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Investigations

Initiating an investigation

Who can initiate an investigation of potential cartel conduct?

An investigation of a potential cartel is formally initiated by the European Commission. However, it can be triggered by different players. Own initiative or ex officio investigations by the European Commission are triggered by, among other things:

  • information reported by individuals via the ‘whistleblower’ tool
  • information from the European Competition Network and non-EU competition agencies;
  • market intelligence, such as sector inquiries; and
  • a leniency application from one of the participants to a cartel. 

If an investigation is initiated by complainants or third parties, what rights (if any) do they have?

In the case of a formal complaint, the complainant has the right to be involved in a subsequent investigation, primarily meaning that it can provide comments to the request for information sent out by the European Commission. However, the complainant and third parties have no right of access to the file during the investigation.

In the case of an oral hearing, the complainant and interested third parties have the right to attend the oral hearing chaired by the hearing officer.

Complainants or third parties with a direct or indirect interest have the right to appeal the decision of the European Commission in front of the General Court.

What obligations does a company have on learning that an investigation has commenced?

Companies must tolerate and cooperate actively with the European Commission once it has commenced the investigation. Especially in the case of dawn raids, companies must submit to inspections, in particular by granting access to the premises concerned and presenting the business documents requested by officials. If a company refuses to submit to the inspection (ie, by destroying evidence after the inspection is initiated), the European Commission may impose a fine. In the case of information requests by formal decision, companies must supply the requested information in a correct and non-misleading way.

However, a company does not need to self-incriminate. The European Commission may thus not compel a company to provide it with answers that might involve an admission on its part of the existence of an infringement.

Formal stages of investigation

What are the formal stages of and approximate timeframe for investigations?

In the first step, the European Commission is entitled to launch investigations on its own initiative. Besides that, investigations can be triggered as a result of one party to a cartel conduct approaching the European Commission in connection with the leniency programme, a third party making a complaint or a national authority raising the matter with the European Commission.

As a second step, the European Commission will collect further information to decide whether to take action on the complaint. If the European Commission finds evidence of a violation of Article 101 of the Treaty on the Functioning of the European Union (TFEU) in the course of its investigation, it will open formal proceedings.

In this case, the European Commission serves a formal statement of objections to the alleged parties in which the European Commission sets out the case. This includes in particular the names of the alleged companies and the alleged cartel conduct. The parties then have the right to gain access to the European Commission’s files and submit a statement setting out their opinion in writing and at a hearing.

In the last step before issuing a final decision, the European Commission must consult an advisory committee on restrictive practices and dominant positions.

There is no official timeframe for investigations. However, they usually take several years from initial investigation to final disposition.

Investigative powers

What investigative powers do the authorities have?

The European Commission’s investigative powers are set out in Chapter V of EU Regulation 1/2003. Its two main instruments are (binding) requests for information and inspections (both announced and unannounced – known as dawn raids). The third instrument is the power to take statements from any natural or legal person who consents to be interviewed for the purpose of collecting information relating to the investigation.

What is the geographic reach of public enforcement actions?

Although the effects doctrine applies to EU cartel law, the European Union cannot enforce decisions or judgments outside its own territory. The public enforcement powers of EU authorities apply solely to the territory of EU member states.

When is court approval required to invoke these powers?

Court approval is required when:

  • the undertaking or association of undertakings prevents entry to its premises, land and means of transport and therefore forcible entry is needed; and
  • other premises (including the homes of directors and other employees) are to be inspected on reasonable suspicion that books and other records relating to the business and the subject matter of the inspection are kept at the premises.

Are searches of business and personal premises authorised? If so, which bodies carry out searches and will they wait for legal advisers to arrive?

Yes. Under Article 20 of EU Regulation 1/2003, officials and other persons authorised by the European Commission to conduct the inspection have the power to enter any premises of the undertaking or association of undertakings, to examine all business-related records and take or obtain copies or extracts from such records. Under Article 21 of EU Regulation 1/2003, the European Commission can order an inspection of any other premises, including the homes of directors, managers and other staff members of the undertakings and associations of undertakings concerned, if a reasonable suspicion exists that relevant materials could be stored there. However, European Commission officials have no power to force entry. Should the entry be prevented, national competition agency officials assisting the search may use force to gain entry, provided they have obtained the necessary warrant (according to national procedures).

What level of cooperation with the authorities is required and what are the consequences for failing to cooperate?

The undertaking and associations of undertaking must fully cooperate with the authorities and supply correct and complete information as well as books and other records within the set time limit. Should they fail to cooperate, the European Commission can impose fines and periodic penalty payments on them (according to Articles 23 and 24 of EU Regulation 1/2003). The fines can be up to 1% of their total turnover in the preceding business year. The periodic penalty payments can be up to 5% of the average daily turnover in the preceding business year per day. Moreover, a lack of cooperation can result not only in additional fines and periodic penalty payments, but also significantly influence the amount of the fine for antitrust violation investigated.

