Cartels - Association of Corporate Counsel

CartelsEnforcement, Appeals and Damages Actions

2019Contributing Editors:

Nigel Parr & Euan Burrows

CONTENTS

Preface Nigel Parr & Euan Burrows, Ashurst LLP

Angola Miguel Mendes Pereira & João Francisco Barreiros, Vieira de Almeida 1

Australia Dennis Miralis, Phillip Gibson & Jasmina Ceic, Nyman Gibson Miralis 7

Belgium Hendrik Viaene, Laga 19

Canada Joshua A. Krane, Chris Dickinson & Gillian Singer, Blake, Cassels & Graydon LLP 29

Chile Luis Eduardo Toro Bossay, Francisco Borquez Electorat & Macarena Viertel Iñiguez, Barros & Errázuriz 48

China Dr. Zhan Hao, Song Ying & Stephanie (Yuanyuan) Wu, AnJie Law Firm 57

Denmark Olaf Koktvedgaard, Frederik André Bork & Søren Zinck, Bruun & Hjejle Advokatpartnerselskab 82

European Union Euan Burrows, Irene Antypas & Jessica Bracker, Ashurst LLP 92

Finland Ilkka Aalto-Setälä & Henrik Koivuniemi, Borenius Attorneys Ltd 114

France Pierre Zelenko & Jérémie Marthan, Linklaters LLP 124

Germany Prof. Dr. Ulrich Schnelle & Dr. Volker Soyez, Haver & Mailänder Partnerschaft m.b.B. 134

India Naval Satarawala Chopra, Manika Brar & Nitika Dwivedi, Shardul Amarchand Mangaldas & Co. 148

Indonesia Benedicta Frizka, Jonathan Tjenggoro & Lia Alizia, Makarim & Taira S. 165

Israel Eytan Epstein, Mazor Matzkevich & Shani Galant-Frankfurt, M Firon & Co. 176

Italy Alessandro De Stefano & Luca Toffoletti, Nctm Studio Legale 188

Japan Kei Amemiya, Daiske Yoshida & Kazuyasu Yoneyama, Morrison & Foerster 203

Malaysia Raymond Yong & Penny Wong, Rahmat Lim & Partners 213

Netherlands Louis Berger, Hans Bousie & Rieneke Reijnen, bureau Brandeis 222

New Zealand April Payne & Oliver Meech, MinterEllisonRuddWatts 231

Pakistan Hira Ahmad & Ali Qaisar Siraj, LMA Ebrahim Hosain 243

Romania Mihaela Ion & Silviu Stoica, Popovici Nițu Stoica & Asociații 250

Singapore Lim Chong Kin & Corinne Chew, Drew & Napier LLC 262

Spain Pedro Moreira, SCA Legal, S.L.P. 274

Sweden Peter Forsberg, Haris Catovic & Johan Holmquist, Hannes Snellman Attorneys Ltd 292

Switzerland Michael Tschudin, Frank Scherrer & Urs Weber-Stecher, Wenger & Vieli Ltd. 305

Taiwan Belinda S. Lee, Christopher B. Campbell & Meaghan Thomas-Kennedy, Latham & Watkins LLP 316

Turkey Gönenç Gürkaynak & Öznur İnanılır, ELIG Gürkaynak Attorneys-at-Law 324

Ukraine Sergey Denisenko, Yevgen Blok & Anna Litvinova, AEQUO Law Firm 337

United Kingdom Giles Warrington & Tim Riisager, Pinsent Masons LLP 346

USA Jeffrey T. Green, Sidley Austin LLP 359

PREFACE

We are delighted to present the seventh edition of Global Legal Insights – Cartels. This edition covers the most significant

developments in 30 jurisdictions around the world and, as before, is

designed to provide in-house counsel, government agencies and private practice

lawyers with a practical insight into cartel enforcement policy and procedure,

including leniency/amnesty regimes, administrative settlement, sanctions and

appeals.

The aim of this edition, as with other volumes in the Global Legal Insights

series, is to collect the views and opinions of a group of leading competition law

practitioners from around the world in a single volume. Authors continue to be

encouraged to focus their chapter on what they consider to be the most

important practice points and recent developments in their jurisdictions, with a

free rein to determine the content of their chapter. By giving the authors the

opportunity both to select the legal and policy issues which they wish to discuss,

and to offer insights into the practical operation of their national regimes, this

book aims to look beyond the anti-cartel provisions and enforcement

procedures which apply in the various jurisdictions. It also facilitates an up-to-

date comparative analysis of the approaches currently being taken by

competition agencies around the world to some of the difficult issues that can

arise in practice, which we hope will prove to be helpful when considering

enforcement initiatives and developments in your own jurisdiction.

Nigel Parr and Euan Burrows,

Ashurst LLP

Angola

Overview of the law and enforcement regime relating to cartels

João Lourenço took office as the President of the Republic of Angola in September 2017. He replaced José Eduardo dos Santos, who led the country for 38 years. In October 2017, during one of his first speeches as President, João Lourenço announced that the Government was preparing legislation aimed at tackling the “imperfections that still exist in the Angolan economy”.

On 18 April 2018, the Parliament approved the Angolan Competition Act, which came into effect on 10 May 2018 (Act 5/18, of 10 May, hereinafter “Competition Act”). A few months later, the President passed Decree 240/18, of 12 October 2018, approving the Competition Law Regulation (“Competition Regulation”). The Competition Regulation clarifies a number of concepts, establishes procedural rules and sets the relevant thresholds for merger control review.

The advent of competition law in Angola was widely perceived not only as a sign of the reforms the new President intends to bring about but also as the fulfilment of requirements laid out by the International Monetary Fund in exchange for the USD 3.7 billion credit facility announced in December 2018.

The declared aim of the adoption of a competition law regime is to contribute to the implementation of a fully-fledged market economy, the reinvigoration of the Angolan economy and the improvement of the country’s place in the “Doing Business” international rankings.

The new legislation is largely inspired by the European Union competition framework and, in particular, the Portuguese Competition Act. Angolan competition law is applicable to all economic activities in both the private and public sectors, as well as to cooperatives and trade associations.

The Competition Act and the Competition Regulation will be enforced by the Competition Regulatory Authority (“CRA”). Once the CRA is up and running, it is expected that the enforcement of the Competition Act draws significant inspiration from the application of Portuguese competition law, given the historic and linguistic ties between both nations, particularly in light of the notorious influence played by the Portuguese Competition Act on the wording of the Angolan legislation. This means that EU competition law – mirrored to a large extent in Portuguese competition law – will also serve as a source of inspiration for the application of Angolan antitrust law. It would, however, be naive to think that Angolan authorities will simply transpose the law as applied by the Portuguese and EU courts and authorities. The evolution of the Angolan legal system in other domains has shown a keen willingness in developing autonomous, and often creative solutions for similar problems.

