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Investigations

Initiating an investigation

Who can initiate an investigation of potential cartel conduct?

The European Commission and national competition authorities (NCAs) have wide powers of investigation under EU Regulation 1/2003. Investigations may be triggered as a result of:

  • one or more of the parties to a cartel or anti‑competitive agreement approaching the commission or the NCAs (eg, as a whistleblower under applicable leniency programmes) (see below);
  • a third party making a complaint (eg, customers, competitors, consumers, employees or any other party with information);
  • the commission or an NCA launching an inquiry of its own initiative; or
  • an NCA referring a case with a cross‑border element to the commission (or vice versa) through the structures of the European Competition Network.

If an investigation is initiated by complainants or third parties, what rights (if any) do they have?

See “Immunity and leniency” below.

What obligations does a company have on learning that an investigation has commenced?

If an undertaking is subject to a dawn raid, it must cooperate fully and actively with the commission’s inspection. This means that the undertaking may be required to provide appropriate representatives or members of staff to assist the inspectors with:

  • explanations on the organisation of the undertaking and its IT environment; and
  • specific tasks such as temporarily blocking of individual email accounts, temporarily disconnecting running computers from the network, removing and re-installing hard drives from computers and providing administrator access rights support.

When such actions are taken, the undertaking must not interfere in any way with these measures and it is the undertaking's responsibility to inform the employees affected accordingly.

Under Article 18 of Regulation 1/2003, the commission has extensive powers to request information from companies and undertakings must comply with Article 18 information requests as fully and as accurately as possible. 

What obligations does a company have if it believes that an investigation is likely?

There are no formal obligations if an investigation is likely; however, an undertaking would be wise to pay attention to the wider context, including the possibility that multiple investigations or court proceedings could be triggered in different jurisdictions (see “International cooperation” below). Moreover, the undertaking should begin to develop a tailored strategy, establish facts, identify risks and consider its document creation and retention policies.

What are the potential consequences of failing to act or delaying action?

See below.

Formal stages of investigation

What are the formal stages of and approximate timeframe for investigations?

Once a case comes to the commission’s attention, it will collect further information, either informally or using its formal powers of investigation laid down in Regulation 1/2003 (see below). Information may also be offered by third parties or the cartel participants themselves under the commission’s immunity or leniency programmes (see “Immunity and leniency” below). If the commission considers that there is evidence of an Article 101 infringement that should be pursued, it may decide to open formal proceedings itself or it may refer the case to one or more of the NCAs through the European Competition Network.

Where proceedings are brought at the commission level, this may lead to the commission formally addressing a written statement of objections to the parties setting out the commission’s case. The parties are then allowed to examine the documents on the commission’s file and respond to the statement of objections (in a written reply and at an oral hearing).

Before the commission takes its final decision, it must consult the Advisory Committee on Restrictive Practices and Dominant Positions, which contains officials from each NCA. The commission’s final decision is then taken by the full College of Commissioners and is notified to the undertakings concerned.

From initial investigation to final disposition a cartel case usually takes several years.

Investigative powers

What investigative powers do the authorities have?

The commission’s principal powers of investigation under Regulation 1/2003 are the power to:

  • require companies to provide information (Article 18);
  • conduct voluntary or mandatory on-the-spot investigations (dawn raids) on company premises (Article 20);
  • inspect employees’ homes and cars (Article 21); and
  • take voluntary statements for the investigation (Article 19).

Dawn raids Commission officials can enter the premises, land and means of transport of a company, examine its books and other business records (including computer records), take copies from books and records and ask for oral explanations on the spot. Regulation 1/2003 also provides for the power to seal premises and records. The commission can also inspect any other premises (including the homes of directors and employees), subject to obtaining a court warrant, if there is reasonable suspicion that books and other records related to the business and to the subject matter of the inspection are kept at the premises.

Commission officials will usually tolerate a short delay in order to allow the undertaking to contact its lawyers.

