This article is an extract from GTDT Market Intelligence Cartels 2023. Click here for the full guide.
Helen Gornall of De Brauw Blackstone Westbroek has extensive experience in all aspects of competition law, including merger control, cartels, dominance and vertical restraints. Her in-house and private practice expertise allows her to understand business drivers and offer clear and practical advice, even in the most complex of matters. She regularly advises international companies on their European and international M&A and competition law matters. She is dual-qualified as both a solicitor (England and Wales) and Dutch advocaat.
Anna Lyle-Smythe is a partner in Slaughter and May’s Brussels office. She has a broad competition practice, including advising on mergers, cartels, state aid and market investigations. She has dealt extensively with the European Commission and the UK Competition and Markets Authority, as well as other regulators around the world. Her highlights include advising DuPont on the EU investigation of the chloroprene rubber cartel, and in the subsequent appeals to the EU General Court and European Court of Justice. She is a member of the Brussels Bar (A list), as well as being qualified as a solicitor (England and Wales).
Markus Röhrig is a partner of Hengeler Mueller’s antitrust practice and based in the firm’s Brussels office. He advises clients on European and German competition law, including in merger reviews, cartel investigations and unilateral conduct cases both before the regulators and in court. He also offers antitrust compliance advice and counsels clients conducting internal antitrust investigations. Markus acts for a diverse client base from a broad range of industries, including the insurance sector.
1 What kinds of infringement has the antitrust authority been focusing on recently? Have any industry sectors been under particular scrutiny?
Markus Röhrig: The Commission continues to break new ground by looking into less traditional cartels, such as buyers’ cartels, information exchange, collusion to restrict competition on technical development or coordination on products characteristics. Over the past years, the Commission has fined a number of buyer cartels across various industries, most recently in the styrene monomer space. The Car Emissions case was the first cartel decision on collusion to limit technical development under article 101 TFEU. In its Metal Packaging cartel decision, the Commission looked not only into price coordination, but also into collusion around minimum durability recommendations, the quality of packaging and, more generally, arrangements to avoid innovation competition.
Helen Gornall: The Commission’s enforcement against cartels was at a relatively lower level in 2022 than in past years, with metal packaging, transport and financial markets being on its enforcement radar. Although the Commission confirmed some dawn raids, it adopted only a few fining decisions or statements of objections. That said, the Commission continued to align its investigations with its focus on the transition to a greener EU economy – as seen by its dawn raids into the vehicle recycling market and fashion industry.
2 What do recent investigations in your jurisdiction teach us?
Anna Lyle-Smythe: The leniency regime remains key in the Commission’s enforcement toolkit. The Commission is also expanding the use of its whistle-blower tool, which was first introduced in 2017 and has resulted in around 100 messages per year sent via the tool since its launch. That said, the Commission and other agencies are talking more and more about ‘own initiative’ investigations and exploring tools they can use or develop to detect potentially anticompetitive activity even in the absence of a whistle-blower. The return of dawn raids in the past couple of years is also a noteworthy development, particularly as dawn raids started picking up again when travel and teleworking restrictions as a result of the covid-19 pandemic were still in place to some extent in the relevant jurisdictions. It will be interesting to see how those experiences continue to shape the Commission’s dawn raid policy in the years to come, particularly in terms of being able to access information held in home offices and to use their interview powers for staff who are not located on-site. Some of those questions may be answered when we see the outcome of the Commission’s consultation on Regulation 1/2003.
MR: The Commission’s whistle-blower tool indeed appears to develop into an important complementary tool for detecting cartel behaviour. We understand that leads provided via the whistle-blower tool have resulted in several inspections by the Commission and the NCAs. It also appears that the tool is gaining traction in the business world and that businesses are learning how to effectively use it, as suggested by the fact that only 5 per cent of the messages received by the Commission are irrelevant from an EU competition law perspective, and that share continues to decrease. The quality of the leads provided through the whistle-blower tool also appears to have significantly improved throughout the years.
3 How is the leniency system developing, and which factors should clients consider before applying for leniency?
ALS: In the past year, the Commission has made some practical changes to its leniency programme to provide greater transparency, predictability and accessibility to potential leniency applicants and encourage leniency applications. In October 2022, it published a new leniency FAQ document that clarifies the Commission’s current practices concerning to the 2006 leniency notice. The Commission has also announced an upgrade to its eLeniency tool, to make it easier for companies and their representatives to submit and access leniency and settlements documents online. The Commission is clearly hoping to reverse the very clear drop in leniency cases since 2015, which has been seen both at the EU and member state level.