The Competition Act:

• prohibits anticompetitive agreements;

Miguel Mendes Pereira & João Francisco Barreiros Vieira de Almeida

GLI – Cartels 2019, Seventh Edition www.globallegalinsights.com1

© Published and reproduced with kind permission by Global Legal Group Ltd, London

• prohibits the abuse of a dominant position;

• prohibits the abuse of economic dependency; and

• establishes a merger control review procedure.

As regards multilateral behaviours, the prohibition set forth in Articles 12 and 13 of the Competition Act encompasses horizontal and vertical agreements between undertakings, concerted practices, and decisions by associations of undertakings, insofar as they substantially restrict competition in the Angolan market.

The Competition Act provides for a number of examples of anticompetitive practices such as price-fixing agreements, market-sharing agreements, output restrictions, resale price maintenance and discriminatory pricing to equivalent customers or suppliers.

The prohibition of restrictive horizontal and vertical agreements contains a puzzling provision in Articles 12 (2) and 13 (2) of the Competition Act, further to which the burden of proof is reversed: it is incumbent upon the undertakings to prove that their behaviour does not materialise a restriction of competition. It remains to be seen how exactly this provision is going to be applied by the CRA, namely in light of the principle of the presumption of innocence enshrined in the Angolan Constitution.

It bears emphasis that anticompetitive agreements may be exempted pursuant to Article 14 of the Competition Act (the equivalent to Article 101 (3) TFEU), provided the parties are able to show that:

• the agreement contributes to improving the production or distribution of certain goods or services, or to promoting technical or economic progress;

• an equitable part of the benefits is passed on to the users of these goods or services;

• the agreement does not impose any restrictions which are not indispensable to the attainment of these objectives; and

• the agreement does not allow for the elimination of competition.

The exemption is granted ex ante by the CRA and is temporary in nature (Article 14 (4)).

Overview of investigative powers in Angola

In the context of an investigation for antitrust infringement, the CRA may:

• carry out dawn raids in the premises of every undertaking or association of undertakings, and seize documents;

• question legal representatives of the undertakings or associations of undertakings concerned, or any other persons, if found relevant for the progress of the investigation;

• request from legal representatives of the undertakings or associations of undertakings concerned, or any other persons, documents and other items of information, if found relevant for the progress of the investigation;

• when empowered by an order of the competent judicial authority, seal off the premises of undertakings where relevant documents may be located; and/or

• request assistance from any service that is part of the public administration, including the police, as necessary for the attainment of its goals.

Enforcement

On 21 December 2018, Presidential Decree 313/18 approving the Bylaws of the CRA was published, putting in place the last piece of the legal construction underlying the novel CRA.

Vieira de Almeida Angola



The CRA is designed as a public agency enjoying administrative and financial autonomy and is subject to the supervision of the President of the Republic through the Ministry of Finance. The supervision of the CRA comprises the power to appoint the members of the Board, the establishment of goals and priorities of the CRA and the exercise of disciplinary power over the members of the Board. The latter may raise doubts as to the future independence of the CRA vis-à-vis the President and the Government.

The CRA is built around two bodies: the Board of Directors and the Supervisory Board, each composed of three members. It is up to the Board of Directors to decide the opening and closure of cases, and the President of the Board has the power to appoint and dismiss the Heads of Departments. The Supervisory Board is in charge of ensuring generic compliance and supervising all management matters of a financial or economic nature.

As regards enforcement activity, the CRA will have a Merger Control department, a Conduct Investigation (i.e. antitrust) department, a Study and Market Follow-Up department and a Legal & Litigation department. Interestingly enough, the Bylaws also provide for a State Aid department, a division not often found outside the EU. It remains to be seen how Angola will develop a State aid policy in the absence of a Single Market goal that has underpinned the enforcement of State aid rules in the EU. The fact that in this field the CRA is mandated with controlling public subsidies in view of “price stabilization” might indicate that this was a way to accommodate one of the missions of the Prices and Competition Institute, from which the CRA inherits both ongoing cases and personnel.

The headquarters of the CRA are located in the capital Luanda, although the law provides for the possibility of provincial branches being established throughout the territory. The main office of the CRA will count with a staff of 100 officials.

The appointment of the members of the Board is now eagerly awaited for the CRA to become operational.

Key issues in relation to investigation and decision-making procedures

Whenever the CRA becomes aware of strong evidence of the existence of restrictive practices, it is obliged to open an investigation (Article 27 (1) of the Competition Act).

Pursuant to Article 18 (2) of the Competition Regulation, the antitrust investigation must be closed within 24 months from the opening of the proceedings. It remains to be seen whether compliance with the deadline is feasible or whether the two years should be considered a mere recommendation. Article 18 (4) provides that, following the adoption of a Statement of Objections, the CRA has a “maximum of 12 months” to conclude the investigation.

The undertakings accused of an infringement of competition law have 20 business days to submit their defence (Article 18 (5) of the Competition Regulation).

The Competition Regulation (Article 22) grants the investigated undertakings, their lawyers and economic advisers the right to access the CRA’s case file. In addition, the Bylaws instruct the CRA to adequately state the grounds for its decisions and to comply with the duty of information.

The protection of business secrets is ensured by Article 8(f) of the Bylaws. However, the treatment of legal privilege is still critically absent from the Angolan competition regime.

Leniency regime

Article 25 of the Competition Regulation empowers the CRA to adopt a leniency regime




applicable to both undertakings and individuals, insofar as their collaboration results in the identification of other participants of the infringement and/or in the collection of information and documents that prove the infringement under investigation.

The application of said regime is dependent on the fulfilment of the following conditions:

• the CRA does not have sufficient evidence to back up the imposition of a fine;

• the undertaking admits to its participation in the infringement and cooperates fully and permanently with the investigations; and

• the undertaking ceases participating in the infringement under investigation as of the day it submits the leniency application.

Complete immunity is off the table. Pursuant to Article 25 (3) of the Competition Act, to the first undertaking coming forward, a 50–70% fine reduction may be granted, to the second 30–50% and to the third 10–30%.

Administrative settlement of cases

The Angolan competition framework does not foresee the possibility of settlement of antitrust cases.