The commission has no power to require individuals to make statements or provide evidence under oath. Under Article 19 of Regulation 1/2003, the commission only has the power to take statements from any natural or legal person on a voluntary basis (ie, such persons cannot be summoned to testify). Commission investigations therefore tend to focus heavily on documentary evidence. Consistent with the interpretation of the European courts, Regulation 1/2003 grants the commission the power to interrogate a company’s representatives and staff for explanations only on facts or documents relating to the subject matter and purpose of the inspection.

Commission officials have no power to force entry; however, where an investigation is obstructed, the NCA officials assisting the commission in its investigation may use force to gain entry, provided that they have obtained the necessary warrant (under national procedures). In practice, as a precaution, the NCA officials generally have such a warrant.

Information requests Under Article 18 of Regulation 1/2003, the commission also has extensive powers to request information from companies. These requests for information are addressed in writing to the companies subject to the investigation or to third parties (eg, competitors and customers). They must set out the legal basis and the purpose of the request, as well as the penalties for supplying incorrect information. 

What is the geographic reach of public enforcement actions?

Commission officials can conduct dawn raids anywhere in the European Union. The commission can also request that the European Free Trade Area Surveillance Authority conduct a dawn raid in respect of undertakings located in Iceland, Liechtenstein or Norway.

With respect to non‑EU companies, the commission often exercises its enforcement jurisdiction by sending the request for information within the European Union to a subsidiary company of the non‑EU parent firm or group. However, where a firm has no physical presence in the European union, this will not be possible. In the latter case, the commission usually sends out informal requests for information (without reference to its fining powers under Regulation 1/2003); it would be normal for addressees to cooperate in the provision of information in response to such requests. 

When is court approval required to invoke these powers?

The commission has wide discretion to collect any information that it considers necessary. However, the commission’s powers are subject to the general principles of proportionality and the rights of defence (see below). Dawn raids may be conducted either pursuant to written authorisation or pursuant to a formal commission decision.

Are searches of business and personal premises authorised? If so, which bodies carry out searches and will they wait for legal advisers to arrive?

Yes. See “Dawn raids” above.

What level of cooperation with the authorities is required and what are the consequences for failing to cooperate?

If a dawn raid is conducted pursuant to a commission decision, the undertaking must permit the investigation to proceed and a fine may be imposed for refusal to submit. However, if the investigation is conducted only by written authorisation, the company need not comply but is asked to submit voluntarily.

An undertaking may be fined for breaking the seal on premises and records following a dawn raid. In 2012 the European Court of Justice (ECJ) imposed a fine of €38 million for breaking a seal on E.ON.

If an undertaking refuses to comply with an Article 18 information request, or submits incorrect or misleading information, fines will be imposed under Article 23(1) of EU Regulation 1/2003. The commission may impose fines up to 1% of the total annual turnover. Periodic penalty payments may be imposed as a means to enforce the information request by decision (see Article 24(1)(d) of Regulation 1/2003).

Is in-house legal advice or attorney work product protected by the law of privilege? Does this extend to the advice of in-house counsel?

The commission cannot require the disclosure of written exchanges between a company and its European Economic Area (EEA) – qualified external lawyers seeking or giving legal advice where the exchange:

  • follows the initiation of proceedings by the commission and concerns the company’s defence; or
  • is linked with the subject matter of those proceedings (even if the exchange occurred before the initiation of proceedings).

The extent of this privilege is therefore limited in scope. In particular, legal professional privilege does not apply to exchanges between a company and its in‑house lawyers (unless they are simply reporting the statements of an EEA‑qualified external lawyer) (ECJ, Azko Nobel (2010), confirming ECJ, AM&S (1982)), or between a company and an external lawyer qualified outside the EEA. Although advice from in‑house lawyers or from lawyers qualified outside the EEA may qualify as privileged under national legislation, caution is still required because of the risk that the commission may investigate.

Are any other limitations imposed on investigatory powers in order to safeguard the rights of those under investigation?

During the commission’s investigations, an undertaking has certain fundamental rights of defence, including the right:

  • not to be subject to an unauthorised investigation;
  • to legal advice;
  • not to be required to produce legally privileged documents; and
  • not to be required to incriminate itself, meaning that the commission may not compel a company to provide answers that might involve admitting the existence of an infringement that it is incumbent on the commission to prove.

