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Incardona, Rossella
The Fight against Hard-core Cartels and the New EU Leniency
Notice
The European Legal Forum (E) 1,2-2007, 39 - 42
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Literature Doc. 686
The European Legal Forum Issue 1/2-2007
I-39
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INTERNATIONAL AND EUROPEAN BUSINESS AND COMPETITION LAW
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The Fight against Hard-core Cartels and the New EU Leniency Notice
Dr. Rossella Incardona*
1. Introduction
Cartels among competitors are a particularly serious form of
anticompetitive behaviour. Cartels may lead to price increases,
lessen the competitive pressure among market players, impede
the optimal allocation of resources, reduce or even eliminate
the incentive of firms to operate efficiently and to innovate,
and ultimately harm consumers and the economy itself. Article 81 EC prohibits agreements and concerted practices between firms that distort competition within the internal market. Firms which are parties to illegal cartels can be sanctioned
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with fines up to 10% of their worldwide turnover.
Cartels are however secret by definition and the antitrust
authorities need to dedicate a great deal of effort to discover,
ascertain and deter them. These efforts have been strengthened
significantly by the use of the so-called leniency programmes,
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first introduced at EC level in 1996 and revised twice, in Feb3
ruary 2002, and recently in December 2006 (2006 Leniency
4
Notice). Participating to a leniency program grants the firms
that are parties to a cartel the immunity from the application
of fines or a reduction of fines in exchange of their help in discovering the cartel. This incentive is aimed at encouraging undertakings to discover cartels which would otherwise remain
secret.
Based upon the public consultations in February and October 2006, the 2006 Leniency Notices clarifies the conditions
for immunity and reduction of fines, introduces a so-called
marker system for immunity applicants and seeks to avoid
that corporate statements made by applicants are made available to claimants in civil damage proceedings.
The 2006 Leniency Notice benefits from the experience
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gathered in the application of the two previous notices to
*
1
2
3
4
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Dr. Rossella Incardona, avvocato, Freshfields Bruckhaus Deringer,
Rome (IT)
On the setting of fines see the new Commission’s guidelines, OJ C 210,
01.09.2006, p. 2-5.
Commission Notice on the non-imposition or reduction of fines in
cartel cases, OJ C 207 of 18.07.1996. This notice provided for a reduction from fine up to 75% for firms cooperating with the Commission.
Commission Notice on the non-imposition or reduction of fines in
cartel cases, OJ C 45, 19.02.2002, p. 3-5.
Commission Notice on Immunity from fines and reduction of fines in
cartel cases, OJ C 298, 08.12.2006, p. 17, available at:
http://ec.europa.eu/comm/competition/cartels/legislation/leniency_no
tice_en.pdf. For a first comment see J.S. Sandhu, The European Commission’s Leniency Policy: A success? 2007 ECLR 148.
The Court of First Instance and even the Court of Justice had to frequently intervene in the calculation of fines under leniency programs.
See, inter alia, Amino Acids, CFI 9 July 2003 – T-220/00 – Cheil Jedang
Corporation v Commission, ECR. 2003, p.II-2473, and ECJ 7 January
2004 – C-204/00 – Aalborg Portland v Commission, ECR. 2004, p.
I-123.
make leniency programmes more transparent and effective in
facilitating the discovery of secret cartels aimed at fixing
prices, restricting output, and dividing markets.
The 2006 Leniency Notices applies to secret cartels between
competitors with effects in the internal market, and entered
into force on the 8th December 2006. For cartels with effects
in one or more Member States, the national leniency pro6
grammes, if any, will apply. To avoid multi-jurisdictional applications subject to different rules within the EU, the network of national competition authorities (NCAs) and the EU
Commission (the European Competition Network, ECN),
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launched a Model Leniency Program which is aimed at a soft
harmonization of the leniency programmes within the EU and
sets a model of summary applications for immunity application of cartels concerning more than three Member States.
This article briefly describes the scope of the 2006 Leniency
Notice and tries to underline its advantages and its drawbacks.