Third party complaints

Any legal or natural person may submit to the CRA a complaint connected with anticompetitive practices. The complaint must be submitted by filling in a form previously approved by the CRA (Article 27, (2) and (3) of the Competition Act).

The CRA may not decide to close the investigation without first informing the complainant and providing the complainant with the opportunity to comment (Article 30 (2) of the Competition Act).

Right of appeal against civil liability and penalties

Further to Article 4 (3) of the Competition Act, all decisions from the CRA are subject to judicial review, according to general rules. No specific rules concerning competition law investigations have been put in place.

Civil penalties and sanctions

Undertakings are subject to fines of between 1% and 10% of their annual turnover if they are found to have entered into a restrictive agreement or other restrictive practice (Article 22 (2) of the Competition Act).

Moreover, should the CRA conclude that the infringement is particularly serious, it may impose ancillary sanctions, such as the publication of the punitive part of the decision in the Angolan newspaper with the highest circulation, and the prohibition of participation in public tenders for a period of up to three years (Article 24 of the Competition Act). The CRA is also empowered to impose structural measures such as the spin-off of an undertaking, the transfer of shareholder control, the sale of assets, the winding-down of activities, or any other act or measure which it deems necessary in order to eliminate harmful effects on competition.

The Competition Act further allows the CRA to impose daily penalty payments on undertakings of up to 10% of their average daily turnover, in cases where an undertaking fails to comply with a decision imposing either sanctions or the adoption of specific measures (Article 25 of the Competition Act).




Criminal sanctions

Without prejudice to the application of Angolan criminal law, the Angolan competition framework does not foresee the imposition of criminal sanctions specific to antitrust infringements.






Miguel Mendes Pereira Tel: +351 213 113 392 / Email: [email protected] Miguel Mendes Pereira has a law degree from the Faculty of Law of the University of Lisbon, an LL.M. in European legal studies from the College of Europe, Bruges, Belgium and a Master’s degree in European Legal Sciences from the Faculty of Law of the University of Lisbon. He is a lecturer at the Faculty of Law of the University of Lisbon in EU law and competition law (postgraduates). He joined Vieira de Almeida in 2011 and is currently a partner in the competition and EU practice. He is also active in the field of copyright, electronic communications, media and advertising. Before joining the firm, he was a partner at Abreu Advogados (2008–2011), lead legal counsel at the Portuguese Competition Authority (2006–2008), legal secretary at the chambers of the Portuguese judge at the General Court of the EU in Luxembourg (2004–2006), administrator at the Directorate-General for Competition of the European Commission in Brussels (2000–2004), head of legal affairs at Lusomundo and Warner Lusomundo (1997–2000) in Lisbon and an associate lawyer, as well as trainee, with Athayde de Tavares & Associados (1992–1997), also in Lisbon. He is the author of various articles and publications, including the Commentary to the Portuguese Competition Act (2009), and speaks regularly at conferences and seminars. His work has also been recognised by the most important international rankings, including Chambers Europe, The Legal 500 and Who’s Who Legal, all of which rate Miguel Mendes Pereira as a leading and recommended lawyer.

João Francisco Barreiros Tel: +351 213 113 392 / Email: [email protected] João Francisco Barreiros has a law degree from Nova University of Lisbon and an LL.M. in European Union law from the College of Europe, Bruges, Belgium. He joined Vieira de Almeida in 2017 and is currently a trainee in the competition and EU practice, where he has been actively involved in several transactions in a wide range of sectors, notably telecommunications and air transportation. He regularly advises clients in a broad range of antitrust subjects before both the Portuguese Competition Authority and the European Commission. Before joining the firm, he was a trainee in the competition law team of the European Commission’s Legal Service, João also worked in the Brussels office of Cleary Gottlieb Steen & Hamilton LLP, both as a trainee and as an associate lawyer. During his studies in Lisbon, he concluded a traineeship at the merger control department of the Portuguese Competition Authority.

Rua Dom Luis I, 28, 1200-151 Lisbon, Portugal Tel: +351 21 311 3400 / Fax +351 21 311 3406 / URL: www.vda.pt

Vieira de Almeida


Australia

Overview of the law enforcement regime relating to cartels

Corporate cartel conduct in Australia is regulated by Part IV of the Competition and Consumer Act 2010 (Cth) (“CCA”). A corporate cartel exists when actual or potential competitors agree to a cartel provision.

A cartel provision is defined as a provision of a contract, arrangement or understanding that occurs between two actual or potential corporate competitors. The purpose or effect of the condition must be to fix, control and maintain price or to:

a) prevent, restrict or limit production, capacity or supply;

b) allocate customers; or

c) bid rig.1

Australian law provides for both criminal and civil penalties for those found to have contravened the offence provisions. The Australian Competition and Consumer Commission (“ACCC”) is responsible for investigating cartel matters, while the Commonwealth Director of Public Prosecutions (“CDPP”) is responsible for prosecuting such cases.

The Federal Court of Australia has jurisdiction for civil matters arising under the Act2 and exclusive jurisdiction in respect of criminal proceedings. The State and Territory Courts have jurisdiction to deal with certain offences3 as well as examinations and commitment for trial on indictment.

Overview of investigative powers in Australia and current reforms

The mandate for fairer business practice in the area of competition led to a review by Professor Ian Harper (“The Harper Review”), commencing in 2014, to determine whether the legislation was still adequate given the economic changes that have occurred since the 1990s.4 This was the first Competition Policy Review in Australia in over 20 years. In 2017, two bills were passed to implement long-needed reforms which came into operation on 6 November 2017.

The Harper Review recommended that: the power given to the ACCC under s 1555 should be ‘extended to cover the investigation of alleged contraventions of court-enforceable undertakings’;6 that the amendment to s 155 of the CCA was to include a reasonable search defence to the contravention of ‘refusal or failure to comply with a notice’ issued by the ACCC;7 and the fine for non-compliance with a notice was to be increased.

