The European Commission’s Settlement Notice, first introduced in 2008, provides a settlement procedure in cartel investigations. In accordance with the Settlement Notice, the European Commission may invite a party, after having seen evidence in the European Commission’s file, to acknowledge its involvement in the cartel and its liability for it. In return for the party’s acknowledgement, the European Commission will reduce the fine to be imposed by 10 percent.
The aim of the settlement procedure is to simplify and speed up cartel investigations, reduce appeals before the Court of Justice of the European Union, and free up the European Commission’s resources to pursue other investigations.
In addition to the lower fines and a swift and less burdensome procedure, a settlement decision adopted by the European Commission is considerably shorter and less detailed than an ordinary decision. It can thus help protect companies from claimants seeking follow-on damages.
The settlement procedure may be attractive to companies in many cases, and it has since its introduction been used in close to twenty cases. Uniquely, some of these cases have ended up being hybrid settlement cases, in which some parties settle, while one or more other parties hold out and do not settle. Undertakings under investigation do not always
consider settling the investigation. The assessment whether or not to accept a settlement offer of the European Commission is a tricky one.
In May 2016, the European Commission adopted a decision in a hybrid settlement case relating to an alleged cartel in the steel abrasives sector. The European Commission adopted a settlement decision in April 2014 concerning the participation in a cartel by four undertakings, Ervin, Winoa, Metaltechnik Schmidt and Eisenwerk Wurth, in the steel abrasives sector. The alleged cartel involved the exchange of information on key price components of all their sales in the European Economic Area. In particular, the parties agreed to coordinate the calculation models for scrap surcharges, to introduce an energy surcharge, and to coordinate behaviour with respect to individual customers. The four undertakings agreed to settle the case, and the European Commission imposed fines of €30 million after deducting 10 percent in return for the four undertakings having settled.
The biggest beneficiary of the settlement procedure was Winoa, which got a reduction of €2 million. However, one undertaking, Pometon, refused to settle. The European Commission continued its ordinary procedure and adopted, almost two years after having issued the settlement decision, an ordinary decision imposing a fine of just over €6 million on Pometon. It is unclear why Pometon decided to walk away from the settlement discussions; however, it is clear that accepting an invitation by the European Commission to settle a cartel case is an offer some undertakings do consider worth refusing.
It is a complex decision whether to settle a cartel case or not. While an undertaking under investigation is given access to the evidence in the European Commission’s case file, the European Commission only provides an estimate of the range of the fine it intends to impose. Elements for an undertaking to consider in determining whether to settle are the strength of the European Commission’s case, the gravity and duration of the alleged behaviour, the strength of its legal defence, and the timing of the procedure. While a successful settlement procedure is more swift and less burdensome than an ordinary procedure, in certain circumstances an undertaking may wish to postpone the imposition of any fine. Similarly, although a settlement decision is shorter and less detailed than an ordinary decision, and thus may provide less ammunition to private damage claimants, it is arguable to what extent that will indeed be a benefit in light of the evidence disclosure rules introduced throughout the EU by the Directive on Antirust Damages (2014/104/EU). In addition, accepting a settlement proposal by the European Commission requires the undertaking to admit to its participation in the alleged cartel, a thing undertakings are often reluctant to do. A reduction in fine of merely 10 percent is often not enough to convince an undertaking to admit its liability.
Agreeing to a settlement procedure is not an option in every cartel investigation, and it is for the European Commission to determine whether or not it wishes to grant that option to the undertakings under investigation. Indeed, in most cases there are either no settlement discussions or they fall through completely (such as in the smart card chips cartel in 2014). There are numerous factors to be considered when determining whether to settle, and often there is not much certainty in relation to the potential benefits. There seems to be only one certainty in relation to settlement procedure: it’s not everyone’s cup of tea.