In this context, the European courts appear to draw a distinction between requests intended to secure purely factual information on the one hand, and requests relating to the purpose of actions taken by the alleged cartel members on the other hand. Whereas the former type of questions is generally permitted, the latter infringes the undertaking’s rights of defence.

What is the process for objecting to an authority’s exercise of its claimed powers?

See “Appeal process” below.

Publicity and confidentiality

What information about investigations will be made publicly available and at which stage(s) of the process?

All information and documents communicated to the commission under the leniency notice are treated confidentially. Any subsequent disclosure, as may be required by the proceedings, will be made in accordance with the rules relating to access to the file. Following the adoption of the EU Damages Directive, the commission will not transmit leniency corporate statements or settlement submissions to national courts for use as evidence in support of actions for damages for breach of EU antitrust laws.

In practice, the commission does not publicly reveal the identity of a leniency applicant while the investigation continues. Eventually, however, details of the cartel investigation and the applicant’s involvement may be made publicly available in the final commission decision. Applications may be made to the commission to redact confidential information or business secrets.

Is any information automatically confidential and is confidentiality available on request?

See above.

International cooperation

Do the authorities in your jurisdiction cooperate with authorities in other jurisdictions?

In accordance with EU Regulation 1/2003, the NCAs throughout the European Union are also fully competent to enforce Articles 101 and 102 (as well as their domestic competition rules) in relation to cartels at the EU level. There is close cooperation between the European Commission and the NCAs, which have established the European Competition Network (ECN). The various authorities exchange information and cooperate through the ECN structures to ensure the efficient allocation of cases. There is also close cooperation between the commission and international competition authorities, particularly in the United States.

Do the relevant enforcement authorities request waivers so as to allow for increased cooperation with authorities in other jurisdictions? What are the consequences of declining to grant a waiver?

Information may be exchanged informally between competition authorities to permit cooperation. In international cases, waivers are typically granted where an undertaking has applied for immunity or leniency with at least two jurisdictions so that confidential information can be exchanged.

Decisions

How is a cartel investigation resolved? Are settlements, plea bargains or other negotiated resolutions available?

The commission both investigates and adjudicates on cartel matters. At the end of an investigation by commission officials, the final decision is taken by the College of Commissioners.

The settlement procedure is available in cases where the commission has initiated proceedings with a view to adopting an infringement decision and imposing fines, but has not yet issued a formal statement of objections. Pursuant to the settlement procedure, the parties are expected to acknowledge their participation in and liability for the cartel and reach a common understanding with the commission about the nature and scope of the illegal activity and the appropriate penalty. In return for such cooperation:

  • the parties enjoy a 10% reduction in fines (cumulative to any leniency reduction); and
  • any specific increase for deterrence used in their regard will not exceed a multiplication of two.

What is the process for negotiating a settlement, plea bargain or other negotiated resolution? Do such resolutions require court or other approval?

The commission has a broad margin of discretion to determine which cases may be suitable for settlement. An undertaking has no right to enter into settlement discussions, nor is it under an obligation to do so if invited by the commission. When the commission determines the suitability of a case, account is taken of the probability of reaching a common understanding within a reasonable timeframe in view of factors such as the number of parties involved, the extent of contested facts and the prospect of achieving procedural efficiencies.

Where the commission considers a case to be potentially suitable for settlement, it will request that the parties indicate, in writing, their wish to engage in such settlement discussions. The commission request will set a time limit of up to two weeks in which the parties must respond. This written indication by the parties does not imply an admission of participation in or liability for the cartel. Following receipt of an expression of interest, the commission has discretion as to whether to proceed with the settlement discussions and to determine the appropriateness and the pace of the discussions. The commission may decide at any time during the procedure to discontinue settlement discussions altogether.

The settlement discussions will cover:

  • the alleged facts;
  • the gravity and duration of the infringement;
  • the liability of the undertaking; and
  • the potential maximum fine.

