New in the EU: EC urges law on cartel procedure

The new Leniency Notice adopted a revised Notice on Immunity from Fines and Reduction of Fines in Cartel Cases.

eu flag biz 88 (photo credit: )
eu flag biz 88
(photo credit: )
The European Commission last week launched a public consultation on a package designed to allow for settlements of cartel cases where the parties not only acknowledge their involvement in the cartel and their liability for it but also agree to a faster and simplified procedure. The package consists of a draft Commission Notice and a draft Commission Regulation amending Regulation (EC) Number 773/2004. Settlements would aim to simplify the administrative proceedings and could reduce litigation in cartel cases, thereby freeing resources to pursue more cases. The draft proposal would allow the Commission to impose a lower fine on parties who agreed to the settlement procedure. This initiative complements the recent review of the Leniency Notice and the revised fines guidelines. The Commission has called for comments on the package of new laws. Interested parties have until December 21 to submit their comments on the settlement package. Following these comments, a revised proposal will be prepared, in consultation with Member State competition authorities, for final adoption in 2008. In practice, the Commission's ability to fight cartels hinges on the evidence gathered during the investigation. Parties generally do not litigate to contest the existence of a cartel or their involvement in it, but rather to reduce or avoid liability. This is particularly so in cases driven by leniency. A Commission Decision finding an infringement and imposing fines, pursuant to Articles 7 and 23 of Regulation (EC) Number 1/2003, will be adopted after a thorough investigation, irrespective of whether the standard or the settlement procedure applies. Under the proposed settlement procedure, the Commission would neither negotiate nor bargain the use of evidence or the appropriate sanction, but could reward the parties' cooperation to attain procedural economies. Such cooperation would be different from the voluntary production of evidence to trigger or advance the Commission's investigation, which is already covered by the Leniency Notice. The new Leniency Notice, which came into force on December 8, 2006, adopted a revised Notice on Immunity from Fines and Reduction of Fines in Cartel Cases. The revised Leniency Notice clarified the information an applicant needs to provide to the Commission to benefit from immunity, and introduces a so-called marker system for immunity applicants. It also clarified the conditions for immunity and reduction of fines and introduced a procedure to protect corporate statements made by companies under the Leniency Notice from being made available to claimants in civil damage proceedings. The immunity thresholds in the Notice set out explicitly and clearly what type of information and evidence the applicants should submit to qualify for immunity, and link the threshold for immunity to information needed by the Commission to carry out a "targeted" inspection in connection with the alleged cartel, which allows for the inspections to be better focused. Likewise, last year the European Commission adopted guidelines on the method of setting fines to be imposed on companies that infringe EC Treaty rules that outlaw cartels and other restrictive business practices (Article 81) and abuses of dominant position (Article 82). The Guidelines revised the guidelines from 1998, with a view to increasing the deterrent effect of fines. Council Regulation 1/2003 (as with Council Regulation 17/62 before it) provides that companies may be fined up to 10% of their total annual turnover. Within this limit, the revised Guidelines provide that fines may be based on up to 30% of the company's annual sales to which the infringement relates, multiplied by the number of years of participation in the infringement. Moreover, a part of the fine - the so-called "entry fee" - may be imposed irrespective of the duration of the infringement. Under the new package, the parties would have neither the right nor the duty to settle, but in cases where companies were convinced that the Commission could prove their involvement in a cartel, a settlement could be reached with the parties on the scope and duration of the cartel, and their individual liability for it. To this end, parties would be made aware of the envisaged objections and the evidence supporting them, and would be allowed to state their views thereon in anticipation of the formal objections. If parties chose to introduce a settlement submission acknowledging them, a Commission's statement of objections (SO) endorsing the contents of the parties' settlement submission could be much shorter than a SO issued to face contradiction. Since parties would have been heard effectively in anticipation of the "settled" SO, other procedural steps could be simplified so that, following confirmation by the parties, the Commission could proceed swiftly to adopt a final decision after consulting Member States in the framework of the Advisory Committee. The Commission would retain the possibility to depart from the parties' settlement submission until the final Decision, in which case the standard procedure would apply. Also, if no settlement was explored or reached, the standard procedure would apply by default and remain the fall-back option. The suggested amendments to Commission Regulation (EC) number 773/2004 would accommodate the settlement option within the existing framework. Changes would include variants in the provisions on issues such as initiation of proceedings, access to file and oral hearings. Moreover, it will include the choice for a different sequence of procedural steps, advancing some before the adoption of the SO. [email protected] The author is head of the International Department at the Joseph Shem-Tov law firm.