Section 155 CCA changes

The CCA provides that the ACCC may issue a notice to obtain information, documents and evidence if the matter ‘constitutes, or may constitute a contravention of any of the terms of

Dennis Miralis, Phillip Gibson & Jasmina Ceic Nyman Gibson Miralis



an undertaking under section 87B of this Act or under section 218 of the Australian Consumer law’.8

It is a contravention of the CCA to ‘refuse or fail to comply with a notice…’ given by the ACCC.9 In order for the defence to be available, the notice must relate to producing documents and the individual must prove that, after a reasonable search, they are not aware of the documents.10 Additionally, the person must provide a written response to the notice that includes a description of both the scope and limitations of the search.11 The defendant bears the onus of proof in determining whether a reasonable search has been conducted.12

In order to determine what constitutes a ‘reasonable search’, an additional provision was introduced by the Amendment Act to include, ‘the nature and complexity of the matter, the number of documents involved, the relative ease and cost of retrieving a document and any other relevant matter’.13 Although these factors provide a guide only, what constitutes ‘reasonable’ has intentionally been given a broad scope.14

A person who refuses or fails to comply with a notice from the ACCC ‘is guilty of an offence punishable…[by]…a fine not exceeding 100 penalty units’ ($21,000.00).15 If the defendant is a corporation, the fine may be a maximum of $105,000.00.16

Given the serious nature of non-compliance with compulsory evidence-gathering notices, the ACCC may also choose to refer the matter to the CDPP.17 If the CDPP elect to prosecute, a conviction for this offence is punishable by imprisonment for two years.18 Furthermore, ‘if a person refuses or fails to comply with a notice, a Court may, on application by the Commission, make an order directing the person to comply with the notice’.19

In conclusion, the implementation of the recommendations of The Harper Review has seen an overall increase in the ACCC powers and the enforcement procedures available for contraventions of the Act.

Overview of cartel enforcement activity during the last 12 months

During 2018 there were a number of significant developments in enforcement activity relating to corporate cartels, demonstrating an increased appetite for enforcement and a trend towards higher monetary penalties being imposed on corporations and individuals in order to deter cartel conduct. This was evident in the cases of Nippon Yusen Kabushiki Kaisha (“NYK”) and Kawasaki Kisen Kaisha (“K-Line”).

NYK

NYK is a Japanese shipping company responsible for supplying ocean shipping services to Australia. It was the first company to be criminally prosecuted in Australia since the criminalisation of cartel conduct. NYK pled ‘guilty to a single charge of giving effect to a cartel provision’, contrary to s 44XXRG(1)20 of the CCA.21 Although it was not possible to determine the total value of benefits it received from its cartel conduct, the profits generated from the anti-competitive conduct were estimated at AUD$15.4 million.

In imposing the sentence, Wigney J made reference to six factors that weighed in favour of a substantial penalty being imposed:

1. According to the legislation, the maximum penalty for the office is the greater of: a) AUD$10 million; b) three times the benefits attributable to the offence; or c) if benefits cannot be attributed, 10% of the corporation’s annual turnover in the 12

months preceding the offence.22

Nyman Gibson Miralis Australia



Given NYK’s benefits cannot be accurately determined, the maximum penalty they were to face was AUD$100 million (annual turnover of AUD$1 billion).

2. The seriousness of the offence in the circumstances.

3. The conduct was ‘covert, deliberate, systematic and involved planning and deliberation’.23

4. Senior managers were involved in the conduct who knew or ought to have known that the conduct ‘breached anti-trust or competition laws’.24

5. Profits were obtained from the cartel conduct.

6. General deterrence for other corporations that are engaging or considering engaging in similar conduct.

Wigney J considered that the following four factors mitigated the offence and suggested a lesser penalty:

1. NYK pled guilty at a very early stage. The company also provided ‘timely, full, frank and…expeditious cooperation’.25 Furthermore, NYK gave an undertaking to provide assistance in future proceedings against other members of the cartel.

2. Since the offence, NYK has demonstrated excellent prospects of rehabilitation. They have established new systems and structures within the company to ensure similar conduct does not occur in the future.

3. They have no ‘prior record of corporate criminal conduct’.26

4. NYK has already had administrative and other penalties imposed by foreign jurisdictions in relation to the impact on those particular jurisdictions.

After considering the above factors, Wigney J came to an initial penalty of AUD$50 million. He then applied a 50% discount for the early guilty plea, past and future assistance. Of that 50% discount, 10% specifically relates to the future assistance. NYK was fined a total of AUD$25 million with the possibility of AUD$30 million if they do not comply with their undertaking.

K-Line

K-Line was part of the same cartel as NYK and also pled guilty to the offence on 5 April 2018, some months after the penalty was handed down in NYK. K-Line’s cartel conduct concerns the shipping of cars, trucks and buses to Australia. K-Line is a global organisation with offices in Europe, Africa, Northeast and Southeast Asia, America, India and the Middle East and it has an Australian subsidiary with a head office in Tokyo.

K-Line’s executives have not been prosecuted, only the corporation. Australia commenced a criminal prosecution against K-Line following the Department of Justice in the US conducting an investigation which saw the corporation pleading guilty and agreeing to pay a criminal penalty of US$67.7 million.

As of the date of the writing of this article, K-Line has yet to be sentenced for the 37 contraventions of Section 44ZZRG(1) of the CCA.

Australia and New Zealand Bank, Deutsche, and Citigroup

The strong focus by the ACCC on the financial sector has seen the ANZ Bank, Deutsche Bank and Citigroup charged by the CDPP with alleged cartel conduct, relating to the CCA ‘Share Placement Cartel’. A number of CEOs and senior executives were also criminally charged.27 It is alleged that conduct involves cartel arrangements relating to trading in ANZ shares following a AUD$2.5 billion institutional share placement in August 2015. ANZ and




each of the individuals are said to be knowingly concerned in some or all of the alleged conduct.28 The case centres on ANZ’s institutional equity placement and the alleged failure to disclose that a significant portion of shares went to two of the three joint lead managers. It is said that the investigation has been conducted for over two years by the regulator. The corporations and individuals are defending the charges.

Although the above highlights the criminalisation of corporate cartels, there have also been a number of recent civil penalties imposed for similar conduct.

Flight Centre

The ACCC alleged that Flight Centre attempted to induce three airlines to enter a contract, arrangement or understanding to fix, control or maintain prices for air travel in contravention of Section 45 and 45A of the then CCA. Flight Centre denied the claim and argued that there is no lessening of competition where the provider of air travel remains the same whether it is sold directly by the airline or by an agent for the airline. The trial Judge agreed with the ACCC and Flight Centre were ordered to pay AUD$11 million for the contravention. Flight Centre appealed to the Full Federal Court and were successful, the Court finding that there was no separate market for distribution services to customers, and that Flight Centre did not compete in the alleged market. The ACCC were ordered to pay Flight Centre’s costs.

