European Cartel Enforcement and Investigations

1
European Cartel Enforcement and Investigations

• ABA Antitrust 51st Annual Spring Meeting
• Alec Burnside
• April 2003

2
Introduction

• Dramatic increase by European Commission in
  cartel enforcement and investigations
• Highest ever imposed fine Hoffman-LaRoche 2001
  (462m) for 8 infringements
• Highest ever imposed fine Lafarge 2002 (249m)
  for 1 infringement
• Commission imposed fine equivalent to entire
  value of market Methylglucamine 2002 (2.85m)
• Commission imposed fines on a cartel which has no
  European presence Nucleotides 2002 (20m)
• Commission conducting simultaneous Dawn Raids
  with other competition authorities e.g. alleged
  PVC cartel 12/02/2003 involving EU, US, Japan
  Canada

3
Some numbers

• 1969 to date gt70 cartel decisions imposing fines
  in excess of 4.3 billion
• 2001 to date 19 cartel decisions imposing fines
  in excess 3 billion
• Commission making on average 1 cartel decision a
  month (previously 1 cartel decision every 2-3
  years)
• Recent success partly due to new Leniency Notice
  (14.02.2002)
• Since new Leniency Notice, Commission has
  received gt30 applications for full immunity and a
  further 10 applications for a reduction in fine.
• Commission receiving increasing simultaneous
  applications for immunity (US, Canada, Japan)

4
Enforcement

• Article 81(1) EC Treaty prohibits all agreements
  between undertakings which both affect trade
  between EU Member States and have as their object
  or effect the prevention restriction or
  distortion of competition
• Regulation 17 grants Commission substantial
  powers to terminate infringements of Article
  81(1), initiate proceedings and issue decisions
• Article 11 Requests - demand information from
  companies
• Dawn Raids - surprise investigation where the
  Commission
• searches business premises, company car, diary,
  computer etc
• is assisted by officials from NCA
• can take away copies including computer copies
  (2001 conducted first paperless Dawn Raid)
• can demand on the spot explanations of documents
  (except self-incrimination)

5
Modernisation

• Regulation 1/2003 will enter into force 1 May
  2004 replaces Regulation 17 and strengthens the
  Commissions powers of enforcement and
  investigation
• Role of NCAs be substantially increased -
  especially important with enlargement and
  additional 10 countries joining the EU
• Commission will be able to search private homes
• Commission will be able to conduct interviews
  with executives
• Commission will be able to affix seals on areas
  to ensure that evidence is not tampered with
• Some EU Member States have enacted legislation
  criminalizing infringements of antitrust rules

6
Leniency Notice

• Immunity from fines (100)
• 1st to whistleblow
• 1st to provide the Commission with evidence of
  infringement
• cooperate fully with the Commissions
  investigation
• cease participation in the infringement
• not coerced others to participate in the cartel
• Reduction in fine (20-50)
• cease participation in the infringement
• provide evidence which represents significant
  added value

7
Oral Presentations

• The Commission will accept oral presentations
  hypotheticals
• Greatly benefit companies not wishing to produce
  a paper-trail e.g. facing US discovery rules
• Commission has already processed 5 Leniency
  applications on the basis of oral statements
  rather than corporate statements.

8
Legal Privilege

• General principle of confidentiality for
  correspondence between lawyers and their clients
• Legal Privilege not available for
• In-house counsel (whatever their status under
  national rules)
• Non-EU lawyers (unless admitted to an EU-bar)
• Therefore the Commission can seize these
  documents in a Dawn Raid!
• Ensure that all documents pass through an EU
  qualified lawyer in
• private practice.
• NB when dealing with a Dawn Raid undertaken by
  an NCA take care as different rules of privilege
  may apply e.g. in Germany and Italy any document
  located in the clients hands may be removed.

9
Double Jeopardy (Ne Bis in Idem)

• In addition to the EU regime, each EU Member
  States is able to undertake parallel, or even
  sole, investigations into cartel behaviour
• Immunity granted by the Commission under the
  Leniency Notice does not prevent NCAs from acting
  - no double jeopardy!
• However Walt Wilhem principle requires NCAs to
  take account of fines imposed by EU
• Article 4 of Protocol No.7 European Convention on
  Human Rights (ECHR) provides right not be to
  punished twice in criminal proceedings. Although
  civil fines they have a criminal character.
• Article 50 Charter of Fundamental Rights of EU
  (CFR) applies Ne Bis in Idem between several
  Member States. Therefore, CFR provides for
  principle of double jeopardy.

10
UK development

• Enterprise Act 2002 provides for individual
  criminalisation (no UK or EU criminal offence for
  companies)
• Criminal offence for individuals who dishonestly
  agree to engage in hard-core cartel agreements
  (Sect 188 EA)
• Maximum 5 years imprisonment or unlimited fine
• OFT will have power to disqualify company
  directors for up to 15 years
• Criminal Leniency available (OFT no action
  letter)
• admission of guilt
• not the ringleader
• cease participation in the cartel
• full cooperation with the investigation
• full disclosure

11
UK development

• A Director/ employee whistleblowing and claiming
  criminal leniency does not provide immunity from
  civil liability for the company!
• Results in a race to the finishing post
• individual vs. individual (UK individual criminal
  leniency)
• individual vs. company (UK individual criminal
  UK corporate civil leniency)
• company vs. company (UK/EU corporate civil
  leniency)
• Conflict of interest - company lawyers will not
  be able to act for individuals subject to
  criminal proceedings
• Criminal offence extraditable to countries which
  have equivalent offences (e.g. Sir Anthony
  Tennant Fine Art Auction Houses Cartel would now
  be extradited - fortunately for Sir Anthony, EA
  not retrospective)
• EA expected to come into force June/July 2003

12
Conclusion

• Commission more aggressive towards combating
  cartels
• Growing recognition of international cooperation
  for international cartels
• Increased level of fines
• However, no criminal sanctions at EU level and
  therefore no ultimate deterrent.

13
Questions