2. Immunity from fines in the 2006 Leniency Notice:
detailed information, genuine cooperation, marker system
and application in hypothetical terms
The 2006 Leniency Notice provides for the cumulative conditions to qualify for immunity. A firm may be granted immunity when (1) it is the first one to provide compelling information that enable the Commission (a) “to carry out a targeted inspection” or (b) “to find an infringement of article 81
EC in connection with the alleged cartel”; (2) the Commission
has no sufficient evidence to carry out an inspection in relation to the cartel at the moment it receives the application; (3)
the firm cooperates with the Commission genuinely and continuously throughout the administrative procedure; and (4)
the applicant did not coerce other participants to join the car8
tel nor to remain in it.
The information to be provided when applying for immunity (so called corporate statement) and needed to allow a target inspection includes the aims, activities, functioning, products concerned, geographic scope, duration and market volumes affected by the alleged cartel, as well as dates, location,
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7
For the analysis of how the modernization of EC competition affects
the leniency programs at the Commission and NCAs level, see S. Blake
– D. Schnichels, Leniency Following Modernization: Safeguarding
Europe’s Leniency Programmes, 2004 ECLR 765.
The Model Leniency Program is available at
http://ec.europa.eu/comm/competition/ecn/index_en.html.
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This last condition is not required by the Italian leniency notice, issued
on 19 February 2007, which seems to admit to immunity also ring leaders and “coercers”.
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content of the contacts/meetings among the parties and details
of the companies and the individuals involved in the alleged
cartel. In case the Commission has already carried out an inspection concerning an alleged cartel or has sufficient evidence
to carry out an inspection, the applicant shall also provide
“contemporaneous, incriminating evidence of the alleged cartel” apart from the corporate statement. The thresholds to be
met are indeed high, but the detailed list of information requested may grant some certainty and predictability to potential immunity applicants, though the Commission enjoys a
certain margin of discretionality in assessing whether the evidential threshold is met. The assessment of the threshold is to
be made ex ante, “exclusively on the basis of the type and
quality of the information submitted by the applicant”, inde9
pendently from the results of the investigation.
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The duty of genuine, full and continuous cooperation of a
firm shall last for the whole procedure (in relation to both
immunity and reduction of fines programs). It includes the
supply of all the evidence which comes in possession of the
applicant; the non destruction, falsification or concealing of
any evidence on the alleged cartel and the confidentiality on
the facts or the content of the application before the Commission, until the issuance of the statement of objection. The duty
of cooperation also requires that a firm applying for immunity
terminates the anticompetitive conduct, unless the Commission authorises or permits the continuation of the alleged cartel to reasonably preserve the integrity of the inspection.
The Commission examines the applications according to the
order in which it receives them. For this purpose, the undertaking may apply for a marker, a discretionary system, which
allows an applicant to reserve its place in the queue for immunity (though not for fine reduction) by providing to the
Commission limited information on the alleged cartel. The
undertaking applying for a marker shall also provide information on other requests for leniency programmes filed with
other authorities and justify its request for a marker. The
Commission may grant a marker and set a period of time during which the undertaking shall supply the evidence required
to reach the threshold for immunity. Once the Commission
has received the information and evidence required, it will
grant the conditional immunity from fines as if the application
was submitted on the date the marker was granted.
The introduction of the marker system is one of the most
welcomed novelties of the 2006 Leniency Notice. The granting of a marker is however left to the discretion of the Commission, and this uncertainty on the final choice might reduce
the attractiveness which the marker system is supposed to
bring to firms intending to disclose their cartels. In any event,
the marker system does offer firms the possibility to win the
race even if they do not have all the information required at
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10
Footnote 1 of the 2006 Leniency Notice.
On the duty of cooperation see the Graphite Electrodes cartel case,
ECJ 29 June 2006 – C-301/04 – Commission v SGL Carbon AG, ECR.
2006, p. I-5915, and the Pre-insulated pipes cartel case, joined cases ECJ
28 June 2005 – C-189/02 – Dansk Rørindustri and others v Commission, C-202/02 – Isoplus and Others v Commission, C-205/02 – Ke Kelit v Commission C-208/02 – LR af 1998 (Deutschland) v Commission
and C-213/02 – ABB Asea Brown Boveri v Commission, ECR 2005, I5425.
the time when they decide to run for the immunity. The experience will say in which circumstances and justifications the
Commission will accept to grant a marker and in which cir11
cumstances and justifications it will refuse it.
