On December 7, 2006, the European Commission adopted a revised Notice on Immunity from Fines and Reduction of Fines in Cartel Cases (the “Leniency Notice") which clarifies the information an applicant needs to provide to the Commission to benefit from immunity, and a reduction of fines. The Leniency Notice also introduces a marker system for immunity applicants, and a procedure to protect corporate statements made by companies from being made available to claimants in civil damage proceedings. The revisions take account of two public consultations, conducted in February, and October 2006. On announcing the new changes, the European Competition Commissioner, Ms. Neelie Kroes, stated,

Secret cartels undermine healthy economic activity. To root out cartels we need heavy sanctions to deter cartels and an efficient leniency policy providing incentives to report them. These changes will further strengthen the effectiveness of the Commission’s leniency program in the detection of cartels, and offer clearer guidance for business.

Leniency allows the European Commission to offer full immunity, or a reduction in the fines, that would otherwise have been imposed on a cartel member in exchange for disclosure of information on the cartel, and cooperation with the investigation. A number of improvements have been made in the revised Leniency Notice to provide more guidance to applicants, and to increase the transparency of the procedure. For example, the immunity thresholds have been clarified to:

– set out explicitly and clearly what type of information, and evidence, the applicants should submit to qualify for immunity;

require that the information provided by the first applicant for full immunity must be sufficient to enable the Commission to conduct a "targeted investigation";

– confirm that applicants are not required to produce in their initial application for immunity information and evidence, the collection of which would jeopardize a Commission inspection, and which can be provided under the continuous cooperation obligation; and,

– state explicitly that the applicants need to disclose their participation in the cartel.

Concerning the threshold for reduction of fines, the Leniency Notice makes it clear that evidence that requires little or no corroboration will have greater value. Such evidence will also be rewarded outside the normal bands for reduction of fines, when it is used to establish any additional facts increasing the gravity or duration of the infringement.

The conditions for immunity and reduction of fines have also been made more explicit by:

– introducing flexibility as to the point in time when applicants should terminate their participation in the alleged cartel activities;

– clarifying that genuine cooperation requires, in particular, that the applicant provides accurate, and complete information that is not misleading;

– extending the obligation not to destroy, falsify or conceal information to cover also the period when the applicant was contemplating making an application;

– stating explicitly that the obligation on continuous cooperation concerns also applications for a reduction of fines.

Another innovation in the revised Leniency Notice is the introduction of a discretionary marker system. The Commission has stated that a leniency application will be accepted on the basis of only limited information, where justified, and the applicant will be granted time to perfect the information, and gather the necessary evidence to qualify for immunity.

Finally, the European Commission has developed a procedure to protect corporate statements given under the Leniency Notice from discovery in civil damage procedures in order to ensure that applicants that cooperate with the Commission’s investigation are not impaired in their position in civil proceedings, as compared to companies who do not cooperate. The Commission considers such a step as "essential to maintain effectiveness of the Leniency Notice".

The revised Leniency Notice came into force on December 8, 2006, when it was published in the EU Official Journal.   It is currently applicable to companies who file for leniency in a cartel case, as long as no other company is already co-operating with the Commission under the Leniency Notice in the same cartel. The procedure to protect corporate statements is also in force with respect to all pending, and new applications for leniency.

Authored by:

Neil Ray

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