MR: The Commission has indeed recorded an increase in leniency applications in 2022 – reportedly twice more than in 2021 and three times as many as in 2020. The Commission credits this surge in applications to stepping up its own ex officio programme and the increase in dawn raids, including in private homes. The Commission’s investments in its technology and expertise in the past few years likely also contributed to boosting cartel detection. It remains to be seen whether the Commission will be able to revive its leniency tool on a lasting basis without offering additional protection to immunity applicants, including potential immunity not only from fines but also from private damages.
4 What means exist in your jurisdiction to speed up or streamline the authority’s decision-making (eg, settlement procedure), and what are your experiences in this regard?
HG: While the possibility for parties to offer commitments to speed up investigations exists, the settlement procedure remains the most common mechanism used by the Commission to expedite the adoption of a cartel decision. The settlement procedure exclusively applies to cartel cases and cannot be relied upon in other antitrust investigations. Last year, both metal packaging producers and participants in the Styrene cartel benefited from a fine reduction because they agreed to settle. In the Biofuel Benchmarking cartel case, one undertaking settled while the remaining companies are being investigated under the Commission’s standard cartel procedure. In contrast, in the alleged Euro-Dominated Bonds trading cartel case, the Commission initially agreed to explore a settlement with the parties only to later continue against all of them under the standard procedure. These examples show that though the decision to settle is voluntary, it is neither an enforceable right of the parties nor an obligation imposed on them. This is why we are witnessing hybrid settlement cases that see some parties settling and others subject to the standard procedure. The staggered approach to investigations in a hybrid case can also raise questions about the non-settling parties’ rights of defence, their presumption of innocence and the Commission’s duty of impartiality.
ALS: On that note, the Commission will have been pleased by the General Court’s endorsement of hybrid settlements in 2021, when it rejected Scania’s appeal against the Commission’s cartel decision. Scania had argued that the Commission’s hybrid approach infringed its rights of defence, the principle of good administration and the presumption of innocence. The Court found that the Commission had not prejudged Scania’s liability, that the settlement decision against the other cartel participants could not be read as a premature expression of Scania’s liability and that when examining evidence submitted by Scania, the Commission was not bound by the findings it adopted in the settlement decision. Scania has appealed the GC’s judgment, so it will be interesting to see where the Court of Justice comes out on this point. In a recent judgment in relation to the Euribor cartel case, the ECJ dismissed HSBC’s arguments that the use of a hybrid procedure had led the Commission to infringe its rights of defence and presumption of innocence.
MR: Despite its success in Luxembourg, the Commission has recently voiced some concerns about the benefits of hybrid settlements, and settlement more generally. One concern raised by the Commission is that companies are not ‘locked into’ the settlement once they have opted to pursue one, leading to significant disruptions in the Commission’s case management and limiting one of the key potential benefits of settlements, namely their capacity to streamline the Commission’s decision-making process. The Commission’s willingness to enter into settlement discussions is also impacted by the fact that settlement decisions are appealed before the General Court. The General Court, in turn, has expressed some concerns about how the Commission in practice conducts the settlement procedure. In particular, there are suggestions that the key benefit is not the 10 per cent settlement bonus but the fact that the settlement procedure turns into somewhat of a full negotiation on level of fines, particularly when the Commission seemingly ‘agrees’ to the more limited factual basis as a starting point for the calculation of the fines imposed. The Commission is looking into additional ways to streamline its proceedings and shortening their duration, although some of these may be more feasible in certain investigations (such as, eg, article 102 cases) than in others where the conduct under investigation has already been brought to an end (such as in cartel cases).
5 Tell us about the authority’s most important decisions over the year. What made them so significant?
MR: 2022 has been quite a calm year in terms of the number of decisions that the Commission adopted – only two, in cases involving styrene purchasers and metal packaging producers. However, each of these two decisions qualifies as a ‘landmark’ in its own right. Both cases have in common that they are not “traditional” cartels, but are based on more innovative theories of harm. On one hand, the Styrene cartel qualifies as a buyers’ cartel, where the parties coordinated their negotiation strategy before and during bilateral negotiations with suppliers to push the monthly contract price of input down. On the other hand, the Metal Packaging cartel qualifies as a cartel on product characteristics – the parties coordinated the pass-on of the additional costs (surcharge) of the healthier (BPA-free) coating of cans and closures to their customers (price coordination). Therefore, the coordination was not only about pricing and costs (the surcharge) but also about product characteristics and the quality of packaging.
6 What is the level of judicial review in your jurisdiction? Were there any notable challenges to the authority’s decisions in the courts over the past year?
