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CartelsFines, Leniency, Settlement

John PheasantNovember 28, 2007

Brussels

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Outline

• Fining policy

• Leniency

• The proposed settlement procedure

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Total Cartel Fines Imposed

0.0

0.5

1.0

1.5

2.0

2.5

3.0

€ b

illion

2002 2003 2004 2005 2006 2007

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Fines - 2006

0

100

200

300

400

500

600

700

800

900

1000

€ millio

n

BleachingChemicals

Acrylic Glass RoadBitumen

CopperFittings

SyntheticRubber

Overall cartel fine Highest individual fine

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Fines - 2007

0

100

200

300

400

500

600

700

800

900

1000

€ millio

n

GasInsulated

Switchgear

Lifts &Escalators

Beer Fasteners Bitumen ProfessionalVideotape

Overall cartel fine Highest individual fine

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Fines

The New Fining Guidelines

1. Up to 30% of relevant turnover

2. Multiplied by each year of the infringement

3. 15 to 25% for cartel “entry fee”

4. Adjusted for aggravating and/or mitigating factors, including

5. 100% recidivist uplift (for each previous infringement)

6. Increase for deterrence

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Fines1. Relevant turnover = 100 x 20% = 20

2. Duration = 5 years x 5 = 100

3. + entry fee + 25% = 125

4. Aggravation/ mitigation

+ 0 = 125

5. Recidivism (one previous infringement)

+ 100% = 250

6. Deterrence + 0 = 250

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Fines

First case under the New Guidelines

Professional Videotape: Sony, Fuji, Maxell

Total annual sales = €115m (in 2001)

Duration = 3 years

Total fines = € 75m

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Fines

Professional Videotape

€m

115 x 20% = 23

x 3 years = 69

Aggravation Sony +30%

Leniency Fuji -40%

Maxell -20%

75

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Leniency

Immunity applicant: 100%

First leniency applicant: 30-50%

Second leniency applicant: 20-30%

Subsequent leniency applicants: up to 20%

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Settlement

• 200+ leniency applications since 2002

• Fewer than 10 cartel decisions annually

• Significant backlog (the time bomb)

• Need for an expedited administrative procedure

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Stage 1 - Commencement

Party requests

settlement discussions

Commission does not

consider case suitable at any time

Standard procedure

Commission considers

case suitable

Min. 2 weeks for other parties to declare

Bilateral procedure

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Stage 2 – Disclosure and Discussion

Disclosure by Commission of essential elements: • alleged facts• gravity• duration• attribution of liability• range of fines• evidence

Party can assert views and

decide whether to settle

Common understanding:• scope of objections• range of fines

Possible access to Commission’s file:• re any other aspect of the cartel• if procedural efficiencies not jeopardised

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Stage 3 – Settlement Submissions

Commission sets time limit for final

WSS

WSS• acknowledgement

• facts• legal qualification• duration

as per Stage 2• maximum amount of

fine• rights of defence respected• no access to file or

hearing• Community language

WSS =• commitment to cooperate• irrevocable unless

Commission does not endorse

WWS in SO and then Decision

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Stage 4 – Statement of Objections & Reply

SO:Endorses WSS if it reflects:• description of cartel• undertaking’s involvement• legal qualification

Reply:Min. 1 week time-limit:• simple/unequivocal confirmation that SO and WSS correspond• continued commitment to

settlement procedure

SO: Does not endorse:• standard procedure• acknowledgements in

WSS withdrawn

New Defence

No confirmation:Standard procedure

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Stage 5 – Decision & Settlement Reward

Consultation with Advisory Committee

NO other procedural step, e.g. no hearing or access to file

Decision:• if consistent with WSS, settlement request cannot be revoked• amount of the fine

Commission may still adopt a different position

New SO

• Reduction in the fine ?• Equivalent for all parties• Increase for deterrence not greater than x 2• Added to leniency

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Stage 6 – Appeal

Decision may be appealed to CFI

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Settlement - Issues

• Procedural efficiency v. Rights of the Defence

• Bilateral settlements in a multilateral environment

• Commission’s discretion: no certainty until Decision

• Determination of incentives: what is the discount?

• Is it too complicated?

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Final Thought

BEWARE – THE TIME BOMB!

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