The European Competition Network ("ECN") has published a new version of its Model Leniency Programme ("MLP"). The MLP makes it easier for companies that have uncovered evidence of participation by their employees in a cartel to "blow the whistle" in return for immunity from, or a reduction in, fines in the EU Member States affected by the reported cartel.
Although the MLP falls short of introducing a one-stop shop leniency program at EU level, it introduces a set of common standards for multiple leniency applications, in an endeavor to overcome any reluctance to apply for leniency resulting from discrepancies between the different leniency regimes in the EU.
The ECN is a forum for discussion and cooperation between the European Commission ("Commission") and the national competition authorities ("NCAs") of the EU Member States.
The Commission and the NCAs have concurrent powers to enforce Article 101 of the Treaty on the Functioning of the EU which prohibits cartels and similar anticompetitive practices. A case allocation mechanism works to ensure that each case is handled by the best placed authority. For example, the Commission may be particularly well placed to deal with cartels with effects in more than three Member States. However, at the outset, when the effects of the suspected cartel are often not fully known, it is not certain which competition authority ultimately will handle the matter. Accordingly, leniency applicants initially may wish submit parallel applications to all ECN members that may investigate the reported cartel. Making multiple parallel applications is a complex exercise, given the discrepancies that currently exist among the different leniency regimes in the EU.
The MLP was adopted by the ECN in 2006 with the aim of making it easier for companies to submit multiple leniency applications simultaneously. The new MLP introduces some important changes and clarifications.
These are summarized below.
The type of conduct to which the MLP applies
The MLP continues to apply only to secret cartels. Other types of restrictions such as vertical agreements and horizontal restrictions other than cartels are less difficult to detect and therefore excluded from the MLP. However, the ECN now extends the application of the MLP to cartels that include vertical elements (such as a hub-and-spoke cartel).
The MLP continues to apply only to companies, not individuals. The MLP ought not to prevent NCAs from applying their own national leniency regimes for individuals, if any (e.g. the UK Office of Fair Trading's no action letter regime).
The categories of leniency and the conditions of eligibility
The MLP continues to use the categories and eligibility conditions contained in the EU Leniency Notice. Accordingly, immunity from fines is granted only to the company that first submits evidence of an alleged cartel, either before or after a dawn raid (so-called Type 1A or 1B applications). Further, reduction of fines is granted to the companies that do not qualify for immunity but nevertheless come forward with evidence that represents significant added value relative to the evidence already in the possession of the authority (Type 2 applications).
Additional conditions must be met for leniency: full cooperation, termination of any participation in the reported cartel, confidentiality, non-disclosure, and relevant documents retention. Finally, ringleaders may qualify for a reduction of fines, but not for immunity.
Procedures to apply for leniency
The MLP now allows for anonymous approaches to the NCAs by any potential applicant wishing to obtain guidance on whether it qualifies for leniency. A “marker” is available to protect an applicant’s place in the queue for a given period of time while the applicant gathers the required information and evidence in order to meet the leniency threshold. An applicant will be informed as early as possible of the status of its application. Finally, where the applicant believes that the Commission is the best placed authority to investigate, an applicant now may make summary applications to the NCAs, thereby protecting its position under the leniency program of the NCAs.
Protection from disclosure of leniency applications
The MLP introduces a number of additional safeguards against the risk of disclosure of leniency applications to plaintiffs in private actions for damages against leniency applicants (see the previous Jones Day alert, Leniency Documents Not Exempt from Disclosure Demands in EU.
To reduce such risk, the MLP allows for oral applications (so-called corporate statements) in cases where this would appear to be justified and proportionate, in particular in cases where the Commission is particularly well placed to act. The MLP also provides that no access to the investigation file should be granted to the parties under investigation before the statement of objections (formally recording the charges against alleged cartel member) has been issued. Practical Impact
Making multiple parallel applications across the ECN is a complex exercise given the existing discrepancies between the different leniency regimes across the EU.
Recent cases illustrate the dangers of getting this exercise wrong. For example, in the washing powder cartel, Henkel obtained immunity at EU level but was fined at national levels where it failed to meet the conditions for immunity. Similarly, in the freight forwarding cartel, DHL obtained immunity at EU level but was fined at national level where it failed to meet the conditions for immunity.
In an ideal world, leniency requirements and procedures would be harmonized throughout the EU, to avoid the risk of inconsistent approaches at the national level. Without EU harmonized legislation, even under the new MLP, leniency applicants may still need to submit multiple applications to protect themselves from exposure in EU jurisdictions. However, the new MLP is a welcome step towards further harmonization of leniency regimes across the EU.