Is in-house legal advice or attorney work product protected by the law of privilege? Does this extend to the advice of in-house counsel?

Attorney work product is protected from the European Commission’s investigative powers by the principle of lawyer-client confidentiality. According to the European Court of Justice (ECJ) (AM&S and Akzo Nobel), privilege requires that:

  • the communication emanates from external independent EEA-qualified lawyers who are not in any employment relationship; and
  • the purpose of the communication must be to defend the company concerned. 

The work product of an in-house lawyer is thus not privileged.

Are any other limitations imposed on investigatory powers in order to safeguard the rights of those under investigation?

The investigatory powers are subject to the general principles of proportionality and the rights of defence. For this purpose, the EU courts have recognised a privilege against self-incrimination. Although undertakings must cooperate actively with the European Commission’s investigation, it cannot compel an undertaking to provide it with answers that might involve an admission on its part of the existence of an infringement. The ECJ (Case 374/87 – Orkem) has stated that the only questions permitted are those intended to secure factual information. By contrast, questions relating to the purpose of actions taken by the alleged cartel members are prohibited, as they compel the applicant to acknowledge its participation in cartel conduct. 

What is the process for objecting to an authority’s exercise of its claimed powers?

An appeal against the European Commission’s investigation measures can be lodged with the General Court and appeals on points of law may be made to the ECJ.

Publicity and confidentiality

What information about investigations will be made publicly available and at which stage(s) of the process?

The European Commission sometimes publishes a press release confirming inspections of certain sectors rather than individual companies, but usually only as a response. It also usually publishes a press release informing the public that certain parties have had written competition law objections raised against them.

More importantly, the European Commission publishes a non-confidential version of the decision and a related press release (as well as a non-confidential summary of the decisions together with the hearing officer’s final report and the advisory committee’s opinion). In particular, the decision includes the names of the parties and the main content of the decision, including the fines imposed. However, business secrets and certain other confidential information is not disclosed.

Is any information automatically confidential and is confidentiality available on request?

If the European Commission’s investigation leads to the adoption of a statement of objections, it will make available documents that it has obtained during the course of its investigation as part of the access to file procedure. In respect of this information, the parties can claim confidentiality for information in their submissions which they regard as business secrets or otherwise confidential. To this end, they must provide a non-confidential version of each submission in which they redact the information considered confidential. The parties must also give reasons for their claim. If the parties fail to comply with this, the European Commission may assume that the documents or statements concerned do not contain confidential information.

International cooperation

Do the authorities in your jurisdiction cooperate with authorities in other jurisdictions?

The European Commission cooperates closely with all 28 national competition authorities within the European Competition Network. Cooperation encompasses the allocation of cases between the European Commission and national competition authorities. European Competition Network members can also exchange information, including confidential information, for the purpose of applying Article 101 of the TFEU or for parallel national proceedings under national competition law. More recently, the European Commission adopted the proposal for a programme for increased cooperation by empowering the national competition authorities and harmonising the leniency application procedures in all 28 EU member states.

The European Commission is also part of the International Competition Network, a network of competition agencies and a multilateral forum for addressing international cooperation within the competition law framework. In addition, the European Union has separate cooperation agreements (either multilateral or bilateral) with some non-EU countries.

Do the relevant enforcement authorities request waivers so as to allow for increased cooperation with authorities in other jurisdictions? What are the consequences of declining to grant a waiver?

Yes. The European Commission uses a template created by the International Competition Network. Companies are not legally obliged to grant a waiver. However, the European Commission’s leniency notice requires a leniency applicant to inform about it of any other applications that companies have filed with other competition authorities. Therefore, applicants should grant the waiver immediately when making their first submission.

Decisions

How is a cartel investigation resolved? Are settlements, plea bargains or other negotiated resolutions available?

Where the parties to a cartel case agree with the findings, the European Commission can use the settlement procedure as an instrument to speed up the adoption of a decision.

What is the process for negotiating a settlement, plea bargain or other negotiated resolution? Do such resolutions require court or other approval?

The procedure does not give undertakings involved the ability to negotiate with the European Commission as to the existence of an infringement of EU competition law or the appropriate penalty. However, it can reward companies’ cooperation by speeding up the proceedings in cartel cases and reducing fines by 10%. This does not require court approval.

If a settlement is not reached, what is the procedure for adjudicating a charge of cartel conduct?

Proceedings can be brought before the general court against European Commission decisions which impose fines against undertakings. The court may quash, reduce or increase the fine or periodic penalty payment imposed.

Which party must prove its case? What is the relevant standard of proof?

The European Commission must also comply with the principle of examination, meaning that it must establish the relevant facts in accordance with the principle of sound administration and be thorough and impartial when assessing all relevant aspects of each case. According to Article 2 of EU Regulation 1/2003 the burden of proving an infringement of Article 101(1) of the TFEU rests on the party or authority alleging the infringement. The undertaking or association of undertakings claiming the benefit of Article 101(3) of the TFEU will bear the burden of proving that the conditions of that paragraph are fulfilled.

