The European Commission has finalised and adopted its procedure to allow companies to settle cartel cases early and receive a reduction in fines in return for admitting liability and their involvement in a cartel (the original proposal was issued in October 2007 and summarised in our February issue of the Competition Law Bulletin). This is in addition to the Commission’s leniency regime where companies can get full or partial immunity from fines by blowing the whistle on a cartel. The new procedure, contained in a Commission Notice and Regulation to amend Regulation 773/2004, permits parties to cartel cases to engage in settlement discussion, after initiation of proceedings but before a statement of objections is issued. The Commission has the discretion on whether to settle or not. On completion of a settlement procedure, the company will receive a 10% reduction in its fine, in addition to any reduction received under the Leniency Notice. This is also beneficial to the Commission as it will free up resources to pursue more cases.
The Commission will retain wide discretion to decide whether settlement will be suitable for a particular cartel case. In particular this will depend on the ability of the Commission and the parties to reach a common understanding on the scope of the case. The settlement procedure will not be appropriate where a party contests the facts, as the reduction in fine will be only 10% and a party engaging in the settlement procedure must waive its rights of access to the Commission’s file and its right to an oral hearing. It should be noted that the Commission cannot impose a settlement on a company and companies have to make a request for the Commission to start settlement discussions with them. Under the finalised procedure, settlement submissions need no longer be in writing. They also benefit from a degree of protection against disclosure to national courts and competition authorities.
Whilst the parties to a settlement receive a reduction in fine in return for admitting liability and agreeing to a faster and simplified procedure, the Commission benefits from faster proceedings as this procedure frees up resources to allow them to pursue more cases. Recent cartel cases have taken as long as six years for the Commission to issue a decision from the start of the investigation. The Commission also hopes that settlements could reduce litigation in cartel cases on the basis that companies usually dispute the amount of fines, procedural issues and liability of parent companies for their subsidiaries’ activities rather than actual liability or involvement in the cartel.
The settlement procedure will not affect the leniency procedure by which parties can apply for complete immunity or a reduction in fines. Leniency procedures relate to the initial stages of an investigation where companies can voluntarily provide evidence which triggers or advances the Commission’s cartel investigation. In contrast settlements will affect the procedure leading to the adoption of a final decision. Companies will still have a strong incentive to apply for leniency even if they later decide to settle, although it is questionable whether a company that has received conditional full immunity from fines under the leniency program will have anything to gain from a settlement. Companies who only receive partial immunity under the leniency regime will perhaps want to use the settlement procedure to get a further reduction in fine and earlier resolution of their case. However, it is not clear whether settlement could expose companies to greater liability in private damages actions or at least accelerate the likelihood of damages actions.
The Commission notice provides that the Commission may decide to discontinue the settlement discussions if the parties distort or destroy the evidence. This may also be an aggravating factor in settling a fine and amount to a lack of co-operation under the Leniency Notice.
Previously settlements or expedited procedures have been successfully used to reach a swifter conclusion in cases concerning schools and supermarkets/dairy processors in the UK and the construction industry in The Netherlands. Not all parties in these cases chose to settle and it will be interesting in future to see whether companies differing strategies have an impact on the use of the Commission’s settlement procedure and cartel victims’ ability to bring damages actions.
Source: Commission press release IP/08/1056, Commission Regulation (EC) No 622/2008 of 30 June 2008 amending Regulation (EC) No 773/2004, as regards the conduct of settlement procedures in cartel cases (Text with EEA relevance), Official Journal L 171, 1.7.2008, p. 3–5 Commission Notice on the conduct of settlement procedures in view of the adoption of Decisions pursuant to Article 7 and Article 23 of Council Regulation (EC) No 1/2003 in cartel cases (Text with EEA relevance ), Official Journal C 167, 2.7.2008, p. 1–6 Frequently asked questions (30.06.2008) http://ec.europa.eu/comm/competition/cartels/legislation/settlements.html