The European Commission has invited comments on a draft legislative package to introduce a settlement procedure for cartels. The Commission claims that this new procedure will facilitate faster decision making (at present cartel investigations take on average five years), freeing up some of the Commission's already limited resources.


The proposed settlement procedure will allow companies that have been involved in a cartel to co-operate with the Commission by providing written confirmation which acknowledges wrongdoing and suggesting the maximum fine the parties consider should be imposed in order to mitigate any potential fine. The practical benefit to a cartelist is that such a settlement would allow it to draw a line under its financial exposure much faster than is generally possible under the current regime.

The Commission's proposed scheme, however, contains a number of issues which should lead companies to think very carefully before making use of the proposed settlement system. In particular: (i) it remains unclear as to the level of any eventual reduction in the fine; (ii) the Commission is looking to retain a broad discretion in a number of areas, particularly the right to discontinue discussions if not all the cartelists involved are amenable to settlement; and (iii) the procedure is envisaged as primarily "written" based, which may result in document disclosure issues to, in particular, third parties looking to bring court action in the US (where triple damages are available for certain anti-competitive conduct).

How does the proposed procedure sit with the Commission's Leniency Programme?

The Commission has emphasised that the settlement procedure is wholly separate from the leniency programme. Broadly, the leniency programme is used to collect evidence during the investigation and rewards companies who provide information of significant value with reduced fines. Companies that provide information at an early stage- those that blow the proverbial whistle in the investigation can potentially escape any Commission fines at all. In contrast, all parties involved in a settlement will receive the same reduction in fine, based on the impact that the settlement has on procedural efficiency.

The Commission's view is that the proposed settlement procedure will not detract from the leniency programme as the potential reduction in fine from "whistle-blowing" is substantially greater than that offered under the proposed settlement procedure. The Commission adds that the reductions in any fine granted under the leniency procedure, and those given under the proposed settlement procedure, will be cumulative. 

Some Concluding Thoughts

The success of the leniency programme has proved vital for the Commission (and, for that matter, the OFT) in its fight against cartels. The Commission will therefore need to be very careful in the implementation and application of the proposed settlement programme to ensure the right balance is struck between leniency and settlement, whilst still maintaining an effective deterrent to potential cartel offenders. However, with total fines escalating from €683m in 2005 to €1.85bn in 2006 and up to €3.33 bn in 2007 (to date…), the use of any scheme that has the potential to alleviate such hefty fines will, and should be, considered at an early stage by companies which find themselves to have been involved in illegal cartels.