The European Commission has issued a Statement of Objections against Honeywell International Inc. (Honeywell) and E.I. du Pont de Nemours and Company (DuPont). The Commission’s allegations centre on certain agreements the parties entered into in 2010 over the production of a new refrigerant for use in car air-conditioning systems (R-1234yf). The Commission believes that the agreements may have limited the product’s availability and technical development cooperation in breach of Article 101(1) of the Treaty on the Functioning of the European Union (‘TFEU‘);. The Statement of Objections is a formal charge sheet issued by the Commission into suspected violations of EU antitrust rules and is the culmination of its investigation against the parties which began in 2011. Its issue however does not prejudge the final outcome of the investigation.

Background

In 2006, the EU adopted new standards on air conditioning systems in motor vehicles with the aim of reducing harmful emissions and combating global warming. These standards were set out in Council Directive 2006/40/EC sometimes referred to as the Mobile Air Conditioning Systems Directive (‘MAC‘) Directive. The MAC Directive requires the use of refrigerants with a global warming potential (‘GWP‘) below 150 in all new car models sold in the EU as of 1 January 2011, and in all new cars as of 1 January 2017.

A new refrigerant known as R-1234yf, which is intended for use in future car air conditioning systems, was announced as a suitable global replacement for the previous refrigerant R134a, which did not meet new EU rules as regards its global warming potential. The selection of R-1234yf is the result of a process conducted under the auspices of the Society of Automotive Engineers, which represents the interests of all groups involved in the automotive sector.

Honeywell and DuPont are the only two suppliers of R-1234yf to carmakers.

The Commission’s provisional finding as set out in the Statement of Objections was that the cooperation between Honeywell and DuPont on production of R-1234yf had reduced their decision-making independence and resulted in restrictive effects on competition. These effects include a limitation of the available quantities of the new refrigerant that would have otherwise been brought to the market, as well as a limitation of related technical development. The Commission believed that this behaviour may infringe Article 101 of the TFEU and Article 53 of the EEA (European Economic Area) Agreement that prohibit anti-competitive agreements.

In addition the Commission originally examined in its investigation whether Honeywell engaged in deceptive conduct during the evaluation of R-1234yf between 2007 and 2009. It claimed that Honeywell did not disclose its patents and patent applications while the refrigerant was being assessed and then failed to grant licences on fair and reasonable (so called “FRAND”) terms. However these allegations were not pursued in the Statement of Objections.

Future Action

The parties now have approximately 4 weeks to respond to the Commission’s alleged violations of the EU antitrust rules. Following the parties exercising their rights of Defence, if the Commission still believes that the parties’ cooperation appreciably restrict competition in the EU, it can issue a Decision condemning the parties’ behaviour, demanding changes in the parties’ conduct and imposing a fine of up to 10% of their Groups’ worldwide turnover.

If the Commission does condemn the parties’ conduct, they will become liable to aggrieved third parties for any damage the parties’ restrictive behaviour has caused in proceedings in the national courts of the EU Member States.