1 Legal and enforcement framework
1.1 Which legislative and regulatory provisions apply to cartels in your jurisdiction?
- Article 101 of the Treaty on the Functioning of the European Union (TFEU), which sets out the prohibition against agreements, decisions and concerted practices (including cartels) which have as their object or effect the prevention, restriction or distortion of competition within the EU and EEA internal market (see also question 2.1);
- Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the EC Treaty (now Articles 101 and 102 TFEU respectively) (Regulation 1/2003), which fleshes out the procedural framework for the enforcement of EU competition law (see also question 1.2); and
- Commission Regulation (EC) No 773/2004 of 7 April 2004 relating to the conduct of proceedings by the Commission pursuant to Articles 81 and 82 of the EC Treaty (now Articles 101 and 102 TFEU respectively), which relates to the conduct of competition proceedings by the European Commission.
1.2 Do any special regimes apply to cartels in specific sectors?
There are no special regimes or offences applying to cartels in specific sectors.
However, the European Commission (Commission) and European Council have adopted regulations providing for ‘block exemptions'. These exemptions specify conditions under which particular types of agreements and arrangements (eg, relating to technology transfers, car distribution, research and development and vertical agreements) meeting various conditions are exempt from the Article 101 TFEU prohibition.
1.3 Which authorities are responsible for enforcing the cartel legislation?
Under Regulation 1/2003, the authorities responsible for applying Article 101 TFEU are:
- the Commission (see Article 4);
- the National Competition Authorities (NCAs) of EU Member States, which must apply Article 101 TFEU alongside national competition law to anti-competitive behaviour which may affect trade between member states (see Articles 3 and 5); and
- the national courts of the EU Member States (see Article 6).
The Directorate-General for Competition (DG COMP) is the specific department of the Commission tasked with enforcing EU competition rules.
Regulation 1/2003 provides for close cooperation and the exchange of information between the Commission and the NCAs for the purposes of applying competition law. Pursuant to Article 33(1)(b) of Regulation 1/2003, the Commission adopted the Notice on Cooperation within the Network of Competition Authorities, which formed a network of all EU competition authorities, known as the European Competition Network (ECN), to act as a framework for the cooperation mechanisms provided for in Regulation 1/2003. In February 2019, a directive to strengthen the powers of national competition authorities in order to increase the efficiency of competition law enforcement (ECN+) came into force. The directive aims to bolster the cooperation network by addressing gaps in competition mechanisms that undermine the system of parallel enforcement of EU competition law (see question 9.1).
1.4 How active are the enforcement authorities in investigating and taking action against cartels in your jurisdiction? What are the statistics regarding past and ongoing cartel investigations? What key decisions have the enforcement authorities adopted most recently?
The number of cartel cases concluded by the Commission saw a dip in 2018. The Commission issued four cartel decisions – Braking systems, Spark plugs, Maritime car carriers and Capacitors – in 2018, with fines totalling just over €800,000. In 2017, on the other hand, it heard seven cartel cases, with fines imposed amounting to more than €1.9 billion.
As at the date of writing, total fines of €1.4 billion have been issued in three cartel decisions (Occupants Safety Systems II and two Forex decisions), with a fine of more than €1 billion imposed in the Forex cartel cases alone. Five banks were fined in two decisions for participating in cartels in the spot foreign exchange market for 11 currencies. UBS received total immunity under the Leniency Notice (see question 5.1) for revealing the existence of the cartel.
2 Definitions and scope of application
2.1 How is a ‘cartel' defined in the cartel legislation?
Article 101(1) generally prohibits as incompatible with the internal market "all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the internal market".
2.2 What specific offences are defined in the cartel legislation?
The following types of conduct are prohibited by Article 101(1) TFEU where they may affect trade between member states and have as their object or effect the prevention, restriction or distortion of competition within the internal market:
- agreements between undertakings;
- decisions by associations of undertakings; and
- concerted practices.
Agreements, decisions and concerted practices prohibited in particular are those which:
- directly or indirectly fix purchase or selling prices or any other trading conditions;
- limit or control production, markets, technical development or investment;
- share markets or sources of supply;
- apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; or
- make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.
Article 101(2) states that any agreements or decisions prohibited pursuant to Article 101(1) will be automatically void and unenforceable without any need for a Commission's decision finding a breach of Article 101.
An exemption from Article 101(1) may apply under Article 101(3) in the case of agreements and decisions that contribute to improving the production or distribution of goods or promoting technical and economic progress, so long as consumers are allowed a fair share of the resulting benefit and the agreement does not impose anticompetitive restrictions unnecessary for the achievement of those objectives or create the possibility of eliminating competition for a substantial part of the products in issue.
2.3 Is liability under the cartel legislation civil, criminal or both?
The EU cartel regime imposes civil rather than criminal liability. However, some Member States, such as Denmark and the United Kingdom, provide for criminal sanctions for cartel offences; while in others, such as France, Greece and Romania, cartel-type behaviour may be prosecuted under the national fraud offences.
2.4 Can both individuals and companies be prosecuted under the cartel legislation?
Article 101 TFEU applies expressly only to ‘undertakings'.
According to EU case law, an ‘undertaking' is an "entity engaged in an economic activity, irrespective of its legal status and the way in which it is financed". This means that, as long as they carry out an economic activity, individuals, as well as companies and unincorporated bodies, may fall within the scope of Article 101 TFEU – self-employed persons, for example, have been found in some cases to fall within the definition of ‘undertaking'. Article 101 TFEU does not apply to individual employees or directors of an undertaking.
Both individuals and companies may also be subject to criminal prosecution under national regimes (see question 2.3).