Is there a hearing? If so, what is the process for submitting evidence and testimony?

The right to a hearing is one of the fundamental rights under EU law. It can be found in several provisions, such as Article 41 of the Charter of Fundamental Rights and Article 27 of EU Regulation 1/2003. The European Commission must therefore inform the parties involved about the charges against them. The parties can then respond to the charges in writing and, on application, ask for an oral hearing.

What are the accused’s procedural rights?

Apart from the right to a hearing, the parties involved have the right of access to the files of the Commission. Further, equal treatment of the parties must be guaranteed.

Appeal process

What is the appeal process?

The European Commission’s decisions are subject to judicial review by the General Court at first instance and the European Court of Justice (ECJ) on appeal.

To what extent can the appeal body review the agency’s findings of fact, legal assessment and penalties?

The General Court has jurisdiction to:

  • review both the legality and the procedural propriety of the decisions; and
  • assess the appropriateness of the amount of the fines imposed.

The General Court may cancel, reduce or increase the fine. The ECJ can only be appealed to on points of law.

What obligations does a company have if it believes that an investigation is likely?

In the period before an investigation commences, there are no specific obligations.

What are the potential consequences of failing to act or delaying action?

The European Commission can impose fines of up to 1% of the total annual group turnover if a company:

  • supplies incorrect or misleading information;
  • fails to act within the given period; or
  • refuses to submit to inspections.

Penalties

Penalties for companies

What are the potential penalties for companies involved in a cartel?

In accordance with Article 7 of EU Regulation 1/2003, the European Commission may impose behavioural or structural remedies which are proportionate to the infringement committed and necessary in order to effectively end the infringement. Pursuant to Article 8 of EU Regulation 1/2003 the European Commission may also, in cases of urgency due to the risk of serious and irreparable damage to competition, order interim measures. Finally, the European Commission may impose fines of up to 10% of the total group turnover in the preceding business year on the companies involved in a cartel.

Are there guidelines in place for penalties? If not, how are penalties normally calculated?

Behavioural and structural remedies should be proportionate to the infringement committed and necessary in order to effectively end the infringement. The European Commission has broad discretion in setting the level of fines within the limit of Article 23(2) of EU Regulation 1/2003, after which the fine will not exceed 10% of the total group turnover in the preceding business year.

The European Commission has also published fining guidelines. First, the European Commission determines a basic amount for each company relative to a percentage of the annual sales of the product concerned by the infringement depending on the seriousness of the infringement. For cartels, the relevant percentage tends to be between 15% and 20%. This percentage of relevant sales is then multiplied by the number of years and months that the infringement lasted. Second, the basic amount may be increased or decreased by the European Commission on the basis of an overall assessment which considers all of the relevant circumstances (ie, a refusal to cooperate with the European Commission in carrying out its investigations, the role in the cartel or if the company concerned provides evidence that the infringement has been committed as a result of negligence). In cartel cases the fine is increased by a one-time amount equivalent to 15% to 25% of the value of one year's sales as an additional deterrent (the so called ‘entry-fee’).

The European Commission has also published an instructive fact sheet that illustrates how it sets fines.

Do the authorities take into account any penalties imposed in other jurisdictions?

This question is not relevant in an EU context. The competition authorities of EU member states are automatically relieved of their competence if the European Commission initiates its own proceedings. By contrast, penalties imposed by authorities of non-EU member states will not lead to a decrease in the fine. However, when it comes to including indirect sales for the purpose of calculating the amount of the fine, the European Commission may take into account the fact that these sales have also been included in penalties imposed in another jurisdiction.

How can a company mitigate its exposure to fines?

There are various ways of mitigating exposure to fines. First, applying for leniency may lead to full or partial immunity from fines under the leniency notice. Second, the European Commission offers a fine reduction of 10% if a settlement can be reached. Third, mitigating factors for the fine include providing evidence that the company terminated the infringement as soon as the European Commission intervened, providing evidence that the infringement was committed as a result of negligence or that the company has effectively cooperated with the European Commission outside the scope of the leniency notice and beyond its legal obligation to do so. For a full overview, see the fining guidelines.

Penalties for individuals

What are the potential penalties for individuals involved in a cartel?

At an EU level, there are no potential penalties for individuals as they can only be penalised if they are considered companies under EU competition law.

Do the authorities take into account any penalties imposed in other jurisdictions?

At an EU level there are no penalties for individuals. Therefore, there is no need to consider imposed in other jurisdictions.

Is a company permitted to pay a penalty imposed on its employee?

Since at an EU level penalties can be imposed only on companies, this situation does not occur.

Is a company permitted to continue to employ an employee involved in cartel conduct?

Yes.

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