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Hand holding pen -- Reduction in Leniency; Drop in Enforcement?

September 26, 2019

HSBC v. Commission: Just Give Them a Reason


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On 24 September 2019, the EU General Court (GC) handed down its judgment in HSBC v. Commission.[1] Consistent with recent precedent, the GC reaffirmed the European Commission (“Commission”)’s duty to provide sufficient reasons when explaining fine calculations in cartel cases and annulled the fine imposed on HSBC in full as a result of the Commission’s insufficient reasoning.

The GC also provided clarity on other key aspects of cartel rules: namely, ‘by object’ infringements, the evidentiary requirements to establish a single and continuous infringement (SCI), and the Commission’s obligation to uphold a non-settling party’s presumption of innocence in hybrid settlement procedures.


In December 2013, the Commission fined four banks (Barclays, Deutsche Bank, Royal Bank of Scotland and Societe Generale) a total of EUR 1.49 billion in a cartel settlement decision, for participating in a cartel related to Euro interest rate derivatives (EIRDs).[2] This was based on traders’ discussions of their banks’ submissions for the calculation of the EURIBOR rate, as well as discussions around their trading and pricing strategies.

Three banks, including HSBC, had chosen to withdraw from the settlement procedure, received a Statement of Objections in March 2014 and were imposed with an ordinary infringement decision in respect of the same conduct in December 2016.[3]

Fine Calculations: The Duty to Give Sufficient Reasons

As part of its appeal, HSBC alleged that the Commission failed to provide an adequate statement of reasons as regards its fine calculation. The fine amount itself was calculated using a proxy for the traditional value of sales method used in calculating fines (where, ordinarily, sales of cartelised products or services during the relevant period are used). This was based on the fact that the EIRDs do not generate sales in the usual sense of the term. The proxy value was therefore determined on the basis of the cash flows each bank received from their portfolio of EIRDs, and a uniform percentage reduction factor was then applied in order to account for the specifics of the EIRD market (including the substantial amount of netting inherent in such market).[4]

Whilst the GC found no fault with the use of cash flows as a proxy in this case,[5] it noted the essential nature of the percentage reduction factor to be applied and therefore focused its analysis on the Commission’s level of reasoning in respect of such factor.[6]

The GC began by restating the general position, also set out in the Court of Justice (ECJ)’s July 2019 judgment in ICAP,[7] that the Commission is obliged to state reasons regarding the amount of the fine and its calculation method, indicating the factors which enabled it to determine the gravity and duration of the infringement and explaining the weighting and assessment of the factors considered.[8] The GC then emphasised that compliance with such obligation must be assessed by reference to the specific circumstances of the case,[9] and subsequently identified two circumstances which determined its finding of the Commission’s failure to provide sufficient reasons:

  1. The GC noted that, despite recognising the unusual nature of EIRDs and how they do not generate sales in the usual sense, the Commission had nonetheless chosen to apply the 2006 Fine Guidelines[10] rather than depart from the methodology included in them in accordance with paragraph 37 of such guidelines.[11] As a result, the GC found that “it was essential that the statement of reasons in the contested decision should enable the applicants to verify whether the proxy chosen by the Commission may be vitiated by an error enabling its validity to be challenged and the Court to exercise its jurisdiction to review legality.”[12]
  2. The large value of the cash flow amount used by the Commission as the basis for its fine calculation meant that the reduction factor would play an essential role in determining the ultimate fine amount. As a result, HSBC must have been put in a position to understand how the Commission arrived at the specific percentage reduction factor.[13]

In assessing point (2) in particular, the GC found that the Commission had failed to provide sufficient reasons—by dedicating only five recitals to stating that the percentage reduction factor had to be more than 90% (as the fine imposed would otherwise be overdeterrent), and by merely noting that the Commission had performed an estimation of potential reduction factors without providing the specific values used in such estimation, the Commission did not “provide the applicants with an explanation of the reasons why the reduction factor was set at 98.849% rather than at a higher level,” nor provide the Court with the ability to conduct an in-depth review.[14] Additional explanations provided by the Commission to the GC following the hearing were also irrelevant, as they did not “supplement a statement of reasons which is already sufficient in itself.”[15]