The 2006 Leniency Notice keeps the possibility for firms to
apply for immunity in “hypothetical terms”. This means that
a firm may present in an anonymous form a detailed descriptive list of the evidence it proposes to disclose at a later agreed
date and ask the Commission to verify whether this evidence
would satisfy the conditions for immunity. The applicant shall
in any event indicate the products concerned, the scope and
duration of the alleged cartel, without however disclosing its
name and the names of the other undertakings involved. To illustrate the nature of its disclosure, the applicant may also
submit copies of documents, after having removed any sensitive information. The hypothetical application, though available only to firms which potentially have all the information
and evidence required for an immunity application, allows
firms to require the assessment of the Commission before
they have actually made the choice to apply for immunity.
The undertakings whose application for immunity has been
rejected (either because they are not the first one to apply or
because the type and quality of their information do not meet
the evidentiary threshold for immunity) may convert their
application in one for a reduction of fines.
3. The reduction of fines in the 2006 Leniency Notice
An undertaking qualifies for fine reduction when the evidence supplied represents “significant added value”. As in the
2002 Leniency Notice the Commission explains that the concept of “added value” refers “to the extent to which the evidence provided strengthens, by its very nature and/or its level
of detail, the Commission's ability to prove the alleged cartel”.
In gauging the capability of the evidence provided to meet this
high standard, the Commission will consider of “great(er)
value” written evidence of the same period of time to which
the facts pertain, as well as incriminating evidence directly
relevant to the facts, and compelling evidence which does not
require corroboration from other sources.
The Commission is bound to assess the applications for reduction of fines received before the notification of the statement of objection. After this date, the Commission “may disregard any application for a reduction of fine” for late submission. This provision is aimed at encouraging firms to apply the
sooner as possible to win some form of leniency and avoid the
workload of the Commission due to the examination of further applications when it already has enough information to
construe a statement of objection.
Most important, if the applicant for a reduction of fines is
the first to submit evidence which may establish additional
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The Commission Memorandum, Competition: revised Leniency Notice – frequently asked questions, MEMO/06/469, explains: “there are
some circumstances in which it can be justified to protect the first applicant’s place in the queue for immunity for a short period. In particular, if a new management after having taken over a company realises
that the acquired company was involved in a cartel and decides to apply for immunity”.
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facts increasing the gravity or the duration of the infringement, the Commission will not take such additional facts into
account when setting any fine to be imposed on the undertaking providing this evidence.
The undertaking which qualified for a reduction of fines will
know only at the end of the administrative procedure the extent of the reduction of fines. This leaves the firms in a status
of relative uncertainty, but it is reasonable that the Commission prefers to complete the proceeding before setting the precise extent of the reduction of fines. As in the 2002 Leniency
Notice, the 2006 Leniency Notice also sets a defined range of
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percentage of fine reduction:
1. 30-50% for the first undertaking;
2. 20-30% for the second undertaking;
3. up to 20% for the subsequent undertakings, taking into
consideration the time at which the evidence was submitted
and the extent to which it represents added value.
The chances for applicants coming as second, third of fourth
candidate to get a reduction of fines might weaken their incentive to be first and might encourage them to wait instead than
act and report their participation to a cartel as soon as possible. Further, there is not a big difference between being first,
second and third. The potential application of many firms for
leniency however increases the chances for the Commission to
speed up the investigations and to prove the infringement of
Article 81 EC.
4. Oral corporate statements and access to evidence in the
2006 Leniency Notice
Upon the applicant’s request, the Commission may accept
oral corporate statements. This important possibility was introduced by the 2006 Leniency Notice to avoid that the corporate statements of firms applying for leniency might be sub13
ject to disclosure orders in private litigation and “might be
dissuaded from cooperating with the Commission …if this
could impair their position in civil proceedings, as compared
to companies who do not cooperate” (paragraph 6 of the 2006
Leniency Notice). The positive effects of this provision might
however be impaired where the Commission would expressly
rely on oral corporate statements in the statement of objection, as statement of objections are often included in the discovery requests of private plaintiffs in the US. The Commission shall thus be careful in its use of oral corporate statements.