The parties do not have full access to the commission’s file, nor do they have the right to negotiate the existence of the infringement or the appropriate penalty. However, the commission will hear the parties’ arguments and disclose some (non‑confidential) information from its file. The content of any settlement discussions with the commission cannot be disclosed by the parties to the proceedings to any other undertaking or third party unless the commission has given its prior consent. A breach of such confidentiality may result in the termination of the settlement discussions and, for the purposes of setting a fine, may be treated as an aggravating circumstance.

Should the commission and the parties reach a common understanding as to the scope of the potential objections and the likely fines, the commission will request a settlement submission from the parties within a set period of at least 15 working days. The settlement submission is an oral or written statement that must contain:

  • a clear, unequivocal acknowledgment of the parties’ liability for the infringement;
  • an indication of the maximum fine that the parties would accept;
  • confirmation that the parties have been sufficiently informed of the commission’s objections and have been given sufficient opportunity to be heard;
  • confirmation that the parties do not wish to have an oral hearing; and
  • an agreement to receive the commission’s statement of objections and decision in an official EU language.

Once the settlement submission has been received by the commission, the commission will issue its statement of objections, which may endorse the view in the settlement submission. If it does, the parties will have at least two weeks to respond to the statement of objections by confirming that it corresponds to the contents of their settlement submission and they remain committed to the settlement procedure. Following this, the commission can proceed directly to issuing its decision (following consultation with the advisory committee). The decision will reflect the parties’ cooperation, and all parties which participate in the settlement procedure will receive the same reduction of 10%, in addition to any reduction they may receive for leniency.

However, if the statement of objections does not endorse the view in the settlement submission, the parties’ acknowledgments will be deemed to be withdrawn and normal administrative procedures will be followed (ie, the parties will have full access to the commission’s file and there will be an oral hearing).

Even if the commission endorses the view in the settlement submission in its statement of objections, it may nevertheless adopt a decision that departs from this position. This may be a result of the views put forth by the advisory committee or the College of Commissioners. In this event, the commission will issue a new statement of objections and normal administrative procedures will be followed. 

If a settlement is not reached, what is the procedure for adjudicating a charge of cartel conduct?

The commission both investigates and adjudicates on cartel matters. At the end of an investigation by the commission officials, the final decision is taken by the College of Commissioners.

Which party must prove its case? What is the relevant standard of proof?

The burden of proof lies with the commission to establish the facts and assessments on which its infringement decision is based. However, if the party is claiming that the relevant agreement or concerted practice falls within an exemption under Article 101(3), the burden of proof lies with the party making that claim.

The legislative framework does not provide for precise rules regarding the standard of proof. Case law emphasises the presumption of innocence and states that the commission must produce precise and consistent evidence to support the conviction that the infringement took place (General Court, Danone (2005)).

Is there a hearing? If so, what is the process for submitting evidence and testimony?

If a settlement is not endorsed in the statement of objections or the settlement procedure is not used, there will be an oral hearing and the parties will have full access to the commission’s file.

What are the accused’s procedural rights?

See “Are any other limitations imposed on investigatory powers in order to safeguard the rights of those under investigation?” above.

Appeal process

What is the appeal process?

Commission decisions can be appealed to the General Court in Luxembourg. The grounds for appeal are:

  • lack of competence;
  • infringement of an essential procedural requirement;
  • infringement of the Treaty on the Functioning of the European Union or of any rule relating to its application; or
  • misuse of powers.

The General Court has unlimited jurisdiction, as regards matters of fact and law, to review the legality of and reasons for commission decisions regarding fines and to assess the appropriateness of the amount of the fines imposed. It may cancel, reduce or increase the fines imposed. The burden of proof lies with the commission to establish the facts and assessments on which its decision was based. General Court judgments may be appealed (on points of law only) to the European Court of Justice.

Companies do not necessarily have to pay their fines immediately if they lodge an appeal before the General Court. However, in this case, they must provide a bank guarantee covering the full amount of the fine plus interest.

To what extent can the appeal body review the agency’s findings of fact, legal assessment and penalties?

See above.

Penalties

Penalties for companies

What are the potential penalties for companies involved in a cartel?