2.5 Can foreign companies be prosecuted under the cartel legislation?
Article 101 TFEU is applied to undertakings and companies irrespective of where they are located, as long as the cartel agreement or practice either is implemented inside the EU or produces effects inside the EU (see question 2.6). In addition, a non-EU parent company may be held liable for the anti-competitive behaviour of a subsidiary located in the EU over which the parent company exercises decisive influence.
Foreign companies can, and have been, prosecuted under the cartel legislation. For example, in March 2018 the Commission fined eight Japanese companies €254 million for participating in a cartel relating to the supply of electronic capacitors.
2.6 Does the cartel legislation have extraterritorial reach?
The cartel legislation has extraterritorial reach. As set out by the Commission Notice: Guidelines on the Effect on Trade Concept Contained in Articles 81 and 82 of the Treaty, anticompetitive agreements or practices need not be concluded in the European Union, and the undertakings entering into them need not be based in the EU, for Article 101 TFEU to apply.
Instead, the key test for Commission jurisdiction is whether the agreement or practice either is implemented within the EU or produces effects within the EU. Under the implementation doctrine, developed in the Wood Pulp I case, the decisive factor is the place where the agreement, decision or concerted practice was implemented, and not necessarily where the agreement was entered into. The effects test requires the existence of a foreseeable "immediate and substantial effect" in the EU. There has not always been straightforward consensus over the application of the implementation or effects test. In the Intel case, the Court of Justice of the EU (CJEU) affirmed the General Court's approach that the implementation doctrine and qualified effects doctrine are simply alternative tests for jurisdiction.
2.7 What is the statute of limitations to prosecute cartel offences in your jurisdiction?
The limitation period applicable to the Commission's power to impose fines or periodic penalty payments is five years for substantive infringements of EU competition law (eg, participating in a cartel which breaches Article 101 TFEU and three years for procedural infringements relating to requests for information and the conduct of inspections. Time runs from the date the infringement is committed (except in the case of a continuing or repeated infringement, where the time runs from the date on which the infringement ends).
Actions taken by the Commission or a NCA for the purpose of its investigation (eg, issuing a statement of objections) interrupt the limitation period and restart the clock from the beginning. If the decision is the subject of pending proceedings before the CJEU, the period is suspended (see Article 25 of Regulation 1/2003). The limitation period, including any such interruptions, cannot exceed 10 years.
In relation to the Commission's power to enforce its adopted decisions imposing fines or periodic penalty payments, there is an additional limitation period of five years from the date on which the decision became final (see Article 26 of Regulation 1/2003). Notification of a decision varying the amount of the fine or payment interrupts this period and restarts the clock; as does any action of the Commission or an NCA to enforce payment (see Article 26 of Regulation 1/2003). If time to pay is allowed or enforcement of payment is suspended pursuant to a CJEU judgment, the limitation period is suspended (see Article 25 of Regulation 1/2003).
3 Investigations – general
3.1 On what grounds may the enforcement authorities commence an investigation?
The Commission has very broad discretion with regard to commencing an investigation. All cases are subject to an initial assessment phase, during which the Commission will examine whether the case "merits further investigation" and provisionally define the scope of the investigation (see paragraph 12 of the Commission Notice on Best Practices for the Conduct of Proceedings Concerning Articles 101 and 102 TFEU).
Investigations may be based on:
- complaints by third parties (e.g., customers and competitors);
- information provided by national competition authorities and other competition authorities;
- whistleblowing by individuals (e.g., employees of an undertaking engaging in potential anti-competitive conduct);
- leniency applications by cartelists; or
- the Commission's own market monitoring or investigations, or on its own initiative (when facts have been brought to its attention or further to information gathered).
The Commission will commence an investigation when it has grounds to suspect that there has been an infringement of Article 101 TFEU. The Commission will be required to clearly outline the subject matter and purpose of its investigation and any dawn raids it conducts (see question 4.3).
3.2 What investigatory powers do the enforcement authorities have in conducting their investigation?
Pursuant to Chapter V (Powers of Investigation) of Regulation 1/2003, the Commission has several key investigatory powers, as follows:
- to issue requests for information to undertakings and associations of undertakings, either by simple request (in which case undertakings cannot be fined if they fail to respond) or by decision (in which case undertakings are obliged to respond under threat of a fine up to 1% of turnover);
- to take statements - that is, to interview persons who consent to be interviewed for the purpose of collecting information relating to an investigation; and
- to conduct inspections of undertakings and associations of undertakings, including by entering their premises, examining all relevant information found at the companies' premises, copying relevant information and sealing premises, books or other sources of information to the extent necessary. Other premises – for example, the homes of directors – may also be inspected if there is a reasonable suspicion that relevant information relating to the inspection and to the business is kept at those premises, provided that a decision ordering such inspection is authorised by the national judiciary authority of the member state in question. The Commission may also inspect private devices used for professional reasons when found on the premises (see the Commission's Explanatory Note on the Conduct of Dawn Raids).
3.3 To what extent may the enforcement authorities cooperate with their counterparts in other jurisdictions during their investigation? How common is such cooperation in practice?
Cooperation between the Commission and international counterpart authorities during investigations is commonplace.
Cooperation takes place, for example, within the ECN framework (see question 1.3), which provides for cooperation between the Commission and NCAs. In particular, Regulation 1/2003 sets out a number of mechanisms that facilitate such cooperation.
For example, the Commission and NCAs actively cooperate during inspections: prior to adopting a decision ordering an inspection, the Commission must consult the NCA of the member state in whose territory the inspection will be conducted, and officials of the NCA of the relevant member state are to actively assist Commission officials in their inspection. At the request of the Commission, NCAs should also undertake inspections that the Commission considers necessary.
