On 14 June 2011, the European Union Court of Justice (“ECJ”) issued its preliminary ruling on the discoverability of leniency applications in civil actions based on the breach of the competition rules. The ECJ’s ruling highlights the delicate balance to be drawn between preserving the effectiveness of leniency programs on the one hand and the facilitation of civil actions for damages on the other.
On 21 January 2008, pursuant to Article 81 EC (now Article 101 of the Treaty on the Functioning of the European Union (“TFEU”)), the German Bundeskartellamt (the Federal Cartel Office) (the “FCO”) imposed fines in the amount of €62 million on three European manufacturers of decor paper (and five individuals) for participating in price-fixing and capacity closure agreements contrary to EU competition law. On the conclusion of the FCO’s process, Pfleiderer AG (“Pfleiderer”), a purchaser of decor paper and one of the world’s three leading manufacturers of engineered wood, requested full access to the FCO’s investigation file, with a view to preparing a civil action for damages. The FCO partly rejected Pfleiderer’s application and restricted access to the FCO’s file to a version from which, inter alia, documents obtained through leniency applications had been removed.
Unhappy with the FCO’s approach, Pfleiderer brought an action before the Amtsgericht Bonn (the “Local Court”) challenging the FCO’s decision on disclosure. On 3 February 2009, the Local Court ordered the FCO to grant Pfleiderer’s lawyer access to the leniency documents. The court considered Pfleiderer to be an “aggrieved party” within the meaning of the relevant German law (on the basis that it could be assumed that Pfleiderer had paid excessive prices) and that Pfleiderer had a “legitimate interest” in obtaining access to such documents, since those documents were to be used for the preparation of a civil action by Pfleiderer for damages. However, the Local Court ultimately took the view that the case in issue required an interpretation of EU law and decided to stay the domestic proceedings and seek a preliminary ruling on the matter from the ECJ.
The ECJ decided that Articles 101 TFEU and 102 TFEU, must be interpreted as not precluding a person who has been adversely affected by an infringement of the EU competition rules and who is seeking damages from being granted access to documents relating to a leniency procedure involving the perpetrator of that infringement. However, given the lack of harmonisation under EU law on the subject, the ECJ considered that it is ultimately for the courts and tribunals of the EU Member States, on the basis of their national law and on a case-by-case basis, to determine the conditions under which such access must be permitted or refused.
The European Commission (“Commission”) had argued before the ECJ that a distinction should be made between self-incriminating statements (corporate statements) voluntarily provided by leniency applicants (in which applicants effectively admit and describe their participation in an infringement of the competition rules) which should not, in the Commission's opinion, be disclosed and other pre-existing material submitted by leniency applicants. Advocate General Mazák, in his non-binding Opinion to the ECJ, also took the view that access to voluntary self-incriminating statements made by leniency applicants should not, in principle, be granted. He considered that this could substantially reduce the attractiveness of a leniency program and, in turn, undermine the effective enforcement of the EU competition rules. However the ECJ was not persuaded by the arguments of the Advocate General or the Commission. Accordingly, the case will now be remitted to the Local Court to apply the ECJ’s ruling to the case.
The decision is unlikely to be welcomed by the Commission or national competition regulators and comes at a time when regulators have been strongly arguing that it is necessary to protect such leniency applications against disclosure to ensure the effectiveness of leniency programs in uncovering and prosecuting anticompetitive practices.
On a related note, the Irish Competition Authority’s (the “Authority”) Cartel Immunity Programme (the “Programme”) is currently under review by the Authority and the Director of Public Prosecutions. It is generally acknowledged that the Programme is working well, but that some tweaks may be required in order to provide enhanced clarity on how the Programme operates.