The GC therefore annulled the fine against HSBC in full, echoing the approach in its November 2017 ICAP judgment, which was subsequently upheld by the ECJ in July 2019. Notably, the ICAP judgments focused on the Commission’s duty to provide an adequate statement of reasons regarding the fine when choosing to depart from the general calculation procedure, with the ECJ holding that such instances require “a fuller account of [the Commission’s] reasoning.”[16] The GC’s HSBC judgment goes beyond this, imposing a similarly high obligation of reasoning even when the Commission chooses to adopt the standard fining calculation procedure.

Other Key Findings

‘By Object’ Infringements

The GC also upheld the latest case law in Cartes Bancaires regarding the need for an analysis of the legal and economic context of conduct before concluding that it amounts to an infringement ‘by object,’ as well as an analysis of the nature of goods or services and the functioning and structure of the market.[17] Secondly, the GC affirmed the position in Dole[18] and T-Mobile[19] regarding information exchanges, and the fact that such exchanges could amount to ‘by object’ infringements even without a direct connection between such exchanges and market prices.[20]

The GC upheld the Commission’s finding of a ‘by object’ infringement in respect of the majority of HSBC’s infringing conduct, including both its manipulation of the EURIBOR rate[21] and certain exchanges of information. In respect of the information exchanges in particular, the GC found that the Commission had conducted the necessary analysis by assessing factors such as the sensitivity of the information and its lack of public availability, and the impact of the exchanges on transparency in the EIRD market.[22]

For some instances of information exchange, however, the GC rejected the Commission’s finding of a ‘by object’ infringement. In the GC’s view, the Commission had failed to establish that certain of the discussions on trading positions which were not otherwise connected to HSBC’s manipulation of the EURIBOR rate amounted to ‘by object’ infringements. In reaching this finding, the GC clarified the generally high standard for information exchanges to fall within the category of ‘by object’ infringements, noting that “a finding of infringement by object must be restricted to those exchanges that reveal a sufficient degree of harm to competition, meaning that it is not necessary to examine their effects,” further stating that this includes those information exchanges which “[are] capable of removing uncertainty in the minds of the interested parties as regards the timing, extent and details of the modifications to be adopted by the undertakings concerned in their conduct on the market.”[23] The Commission had not established this in two instances: in the first instance, the Commission had not shown that the discussion in question “gave the traders an informational advantage that may have allowed them to adjust their trading strategies as a result.”[24] In the second instance, the information shared was deemed to be a “simple observation which any market observer could make,” meaning no conclusion of a ‘by object’ infringement could be drawn.[25]

Establishing an SCI

The GC reaffirmed the general requirements for proving an SCI: that the conduct forms part of an overall plan with a single objective, that the relevant undertaking intends to contribute to such common objective, and that they are aware of or could reasonably have foreseen the offending conduct planned or put into effect by other parties in pursuit of such objective.[26]

Applying the standard from ICAP and other precedent cases, the GC dismissed the Commission’s findings of HSBC’s awareness in respect of conduct in which it did not directly participate. In the GC’s view, the central tenet of the overall plan in this case was the operation of the cartel by the same group of persons. Since no HSBC trader was included in such group and since “only very fragmented information” had been provided to HSBC as regards the infringing conduct,[27] the Commission could not find that HSBC traders should have been aware that “a stable group of traders…was participating in other conduct restricting competition on the EIRD market.”[28] As a result, HSBC could only be held liable for the conduct in which it directly participated (as well as the one other instance in which direct evidence of its awareness had been established by the Commission).[29]