ALS: We have mentioned a few cases already, including on the topic of hybrid settlements. Another interesting development last year was the GC’s partial annulment of the Commission’s 2017 decision to sanction certain airlines in the Air Cargo case, as it found that either not all of the alleged infringements were proven or that some of the relevant conduct was time-barred. There is also a developing line of cases, including the ECJ’s judgment in Printeos and the GC’s judgment in Deutsche Telekom, that concerns the level of interest payment the Commission needs to pay to companies who have paid their fines in cases that are then later overturned in the courts. This has implications both for cartel and antitrust cases but, given the duration of the court proceedings in both types of cases, has potentially significant financial implications for the Commission.
HG: The principle of ne bis in idem is enshrined in the EU Charter of Fundamental rights and provides that no one can be tried or punished for an offence for which they have been acquitted or convicted. Until fairly recently, to invoke the protection against double jeopardy in antitrust cases, the second proceedings needed to concern the same person, facts and legal interest. In a welcomed departure, the ECJ confirmed in its response to the Bpost and Nordzucker preliminary references last year that, in principle, a company can now claim protection against double jeopardy if it has been previously subject to proceedings for the same conduct regardless of whether the earlier action concerned a different legal interest. The ECJ also clarified that while duplicate proceedings would amount to a limitation of the fundamental right against double jeopardy, depending on the facts, this may be justified. As per the ECJ, in the Nordzucker case, even if parallel proceedings by the German and Austrian competition authorities satisfied the ne bis in idem test, they could still not be justified as they pursued the same objectives.
7 How is private cartel enforcement developing in your jurisdiction?
HG: Private cartel enforcement actions typically are follow-on damage claims litigated before national courts of the EU member states. To harmonise national rules for damage claims, we have the EU Damages Directive, but this covers only some aspects of private enforcement. As for the rest, the ECJ has provided answers on a piecemeal basis to disparate questions. Many preliminary references are still pending at the ECJ, including on the Damages Directive. Recent times have seen follow-on damage claims surge, and this has led to undertakings thinking twice before making leniency applications due to the fear of subsequent litigation exposure. The Commission and national competition authorities are thus considering ways in which leniency can remain attractive, including possibilities to mitigate the consequences for applicants. This balancing of public and private enforcement is rather critical as, until now, many competition infringements and related follow-on-damages claims have stemmed from leniency applications. In the absence of leniency applications, private claimants might not know about some infringements and would be deprived of the possibility to even make a follow-on-claim.
MR: In past years, we have continued to observe an increase in private litigation across the EU. Obviously, the EU’s conscious choice to make it easier to claim damages, by adopting the Damages Directive, has helped to facilitate the rise of private litigation. Damages claims have also been incentivised by the European Court of Justice which, over time, has developed a very broad reading of the right for compensation enshrined in article 101 TFEU. One of the particularly notable judgments was Sumal, which held that the concept of undertaking also applied to the private litigation space. However, a recent judgment of the Court in the Tráficos Manuel Ferrer v Daimler case might signal a departure from that trend. There, the Court held, in a preliminary ruling focusing on the issue of quantification of harm, that cartel victims seeking compensation are not shielded by EU law from bearing their own costs in legal proceedings if their claim is only partly upheld. It appears that the Court is effectively setting limits to its generous effet utile reading of article 101 TFEU. In reaching this conclusion, the Court considers that the Damages Directive already gives parties who have suffered harm the ‘means intended to correct in his or her favour the balance of power between himself or herself and the party which has infringed competition law’.
8 What developments do you see in antitrust compliance?
ALS: The return of dawn raids has prompted many companies to make sure their own policies on inspections are up-to-date and fit for purpose in a hybrid working world. As the competition authorities expand their areas of enforcement focus – including on buy-side and personnel-related infringements like ‘no poach’ agreements – companies are also expanding the list of personnel within their organisations who are given targeted compliance training.
MR: In a hybrid working environment, as personal devices are increasingly used for work, they are likely to attract the Commission’s attention in dawn raids. Companies also need to (and have already started to) update their compliance programmes in order to take into consideration the increase in Commission dawn raids at private homes, including the specific procedural provisions on the basis of which these dawn raids are conducted. Having a separate and dedicated dos and don’ts list to hand at home may prove useful to employees in the event of a dawn raid.
HG: Companies are eager to keep up with the Commission’s focus on the ‘twin’ digital and green transition, largely because the Commission is prioritising some of its enforcement in line with these policy goals. We also see a lot of interest generated by the chapter on sustainability agreements in the Commission’s draft guidelines on horizontal agreements in addition to the Digital Markets Act, Digital Services Act and, for that matter, the Draft Data Act. As the possibility of digital infringements now means much more to companies than traditional anticompetitive or abuse of dominance cases, we frequently provide training from multiple regulatory angles in order to incorporate data protection and consumer law considerations.
