On 14 June 2011, the European Court of Justice (ECJ) made an important ruling which may force competition authorities to disclose the contents of cartel leniency applications to third parties, and enable domestic courts to order the disclosure by a defendant in a follow on competition damages claim of the information he supplied to the competition authority where the defendant received leniency in the administrative procedure.
The ECJ ruled that EU legislation must not prevent those wishing to bring damages claims against cartel participants from being granted access to leniency documents. The ECJ added that it is for EU Member States’ national courts to determine on a case by case basis the conditions under which this access must be permitted or refused by weighing the interests in favour of disclosure of the information against the interests of protecting the information from disclosure.
This ruling means that those wishing to claim damages from a cartel member who applied to an EU competition authority for leniency are now more likely to obtain disclosure of leniency statements. Leniency statements contain companies’ “confessions” of prohibited cartel behaviour. This will clearly have practical implications for follow on claims (i.e. claims brought once a competition authority or court has already made a formal decision that particular entities have been a member of a cartel and therefore infringed competition law), and might also impact claims made in the absence of an infringement decision.
This ruling comes as a boost to potential claimants in competition damages claims, most obviously in follow-on claims, which are also the most frequent competition damages claims. This ruling can make the process of the claim easier by enabling disclosure of more evidence of infringement.
Arguably though, the bigger impact of this ruling will be on the competition authorities’ future ability to detect cartels. The European Commission and the various competition authorities of the EU Member States had fiercely resisted such disclosure on the basis that cartel leniency programmes offer the best hope of catching cartels. The leniency process is wholly confidential until a decision is made, when the fact of the grant of leniency will be reflected in any fine imposed. Disclosure of leniency applications could undermine companies’ incentives to confess and apply for leniency since a requirement of the application is full admission of cartel participation. The ruling is a severe blow to leniency programmes. Competition authorities can expect to see fewer applications being made to them in future. In turn (and contrary to the impetus behind the ruling), this could also mean fewer competition damages claims as fewer cartels are detected and fewer cartel infringement decisions are available to act as the basis for claims.
Since the issue of disclosure is left to the courts of EU Member States, an inconsistency of approach could also emerge. In practice, this could lead to forum shopping by claimants for the jurisdiction whose courts are most likely to grant disclosure. The case creates a minefield of issues and uncertainties. The extent to which cooperation across the Member States plays any part in commonality of approach will be another point to watch.
The case is C-360/09 Pfleiderer, a reference from a German court to the ECJ. For the full text of the ECJ’s ruling please click here.