Upholding Procedural Rights in Hybrid Settlements 

Following on from the key finding by the GC in its November 2017 ICAP judgment, HSBC, as also a non-settling party in a hybrid settlement case, alleged a breach of its procedural rights, arguing that the settlement decision issued against settling banks prior to its infringement decision prejudged its liability and “irremediably impaired [its] right to be heard.”[30]

Whilst the GC in ICAP gave substantial guidance in response to a similar pleading raised, noting that the Commission must take all necessary steps in order to uphold a non-settling party’s procedural rights in a hybrid settlement case (including by potentially adopting settlement and ordinary infringement decisions on the same date),[31] the GC gives no such indication in HSBC. Instead, it provides a brief discussion of HSBC’s procedural plea, confirming the general right of a presumption of innocence[32] and swiftly concluding that, since the Commission had already validly established HSBC’s participation in the infringement (aside from in the instances annulled by the GC in its analysis of HSBC’s ‘by object’ and SCI pleas discussed above), “there is no reason to assume that, if the settlement decision had not been adopted before the contested decision, the content of the latter would have been different.”[33] As a result, there was no basis on which the contested decision could be annulled.

Key Takeaways

The GC’s HSBC judgment serves as a reminder for the Commission to provide sufficient reasoning when explaining fine calculations in its decisions, not merely when it chooses to rely on paragraph 37 of the 2006 Fine Guidelines, but also where the circumstances of a case demand such detailed reasoning. The GC’s annulment of the decision against HSBC does not, however, prevent the Commission from attempting to address its faults and issuing a re-adopted decision, an approach it took against Printeos in the Envelopes cartel recently.[34] Whilst Printeos’ appeal of the Commission’s re-adopted decision was, on the same date as the HSBC judgment, rejected in substance, the Commission was nonetheless required to pay all costs due to the lack of rigor in the fining methodology and reasoning outlined in its decision.[35]

Regarding ‘by object’ infringements, the GC has reaffirmed the high level of analysis in which the Commission is required to engage before identifying such infringements, particularly in the context of information exchanges. This ties in with Advocate General Bobek’s recent Opinion in a preliminary ruling related to the Interchange Fee case, which confirmed the two-step procedure inherent in finding a ‘by object’ infringement (first, identifying whether an agreement is inherently harmful, and second, verifying such finding by conducting the necessary contextual analysis).[36] The HSBC judgment also reaffirms the generally high evidentiary standard with which the Commission must comply in establishing and proving an SCI, and in particular, a party’s requisite awareness for such SCI.

By contrast, the HSBC judgment lacks guidance on the operation of hybrid settlement procedures compared to other recent judgments in appeals by non-settling parties—the GC in HSBC simply rejected HSBC’s procedural plea without giving any guidance on the operation of the hybrid settlement procedure to protect procedural rights of non-settling parties, either by way of the timing of decisions as suggested in ICAP[37] or through linguistic changes in a settlement decision as suggested in Pometon.[38] Further guidance on this issue may therefore be something to look out for in other pending appeals by non-settling parties in hybrid cases, including the Credit Agricole and JPMorgan appeals in relation to the same EIRD decision.[39]