9 What changes do you anticipate to cartel enforcement policy or antitrust rules in the coming year? What effect will this have on clients?
ALS: We are already seeing more enforcement on less traditional cartel structures such as buy-side cartels and ‘no poach’ agreements. I also think we will see more and more enforcement of anticompetitive information exchange, as the authorities grapple more with the question of where to draw the line on that topic. Of course, were a price-fixing, market-sharing or bid rigging case to come to light, the Commission would not hesitate to enforce that very strictly. As we already mentioned, it will also be interesting to see the extent to which the Commission is willing to incorporate sustainability and environmental objectives into its enforcement policy.
HG: We understand that beyond traditional cartel conduct involving price-fixing and market sharing, the Commission is considering providing separate guidance on ‘grey area’ cartel behaviour. This could cover buyer cartels, benchmark fixing and information sharing, including technical exchanges. On the topic of sustainability and article 101 TFEU more generally, the final version of the Commission’s draft chapter on sustainability agreements is also expected to be finalised, particularly on the delicate issue of the extent to which wider benefits to society are relevant under the individual exemption analysis of article 101(3) TFEU. The Dutch competition authority has been very vocal in the ability to include these benefits to offset anticompetitive harm, but it seems likely that the Commission will fall short of this rally cry.
10 How has the covid-19 pandemic affected cartel enforcement in your jurisdiction?
MR: It appears that the Commission has developed a significant backlog during the pandemic, resulting in a lower number of decisions adopted in 2022. We do expect, however, an upswing in activity towards mid-2023.
HG: The Commission has withdrawn its temporary assessment framework for antitrust issues related to cooperation in situations of urgency caused by covid-19. Sector-wide initiatives that were justified in view of the pandemic, such as those adopted by supermarkets and pharmaceutical companies, are a thing of the past. In these sectors, we expect the Commission and national authorities to once again be vigilant in identifying anticompetitive behaviour capable of resulting in price hikes.
ALS: On a practical note, the pandemic changed some of the Commission’s practices, for example, on how to conduct oral hearings and access to file. And no doubt the Commission was relieved to have introduced the e-leniency system well ahead of the pandemic so such applications could still be made notwithstanding their offices being closed. I think some of the measures adopted during the pandemic have become standardised and are here to stay despite businesses and the Commission having returned to the office.
The Inside Track
What was the most interesting case you worked on recently?
HG: Confidentiality requirements hold me from disclosing the interesting cases that I worked on last year. I do continue to represent PACCAR/DAF in connection with follow-on litigation proceedings stemming from the Commission’s settlement decision in the Trucks case. In 2022, the trucks litigation entered a new phase as we had to deal with numerous first instance and Court of Appeal decisions and some Supreme Court judgments. The thousands of claims in the trucks cases are tangible evidence as to why follow-on litigation is making applications for leniency unattractive. The Commission’s recent FAQs on Leniency do not offer obvious solutions to this problem, so more radical ideas will be needed if a change in incentives is to be realised.
ALS: Without going into specifics given the confidential nature of the work, I think some really interesting questions are coming up on the approach to fines in less traditional cartel cases. As they become more commonplace, the ‘sell-side price-fixing’ focus of the fining guidelines might benefit from refinement. I am also watching out for any impact the Court’s judgments (both those already delivered and ones still under appeal) on interest payments have on how the Commission’s practice develops in this area.
If you could change one thing about the area of cartel enforcement in your jurisdiction, what would it be?
ALS: I would be keen to see a ‘one stop shop’ for leniency in the EU. I think this would serve both the enforcers and the business community much better than the current system. The introduction of ECN+ is a positive step, but does not go far enough. The Commission has recently announced that it is commissioning a survey to gather views from practitioners on the effectiveness of its enforcement practices.
MR: I would like to see the Commission adopt something like an ECN++ Directive, that would lay down robust and uniform rules regarding legal privilege and the right against self-incrimination in cartel cases. The European Court of Justice’s December judgment in the Orde van Vlaamse Balies case broadens the scope of legal professional privilege to all communications between independent lawyers admitted in the EU and their clients and clarifies that legal privilege covers the content of the communication and its existence. However, substantial uncertainty remains with respect to the scope of legal professional privilege, and rules in member states can differ significantly.
HG: It is disappointing that the leniency system still requires the admission of being in a cartel. This seems to create a black and white environment where either parties were in a cartel or they were not, whereas reality can be much more complex. For example, commercial managers may exchange information because they do not understand their obligations, infringing competition law without there being a cartel-type risk of impact.