Of particular importance are the exchange of information provisions in Article 12 of Regulation 1/2003. The Commission and the NCAs, for the purposes of enforcing Articles 101 and 102 TFEU, are empowered to exchange and use in evidence "any matter of fact or of law, including confidential information".
Cooperation also takes place with authorities outside the EU. For example, the Commission has bilateral agreements and memoranda of understanding with a number of countries – such as the United States, Canada, Japan, Korea, Switzerland, China and Brazil – which provide for cooperation on competition issues. Some of these (e.g., the bilateral agreement with Switzerland) make specific provision for the exchange of information with respect to investigations; while others (e.g., the memorandum of understanding with Brazil) provide more generally for overarching principles of cooperation and assistance.
3.4 Is there an opportunity for third parties to participate in the investigation?
Third parties may be able to participate in the investigation to the extent that they provide information to the Commission regarding alleged anti-competitive behaviour, either on their own initiative or in response to a third-party request for information made by the Commission pursuant to Article 18 of Regulation 1/2003.
Third parties may also apply to be heard following the adoption of a statement of objections by the Commission against the undertakings, provided that they show sufficient interest in the outcome of the procedure. A sufficient interest may exist where it was the third party's complaint that initiated the Commission's investigation or where the third party has an economic or legal interest that may be significantly affected by the cartel behaviour. The hearing officer will make the determination on whether third parties are permitted to be heard. If they are permitted, they may request access to the Commission's file and that they be given an opportunity to attend the oral hearing between the alleged cartelists and the Commission.
3.5 What are the general rights and obligations of the enforcement authorities during the investigation?
See question 3.2 on the Commission's investigatory rights and powers. The Commission is also obliged to comply with the rights of defence of the alleged cartelist outlined in question 3.5.
3.6 What are the general rights and obligations of the target company during the investigation?
An undertaking's rights of defence must be respected – these include the right against self-incrimination, the right to a fair trial (including the presumption of innocence) and the right to legal professional privilege (see question 3.6).
The right against self-incrimination provides that the Commission may not compel an undertaking to provide answers that may involve an admission on its part of the existence of an infringement which it is incumbent on the Commission to prove. Regulation 1/2003 also refers to this right, but notes that undertakings are required to answer factual questions and provide documents, even if the information provided may be used against them.
Undertakings are obliged to cooperate actively with the Commission in the course of its investigations. Subject to the right against self-incrimination, the EU courts have held that this right requires undertakings to make available to the Commission all information relating to the subject matter of the investigation.
Obstruction of a Commission investigation should also be avoided. Pursuant to Regulation 1/2003, the Commission may impose fines of up to 1% of an undertaking's annual turnover if it fails to fully or properly respond to a request for information or to submit to an inspection. In 2008, the Commission fined E.ON €38 million for breaking a seal during an inspection.
Obstruction also constitutes an aggravating circumstance under the Commission's Guidelines on the Method of Setting Fines. In 2007, the Commission increased Sony's fine in a cartel case by 30% for obstruction to nearly €47.2 million.
3.7 What principles of attorney-client privilege apply during a cartel investigation?
Regulation 1/2003 does not provide for legal professional privilege; the concept has instead been recognised and elaborated by the EU courts. The AM&S case elucidated this principle of observation of confidentiality of communications between lawyer (admitted in a Member State) and client, subject to the conditions that the communications are:
- made for the purposes, and in the interests of, the client's rights of defence; and
- between external (i.e., not in-house) lawyers and the client.
The Azko Nobel case in 2010 confirmed the second condition, although it has been clarified that internal working documents created for the purposes of instructing external lawyers may also be covered.
3.8 Are details of the investigation publicly announced? If so, what principles of confidentiality apply?
Under Article 2(2) of Commission Regulation (EC) No 773/2004 of 7 April 2004 relating to the conduct of proceedings by the Commission pursuant to Articles 81 and 82 of the EC Treaty (now Articles 101 and 102 TFEU respectively), the Commission may make public the initiation of proceedings under Regulation 1/2003 in "any appropriate way", provided that it first informs the undertakings involved.
Per the Commission Notice on Best Practices for the Conduct of Proceedings Concerning Articles 101 and 102 TFEU, the Commission's current policy is to publish announcements relating to ongoing investigations on the Directorate-General of Competition's website if this will not harm the investigation. These announcements are brief and do not cover confidential information – they typically confirm the opening of an investigation into unnamed companies in a particular sector and note the general period of time or date on which officials carried out inspections.
4 Investigations – step by step
4.1 What initial steps do the enforcement authorities take to commence a cartel investigation?
Once a case has been opened (see question 3.1), the Commission will carry out an initial assessment. During this phase, the Commission will assess whether the case "merits further investigation" and provisionally define the focus of the case, in particular with respect to the relevant parties, markets and conduct (see the Commission Notice on Best Practices for the Conduct of Proceedings Concerning Articles 101 and 102 EUTFEU). During this assessment, it may make use of investigatory powers, including issuing requests for information. At this stage, the Commission may make use of the ECN framework and reallocate the case to a NCA.
If the Commission does not discard the case at this stage and considers it worth further investigation and the scope properly defined, it will open formal proceedings under Article 11(6) of Regulation 1/2003 and allocate resources to the case.
Before the opening of proceedings is announced publicly (see question 3.8), the undertakings will be informed in advance in order to allow them to prepare their own PR communications.
At the same time as the opening of proceedings, the Commission will normally adopt a statement of objections to inform the undertakings concerned of the objections raised against them when opening the proceedings and provide them with the opportunity to respond to all of the Commission's allegations.