The ACCC was granted special leave to appeal to the High Court of Australia in 2016. The majority of the High Court (4-1) considered that there was a market in which the parties competed and as a result the agreements between Flight Centre and the airlines substantially lessened competition. In May 2017, the matter was remitted to the Full Federal Court of Australia on the issue of penalty alone and this resulted in an increased fine of AUD$12.5 million.29

Yazaki Corporation

The Federal Court of Australia found that Yazaki Corporation engaged, with a competitor, in collusive conduct when supplying Toyota Australia with wire harnesses. The Corporation was initially fined AUD$9.5 million. In the recent appeal, the Full Federal Court of Australia increased the penalty to AUD$45 million, which currently constitutes the highest penalty imposed under the CCA.30

This decision to more than quadruple the penalty brings Australia’s cartel penalties more in line with US and European jurisdictions.

Moving forward, it is reasonable to expect that there will be an increase in ACCC Cartel enforcement investigation and activity. The Chairman of the ACCC Rod Sims has highlighted that the regulator has a ‘substantial team of specialist criminal cartel investigators’.31

Key issues in relation to enforcement policy

The greatest investigative challenge that the ACCC continues to confront is that cartel conduct is usually conducted covertly. Corporations attempt to hide their wrongdoings in order to retain the profits that they have made through their illegal conduct.

Imposing an appropriately deterrent financial penalty also remains an enforcement challenge. The ACCC has indicated that many penalties imposed on corporations fail to consider the size of the corporation.32 This is supported by independent research conducted by the Organisation for Economic Co-operation and Development (“OECD”). Overall, the maximum fines imposed in the Australian jurisdiction are significantly lower in comparable jurisdictions.33




An important development in the investigation of criminal cartels that operate in covert ways is detecting digital collusion through algorithms. Digital collusion through mechanisms such as pricing algorithms, as well as advancing technology to prevent and detect digital collusion, are some of the issues faced by regulators. Experts are divided in their views about the degree to which artificial intelligence and algorithms pose threats to competition and whether appropriate legislation can address these risks.34


While the covert actions of corporate cartels create challenges for investigations and enforcement, this also affects decisions concerning whether to prosecute individuals and corporations. The ACCC is unable to recommend corporations to the CDPP for prosecution unless they have enough evidence to do so.

The ACCC refers any serious breach of CCA legislation for prosecution wherever possible.

On 15 August 2014, the ACCC and CDPP signed a Memorandum of Understanding (“MOU”) regarding serious cartel conduct and the CDPP is responsible for prosecuting offences against Commonwealth law. The MOU states that conduct is deemed to be “serious” if one or more of the following apply:

• the conduct was covert;

• the conduct caused, or could have caused, large-scale or serious economic harm;

• the conduct was longstanding, or had a significant impact on the mark;

• the conduct caused or could have caused significant detriment to the public;

• one or more of the alleged participants has previously been found by a Court to have participated in cartel conduct either criminal or civil;

• senior representatives within the relevant corporation(s) were involved in authorising or participating in the conduct;

• the government and, thus, taxpayers were victims of the conduct; and/or

• the conduct involved the obstruction of justice or other collateral crimes committed in connection with the cartel.35

Leniency/amnesty regime

Both corporations and individuals in Australia can apply for immunity in relation to cartel conduct. The application can be made in relation to civil or criminal proceedings. It is generally referred to as ‘first in’ immunity as it is only available to the first entity to disclose cartel conduct.36 It is not necessary to have the required information at the initial stage of the immunity application.

Corporations in civil proceedings

In order for a corporation to be eligible for conditional immunity, it must satisfy the following criteria:

a) they must be or have been a party to the cartel;

b) they must admit that their conduct may constitute a contravention of the CCA;

c) they are the first of the cartel to apply for immunity;

d) they have not coerced others to participate in the cartel;

e) they have ceased or indicate they will cease involvement in the cartel;




f) the admissions are a truly corporate act;

g) they have provided full, frank and truthful disclosure and have cooperated fully and expeditiously while making the application; and

h) they must also undertake to continue to act in this way.37

Additionally, related corporate entities and officers/employees of the corporation may apply for derivative immunity if the corporation qualifies for the above. In conjunction with the above criteria, immunity is only available if the ACCC has not yet received written legal advice that they have reasonable grounds to institute proceedings in relation to that cartel.38

Individuals in civil proceedings

Aside from the ‘corporate act’ criterion above, individuals must meet the same criteria as corporations in order to be eligible for conditional immunity in relation to cartel conduct.

Criminal immunity

The CDPP and the ACCC have agreed to facilitate immunity for criminal proceedings at the same time as immunity for civil proceedings as they recognise the need to maximise certainty within cartel cases.39 If the ACCC is satisfied that an applicant is eligible for immunity, they can make a recommendation to the CDPP that immunity from prosecution also be granted. Although the CDPP will consider this recommendation, they ultimately make an independent assessment. If they too are satisfied the applicant meets the criteria, they will write a letter of comfort which recognised the ‘first-in-status’.40 In order to maintain this status, applicants must continue to provide full, frank and truthful disclosure whilst also maintaining confidentiality regarding details of the investigation.

Application process

The corporation or individual seeking immunity must first request the placement of a marker. A marker effectively preserves the ‘first-in-status’ and allows the applicant a limited time (generally 28 days) to gather information and demonstrate they meet the conditional immunity criteria. Once the information has been gathered, the applicant must provide a proffer. This essentially means the applicant is required to give the ACCC the information they have acquired. A proffer can be made orally or in writing.

If the ACCC determines there is sufficient information, the applicant will be requested to sign a waiver in regards to their identity and the information provided for each affected jurisdiction. It is important to note that the ACCC endeavours to protect any confidential information provided along with the applicant’s identity; however, sometimes this cannot be achieved. If a criminal prosecution is to proceed, the ACCC will make a recommendation to the CDPP that criminal immunity also be granted to the applicant.

Finally, the ACCC is then at liberty to grant conditional immunity to the applicant. Final immunity is only granted if the applicant maintains eligibility and continues to provide full, frank and truthful disclosure throughout the remainder of the investigation.

Cooperation

In circumstances where an applicant is not eligible for ‘first in’ immunity, they are still able to cooperate if they desire to. If a party chooses to cooperate, the ACCC can make submissions to the Court regarding the cooperation provided. Generally, the Courts afford more lenient treatment to parties that have provided cooperation in relation to cartel conduct.

