EU: Leniency - European Commission published new FAQ guidance on the immunity and fine reduction 2006 notice
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The last few years have seen a decrease in the number of applications for leniency from undertakings parties to cartels. That trend, allegedly owing to strengthening of the civil enforcement regime brought about by the 2014 Damages Directive, has in the Commission’s view become a concern. This is best expressed in numbers: following the Damages Directive the volume of leniency applications shrank from 46 in 2014 to just 24 in 2016. Other factors potentially adding up to the decrease such as jurisdiction and parallel investigations or general administrative uncertainty, are also accounted for in the guidance.
Accordingly, the Commission has as of late initiated action towards strengthening one of its most powerful tools against coordinated anticompetitive practices: its leniency programme. This resulted first in the reform of its eLeniency tool, and now in the newly adopted FAQ Guidance, which aims to provide undertakings with further detail on the practical enforcement of the leniency programme.
As the Commission acknowledges at the outset, the FAQ Guidance is rather modest in its aims. It is descriptive rather than prescriptive of its activities. It merely seeks to “clarify certain concepts and current practices” in the Commission’s leniency procedures. It constitutes an attempt to nudge undertakings towards leniency by building trust. This is to be achieved by enhancing transparency and predictability in its procedures.
But does the Guidance really provide any added value in this respect?
At first glance, the format chosen by the Commission in drafting the document is laudable: simple and to the point, defining each concept in its own separate space and adding practical insight to the text of the 2006 Notice. Overall, it is a very “applicant-friendly” text, in that it helps understand the applicability and feasibility of the leniency programme from the practical reality of an undertaking, as opposed to the vagueness and obscurity of traditional statutes.
When it comes to content, there are several sections where the guidance merely cites or summarises the Notice or the relevant legislation, adding immaterial or superficial insight. However, the Guidance also has sections where the opposite is true, by adding relevant information that might prove helpful to encouraging undertakings to resort to leniency. This is all summarised below. The body of the document is split into seven sections, each dealing with the different aspects covered by the Notice and related legislation:
1. The concept of a (secret) cartel
In addition to giving nuance to the definition of what constitutes a cartel by means of examples, the Guidance elaborates on the secrecy under which cartels typically operate.
2. The key elements of a leniency programme
Here, the FAQ Guidance mostly paraphrases what is already stated in point 12 of the Notice, but adding practical examples to clarify its meaning. It does however address an issue often brought up in practice: the fact that the undertaking which was to be granted immunity in the first place is ultimately unsuccessful does not result in the next undertaking in the queue being ‘promoted’ to immunity.
3. Contacting the Commission
The Notice adopts a more practical tone when it comes to procedure. This section explains the possibility for potential applicants to be informed of whether an infringement qualifies for leniency purposes. The possibility is introduced informally by the Commission informs “on a no-names basis”.
It also provides further practical details regarding the possibility for hypothetical applications, whereby undertakings can provide information related to a cartel without revealing the content of that information. The only information required in this case is that of the sector concerned, the geographic scope, and its estimated duration.
The Guidance includes an additional point which does not feature in the 2006 Notice: the possibility of an undertaking asking directly whether immunity has already been granted or whether, on the contrary, they must obtain it.
Another interesting point in this part of the document is the description of the tasks of the Leniency Officer, as well as details on the disclosure of ongoing cooperation. On this last point, the Guidance builds on the 2006 Notice’s provision that an undertaking may only reveal its cooperation with the Commission’s consent. The Guidance clarifies that such consent is only granted in cases such as due diligence procedures or audit reporting.
4. Leniency policy and practice
The FAQ Guidance introduces first some practical remarks regarding the marking system. Accordingly, it states that it is common practice for the Commission to allow only a month for the concerned undertaking to fulfill the statutory conditions for leniency. The possibility of extending that term depends on the circumstances of the case.
Regarding decisional practice on fine reduction, the FAQ Guidance mentions the “generosity” of the Commission in recent cases (specifically mentioned), in which it used its discretion to determine the applicants’ specific fine reduction percentage within their designated band.
The concept of the significant added value threshold is thoroughly examined. It is affirmed that as long as undertakings provide full information in their possession and cooperate fully, they are mostly safe to meet the threshold of relevant evidence provided. Likewise, it is stated that only on three occasions has the Commission found applicants to be non-compliant with this requirement. The Guidance further analyses the value attached to each type of evidence in practice, referring amongst other things to contemporaneous evidence, direct evidence, and compelling evidence.
The document is also explicit about the Commission’s practice concerning the stage at which immunity or fine reduction is granted. Accordingly, although immunity (or fine reduction) is only confirmed at the end of the procedure, it is before that stage that companies are given confirmation as to the success of their request. As regards to immunity, companies will know be aware of it before facing inspection or any other investigative measure. As for fine reduction, the Commission reports on the fine-reduction band corresponding to each undertaking upon initiation of the proceedings. This is one of the most informative parts of the Guidance, disclosing further details on the four different outcomes by way of letters to the undertakings and adding relevant decisional practice of the Commission in that regard.
Whistleblowing is another relevant point in this section of the Guidance. The Commission seizes the opportunity to inform of the potential relevance of whistleblowers’ information as well as the special protection whistleblowers are granted. This puts pressure on undertakings in the form of a potential threat they might dodge by resorting to leniency.
5. Further protection of leniency applicants outside the leniency notice
As stated above, one of the crucial factors in understanding the decreasing trend in leniency applications is the entry into force of the Damages Directive, which has increased the likelihood of civil action against undertakings once a cartel is made public. The Commission tries to reassure potential leniency applicants of the protection afforded to any statements made by undertakings during leniency proceedings.
The Guidance also explains the benefit of leniency and collaboration with regards to avoiding a potential ban from procurement procedures under the Financial Regulation. However, this is simply an overview of the relevant provisions and, as opposed to other parts of the document, it adds little practical decisional insight.
6. European/international cooperation
One of the most interesting parts of the document concerns dealing with requests from third countries for the disclosure by the Commission of leniency material. On that point, it is stated that the Commission can and has already in the past successfully opposed such requests even before US Courts under the pretext that it might undermine its leniency regime. Such opposition may occur by means of a letter to the competent court or by the Commission acting as amicus curiae.
7. The benefits of leniency
The Commission claims that under the current legal framework on leniency, undertakings have saved EUR 16 billion in potential fines.
Even though it is unlikely that the FAQ Guidance will transform the state of play, it nevertheless constitutes a good effort to reverse the declining trend in the number of EU leniency applications during the last few years. It is a clear, concise, full of practical insight, and enhances transparency by helping undertakings to assess the benefits of the leniency procedure.
For more information, please contact Jose Rivas or Ignacio Villalba Navarro.