4.2 Are dawn raids commonly conducted in your jurisdiction? If so, what are the pre-conditions for conducting a dawn raid? When, where and by whom are they conducted? Do the enforcement authorities have the power to search private as well as company premises?
Dawn raids are commonly carried out under the EU competition regime as a means to obtain evidence in relation to secretive cartels.
Commission's officials (and officials of the relevant NCA) are empowered to conduct inspections of undertakings and associations of undertakings, including by entering their premises, examining all relevant information found at the companies' premises, copying relevant information and sealing premises, books or other sources of information to the extent necessary.
Other premises – for example, the private homes of directors – may also be inspected if there is reasonable suspicion that documents related to the inspection and business are kept at those premises, provided that a decision ordering such inspection is authorised by the national judicial authority of the member state in question. The Commission may also inspect private devices used for professional reasons when found on the premises (see the Commission Explanatory Note on the Conduct of Dawn Raids).
Dawn raids are carried out under either a written authorisation or a decision of the Commission. Either of these must specify the subject matter and purpose of the inspection. Written authorisations must also specify the fines provided for if production of records is incomplete or where answers to questions asked are misleading. Decisions must also specify the fines and periodic penalty payments if incomplete or misleading information is provided, as well the right to have the decision reviewed by the CJEU.
Inspections can take place during the initial assessment phase (see question 4.1 and the Commission Notice on Best Practices for the Conduct of Proceedings Concerning Articles 101 and 102 TFEU), as well as once proceedings have been opened.
4.3 What powers do officers have during the dawn raid? Are there any limitations on these powers?
Commission's officials, authorised accompanying persons and officials of the NCA of the member state in whose territory the inspection is to be conducted are expressly empowered by Regulation 1/2003 to:
- enter any premises and means of transport of the undertaking;
- examine all relevant information and records related to the business (e.g., electronic information on servers, computers, phones, CD-ROMs, USBs);
- obtain copies or extracts from these records;
- seal premises and records during and as necessary for the inspection; and
- ask any representative or member of staff for explanations of facts or documents relating to the inspection, and record the explanations given.
The Commission is required to outline clearly the subject matter and purpose of its investigation and its dawn raids. The EU courts have also held that the Commission may not engage in ‘fishing expeditions' - that is, search for information relating to alleged anti-competitive behaviour that falls outside the scope of its investigation.
In particular, the General Court's judgments in Prysmian and Nexans in relation to the Power cables cartel make clear that the Commission must identify the sectors covered by the alleged infringement with "a degree of precision", and must have reasonable grounds to suspect an infringement (Nexans). In this case it was found that the Commission did not have reasonable grounds to adopt an inspection decision relating to infringements with respect to all types of electric cables, but did have reasonable grounds to adopt an inspection decision in relation to high-voltage submarine and underground electric cables.
4.4 What are the rights and obligations of the target company and any individuals targeted during a dawn raid?
Undertakings can consult external legal counsel during a dawn raid. However, Commission's officials are not obliged to await the arrival of legal counsel before commencing their inspection. The EU Courts have upheld a fine increase by the Commission as a penalty for an undertaking refusing to submit to an inspection until the arrival of its counsel (see the Bitumen cartel case). In practice, officials may wait for a short period of time for legal counsel and may attach conditions to any such delay (e.g., sealing the offices).
For dawn raids carried out under written authorisation, the undertaking is not obliged to allow the Commission's officials to conduct their investigations. However, it is fairly straightforward for the Commission to issue a formal decision, pursuant to which the undertaking is obliged to allow the investigation to proceed.
Undertakings are subject to an obligation to actively cooperate with the inspection. This extends to requiring employees to assist the officials in their inspection, including by offering explanations of facts or documents where requested and IT assistance.
Regulation 1/2003 empowers the Commission to impose fines of up to 1% of group annual turnover if an undertaking:
- produces information or records in an incomplete form or refuses to submit to inspections ordered by a Commission decision;
- gives a misleading or incorrect answer to a question relating to the dawn raid; or
- breaks the seals placed on documents or premises by inspectors.
4.5 What evidence can be seized during a dawn raid? Do the enforcement authorities have the power to interview witnesses and take statements during a dawn raid?
Officials can carry out a search for, and take hard and electronic copies of, evidence directly and indirectly relevant to their investigation during an inspection other than legally privileged documents (see the General Court's judgment in Èeské dráhy). The Commission must have at least "information and evidence providing reasonable grounds for suspecting an infringement" to support the stated scope and subject matter of the inspection – see also question 4.3. The undertaking should ensure that it keeps a copy and a record of all of the documents copied by the Commission's officials.
The Commission's officials may ask any representatives or members of staff for explanations of any facts or documents relevant to the inspection. The officials may record the explanations given in any form.
In addition, the Commission may interview any representative or employee of the undertaking who consents to be interviewed for the purpose of collecting information relating to the subject matter of an investigation (see Regulation 1/2003). This interview may take place during the dawn raid or afterwards at the Commission's offices.
4.6 How can a company best prepare itself for dawn raids? What best practices should it follow in the event of a dawn raid?
Companies should ensure that all members of staff are properly briefed on the procedures to follow in the event of the dawn raid and ensure that all legally privileged communications with external counsel are clearly marked as such. Undertakings are not required to hand over legally privileged documents, but they may need to convince the Commission's officials that any such documents fall within one of the categories of legally privileged documents (e.g, by showing the officials certain parts of the document).