Amnesty plus

While cooperating with the ACCC, a party may discover the existence of a second cartel that is unrelated to the first. In these circumstances, the party can apply for conditional




immunity for the second cartel and ‘amnesty plus’ for the original. Essentially, ‘amnesty plus’ is a recommendation to the Court by the ACCC for a further reduction in penalty in relation to the first cartel. Parties who wish to seek ‘amnesty plus’ should initially apply for a marker in relation to the second cartel.41


Australian legislation stipulates there are two types of contravention in relation to cartel conduct. The first is the making of a contract, arrangement or understanding that contains a cartel provision.42 The second is giving effect to such provision.43 As penalties are determined for each contravention, significant fines can be imposed if the cartel conduct occurred over a long period of time. The CCA specifies the maximum pecuniary penalty that can be incurred per offence is the greater of the following:

a) AUD$10 million;

b) three times the benefits attributable to the offence; or

c) if the benefits cannot be attributed, 10% of the corporation’s annual turnover in the 12 months preceding the offence.44

Additionally, individuals who knowingly participate in cartel conduct are liable for pecuniary penalties of up to AUD$500,000. Aside from pecuniary penalties, the Court can also impose injunctions, probation orders, community service orders, adverse publicity orders and orders that exclude individual eligibility for company management.

While there are no official sentencing guidelines for cartel conduct, the Court is likely to consider similar factors addressed by Wigney J in the case of NYK.


As with most single judge decisions, individuals and corporations are afforded the right of Appeal. Flight Centre was seen to utilise this right a number of times, appealing to the High Court of Australia.45 Cartel-related matters are heard by a single judge from the Federal Court of Australia. If an Appeal is lodged, the case will be re-heard in front of the Full Court of the Federal Court of Australia. The Full Federal Court has three or more sitting judges at any time. As seen in Flight Centre, further Appeals can only occur when the High Court of Australia grants leave.46 Further to an Appeal on liability, defendant’s also have a right to Appeal against the penalty imposed. Once again, Flight Centre utilised this process.47

Criminal sanctions

Under s 79 of the CCA, individuals who attempt to contravene, aid contravention, conspire to contravene or knowingly contravene cartel offence provisions may face up to 10 years’ imprisonment, a fine of 2,000 penalty units (currently AUD$420,000) or both. Corporations currently face the same criminal penalties as they do under civil proceedings; however, directors, officers and employees involved in the cartel conduct are punished according to the above.

Although the newest amendments to the CCA have toughened Australia’s stance on corporate cartels, there has been some reprieve through the expansion of the ‘joint ventures’ defence. Previously, this defence was only available if the cartel provision was explicitly stated in the contract of the joint venture. Since the amendments have come into effect, the defence is now available if the cartel provision is contained within the parties ‘contract, arrangement or understanding’.48 In addition, the legitimate purposes for a joint venture have also been




expanded. The amended provision now allows joint ventures for the ‘acquisition of goods and services’.49 Initially, the joint venture defence was only available for the ‘production of goods’ and the ‘supply of goods and services’.50

While the amendments have expanded the available defence, they have also increased the number of elements that must be met in order for business dealings to qualify as a joint venture. For criminal prosecution, the cartel provision must be ‘for the purposes of a joint venture’ and must be ‘reasonably necessary for undertaking the joint venture’.51 Additionally, the defendant bears the burden of proof in such matters.52 When civil penalties are involved, the joint venture must ‘not be carried on for the purpose of substantially lessening competition’.53

Through the expansion of the joint ventures defence, corporations with less formal business connections will now have the opportunity to defend themselves against prosecution in relation to corporate cartel allegations. The new provisions also permit a wider range of business dealing to fall within the exception. Whilst this may be seen as a softening of the law, the latest amendments to the CCA have also included additional requirements that corporations must meet in order to qualify for the defence. This is in an attempt to ensure the legislation strikes a balance between the criminalisation of corporate cartels and allowing the necessary business dealings of corporations to continue.

Cross-border issues

Given the global nature of cartel conduct and the focus by regulators on multinationals, it is important to consider any cross-border issues that may arise when attempting to enforce Australian law. Currently, s 5 of the CCA limits extraterritorial enforcement to conduct engaged in outside Australia by:

‘a) Bodies corporate incorporated or carrying on business within Australia; or b) Australian citizens; or c) Persons ordinarily resident within Australia.’54

The Panel in the Harper Review recommended this section be extended to include conduct that related to trade or commerce within Australia or between Australia and places outside Australia.

As the cartel conduct is generally international in nature, a significant number of countries have come together to form the Cartel Working Group (“CWG”). The 64 member countries are from all six inhabited continents.55 The CWG, which forms part of the International Competition Network (“ICN”), attempts to ‘address the challenges of anti-cartel enforcement, including the prevention, detection, investigation and punishment of cartel conduct’.56 Essentially, the CWG achieves its mandate by facilitating international assistance in relation to enforcement for cartel matters. The CWG also serves as an information sharing platform. While there is still an official process for giving and receiving information, this facilitation provides a fast and effective method.

The CWG has indicated its priorities for 2018–2021. They are as follows:

1. ‘improve the effectiveness of anti-cartel enforcement through education, examining legal challenges and identifying investigative techniques’;

2. ‘promote familiarity with, and use of, existing work product and projects’;

3. ‘expand existing work products’;

4. ‘develop new practical guidance and avenues for exchanging effective enforcement practices’;




5. ‘organise annual Cartel Workshops’;

6. ‘strengthen CWG working procedures’; and

7. ‘contribute to the broader work of the ICN’.57

Further to facilitating assistance between countries, the ICN also provides a significant amount of information in relation to anti-cartel enforcement. A number of manuals have been drafted and are available on the ICN website.

Although Australia has internally limited cross-border enforcement, in recent years it has joined together with other nations in order to investigate corporate cartels. In 2015, Australia and The People’s Republic of China signed a memorandum of understanding. The agreement essentially allows both countries to share information and evidence in relation to anti-competitive conduct. The People’s Republic of China currently has antitrust cooperation agreements with other countries such as Korea, Japan and America.

