Background: cartels and leniency

A new cartel leniency regime is set to be introduced in Ireland under the Competition (Amendment) Act 2022 (the 2022 Act), which will allow cartel members to benefit from reduced penalties by coming forward to the Competition and Consumer Protection Commission (CCPC) and admitting their wrongdoing.

Cartels, by the nature, are inherently "secret" conspiracies in which participants have a common vested interest in protecting information on their activities from the public and enforcers. Cartels can result in increased prices, lower quality products and / or a narrower choice for consumers. Oftentimes the customers of cartelists will not even know that they have been a victim of anticompetitive conduct. Cartels are taken very seriously by competition authorities and are expressly prohibited by section 4 of the Competition Act 2002 in Ireland, as well as being a criminal offence.

Because of their secretive nature, acquiring evidence and bringing enforcement actions against cartels (particularly criminal prosecutions which must be proved beyond all reasonable doubt) can be very difficult. Competition authorities typically investigate potential cartels on the basis of their own suspicions, information from other agencies or (perhaps most valuably) from participants or individuals "on the ground" on the basis of immunity or leniency applications.

How do leniency programmes work?

Under leniency programmes, competition enforcers forgo applying the full rigours of the law in exchange for an applicant’s cooperation in establishing a case against other cartel members. The purpose of a leniency programme is to operate as both a detection and deterrent mechanism against breaches of competition law. A good leniency programme is designed to foster distrust amongst cartel participants, because of a constant threat of a member "blowing the whistle".

Leniency programmes typically only apply to hardcore secret cartels involving direct competitors, such as those involving price fixing, bid rigging, capacity restrictions (i.e. limiting output), or the allocation ("divvying up") of markets / customers / sales. These kinds of anticompetitive arrangements are considered to be "hardcore" or "per se" infringements, meaning that competition authorities do not need to prove the anticompetitive effects arising from them. Purely "vertical" agreements (i.e. supply, distribution, licensing etc.) are less often included in the scope of leniency programmes, other than the most serious cases such as retail price maintenance (i.e. imposing minimum resale prices).

Out with the old…

Under the previous Irish regime, the CCPC's powers were essentially limited to investigating breaches of competition law and its ability to effectively enforce was practically very limited. Most notably, the CCPC did not have the ability to administer civil fines for cartel behaviour. In effect, this meant that the primary deterrent to cartel behaviour in Ireland was either a full-scale criminal conviction involving the DPP (which is burdensome and time-consuming to prove in court) or, at the other end of the spectrum, simply the indirect effect of "bad PR" for a company arising from a CCPC investigation and a negative finding.

Until recently, there were fairly significant differences in the availability and scope of leniency programmes across the EU Member States. This caused legal uncertainty for undertakings that may have wanted to "come clean", particularly in relation to the conditions for leniency and their immunity status. Such uncertainty weakened the incentives for potential leniency applicants to apply, which in turn will have led to less effective competition enforcement with fewer secret cartels being uncovered.

… and in with the new

The 2022 Act places leniency applications on a statutory footing in Ireland for the first time. The 2022 Act inserts new sections 15AH-15AP as a new Part 2E of the Competition Act 2002 (the principal competition legislation in Ireland). The new provisions on leniency are detailed and they run to almost 4000 words. The leniency regime is more nuanced and detailed than the cartel immunity programme currently in place (see further below) and will involve special arrangements for applications from participants who are seeking to report the activities of cartels.

For the purposes of the Irish regime, leniency means being immune from administrative / civil fines or a reduction in those fines. Full immunity from administrative financial sanctions will only be available to the first participant that applies for leniency (in accordance with the new section 15AI). Any subsequent applicants many benefit from a possible reduction of up to 50% of any administrative financial sanctions that would otherwise be imposed (in accordance with the new section 15AJ). Obviously, the purpose of distinguishing between "first in" and subsequent applicants is to encourage and incentivise undertakings to be the first to "blow the whistle" on the cartelists. However, those who benefit from the leniency regime would only theoretically be protected from "public" enforcement. The leniency programme would not prevent the applicant from being sued for damages by their own customers who may have suffered as a result of the cartel conduct. In practice, this residual threat of private enforcement will likely act as a disincentive for applicants to come forward.

The new section 15(AK) sets out the general conditions for leniency. Any undertaking may apply for leniency including those that materially facilitate the formation or operation of a cartel, even where it was not engaged in the same type of business as the direct participants. An undertaking will not be eligible to benefit from the leniency programme if it took steps to coerce another undertaking to join a cartel or remain in it. In order to qualify for leniency, an applicant must end its involvement in the alleged cartel; cooperate fully with the CCPC; and assist in providing bona fide evidence to the CCPC.

The remainder of section 15 sets out the procedural aspects of the new leniency programme, including the form in which leniency statements are made, how protection (a described as a "marker") is obtained by applicants, and summary applications for leniency. Section 15AI(2) also requires the CCPC to introduce a leniency programme by way of a notice. The CCPC consulted on its new "Administrative Leniency Policy" (ALP) for cartels in February 2022. The ALP is modelled on the European Competition Network’s revised "Model Leniency Programme" – which will bring the Irish regime closely into line with other EU Member States.

Relationship with the existing "cartel immunity programme"

Although there was no formal cartel leniency programme in place in Ireland until now, there has been a similar (but different) Cartel Immunity Programme (CIP) in place for some time. The CIP relates to immunity from criminal prosecution for criminal cartel offences (rather than a reduction in civil penalties). The CIP is based on a “soft law” notice rather than statute and it is the DPP rather than the CCPC that decides whether to grant immunity. Although there is some track record in Ireland of the CIP being used to bring evidence forward in cartel cases (most notably in the oil and motor car sectors), its use has been very limited. The current penalties for criminal cartel offences are fines of up to €5 million or 10% of an undertaking's annual turnover. An individual convicted on indictment faces the same fine or imprisonment for up to 10 years (or both); as well as disqualification as a director. The 2022 Act does not propose to change these penalties.

The new leniency programme is separate (and in addition) to the existing CIP. An undertaking which is granted leniency under the ALP will not automatically be immune from criminal prosecution and vice versa. This will be a matter for the applicant to consider carefully and it is likely that applicants will use both the CIP and ALP to obtain immunity from both criminal prosecution and leniency regarding administrative financial sanctions.