthe judgment of 6 December 2012 in Commission v Verhuizingen Coppens(C-441111 P, ECR, EU:C:2012:778).

The second plea, alleging breach of the rights of the defence

67 The applicants submit that their rights of defence have been infringed in so far asthe Statement of Objections did not properly inform them of the nature of theCommission's objections, nor its interpretation of the evidence on which thoseobjections were based. In this regard, the applicants rely on the use by theCommission of two internal LAN Cargo e-mails dated 22 August 2005 and11 February 2006 respectively. [confidential]. The Statement of Objections didnot inform the applicants of the interpretation made by the Commission of thosee-mails or of the fact that the e-mails would be used to support the factualallegations in the contested decision. This infringes Article 11(2) of RegulationNo 773/2004. If the applicants had been correctly informed, they would haveexpressly refuted the Commission's allegations in that respect, both in their replyto the Statement of Objections and at the hearing. The applicants rely on thejudgment of 9 July 2009 in Archer Daniels Midland v Commission (C-511106 P,ECR, EU:C:2009:433) to support their contention that the addressee of a decisionmust be afforded the opportunity to review and comment on the evidence beforethe Commission and on the Commission's interpretation of that evidence.

68 [confidential]. The Commission adds that, in any event, there is sufficientevidence in the contested decision of the applicants' participation in theinfringement identified. Finally, [confidential].

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The third plea, alleging breach of the principles of equal treatment, individualliability and proportionality in determining the basic amount of thefine

69 The applicants primarily consider that the Commission has failed to prove theirinvolvement in a single and continuous infringement during the period alleged andthat it has breached the principles of equal treatment, individual liability andproportionality.

70 In relation to the breach of the principle of equal treatment and individual liability,the applicants state that the basic amount of the fine does not reflect that the extentof their participation in the alleged infringement was very limited. In the contesteddecision, the Commission set that amount in the same way as it set the amount ofthe fine imposed on the other incriminated carriers, in spite of their very differentsituations.

71 The applicants point out that, in the contested decision, it was accepted that theywere involved solely in the FSC aspect of the cartel, and not in the aspects relatingto the SSC or the non-payment of commission. The other incriminated carrierswere involved in at least two of the three aspects and, for the most part, in allthree. In addition, in connection with the four geographic segments taken intoaccount in the contested decision, the Commission found that the applicantsoperated only on EU-third country routes. They were unique in operating in onesegment only and in infringing neither Article 53 of the EEA Agreement norArticle 8 of the Swiss Agreement.

72 The fact that the Commission granted the applicants a 10% reduction of the basicamount does not remedy this failure, as the basic amount should be less than thisreduced amount due to the very minor involvement of the applicants in theinfringement, the assessment of the gravity being made at the time of calculatingthe basic amount, not at the time of applying a reduction.

73 The Commission responds that the applicants' assertions are incorrect andinconsistent. The first assertion ignores the fact that FSC, SSC and commissionare all merely elements of the same price. The infringement found is a single andcontinuous infringement and the applicants were or should have been aware thatthe infringement went beyond the FSC and extended to the SSC and non-paymentof commission. Responsibility for all those aspects should therefore be borne bythe applicants and the fine should reflect that. [confidential]. The Commissionregards its position as being confirmed by case-law.

74 The second assertion ignores the fact that the cartel was worldwide and was not acombination of different local cartels. [confidential]. The question of theapplicants' peripheral role was an entirely separate matter from the limitednumber of routes operated. The peripheral nature of the role was recognised inaffording the applicants a further 10% reduction.

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75 In relation to the breach of the principle of proportionality, the applicants maintainthat determination of the basic amount did not reflect the fact that theinfringement did not cover the entire price of the relevant services, which,contrary to what is said in recital 1176 of the contested decision, would reduce thegravity of the infringement. The fine is therefore disproportionate in that it wascalculated as if the infringement were wider and more harmful to competition thanhas been proven. The same can be said of the additional amount set pursuant toparagraph 25 of the 2006 Guidelines.

76 The Commission maintains that the applicants and the other incriminated carrierswere involved in horizontal price-fixing, which, by its nature, is among the mostharmful restrictions of competition and which must be heavily fined. Theapproach applied was in accordance with the 2006 Guidelines and there is nodifference in gravity between purporting to fix the whole price and purporting tofix one or several elements of the price.

77 In the alternative, the applicants submit that an error was made in the calculationof the basic fine, since the relevant basic amount given in Table 6 of the contesteddecision is [confidential], which is more than 50% of the basic amount given inTable 5, [confidential]. Assuming that the Commission has used a method ofcalculation involving rounded figures, there are instances where that method hasnot been followed.

