Cartels are illegal under European Union competition law and the European Commission imposes heavy fines on companies involved in a cartel. Action against cartels is a specific type of antitrust enforcement. A cartel is a group of similar, independent companies which join together to fix prices, to limit production or to share markets or customers between them.
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Instead of competing with each other, cartel members rely on each others’ agreed course of action, which reduces their incentives to provide new or better products and services at competitive prices. As a consequence, their clients (consumers or other businesses) end up paying more for less quality.
This is why cartels are illegal under EU competition law and why the European Commission imposes heavy fines on companies involved in a cartel.
Since cartels are illegal, they are generally highly secretive and evidence of their existence is not easy to find. The ‘leniency policy’ encourages companies to hand over inside evidence of cartels to the European Commission. The first company in any cartel to do so will not have to pay a fine. This results in the cartel being destabilised. In recent years, most cartels have been detected by the European Commission after one cartel member confessed and asked for leniency, though the European Commission also successfully continues to carry out its own investigations to detect cartels.
Since 2008 companies found by the Commission to have participated in a cartel can settle their case by acknowledging their involvement in the cartel and getting a smaller fine in return.
Leniency
The penalties for companies that breach the competition rules can be very severe. For cartel infringements, the largest fine imposed on a single company is over 896 million; the largest fine imposed on all members of a single cartel is over 1,3 billion. In June 2006 the European Commission revised its guidelines for setting fines in competition cases. These revised guidelines will often lead to fines for cartels being significantly higher than previously.
However, companies that have participated in illegal cartels have a limited opportunity to avoid or reduce a fine. The Commission operates a leniency policy whereby companies that provide information about a cartel in which they participated might receive full or partial immunity from fines.
About the leniency policy
Along with the other detection and investigation tools at the Commissions disposal, the leniency policy proves very successful in fighting cartels.
In essence, the leniency policy offers companies involved in a cartel – which self-report and hand over evidence – either total immunity from fines or a reduction of fines which the Commission would have otherwise imposed on them . It also benefits the Commission, allowing it not only to pierce the cloak of secrecy in which cartels operate but also to obtain insider evidence of the cartel infringement. The leniency policy also has a very deterrent effect on cartel formation and it destabilizes the operation of existing cartels as it seeds distrust and suspicion among cartel members.
In order to obtain total immunity under the leniency policy, a company which participated in a cartel must be the first one to inform the Commission of an undetected cartel by providing sufficient information to allow the Commission to launch an inspection at the premises of the companies allegedly involved in the cartel. If the Commission is already in possession of enough information to launch an inspection or has already undertaken one, the company must provide evidence that enables the Commission to prove the cartel infringement. In all cases, the company must also fully cooperate with the Commission throughout its procedure, provide it with all evidence in its possession and put an end to the infringement immediately. The cooperation with the Commission implies that the existence and the content of the application cannot be disclosed to any other company. The company may not benefit from immunity if it took steps to coerce other undertakings to participate in the cartel.
Companies which do not qualify for immunity may benefit from a reduction of fines if they provide evidence that represents “significant added value” to that already in the Commissions possession and have terminated their participation in the cartel. Evidence is considered to be of a “significant added value” for the Commission when it reinforces its ability to prove the infringement. The first company to meet these conditions is granted 30 to 50% reduction, the second 20 to 30% and subsequent companies up to 20%.
The Commission considers that any statement submitted to it within the context of its leniency policy forms part of the Commissions file and may therefore not be disclosed or used for any other purpose than the Commissions own cartel proceedings.
Leniency applications
In order to benefit from the Notice, companies can approach the Commission directly or through a legal adviser. To apply for leniency please contact the Commission only through the following dedicated fax number:
Leniency fax: +32 2 299.45.85
The use of this fax ensures that the precise time and date of the contact is duly recorded and that the information is treated with the utmost confidentiality within the Commission. Before sending the actual submission by fax, however, it is advisable to seek assistance from one of the Commission officials involved in leniency by calling the following dedicated telephone numbers:
Telephone numbers: +32 2 298.41.90 or +32 2 298.41.91
Because of the need for confidentiality of leniency applications, companies are requested not to send any application to the Commission by any other channel than the leniency fax.
Please note that these telephone numbers are only to be used for leniency applications. Given the importance of keeping these lines clear so that companies can make their applications promptly, no other queries will be answered.
The telephones are monitored from 09.00 to 17.00 on weekdays. Outside of these times, please use the leniency faX.
Source: European Commission