In the event of a dawn raid, a company's members of staff should immediately check all documentation provided by officials, send copies to their external counsel and consult with external counsel to ensure that they understand the legal basis and the scope of the inspection. The Commission's officials need not await the arrival of the undertaking's lawyers before commencing their investigations of the premises.
Officials should be given space (e.g., a meeting room or office) to conduct their inspection and should be accompanied by members of staff – ideally legal counsel – at all times, although the inspection should not be obstructed. The company should take a record of everything done by officials during the inspection (e.g., offices searched, computers checked), and ensure that IT members of staff can assist the officials with accessing the undertaking's IT systems.
4.7 What are the next steps in the cartel investigation following a dawn raid? What timeframe do these typically follow?
It may take the Commission a number of months or a year to fully review the documents it has obtained from the dawn raid. The Commission will create a file with the documents that it believes are relevant for its investigation (as well as including other evidence, such as leniency statements). Once the statement of objections has been issued, the undertakings will have the right to request access to the Commission's file.
If the Commission's case "merits further investigation" on the basis of information and evidence collected through its investigatory powers, it will officially open proceedings and issue the alleged cartelists with a statement of objections in writing (see question 4.1). A statement of objections sets out the allegations made by the Commission against the undertakings (e.g., the facts of the cartel and how they infringed Article 101 TFEU). The Commission will provide the undertakings with at least four weeks to respond in writing to the statement of objections. The undertakings may then also request an oral hearing with the Commission.
Following this phase of the investigation, the Commission will either close the case if it considers that its initial objections turn out to be unsubstantiated or proceed towards adopting a decision finding an infringement. If it proceeds towards adopting a decision, a draft decision is usually prepared for the College of Commissioners following consultation with an Advisory Committee on Restrictive Practices.
The Commission's investigation of a cartel, from discovering an alleged infringement to adopting a final decision, will usually take a number of years.
4.8 What factors will the enforcement authorities consider in assessing whether cartel activity has taken place?
The Commission will carefully examine and assess the evidence for the existence of agreements between undertakings, decisions by associations of undertakings or concerted practices. In the context of agreements, the Commission will generally look for evidence of a "meeting of the minds" or "concurrence of wills" - the form of the agreement or contact between the undertakings is irrelevant. Concerted practices do not require an actual agreement or decision to collude – it is sufficient that there is direct or indirect contact between competitors that knowingly substitutes competition for practical cooperation between themselves and that may influence their market conduct. Exchange of commercially sensitive information between competitors may be used in order to facilitate a cartel's conduct, but it may also infringe Article 101 in its own right.
The Commission will also consider whether the behaviour in question has an anticompetitive object or restrictive effects on competition. Restrictions by object are those that, by their very nature, have the potential to restrict competition. In considering whether restrictive effects are present or likely, the Commission will examine, among others, the effect or likely effect on price, output, product quality, product variety or innovation.
Evidentiary factors that may indicate that cartel behaviour has occurred in a market include:
- prices being increased by competitors at the same time;
- output/volumes decreasing in a particular market without any objective justification and where there are indications of coordination; and
- the level of cross-border trade of certain goods/services being lower than what could be expected given the nature of the market.
4.9 In case of a finding of cartel activity, can the company seek to negotiate a settlement, plea bargain or similar resolution? If so, what is the process for doing so?
A settlement procedure has been available since July 2008, when Regulation 622/2008 regarding settlement procedures in cartel cases entered into force. Approximately half of the decisions adopted in cartel cases have been concluded under settlement. Settling undertakings are rewarded with a 10% reduction in the fine.
After the Commission has opened proceedings, it may set a period of at least two weeks in which the undertaking can confirm that it is prepared to enter into settlement discussions. This is at the Commission's discretion: it may not consider all cases to be suitable for settlement, depending on factors including the "probability of reaching a common understanding" (see the Commission Notice on Settlement Procedures).
Settlement discussions will proceed at a pace determined at the Commission's discretion. The Commission will also decide the timing of the limited access to its file, which should allow the undertaking to be informed of the essential elements of the Commission's case and allow it to make an informed decision on whether to settle. Either the undertaking or the Commission can cease settlement discussions at any stage - this reverts the procedure to the standard infringement proceedings.
The undertaking must then submit a settlement submission that acknowledges its infringement of Article 101 TFEU and indicates the maximum fine foreseen and acceptable to it. If the undertaking agrees with the statement of objections issued by the Commission, it must confirm that it reflects the settlement submission and that it wishes to proceed to the adoption of a settlement decision.
5.1 Is a leniency programme in place in your jurisdiction? If so, how does this function?
The Leniency Notice sets out a framework for the leniency programme in the EU.
The first undertaking to submit information and evidence enabling the Commission to carry out a targeted inspection or find an infringement of Article 101 TFEU will qualify for full immunity. Undertakings will need to submit sufficiently detailed evidence to qualify for immunity by enabling the Commission to carry out a targeted inspection. To qualify for immunity by enabling the Commission to find an infringement, it is also necessary that the Commission did not already have sufficient evidence to find such an infringement prior to the leniency application.
A number of other conditions apply. The undertaking must cooperate "genuinely, fully, on a continuous basis and expeditiously" throughout the process (see question 5.4). It must also have ended its involvement in the alleged cartel immediately following its application (except where continuation is deemed necessary by the Commission for investigatory purposes), and must not have "destroyed, falsified or concealed evidence" of the alleged cartel when contemplating making its leniency application.
Undertakings which are not the first to submit evidence and therefore do not qualify for full immunity may nonetheless be eligible for a reduction in their fine (between 30% and 50% for the first undertaking; between 20% and 30% for the second; and up to 20% for any others) if they provide evidence that represents "significant added value with respect to the evidence already in the Commission's possession".
