The Use Of Leniency In EU Cartel Enforcement: An Assessment After Twenty Years
Wouter P. J. Wils
King’s College London; European Commission
June 10, 2016
Since 1996, the European Commission has been operating a leniency program, under which companies cooperating with its cartel investigations can obtain immunity from fines or a reduction of fines. Leniency plays a prominent role in EU cartel enforcement today. This paper assesses the positive effects and the possible negative effects of leniency, in the light of twenty years of experience.
The Use Of Leniency In EU Cartel Enforcement: An Assessment After Twenty Years – Introduction
Overview of the applicable provisions
According to the definition provided by the EU legislator, a “leniency program” is “a program […] on the basis of which a participant in a secret cartel, independently of the other undertakings involved in the cartel, cooperates with an investigation of the competition authority, by voluntarily providing presentations regarding that participant’s knowledge of, and role in, the cartel in return for which that participant receives […] immunity from, or a reduction in, fines for its involvement in the cartel”.
The European Commission adopted its first Leniency Notice in 1996. This initial Leniency Notice was replaced by a new one in 2002. The main changes were that immunity became automatic, and that fine reductions became more strictly aligned to the timing of the cooperation. In 2006 the European Commission again amended its Leniency Notice, mainly to clarify the threshold for immunity in terms of information to be provided and to clarify the duty of cooperation of all leniency applicants.
The 2006 Leniency Notice, as currently applicable, provides as follows:
- The European Commission will grant immunity from any fine which would otherwise have been imposed to an undertaking disclosing its participation in a cartel if that undertaking is the first to submit information and evidence which in the Commission’s view will enable it to carry out a targeted inspection in connection with the cartel, and if, at the time of the application for immunity, the Commission did not yet have sufficient evidence to adopt a decision to carry out an inspection and had not yet carried out such an inspection.
- The immunity applicant must provide the Commission with a leniency corporate statement, which may be written or oral and which must include, in so far as it is known to the applicant at the time of the submission, a detailed description of the cartel arrangement, as well as with other evidence relating to the alleged cartel in possession of the applicant or available to it at the time of the submission, including in particular any evidence contemporaneous to the infringement.
- If no undertaking has been granted immunity on the above ground, the Commission will alternatively grant immunity to the undertaking that is the first to submit information and evidence which will enable the Commission to find an infringement of Article 101 TFEU in connection with the cartel, provided that the Commission did not yet have, at the time of the submission, enough evidence to make such a finding. The undertaking must provide the Commission with contemporaneous, incriminating evidence of the alleged cartel as well as a leniency corporate statement.
- A number of additional conditions must be met in any case to qualify for immunity: the undertaking must cooperate genuinely, fully, on a continuous basis and expeditiously from the time it submits its application throughout the Commission’s administrative procedure; and the undertaking must have ended its involvement in the cartel immediately following its application, except for what would, in the Commission’s view, be reasonably necessary to preserve the integrity of the inspections. Moreover, an undertaking which took steps to coerce other undertakings to join the cartel or to remain in it is not eligible for immunity.
- Undertakings disclosing their participation in a cartel that do not meet the conditions for immunity may still be eligible for a reduction from any fine that would otherwise have been imposed, if they provide the European Commission with evidence which represents significant added value compared to the evidence already in the European Commission’s possession, and provided that they fulfil the same conditions of genuine, full cooperation and termination of the infringement as applicable to immunity applicants.
- The first undertaking to provide such significant added value will receive a reduction of 30 to 50 % of the fine which would otherwise have been imposed, the second undertaking a reduction of 20 to 30 %, and subsequent undertakings a reduction of up to 20 %.
- The degree of added value depends on the extent to which the evidence provided strengthens, by its very nature and/or its level of detail, the European Commission’s ability to prove the infringement. The degree of corroboration from other sources required for the evidence submitted to be relied upon against other undertakings involved in the cartel will have an impact on the value of that evidence, so that compelling evidence will be attributed a greater value than uncorroborated or simply corroborating statements.
Guidance as to the normal amount of the fine, and thus the size of the reduction in absolute terms available under the Leniency Notice, can be found in the European Commission’s Fining Guidelines. Indeed, the desire to offer potential leniency applicants a somewhat higher degree of predictability as to the amount of the fines normally imposed was among the reasons why the Commission adopted in 1998 its first Fining Guidelines, and why it replaced these in 2006 by the currently applicable Fining Guidelines.
In 2008, the European Commission introduced a cartel settlement procedure, under which, in cases deemed suitable by the Commission, undertakings can obtain an additional fine reduction of 10 % if they make a formal settlement submission, containing a recognition of the infringement and of the undertaking’s liability for it, acceptance of a range of likely fines, and a waiver of some procedural rights.
The European Commission’s Leniency Notice, Fining Guidelines and cartel settlement procedure only apply to the European Commission’s own cartel enforcement.
The cartel prohibition contained in Article 101 TFEU is however also enforced by the competition authorities of the EU Member States. Indeed, Regulation 1/2003,18 which entered into force on 1 May 2004, provides that all EU Member States must have a national competition authority that is empowered to apply Article 101 TFEU, and that those national competition authorities must also apply Article 101 TFEU whenever they apply their national competition laws to cartels that may affect trade between Member States.
Following the example of the European Commission, most EU Member States’ competition authorities have also introduced a leniency program, starting with the British and German competition authorities in 2000. The leniency programs of the European Commission and of the various national competition authorities are autonomous and independent of each other. They are however broadly similar, in part as a result of soft harmonization through the European Competition Network (ECN), which groups the European Commission and the competition authorities of the EU Member States, and which adopted a first ECN Model Leniency Program in 2006 and a second, revised one in 2012.
Finally, in 2014 and 2015, the European Parliament and Council and the