An offer you can't refuse? An analysis of EC cartel settlement
| Autor | Mark English |
| Cargo del Autor | Trainee Solicitor. Pinsent Masons LLP |
| Páginas | 131-173 |
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Ver Nota1
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The European Commission (the Commission) regards cartels as "unjustified and unjustifiable […] attack[ing] free markets at their very hearts”2and has promised to "take all measures to stamp them out"3. This determination is amply illustrated by the recent decision fining car glass producers a total of over €1.3 billion, with a single participant receiving a
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fine of €896 million. These were the highest fines ever imposed in an EC cartel case both on an individual company and on a cartel as a whole4.
The Commission certainly has no shortage of material for new cartel cases. Since its inception in 1996, the Commission's leniency programme5has been a great success in encouraging firms to come forward and report cartels to the Commission. For example, 167 applications for leniency, including 87 for immunity, were reportedly made between 14 February 2002 and the end of 20056. In addition to EC leniency, a significant number of cartel investigations are ex-officio7.
Unfortunately for the Commission, and the undertakings involved, these investigations can resemble a black hole sucking in vast amounts of time and resources. The initial investigation, typically including dawn raids and leniency applications, can take a number of years even before the Statement of Objections (SO) is issued. Once the parties are in possession of the SO, they need to be given an opportunity to reply to the accusations contained therein. This involves granting access to the Commission's file which commonly raises a whole raft of confidentiality and translation issues, especially in investigations involving a large number of parties based in various jurisdictions. Parties also need to be given the opportunity to
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express their views in an oral hearing8. The decision must then be drafted, normally adding at least another year to the process. Finally, there are the appeals to the CFI and possibly the ECJ which can postpone closure for another several years. According to Neelie Kroes, the European Commissioner for Competition, in 2005, one cartel decision triggered an average of three to four court cases9. The incentive to appeal is now even greater since the exponential increase in fines under the 2006 Fining Guidelines10means that even a small fine reduction in percentage terms won in Luxembourg could be worth millions of Euros.
With apparently only approximately 55 case handlers11the Commission is limited in the number of cartel infringement decisions that it can issue; 38 between 2000 and 200512, seven in 2006, eight in 2007 and seven in 200813.
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The discrepancy between the number of leniency and immunity applications, ex-officio investigations and infringement decisions suggests that a significant backlog of cartel cases is building up within the Commission. Largely for this reason, as early as 2005, Neelie Kroes was complaining that the Commission "risks becoming a victim of its own cartel-busting success"14.
On 1 July 2008, the Commission introduced its Settlement Package15, and with it the prospect of parties under investigation being able to agree with the Commission the contents of a cartel decision before it is made. An effective settlement system would directly benefit both the Commission and the parties involved. Commission resources would be freed up allowing it to deal with more cases, ensuring that more cartelists are punished and hopefully deterring others. The parties would be able to deal with the uncertain, expensive and distracting process of a cartel investigation more quickly, minimising negative publicity, saving on legal fees and benefiting from a reduced fine.
In order to be successful, the Settlement Package must strike a delicate balance: it must generate the anticipated procedural efficiencies for the
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Commission whilst parties involved must be persuaded that the benefits offered outweigh the costs. To this end, the International Competition Network has identified transparency, predictability and certainty as key elements of a settlement system16. Similarly, the reduction in fine offered must constitute a sufficient financial incentive whilst not undermining the deterrent effect of fining policy. The impact of settlement on related issues such as respect for rights of defence, exposure to criminal sanctions for individuals and to follow-on actions also needs to be considered.
This article uses the analogy of a poker game to describe how settlement might occur in practice, outlining a number of issues which the Commission and the parties involved are likely to encounter along the way. It also asks whether an appropriate balance of efficiencies and incentives has been struck in order to capture the potential benefits of an EC settlement system.
Just as Neelie Kroes was inspired by "a comparative glance across the Atlantic"17, this paper takes a comparative glance across the Channel (from Belgium) to the United Kingdom where negotiated settlement is well established in the decisional practice of the Office of Fair Trading (the OFT), the UK's main national competition authority (NCA), and UK sectoral regulators, also authorised to apply competition law in their respective sectors18. Settlement occurs in the UK without formal legislation or guidelines on the matter.
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In late 2005, the OFT issued an SO against 50 independent (privately owned, fee-charging) schools accusing them of exchanging information about future fees, infringing Chapter I of the Competition Act 199819, the UK equivalent of Article 81 EC. Possibly due to the number of parties involved, rather than negotiating directly with the schools themselves the OFT dealt with the "ISC Steering Group" which represented schools collectively. Under the terms of the settlement the schools admitted to an infringement of competition law and each agreed to pay a penalty of £10,000.
Although the schools refused to admit that the information exchange had any effect on fees, they agreed to make ex-gratia payments totalling £3 million into an educational charitable trust to "benefit" (not "compensate") pupils who had attended the schools during the period of the infringement. The OFT published a full-length decision but did not make any findings on the effect of the information exchange on fees charged by the schools20. The absence of admission of and finding on effect made follow-on actions for damages from disgruntled parents more difficult and limited harm to the schools' reputations. However, a notice of a claim for damages has been filed by parents of children who attended one of the schools involved
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during the relevant period seeking, inter alia, compensation for "school fee over-payments"21.
In 2006, the Office of Rail Regulation (the ORR), the UK rail regulator, found that English Welsh and Scottish Railway Limited (EWS) had abused its dominant position in the market for coal haulage by rail in Great Britain by entering into exclusionary contracts and engaging in discriminatory and predatory pricing. EWS was found to have breached both Article 82 EC and Chapter II of the Competition Act 199822, Article 82 EC's UK equivalent. In reward for EWS's cooperation, which the ORR acknowledged had allowed it to resolve the case "more quickly and effectively than would otherwise have been the case", EWS received a 35% reduction in fine23. The ORR published a full-length decision, but did not make any findings as to exclusionary intent or effect24. A claim for damages has though been filed by a customer of EWS claiming that EWS's conduct was intended to...
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