5.2 What are the benefits of applying for leniency, both for the first mover and for subsequent applicants?
Full immunity from fines is afforded to the first undertaking to submit information and evidence enabling the European Commission to carry out a targeted inspection or find an infringement of Article 101 TFEU, provided that certain conditions are met (see question 5.1). A reduction in fines (between 30% and 50% for the first undertaking; between 20% and 30% for the second; and up to 20% for any others) is afforded to those providing evidence adding significant value to the Commission's evidence file (see question 5.1).
5.3 What steps does a leniency application involve? What timeframe do these typically follow?
An immunity applicant will usually apply for a ‘marker' first by providing brief details of the alleged cartel in order to guarantee its place in the queue in respect of other leniency applicants for a period of time while it gathers further information and evidence.
A formal leniency application requires an undertaking to provide detailed evidence of the cartel (see question 5.1) and a corporate statement. Alternatively, it may offer this evidence in hypothetical terms and present a list of the evidence it proposes later to disclose.
The Directorate-General of Competition will grant conditional immunity if it is satisfied that the application or a hypothetical set of evidence will meet the conditions. Once the evidence is disclosed and matches the hypothetical descriptions provided, conditional immunity will be granted. The immunity granted at this stage is conditional – if the end of the administrative procedure is reached and the undertaking has failed to meet the other conditions set out in question 5.1 (i.e., continuous cooperation; having ended its involvement in the cartel immediately after its application; not having destroyed or concealed evidence), the undertaking will not receive immunity.
The process is similar for applicants applying for a reduction in the fine. At the end of the administrative procedure, the Commission will evaluate the position of each applicant for a reduction, and will determine whether the evidence provided in each application represented significant added value and met the conditions, and the level of reduction in fine for each undertaking.
5.4 What are the rights and obligations of the applicant during the leniency application and over the course of its cooperation with the enforcement authorities?
Crucially, leniency applicants are subject to a requirement to cooperate "genuinely, fully, on a continuous basis and expeditiously" from the time they apply throughout the administrative procedure. As set out in the Leniency Notice, this duty to cooperate includes:
- promptly providing the Commission with all relevant information and evidence;
- remaining at the Commission's disposal to answer requests;
- making employees and executives available for interview;
- not destroying, concealing or falsifying evidence; and
- not disclosing the fact or contents of its application before the Commission has issued a statement of objections.
The consequences of failing to comply with this duty extend to immunity being withdrawn or a reduction not being granted, as applicable.
5.5 Is the leniency programme open to individuals? Can employees or former employees benefit from a leniency application filed by their employer? Do the authorities operate a programme for individual whistleblowers separate to the leniency programme?
The leniency programme is available only to undertakings (see question 2.4 for a definition of an ‘undertaking'). Employees and former employees do not formally benefit from a leniency application filed by their employer (but there may be associated longer-term benefits, such as mitigated reputational harm, from an employer being successfully granted immunity or leniency).
Individuals can report cartels to the Commission either directly (which will reveal the individual's identity, but will give the statement more credibility) or through the Commission's anonymous online whistleblower tool, launched in 2017, which uses an encrypted messaging system run through a specialised external service provider to guarantee anonymity. Individuals can agree to two-way communication with the Commission through this tool if further information is needed (e.g., if the Commission seeks clarifications or further details).
5.6 Can leniency be denied or revoked? If so, on what grounds?
Immunity and leniency applications are conditional upon the undertaking meeting certain conditions (continuous cooperation; having ended its involvement in the cartel immediately after its application; and not having destroyed or concealed evidence) at the end of the administrative procedure. The undertaking will not benefit from immunity or a reduction in fine if these conditions are not met (see question 5.1).
For example, in the Commission's Italian Raw Tobacco case, Deltafina breached its duty of cooperation by disclosing its application to the other cartel participants before the Commission had launched its investigation. Conditional immunity was therefore withdrawn. Deltafina's cooperation was nonetheless considered a mitigating circumstance in the Commission's assessment of the appropriate fine, so a reduction in fine was granted outside the formal leniency framework.
6 Penalties and sanctions
6.1 What penalties may be imposed in criminal proceedings on companies? What penalties may be imposed on individuals?
As set out in question 2.3, the EU cartel regime imposes civil, rather than criminal, liability. However, some member states, such as Denmark and the United Kingdom, provide for criminal sanctions for cartel offences; while in others, such as France, Greece and Romania, cartel-type behaviour may be prosecuted under the national fraud offences.
6.2 What penalties may be imposed in civil proceedings on companies? What penalties may be imposed on individuals?
Regulation 1/2003 empowers the Commission to impose fines on undertakings for intentionally or negligently infringing Article 101 TFEU. The maximum fine is 10% of the undertaking's total worldwide turnover in the preceding business year.
The Commission may also impose fines for procedural infringements of EU competition law. Regulation 1/2003 empowers it to impose fines of up to 1% of total turnover in the preceding business year on undertakings where they, for example, intentionally or negligently supply incorrect, incomplete or misleading information in response to a Commission request for information, refuse to submit to inspections ordered by decision or break seals affixed by officials during an inspection.
The Commission is also empowered to impose periodic penalty payments of up to 5% of average daily turnover in the preceding business year per business day, in order to compel undertakings to cease infringing behaviour, comply with a Commission decision, supply complete and correct information or submit to an inspection.
The Commission may not impose sanctions on individuals, since the EU cartel regime is applicable only to undertakings, unless the individual is an undertaking (see question 2.4). However, many Member States can impose sanctions on individuals and penalties under criminal law.