Corporate statements given orally are transcribed at the
Commission’s premises and accepted by the representative of
the applicant.
Access to corporate statements is only granted to the addresses of the statement of objections, provided that they
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13
The Italian leniency notice may apply reductions of fines in the measure of up to, “ordinarily”, 50% of the sanction, but it does not indicated a rigid percentage range for a fine reduction in relation to the
ranking of the different applicants.
This happens in the US where private litigants may seek discovery of
written statements provided to the Commission by leniency applicants.
commit not to make any copy of any information contained
in the corporate statement and undertake to keep its content
confidential. The use of such information for a purpose other
than the administrative proceedings for the application of EC
competition rules in the related administrative proceedings
may be regarded as lack of cooperation and cause the refusal
of the leniency at the end of the procedure. Third parties (consumers affected by the cartel) will not be granted access to
corporate statements.
Information given by firms applying for a leniency are elsewhere protected against public and private competition law
enforcement. According to paragraph 40 of the Network No14
tice, information voluntarily submitted by a leniency applicant or acquired as a result of the leniency application will
only be transmitted to another NCA pursuant to article 12 of
Regulation 1/2003 only with the prior consent of the appli15
cant. The Notice on cooperation with the National Courts
consistently states that the Commission will not transmit to
national courts information voluntarily submitted by a leniency applicant without the consent of that applicant. The
Network Notice further specifies that “Once the leniency applicant has given consent to the transmission of information to
another authority, that consent may not be withdrawn”. This
provision is awkwardly designed as the leniency applicant
might have legitimate reasons to subsequently withdraw its
consent and such an absolute provision might even dissuade
the firm from giving its consent from the start. Paragraph 41
of the Network Notice adds that the consent of the applicant
is not required in case it applied for leniency to the receiving
authority as well and when the receiving authority provided a
written commitment that neither the information transmitted
to it nor any other information it may obtain following the
date and time of transmission, will be used by it (or by any
other authority to which the information is subsequently
transmitted) to impose sanctions. This strengthens the public
enforcement of EC competition law throughout the network
of NCA, but it entails the risk that the rights of defence, or
the economic position, of the applicant may de facto be endangered, notwithstanding the formal undertaking (or even
the compliance with the undertaking) not to impose fines.
5. Concluding remarks
From 1996 to date, the application of the EU leniency programs resulted in a significant increase in the discovery of cartels, thus strengthening public enforcement of EC competition law. Many firms took advantages from their participation
to leniency programmes, enjoying a significant reduction of
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fines and some of them even immunity from fines.
The previous EU leniency experience had also some drawbacks, not granting certainty to the applicants in relation to
the requirements to be admitted to leniency programs, causing
increasing litigation on calculation of fines and a work-load of
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15
Commission Notice on cooperation within the Network of Competition Authorities, OJ C 101, 27.04.2004, p. 43-53.
Commission Notice on the co-operation between the Commission and
the courts of the EU Member States in the application of Articles 81
and 82 EC, OJ C 101, 27.04.2004, p. 54-64, para. 26.
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the Commission in the exam of the leniency applications due
to the case-by case assessment of the conditions to be admitted to leniency programmes. The 2006 Leniency Notice aims
at limiting the shortcomings of the previous notices, granting
more transparency and predictability in relation to the conditions of admission to leniency programs to firms, introducing
a marker systems, allowing oral corporate statements, and
clarifying the procedure for handling of the applications.
The number and quality of the information to be admitted
to leniency programs may represent a too high threshold for
firms and discourage them from applying for leniency. At the
same time, the reward for the firms which are admitted to the
immunity or even to the reduction of fines is equally high, and
a large firm may prefer to make an effort to collect evidence
on the cartel rather than risking to be subject to an investiga17
tion and risking the payment of increasing heavy fines.