78 The Commission responds that, at recital 1216 of the contested decision, it usedrounded figures in accordance with the 2006 Guidelines. The figure used wasbased on an actual, pre-rounding, figure, of [confidential]. Recital 1218 of thecontested decision then states that Table 6 reflects a reduction explained at recital1217 of the contested decision. Applying that [confidential] reduction to the pre-rounded figure results in a figure of [confidential], and after rounding, of[confidential]. There is therefore no calculation error and the final figure of[confidential] is correct. The Commission explains that it rounded the figure foreach basic amount to the nearest EUR 1 million below only when that did notresult in a reduction of more than 2% of the basic amount of the fine. Whererounding down to the nearest EUR 1million would have resulted in a reduction ofmore than 2% of the basic amount, the Commission states that it rounded down tothe nearest EUR 100000.

Fourth plea, alleging breach of the principle of equal treatment and the duty tostate reasons in connection with the adjustment of the basic amount of thefine

79 The applicants submit that the reduction of 10% due to their peripheralinvolvement in the cartel is not sufficient on the ground that:

LAN Cargo's involvement in the infringement was limited with regard toboth subject-matter and geographical category;

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LAN Cargo had significantly less interaction with competitors than the threeother carriers to whom a 10% reduction was granted, in terms of bothfrequency of interaction and the number of competitors involved, andtherefore deserved a greater reduction than that granted to those othercarriers;

LAN Cargo operated further on the periphery of the cartel than did the otherthree carriers referred to, [confidential].

80 The Commission submits that [confidential]. In addition, the Commission statesthat, in accordance with the 2006 Guidelines, it does not accept that playing apassive role in the infringement amounts to a mitigating factor. In any event, theCommission disputes the applicants' self-characterisation of their infringement aspassive. What is more, the fact that [confidential] is of no relevance. TheCommission is not obliged to take into account every difference in the nature andnumber of contacts in the amount of the reduction allowed. Finally, in so far as anundertaking's conduct took place over a shorter period than that of anotherundertaking, that aspect is sufficiently dealt with in the calculation of duration anddoes not call for a further discount.

The fifth plea, alleging breach of the duty to state reasons in connection with theexclusion of the non-incriminated carriers from the objections

81 The applicants state that the Commission did not explain why the objectionsagainst the non-incriminated carriers were abandoned. If the reason wasinsufficient evidence against them, it must be said that that evidence is similar inmany ways to that relating to the incriminated carriers, including the applicants.The key findings against the applicants are based on evidence of communicationinvolving non-incriminated carriers. [confidentiali. There is no explanation ofwhy three carriers involved in those discussions and that exchange were notincriminated.

82 The Commission did not explain whether it considered the bilateralcommunications on the FSC that are described in recital 756 of the contesteddecision as evidence against LAN Cargo. It did not explain how LAN Cargo knewor should have known about discussions among carriers in relation to the SSCprior to 11 February 2006 and in relation to non-payment of commission prior to17 June 2005. It also failed to state reasons for its finding that LAN Cargointended to contribute by its own conduct to the common objectives pursued by allthe incriminated carriers and was prepared to take the risk. [confidential].

83 The Commission submits first, in relation to the failure to state reasons for itsdecision to abandon the objections against the non-incriminated carriers, that it issettled case-law that the Commission cannot be criticised for not providing anexplanation as to why certain undertakings which had been investigated were notthen made subject to a finding of infringement. The Statement of Objections only

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REPORT FOR THE HEARING- CASE T-40/11

indicates that Commission's point of view and cannot be taken to represent anyfinding of fact. Evidence as to a contact between two undertakings mayincriminate one of the two undertakings when taken together with other evidenceagainst it, without serving as a sufficient basis for a finding of infringementagainst the other undertaking, taking into account the other evidence.

84 Next, in relation to the failure to state reasons for the finding of certain factsagainst the applicants, the Commission refers to the evidence proving the contacthad by the applicants and points out [confidential].

85 Finally, in relation to the failure to state reasons in connection with the calculationof the fine, the Commission submits that [confidential]. The substantivearguments put forward in this respect are misconceived, as has already beenshown by the Commission.

The sixth plea, alleging breach of the applicants' right to afair trial

86 In their observations on the Commission's defence, the applicants stated that theywere withdrawing their sixth plea.

Heikki KANNINENJudge-Rapporteur

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LAN AIRLINES AND LAN CARGO v COMMISSION

Table of contents

Background to the dispute II - 2The applicants and the facts leading to the dispute II - 2The contested decision 11- 4

Procedure and forms of order sought by the parties 11- 7

Pleas in law and arguments of the parties II - 9The first plea, alleging errors of fact and law in relation to Article 101 TFEU andthe applicants' involvement in a single and continuous infringement... II - 9The second plea, alleging breach of the rights of the defence 11- 12The third plea, alleging breach of the principles of equal treatment, individualliability and proportionality in determining the basic amount of the fine 11- 13Fourth plea, alleging breach of the principle of equal treatment and the duty tostate reasons in connection with the adjustment of the basic amount of the fine 11- 14The fifth plea, alleging breach of the duty to state reasons in connection with theexclusion of the non-incriminated carriers from the objections 11- 15The sixth plea, alleging breach of the applicants' right to a fair trial.. 11- 16

II - 17