6.3 How are penalties in cartel cases determined? In deciding on the applicable penalties, will the enforcement authorities consider penalties imposed in other jurisdictions?
The Commission's Guidelines on the Method of Setting Fines set out the principles that guide the Commission when it sets fines for undertakings that have infringed Article 101 TFEU.
First, the Commission will determine a ‘basic amount', which is calculated based on a proportion of the value of the sales of cartelised goods or services within the European Economic Area (usually for the last business year of its participation in the cartel). The proportion of this value of sales that will constitute the basic amount of the fine – the percentage/proportion applied depends on the gravity of infringement in the case and is up to 30%. Then this amount is multiplied by the number of years of infringement.
Second, the Commission may make adjustments (upwards or downwards) to the basic amount of the fine on the basis of an assessment of aggravating and mitigating circumstances, the need to ensure that fines are deterrent, the legal cap on the fine (10% of the undertaking's total global turnover in the preceding business year), the discounts available under the Leniency Notice and, exceptionally, the undertaking's inability to pay.
The 2006 Guidelines on the Method of Setting Fines allows the Commission to depart from this general methodology where the "peculiarities of a given case or the need to achieve deterrence in a particular case" justify it. Recent case law has highlighted the need for the Commission to provide a detailed reasoning of its fine calculations, even when it adopts the standard fining calculation procedure (see the General Court's judgements in HSBC) and particularly when it departs from its general methodology (see ICAP).
6.4 Can a defendant company pay the legal costs incurred by and/or penalties imposed on its employees?
As noted in question 6.1, above, the Commission has no power to impose sanctions on individuals unless they themselves constitute undertakings.
7.1 Can the defendant company appeal the enforcement authorities' decision? If so, which decisions of the authority can be appealed (eg, all decisions or just the final decision) and to which reviewing authority? What is the standard of review applied by the reviewing authority (eg, limited to errors of law or a full review of all facts and evidence)?
Addressees of Commission's decisions are entitled to appeal to the General Court within two months of the decision. Third parties may also appeal Commission's decisions, provided they have a direct and individual concern. The grounds of an appeal include:
- the Commission's lack of competence or error of appreciation/fact;
- an infringement of an essential procedural requirement; and
- an infringement of the treaties or rules relating to their application or misuse of powers (see Article 263 TFEU).
The General Court has unlimited jurisdiction in an action for annulment to annul the decision in full or in part, and to increase or decrease any fine imposed.
General Court judgments may be appealed on points of law to the CJEU within two months. Such appeals may be made only on three possible grounds: lack of competence of the General Court, breach of procedure or infringement of EU law by the General Court.
7.2 Can third parties appeal the enforcement authorities' decision, and if so, in what circumstances?
Third parties with a direct and individual concern in the decision may appeal Commission's decisions.
8 Private enforcement
8.1 Are private enforcement actions against cartels available in your jurisdiction? If so, where can they be brought?
A private enforcement claim can be brought following a Commission or NCAs' decision establishing a cartel (the more common route), or can be brought as a standalone action independent of any authority investigation.
In December 2014, the Damages Directive was published in the Official Journal of the EU; member states were required to implement it nationally by 27 December 2016. The date it was actually implemented depends on the date on which each member state enacted its own domestic legislation transposing the directive into national law. All Member States have now implemented the directive.
The directive sought to harmonise national rules and procedures across Member States governing private damages actions and ensure that full compensation could be available for all victims of cartels (purchasers of a cartelised product with a higher price as well as downstream customers, to the extent that the higher cost of the cartelised goods was passed on). In particular, it:
- ensures that parties will have easier access to evidence via disclosure procedures;
- makes infringements found by final decisions of NCAs deemed irrefutably established in the courts of that member state and at least prima facie evidence of infringement in the courts of other member states; and
- establishes a rebuttable presumption that cartels subject to Commission's decisions have caused harm to victims.
8.2 Can private enforcement actions be brought against both companies and individuals?
In the context of private enforcement actions against cartels, it typically follows that such actions are brought against undertakings. As noted in question 2.4, while individuals may fall under the definition of an ‘undertaking', undertakings are mainly companies in the context of cartel enforcement.
Generally, however, private enforcement rights are a question of the national laws and procedure in the member state in question. It usually makes more sense to bring a damages claim against a company rather than an individual for the purposes of enforcing a successful damages claim.
8.3 Are class actions or other forms of collective action available in your jurisdiction?
The extent of availability of collective proceedings varies across member states. The United Kingdom and Netherlands allow for collective compensatory relief, for example, but there is no such mechanism in Estonia and a number of other member states. While the United Kingdom is a popular forum for follow-on competition litigation in the EU, its collective action mechanism is yet to be used successfully in a competition law claim. This is despite the Commission Recommendation of 11 June 2013 on Common Principles for Injunctive and Compensatory Collective Redress Mechanisms in the Member States, which recommends that all member states have collective redress mechanisms for both injunctive and compensatory relief in accordance with the various principles (e.g., that the claimant party is formed on an opt-in basis and that the loser pays the costs of the winning party).
On 26 January 2018, the Commission published a report on the implementation of the recommendation, finding that only 19 member states provide for collective compensatory redress (and in a significant proportion of these, its availability is limited to certain sectors).
In April 2018, the Commission published a proposal for a directive on representative actions that would require all member states to implement and/or harmonise their collective redress mechanisms for breaches of consumer protection law for the protection of the collective interests of consumers. The directive will become law if the new European Parliament, following elections in May 2019, and the European Council agree on the Commission's proposal.
