On December 7, 2006, the European Commission ("Commission") adopted a new Leniency Notice that sets out the framework for granting immunity and reducing fines in cartel cases. The new notice replaces the Commission’s 2002 notice. It primarily seeks to clarify the information companies need to provide in order to qualify for immunity from fines or a significant reduction thereof. The new notice moreover introduces a marker system for leniency applicants, and it formalizes a number of measures the Commission has put in place in order to try to protect corporate statements from discovery in civil damage actions.

Immunity from Fines

Under the new notice, the Commission may grant immunity from fines to a company that is the first to submit information and evidence which, in the Commission’s view, will allow it to:

  • carry out a targeted inspection in connection with the alleged cartel; or
  • find an Article 81 infringement in connection with the alleged cartel.

To be in a position to carry out a targeted inspection, the Commission requires the applicant to provide information and evidence in the form of:

  • a corporate statement, which includes a detailed description of the alleged cartel, addresses of the applicant and other members of the alleged cartel, names and positions of individuals involved in the alleged cartel, and information on other competition authorities that have been approached or are intended to be approached;1 and
  • other evidence relating to the alleged cartel that the applicant is in possession of or that is available to the applicant at the time of application.

After filing the leniency application, applicants are required to continue cooperating with the Commission and to provide information in a prompt, accurate and complete manner. Applicants also need to agree to make their current (and, if possible, former) employees available for interviews with the Commission.2 The obligation to cooperate also extends to not destroying, concealing or falsifying evidence, or disclosing the content of the application prior to a Statement of Objections being issued by the Commission. In addition to cooperation obligations, an applicant is also required to have ended its involvement at the time of making the application, with the exception of instances where doing so would compromise the Commission inspection.

The Marker System

Upon applying for leniency, the applicant can choose to either make a full formal application or apply for a marker to secure its place in the queue for immunity.

To be eligible for a marker, the Commission requires a minimum amount of information consisting of the applicant’s name and address, the parties to the alleged cartel, the affected product(s) and territory(-ies), the estimated duration, and the nature of the alleged cartel. If the Commission grants a marker, a time period will be specified within which the additional information and evidence required to satisfy the requirements for immunity must be provided.

Reduction of Fine

To qualify for a reduction of the fine, a company is required to provide evidence of the alleged cartel which represents significant added value to evidence already in the Commission’s possession. Under the Leniency Notice, "significant added value" refers to evidence that, by its nature and/or detail, strengthens the Commission’s case to prove the cartel. Generally, incriminating evidence directly relevant to the facts in question, which does not require corroboration, is attributed greater value than evidence of indirect relevance or evidence that requires corroboration if contested. As with applications for immunity, a reduction of the fine is subject to the company engaging in genuine cooperation with the Commission.

Unlike applications for immunity, reductions of fines can be granted to more than one company, provided these companies submit evidence with significant added value: the first company to approach the Commission is granted a reduction of 30%-50%; the second company is granted a reduction of 20%-30%; subsequent companies are granted reductions of up to 20%.

Corporate Statements

Under the revised Notice, new procedures have been adopted to ensure that companies are not disadvantaged in civil damages proceedings as a result of their cooperation with the Commission.

First, companies can choose to provide corporate statements orally to the Commission. Oral statements are recorded and transcribed at the Commission’s premises, and must be approved for accuracy by the company within a stated time limit. It should be noted that the Commission will only accept oral statements subject to the content thereof not having been disclosed to third parties.

  • Second, access to the corporate statements, which may not be copied by mechanical or electronic means, is only granted to addressees of a Statement of Objections. In accordance with the Commission Notice on rules for access to the Commission file, access is also conditional upon that the information obtained is used only for the Commission proceedings at issue.

Assessment

Contrary to the U.S. system, the European Commission will only decide whether to grant full immunity or a reduction of the fine at the end of the administrative procedure. Although the new marker system provides a first step towards transatlantic harmonization of the leniency framework, significant discrepancies remain. It would not be unusual for a company to obtain immunity in the U.S., while at the same time leaving the company exposed to possible fines in the EU because the leniency applicant cannot produce the requisite information and evidence.

Footnotes

1. See paragraph 9(a) of the Leniency Notice for a full description of the information required from the applicant. Specifically, the applicant is required to expressly disclose its participation in the cartel.

2. See paragraph 12(a) of the Leniency Notice for a full description of the genuine cooperation obligation.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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