The European Commission can impose fines on the undertakings or associations of the undertakings concerned. The commission has wide discretion in setting the level of fines within the limits of EU Regulation 1/2003. The fine imposed can be up to 10% of worldwide group turnover in the preceding business year where an undertaking or association of undertakings has infringed Article 101 of the Treaty on the Functioning of the European Union. The European Court of Justice (ECJ) has confirmed that fines may exceed the turnover in products concerned by the infringement provided that they stay within the 10% ceiling (ECJ, Pre-insulated Pipe Cartel Appeals (2002)).

The commission also has the power to require the parties to terminate infringement and may require them to undertake any action necessary to ensure that their conduct in future is lawful. For this purpose, in some circumstances it has the power to impose structural remedies and accept binding commitments.

Are there guidelines in place for penalties? If not, how are penalties normally calculated?

In general, the European courts have confirmed that the commission has a wide discretion in setting fines, within the limits of Regulation 1/2003. The commission imposes fines according to its Fining Guidelines on the method of setting fines using a two-step method:

  • Value of sales – the commission starts by applying a percentage of the undertaking’s value of sales in the market affected by the infringement. The percentage applied in each case is based on the gravity of the infringement and, as a rule, will be set at a level of up to 30% of sales. In determining the proportion of the value of sales, account is taken of:
    • the nature of the infringement;
    • its actual effect on the market; and
    • the size of the relevant geographic market.
  • Duration – to take fully into account the duration of the participation of each undertaking in the infringement, the amount determined on the basis of the value of sales is multiplied by the number of years of participation in the infringement.
  • Entry fee – in cartel cases (and other hard-core infringements) an additional sum of between 15% and 25% of the infringer’s value of sales is included to deter undertakings from participating in cartels even for only a short period.
  • Aggravating or attenuating circumstances and other adjustments – the sum of the value of sales multiplied by the duration, plus the entry fee, is the basic amount. The basic amount is adjusted to reflect a variety of possible aggravating or attenuating circumstances. The Fining Guidelines emphasises recidivism as an aggravating factor. Additional adjustments are possible for other objective factors (eg, the specific economic context).
  • Leniency notice – the final (payable) amount is then calculated following the possible application of the commission’s leniency notice (see “Immunity and leniency” below).

Recent years have brought new record fines: in 2016 the trucks cartel was fined €2.93 billion, the largest fine ever imposed by the commission in a single cartel investigation, including a fine of €1.01 billion on Daimler and €753 million on DAF. To date, these are the largest fines imposed on single companies for their involvement in cartel activity.

Given the substantial discretion that the commission has to set fines, in practice it can be difficult to assess with any certainty the basic amount or final (payable) amount in cartel cases. Nonetheless, the commission generally follows the Fining Guidelines and must exercise its discretion in a coherent and non‑discriminatory way.

Do the authorities take into account any penalties imposed in other jurisdictions?

There are no formal rules requiring the commission to take account of penalties in other jurisdictions when determining fines, although the European courts have previously recognised a general principle that any previous punitive decision must be taken into account in determining any penalty that is to be imposed (ECJ, Wilhelm v Bundeskartellamt (1969)). Still, the commission appears to take the view that fines imposed or damages in civil actions paid outside the European Union (most notably in the United States) have no bearing on the fines to be imposed for infringing European competition rules.

How can a company mitigate its exposure to fines?

Cooperation with the commission at an early stage through the settlement and leniency procedures (see “Immunity and leniency” below) are the main methods to mitigate fines.

Penalties for individuals

What are the potential penalties for individuals involved in a cartel?

The European Union does not impose penalties on individuals for involvement in cartels. Some national competition authorities may take criminal or other enforcement action against individuals, depending on their respective national legislation. Further, in international cartel cases executives face the real prospect of extradition resulting in personal fines and imprisonment in jurisdictions outside the European Union (eg, in the United States).

Do the authorities take into account any penalties imposed in other jurisdictions?

Not applicable.

Is a company permitted to pay a penalty imposed on its employee?

Not applicable.

Is a company permitted to continue to employ an employee involved in cartel conduct?

Not applicable.

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