8.4 What process do private enforcement actions follow?
Process and procedure in private enforcement actions depend on the rules of procedure in the member state in which an action is brought. Generally, an injured party will make a claim before the competent court in the jurisdiction in question, either following on from a finding of an infringement by the Commission or an NCA or on a standalone basis (i.e., where an NCA has not already found an infringement of competition law; in that case, the claimant must prove the existence of an anti-competitive infringement as well as its harm suffered from the infringement).
Typically, claimants will have to prove to the court that they have ‘standing' – that is, they have suffered or are likely to suffer harm as a result of the anti-competitive behaviour – and why the member state's court has territorial jurisdiction in its case (e.g., if the cartel occurred in that jurisdiction or the claimant purchased cartelised products or services in that jurisdiction). Claimants will also have to show that the injury they suffered was caused by the infringing behaviour.
8.5 What types of relief may be sought and what types of relief are most commonly awarded? How is the relief awarded determined?
Relief available in a private enforcement action may be injunctive (i.e., an order to cease or, less commonly, to remedy certain anticompetitive behaviour) or compensatory (i.e., monetary damages for harm caused by anticompetitive behaviour).
The relief available in such cases varies across member states. In the main forums in the EU for competition litigation – Germany, the Netherlands and the United Kingdom – it is possible to obtain injunctive and/or compensatory relief depending on the circumstances of the case. In Germany, it is also possible to obtain an injunction for performance in order, for example, to remedy an anti-competitive harm. In these three jurisdictions, interim remedies in cases where the claimant has an urgent requirement or as a preventive measure may also be sought whilst the main proceedings in front of the court are still ongoing.
The Commission has issued a communication on quantifying harm in damages actions in order to provide guidance to national courts in relation to the key principles in quantifying damages, and has issued a comprehensive practical guide to aid national courts and parties that explains types of harm and techniques to quantify such harm. In July 2019, the Commission also published guidance for national courts on how to quantify the amount of overcharge passed on to indirect purchasers of cartelised goods and services. Given the rebuttable presumption under the Damages Directive that cartel overcharges are passed on down the supply chain, the calculation of passed-on prices is important in relation to the quantum of damages awards.
8.6 Can the decision in a private enforcement action be appealed? If so, to which reviewing authority?
Appeals of private enforcement are a question of national laws and procedures. Generally, Member States will have some form of appeal available to a higher court.
The Netherlands, Germany and the United Kingdom all possess a two-tier appeal system. For example, in England and Wales, claimants may bring a competition-related claim in either the High Court or the Competition Appeal Tribunal (CAT) (except collective proceedings cases, which may be brought only in the CAT). The High Court may order that a competition case be transferred to the CAT – for example, Sainsbury's v MasterCard was brought in the High Court and then transferred to the CAT, with the judge noting that the case was complex and lengthy and would be best heard before the CAT (CAT panels may include economic experts as well as judges). First-instance appeals from the High Court or CAT to the Court of Appeal may be permitted on certain grounds (from the High Court only on a point of law and from the CAT on a point of law or the amount of damages), and a second-instance appeal to the Supreme Court is permissible on a point of law only.
9 Trends and predictions
9.1 How would you describe the current cartel enforcement landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?
Leniency applications, a key tool in the Commission's detection of cartels, have become less frequent, falling from 46 applications in 2014 to 18 in 2017.
Against this backdrop, the ECN+ Directive came into force in February 2019 with member states required to transpose it into domestic law by February 2021. The aim of the directive is to strengthen and harmonise cartel investigative and enforcement powers, including leniency programmes, across member states. While the directive falls short of establishing a one-stop shop across the EU for leniency applications, member states must establish domestic leniency programmes (if they do not have them already) and ensure that national competition authorities accept summary leniency applications from Commission leniency applicants. The directive also provides whistleblower protection to directors and employees of immunity applicants from legal liability (in terms of both fines and criminal sanctions), provided that they cooperate with the authorities. This new protection is in addition to the Commission's online whistleblower tool (see question 5.5).
The Commission has also identified cartel enforcement trends in certain economic sectors. In its 2017 e-commerce sector inquiry, it found that two-thirds of online retailers use automatic software programmes and it has discussed the future risk of collusion between competitors' pricing algorithms. The Commission has also looked at the financial services sector: in April 2019 it published a report on EU loan syndication and potential competition issues in the credit markets. In recent years, the Commission appears to have commenced or concluded a number of cartel investigations in the financial services sector.
10 Tips and traps
10.1 What would be your recommendations to companies faced with a cartel investigation and what potential pitfalls would you highlight?
A company faced with a cartel investigation should instruct lawyers specialised in dealing with cartel investigations, who will be experienced in navigating any potential pitfalls.
Companies should conduct a full internal investigation in order to assess the strength of internal evidence relating to the European Commission's investigation. If the company has been subjected to a dawn raid, this should include in particular the documents copied by the Commission as well as the information provided on the scope and purpose of its dawn raid. As discussed in question 4.6, companies should ensure that all of the necessary preparations are in place for a dawn raid.
Companies under investigation should also immediately consider whether it is worthwhile applying for immunity (if another company has not already applied for it first) or leniency, given that companies which are quicker to apply may benefit from a greater discount on any potential fine (see question 6.3).
An increasingly significant consideration for companies under investigation is the risk of follow-on damages claims in domestic courts both in the EU and outside the EU (e.g., the United States in particular). Depending on the cartelised market, the potential financial liability from damages claims may (greatly) exceed any fine from the Commission. Companies should carefully review the evidence on the Commission's file, as well as the scope and the manner in which the Commission describes its allegations against them – follow-on claimants will be able to use the Commission's findings in order to substantiate their own case.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.