Captive sales, i.e., products sold by one entity to another within the same corporate group for incorporation into another (downstream) product, are in the cartel fining spotlight. Captive sales arise where vertically integrated firms wish to own and control their supply chain for, amongst others, reasons of security of supply and consistency in quality. The treatment of captive sales for fining purposes was previously discussed by the European Court of Justice in Guardian in an intra EEA context. In InnoLux, the Court of Justice has now addressed the matter in a context where the captive sales occurred outside the EEA. Innolux was one of six LCD panel producers fined by the European Commission in 2010 for operating a price fixing cartel.  The judgment increases exposure for vertically integrated groups which produce components, sell them internally, and incorporate them into transformed products outside the EEA for sales to third party companies in the EEA.

View full memo, InnoLux: A Charter for the European Commission to Impose Even Higher Fines?