Developments in private enforcement of antitrust laws

Any person who suffers loss or damage by way of cartel conduct is able to bring a private claim in the Federal Court of Australia. Although there are some issues with private enforcement and there is need for further development, the current legislative regime allows for class actions under the Federal Court of Australia Act 1976 (Cth) (“FCAA”). Under the FCAA, the following requirements must be met before a class action can be brought:

‘a) 7 or more persons have claims against the same person; and b) The claims of all those persons are in respect of, or arise out of, the same, similar

or related circumstances; and c) The claims of all those persons give rise to a substantial common issue of law or

fact.’58 Given the potential reach of cartel conduct, the availability of class actions ensures private enforcement can occur on a grand scale. In Australia, all those who meet the description of the ‘group’ are automatically included in the action. In order to opt out of the class action, they must take positive steps to do so. As with a normal cartel case, damages are awarded on a compensatory basis, based on the class as a whole. While class actions seem to be an appropriate way to satisfy private enforcement, the reality is that only a very small number of class actions relate to cartels. A recent study indicated that only 1.5% of all class actions between 1992 and 2014 were brought in relation to cartel conduct.59

Enforcement and compliance priorities for 2018

The ACCC has recently released a statement indicating their enforcement and compliance priorities for 2018. Not surprisingly, cartel prosecution continues to be an area of focus. Particular areas of interest in 2018/2019 are construction, agriculture, financial services and energy sectors. Arguably the most important, however, is the ACCC’s priority on consumer protection. Throughout a number of industries, the ACCC has been investigating potential false and misleading conduct as well as potential cartel conduct that is ultimately affecting consumers.

Increased penalties remain a priority regarding the imposition of sanctions for infringements of competition law in order to deter anticompetitive conduct. On 26 March 2018, an OECD report found that average Australian penalties are significantly lower than those imposed in other comparable OECD jurisdictions. This report has forced regulators and prosecutors to consider the current ‘instinctive synthesis’ approach taken by the Federal Court in its




consideration of various factors, in contrast to OECD countries which use a set methodology including sales of the infringing countries products. As the OECD report found that differences in penalties can have an impact on deterrence, it can be safely predicted that regulators will continue to push for higher penalties. This in turn is likely to lead to corporations increasingly utilising the leniency and amnesty regimes made available by the ACCC and CDPP.

* * *

Endnotes

1. Competition and Consumer Act 2010 (Cth), s 45AD(2)–(3).

2. Ibid., s 86.

3. Ibid., s 45AF or 45AG offences can be dealt with in state and territory Courts.

4. Jones Day, ‘Changes to the ACCC’s Power to Obtain Information’ (February 2018) Australian & New Zealand Competition & Consumer Law Update, https://jonesday-ecommunications.com.

5. Above n 1, s 155A.

6. Commonwealth of Australia, ‘Competition Policy Review – Final Report’ (March 2015) 71.

7. Above n 1, s 155(5)(a).

8. Above n 1, s 155(2)(iii).

9. Ibid., s 155(5)(a).

10. Above n 1, s 155(5B).

11. Ibid.

12. Above n 15.

13. Above n 1, s 155(6).

14. Above n 4.

15. Above n 1, s 155(6A).

16. Above n 15.

17. Ibid.

18. Above n 1, s 155(6A).

19. Ibid., s 155(8A).

20. Now s 45AG(1).

21. Commonwealth Director of Public Prosecution v Nippon Yusen Kabushiki Kaisha [2017] FCA 876 (3 August 2017), 4.

22. Above n 1, s 45AG(3).

23. Above n 31, 17.

24. Ibid., 18.

25. Ibid., 22.

26. Ibid., 24.

27. Australian Competition and Consumer Commission, ‘Criminal cartel charges laid against ANZ, Citigroup and Deutsche Bank’ (5 June 2018).




28. Ibid.

29. Flight Centre v ACCC [2018] FCAFC 53.

30. ACCC v Yazaki Corporation [2018] FCAFC 73.

31. Global Cartel Enforcement – 2017 Full-Year Cartel Report, Allen & Overy LLP 2018.

32. Ibid.

33. OECD, ‘Pecuniary Penalties for Competition Law Infringements in Australia’ (2018), 56, www.oecd.org/daf/competition/pecuniary-penalties-competition-law-infringe ments-australia2018.htm.

34. Global Cartel Enforcement – 2017 Full-Year Cartel Report, Allen & Overy LLP 2018.

35. CDPP Memorandum of Understanding between the CDPP and ACCC regarding Serious Cartel Conduct (15 August 2014), 2.

36. Australian Competition and Consumer Commission, ‘ACCC immunity and cooperation policy for cartel conduct’ (September 2014).

37. Ibid., 4.

38. Ibid.

39. Ibid., 7.

40. Ibid.

41. Ibid., 14.

42. Above n 1, s 45AF.

43. Ibid., s 45AG.

44. Above n 1, s 45AG(3).

45. Above n 37.

46. Ibid.

47. Ibid.

48. Above n 1, s 45AO(d).

49. Ibid, s 45AO(b)(iii).

50. Ibid, s 45AO(b)(i)–(ii).

51. Ibid, s 45AO(a).

52. Ibid, s 45AO.

53. Ibid, s 45AP(1)(c).

54. Above n 1, s 5(1)(g)–(i).

55. International Competition Network, ‘Cartel Working Group 2018 – 2021 Work Plan’ (2018), https://www.internationalcompetitionnetwork.org.

56. International Competition Network, ‘Cartel’ (2018), https://www.international competitionnetwork.org.

57. Above n 1.

58. Federal Court of Australia Act 1976 (Cth), s 33C.

59. Above n 68.





Dennis Miralis Tel: +61 2 9264 8884 / Email: [email protected] Dennis Miralis is a leading Australian defence lawyer who specialises in international criminal law, with a focus on complex multi-jurisdictional regulatory investigations and prosecutions. His areas of expertise include bribery and corruption, global tax investigations, proceeds of crime, anti-money laundering, worldwide freezing orders, cybercrime, national security law, Interpol Red Notices, extradition and mutual legal assistance law. Dennis advises individuals and companies under investigation for economic crimes both locally and internationally. He has extensive experience in dealing with all major Australian and international investigative agencies.

Phillip Gibson Tel: +61 2 9264 8884 / Email: [email protected] Phillip Gibson is one of Australia’s leading criminal defence lawyers, with over 30 years of experience in all areas of criminal law. Phillip has significant experience in transnational cases across multiple jurisdictions often involving: white-collar and corporate crime; assets forfeiture; money laundering and proceeds of crime; extradition; mutual assistance; Royal Commissions; bribery and corruption; and ICAC and Crime Commissions matters. He has extensive experience in dealing with all major Australian and international investigative agencies.

Jasmina Ceic Tel: +61 2 9264 8884 / Email: [email protected] Jasmina Ceic is an accomplished criminal trial advocate. She advises and acts in complex criminal law matters at all levels of the court system, with a specialist focus on serious matters that proceed to Trial in the Superior Courts, as well as conviction and sentence Appeals heard in the Court of Criminal Appeal. She has represented and advised persons and companies being investigated for white-collar and corporate crime, complex international fraud and transnational money laundering.

