Ms. Nellie Kroes, the European Competition Commissioner, delivered a speech on April 7, 2005, on the effective enforcement of European Community competition law. Speaking at the International Forum on Competition Law in Brussels, the Commissioner focused on cartel enforcement, in particular, which she has highlighted in previous speeches as one of her highest priorities during her time in office.
Over the past five years, the Commissioner noted that the European Commission has adopted 31 decisions against cartels, and imposed nearly 4 billion (approx. $5.3 billion) in fines. This represents an unprecedented crackdown on cartels, amounting to 35% of all cartel decisions since the Commission’s first cartel decision back in 1969. She was confident that deeper cooperation between the Commission and national European antitrust authorities, and the new investigative tools allowed by the EC’s modernized regulatory framework, would lead to even more vigorous cartel enforcement. However, she highlighted several emerging trends that would have to be addressed if the European Commission’s cartel enforcement policy is to remain effective.
For example, Commissioner Kroes noted that the growth in number of cartel decisions has brought a corresponding growth in the number of legal challenges to the Commission’s decisions. On average, one cartel decision gives rise to three or four court cases. Accordingly, defending its decisions before the European courts will become an implicit element of the Commission’s cartel enforcement process. Second, the growing number of immunity applications under the leniency program has increased the Commission’s workload and limited their ability to conduct “dawn raids”, or inspections on suspect companies/individuals. The need to fully investigate every leniency application submitted under the current leniency program has also increased the risk that applicants will not receive a prompt response, leaving them in a uncertain situation.
Commissioner Kroes acknowledged that responding to these challenges will be central to the maintenance of an effective European antitrust policy. She noted that the Commission had undertaken a reorganization which had led to the creation of a dedicated cartel directorate to achieve economies of scale, and a pooling of anti-cartel knowledge. More importantly, she discussed five wider systematic changes in the cartel area that may in the future contribute towards a more effective European cartel policy.
First, the weaknesses in the existing leniency regime need to be addressed. In particular, she cited the need for a one-stop shop for European leniency applications. She noted that detailed work is being undertaken with assistance from the European Competition Network comprising of all national antitrust authorities. She suggested that a system based on one central body for applications may not be the best solution, and indicated a preference for a solution that would allow a leniency application to any national antitrust authority.
Second, and based on U.S. practice, Commissioner Kroes suggested that the Commission may look into developing some form of plea bargaining power with a view to negotiating direct settlement agreements with alleged cartel members. Currently, there is no arrangement for the simplified handling of European cartel cases, and the introduction of some form of plea bargaining would remove the need for the Commission to investigate every last substantive detail of each and every case, and lead to faster enforcement decisions.
Third, Commissioner Kroes highlighted an emergent problem caused by the interaction of the EC leniency program, and civil procedures in other non-EU jurisdictions. Specifically, she noted that rules of discovery in some other jurisdictions, in particular, the U.S., can require evidence submitted under the EC leniency program to be disclosed in court actions for related civil damages claims. This threatens the credibility of the EC leniency program, and also limits the willingness of companies to come forward to expose potentially illegal activities to the Commission. She explained that the Commission was working on practical solutions to this problem, which would ultimately be incorporated in a revised Leniency Notice.
Fourth, the Commissioner expressed frustration that companies that were clearly guilty of antitrust violations could escape liability on purely procedural grounds. She explained that the Notice on access to the file is being reviewed in order to offer greater clarity on defense issues, and expects a new Notice to be published later in 2005.
Fifth, she acknowledged that there has been some criticism of the 1998 Guidelines on fines for a lack of transparency. However, the Guidelines have been endorsed by the European Court of First Instance, and, as a matter of principle, allowing infringers to calculate the cost/benefit ratio of cartel participation in advance would not lead to a sustained policy of cartel deterrence and zero tolerance. She accepted, however, that the current Guidelines are rigid. In particular, they appear to apply disproportionate fines to small and medium sized companies. She suggested that the Commission may look at amending the guidelines in this particular respect.
Ms. Kroes ended her speech by emphasizing the importance of international cooperation between antitrust authorities. She cited the achievements of the International Competition Network, and the OECD, and reiterated the need to achieve a global commitment to ban hard-core cartels. She stated that the Commission is currently investigating the possibility of entering a ‘second generation’ cooperation agreement with U.S. antitrust authorities to allow for a deeper degree of cooperation in cartel enforcement.