Indeed, the 2006 Leniency Notice represents a careful balance of distinct interests and, together with the strict policy of
the Commission in the imposition of fines, may successfully
result in deterring cartels and discovering existent ones. At the
same time, the ECN Model Leniency Program shall guarantee
a certain level of harmonization of the leniency programs
within the EU Member States and permit firms to apply to
several NCAs with a summary application, even if there is no
“one shop stop” to handle leniency applications, and the leniency applicant shall consider the possibility to apply to more
NCAs and to the Commission.
Although the rewards of a leniency may seem appealing to
firms and the 2006 Leniency Notice (and the Model Leniency
Notice) may meet some of their expectations, the decision to
apply for leniency is complex and requires a cautious
costs/benefits analysis, notwithstanding the time pressure inherent to the leniency race. Companies shall weigh the likelihood that enforcement agencies will detect the cartel in the absence of their leniency application and the likelihood that
other competitors are planning to apply for leniency. Companies shall evaluate whether their information are compelling
or of added value and whether they would meet the thresholds for being admitted to a leniency programme. Companies
must also consider whether and how applying for leniency
will impact civil liability and will result in action for damages
at national level. In UK and in Ireland, as well as in the US,
companies shall also consider the risks of criminal prosecution
and prison sentences against individual company officers. Beyond these legal considerations, companies shall also weigh
the potential impact of their leniency application on the company’s reputation, on their relations with customers, suppliers, and investors.
Time will say whether the 2006 Leniency Notice will effectively encourage companies to discover their participations to cartels and allow
applicants to receive quicker replies to their application, ultimately
enhancing the Commission action against cartels and contributing to a
European system of undistorted competition aimed at consumer wel18
fare and at the efficient allocation of resources.
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See the Commission MEMO/06/357, cit. above.
Record fines were lately applied in the Elevators and escalators cartel,
st
see Case COMP/E-1/38.823, Commission Decision of 21 February 2007. For the level of fines imposed in cartel cases over the period
2002 to date, see the detailed statistics on the Commission at
http://ec.europa.eu/comm/competition/cartels/statistics/statistics.pdf.
See in this regard para. 13 of the Guidelines on the application of article
81(3), OJ C 101, 27.04.2004 p. 97 – 118.
INTERNATIONAL AND EUROPEAN INTELLECTUAL PROPERTY LAW
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ECJ 25 January 2007 – C-48/05 – Adam Opel AG v Autec AG
Article 5(1)(a) and (2), and Article 6(1)(b) of the Direc1
tive 89/104 – Reference for a preliminary ruling – Trade
Marks – Right of a trade mark proprietor to prevent use by
a third party of a sign identical or similar to the trade mark
– Trade mark registered for motor vehicles and for toys –
Reproduction of the trade mark by a third party on scale
models of that make of vehicle
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Where a trade mark is registered both for motor vehicles
– in respect of which it is well known – and for toys, the affixing by a third party, without authorisation from the
trade mark proprietor, of a sign identical to that trade
mark on scale models of vehicles bearing that trade mark,
in order faithfully to reproduce those vehicles, and the
1
First Council Directive 89/104/EEC of 21 December 1988 to approximate the laws of the Member States relating to trade marks (OJ 1989,
L 40, at 1).
marketing of those scale models:
– constitute, for the purposes of Article 5(1)(a)
of Directive 89/104, a use which the proprietor of the trade
mark is entitled to prevent if that use affects or is liable to
affect the functions of the trade mark as a trade mark registered for toys;
– constitute, within the meaning of Article 5(2) of that directive, a use which the proprietor of the trade mark is entitled to prevent – where the protection defined in that provision has been introduced into national law – if, without
due cause, use of that sign takes unfair advantage of, or is
detrimental to, the distinctive character or the repute of the
trade mark as a trade mark registered for motor vehicles.
Where a trade mark is registered, inter alia, in respect of
motor vehicles, the affixing by a third party, without the
authorisation of the proprietor of the trade mark, of a sign
identical to that mark to scale models of that make of vehicle, in order faithfully to reproduce those vehicles, and the
marketing of those scale models, do not constitute use of an
indication concerning a characteristic of those scale models,