[1] Judgment of the General Court in Case T-105/17 HSBC Holdings plc and Others v Commission, 24 September 2019 (HSBC)
[2] Commission Decision in Case AT.39914Euro Interest Rate Derivatives, 4 December 2013
[3] Commission Decision in Case AT.39914Euro Interest Rate Derivatives, 7 December 2016
[4] HSBC, [22]–[24] and [304]
[5] HSBC, [323]–[324]
[6] HSBC, [327]
[7] Judgment of the Court of Justice in Case C-39/18 P Commission v NEX International Limited and Others (ICAP ECJ), [31]
[8] HSBC, [341]
[9] HSBC, [344]
[10] Guidelines on the method of setting fines imposed pursuant to Article 23(2)(a) of Regulation No 1/2003, O.J. C 210, 1.9.2006, p. 2–5
[11] The Commission, by contrast, took this approach in both the ICAP and Printeos decisionssee Commission Decision in Case AT.39861Yen Interest Rate Derivatives, 4 February 2015; and Commission Decision in Case AT.39780Envelopes, 10 December 2014
[12] HSBC, [346]
[13] HSBC, [347]–[348]
[14] HSBC, [351]
[15] HSBC, [352]
[16] ICAP ECJ, [28] (emphasis added). This follows Advocate General Tanchev's opinion in the same case issued in May 2019, which noted that the Commission had failed to adhere to its duty to provide sufficient reasoning as a result of "the general and vague information and assurances provided"see Opinion of Advocate General Tanchev in Case C-39/18 P Commission v NEX International Limited and Others, 2 May 2019, [85]
[17] HSBC, [57]; Judgment of the Court of Justice in Case C-67/13 CB v Commission, 11 September 2014, [47]. This judgment also established that the category of 'by object' infringements must be interpreted restrictively, a position recently confirmed by Advocate General Bobeksee Opinion of Advocate General Bobek in Case C-228/18 Gazdasági Versenyhivatal v Budapest Bank Nyrt. and Others, 5 September 2019 (“AG Bobek Opinion”), [26] and [40]
[18] Judgment of the Court of Justice in Case C-286/13 Dole Food and Dole Fresh Fruit Europe v Commission, 19 March 2015
[19] Judgment of the Court of Justice in Case C-8/08 T-Mobile Netherlands and Others v Commission, 4 June 2009
[20] HSBC, [63]–[65]
[21] HSBC, [104]
[22] HSBC, [131]–[152]
[23] HSBC, [184]
[24] HSBC, [187][188]
[25] HSBC, [193]
[26] HSBC, [198] and [208]
[27] HSBC, [266]–[268]
[28] HSBC, [269]
[29] HSBC, [248]–[249] and [273]
[30] HSBC, [281]
[31] Judgment of the General Court in Case T-180/15 ICAP and Others v Commission, 10 November 2017, [268]
[32] HSBC, [284]
[33] HSBC, [289]
[34] Commission Decision in Case AT.39780Envelopes, 16 June 2017. Similarly to ICAP, the GC in Printeos noted that there was a requirement for even more specific reasoning for fine calculations when based on paragraph 37 of the 2006 Fine Guidelinessee Judgment of the General Court in Case T-95/15 Printeos, SA and Others v Commission, [48]
[35] Judgment of the General Court in Case T-466/17 Printeos, SA and Others v Commission, 24 September 2019. See also: 'Printeos loses EU court appeal against reimposed envelope-cartel fine', Mlex, 24 September 2019; and 'EU court upholds envelope cartel fine', GCR, 24 September 2019
[36] AG Bobek Opinion, [41]–[43]
[37] This position was effectively rejected by the GC in its April 2019 Pometon judgmentsee Judgment of the General Court in Case T-433/16 Pometon SpA v Commission, 28 March 2019 (“Pometon”), [99]-[100]
[38] The GC in Pometon recognised that a settlement decision has to be clear and precise enough so as not to confuse the final legal position of settling parties with that of a party withdrawing from the settlement procedure. In particular, the manner in which a settlement decision is drafted should protect a non-settling party's procedural rights including, for instance, the Commission having to avoid as far as possible naming the non-settling partysee Pometon, [69]–[72] and [96]
[39] Case C-440/19 P Pometon v Commission; Case T-106/17 JPMorgan Chase and Others v Commission; Case T-113/17 Credit Agricole and Credit Agricole Corporate and Investment Bank v Commission; and Case T-799/17 Scania and Others v Commission (all pending). JP Morgan Chase and Credit Agricole, the other non-settling parties in the EIRD case, have both made arguments around the insufficient reasoning of the fine in their applications for annulment. The dates for these judgments have not been announced yet.

Authors and Contributors

Elvira Aliende Rodriguez



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+32 2 500 9837


Matthew Readings



+44 20 7655 5937

+44 20 7655 5937

+32 2 500 9866

+32 2 500 9866