Level 9, 299 Elizabeth Street Sydney NSW 2000, Australia Tel: +61 2 9264 8884 / Fax: +61 2 9264 9797 / URL: www.ngm.com.au

Nyman Gibson Miralis



Belgium


Article IV.1 of the Code of Economic Law (“CEL”) is the Belgian equivalent to Article 101 of the Treaty on the Functioning of the European Union (“TFEU”). Similar to the TFEU, Article IV.1 CEL prohibits agreements between undertakings and concerted practices that have as their object or effect the restriction of competition on the relevant Belgian market, or a significant part thereof. It applies to both horizontal and vertical agreements. If such actions also affect trade between Member States, Article 101 TFEU can be applied simultaneously.

Competition law enforcement bodies

Competition law in Belgium is enforced through an administrative and/or civil law procedure. The two main bodies responsible for enforcing competition law are the Belgian Competition Authority and the national courts. The Minister of Economy likewise plays a (modest) role.

1. Belgian Competition Authority (“BCA”) The BCA, initially an administrative court, was transformed into an independent administrative authority in 2013. The new BCA is responsible for investigation, prosecution and decision-making in relation to anti-competitive practices. Although there is no institutional separation between the investigation and decision phase, other procedural guarantees were put in place to ensure the BCA’s impartiality.

The main organs of the BCA in its current form are the Public Prosecution Service (“Auditoraat”/“Auditorat”) and the Competition College. Whereas the former is responsible for the investigation and prosecution of anti-competitive behaviour under supervision of the Auditor-General, the latter is responsible for the consequent decision-making and – as the case may be – for the imposition of sanctions. Upon submission of a motivated draft decision by the Public Prosecution Service, the procedure before the Competition College commences. Ultimately, the Competition College decides whether an infringement of competition law is present. If so, it will order its cessation and – if appropriate – impose a fine. It is also possible that the Competition College declares the parties’ proposed commitments binding, without formally ruling upon the existence of an infringement.

2. Minister of Economy

Based on Article IV.41 §1 CEL, the Minister of Economy is granted a limited role in competition law enforcement. In particular, it has a positive injunction right, i.e., it can order the Auditor-General to investigate a certain case. The Public Prosecution Service

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or (if the case proceeds) the Competition College remains nonetheless at liberty to dismiss the case.

3. National courts

Competition law may be privately enforced through national courts (see infra), which are competent to assess damage claims brought before them by victims of competition law infringements. They also hear cases where an infringement of competition law is invoked. Typically, that would be the case where one of the parties invokes the nullity of an agreement.

Within the Brussels Court of Appeals, a number of chambers have now been appointed to constitute a separate section, called the Market Court, which will, among others, be the only court competent to hear an appeal against a decision by the Competition College. Afterwards, only an appeal on points of law remains possible, and can be submitted to the Court of Cassation.

Finally, in case commitments were made binding by the Competition College, as a result of which there is no longer reason for it to proceed, national courts are still competent to rule upon the presence of an infringement in the past.

Sanctions for cartel infringements

The Competition College can impose fines upon the undertakings concerned when ordering cessation of a restrictive competition practice, as well as accompany the cessation order with a periodic penalty payment (see infra). Under certain circumstances, individuals can also be fined by the Competition College. No criminal sanctions are available under Belgian law.

Overview of investigative powers in Belgium

The Public Prosecution Service is charged with investigating anti-competitive practices. Investigations can be initiated either ex officio, upon complaint, or upon ministerial request. The BCA’s investigative powers resemble the European Commission’s investigative powers as enshrined in Regulation No. 1/2003 – an important difference being the capability of the BCA to carry out searches at private individuals’ homes. As discussed below, most cartels are discovered by an ex officio investigation following a leniency application.

General investigative powers

The prosecutors may request the undertakings concerned for information, upon which the undertakings have to respond within a certain indicated time limit. If the required information is not provided after such period has elapsed, a motivated decision can be adopted requiring the undertakings to provide the requested information. The prosecutors are furthermore competent to conduct interviews and take written or oral statements. They may also request and copy all documents or information deemed necessary in order to carry out their investigative duties.

Dawn raids

By far the most intrusive measure is a dawn raid. Prosecutors are empowered to carry out inspections in any premises, means of transport, or other land of the undertakings concerned where the presence of data relevant for their investigation can reasonably be presumed. Inspections in the private homes of the undertakings’ directors, managers and other staff are also possible, and are carried out. Assistance to conduct the inspection can be requested of the police and of experts. The inspections require prior authorisation of an investigating

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judge as well as a warrant specifying the subject matter and purpose of the inspection, issued by the prosecutor in charge of the investigation.

During the course of the inspection, the prosecutors may interview persons in charge as well as staff members in relation to the subject matter of the inspection and in relation to the internal organisation of the undertaking in order to facilitate the inspection. The prosecutors may also seize and seal, but in case such actions are carried out at premises other than those of the undertakings concerned, their duration may not exceed 72 hours.

Regarding the examination of electronic documents, the BCA has put forward transparent guidelines they abide by when examining such documents. Accordingly, a prima facie examination of the content and structure of the electronic data is made in order to identify the persons and files possibly related to the subject matter. Subsequently, either key terms are used within copies of these files in order to facilitate the selection of individual documents relevant to the investigation, or the data is examined manually on site. In the first scenario, the documents are selected without examining their content. The list of used key terms is, in any event, provided to the undertaking concerned. In principle, the undertaking concerned or its advisers should be present during such selection. Unfortunately, the prosecutors seem to have developed a different practice where only the classification into three categories (“in-scope”, “out-of-scope”, or “legal-professional-privilege” (“LPP”)) is conducted in the presence of the undertaking or its advisers, while the selection is made in their absence. Evidently, such a practice does not allow for control over which documents are or are not examined by the prosecutors.

The “in-scope” documents can be examined immediately by the investigation team, while the other documents are sealed pending an examination by an independent prosecutor. It is nonetheless possible that a document is consulted immediately to identify its possible out-of-scope or LPP character.

Sanctions related to the investigation

Failure to comply with certain obligations during the investigation phase may lead to an additional fine of up to 1% of the turnover for undertakings. Although legislation specifically refers to individuals as well as undertakings, the fact that the fine is based on the undertaking’s turnover seems incompatible with imposing such fines on individuals. It therefore remains to be seen whether these fines can and will be imposed on individuals.

Fines can be imposed in case one deliberately or negligently provides inaccurate, incomplete, misleading or untimely information following a request by reasoned decision, as well as in cases where investigations are prevented or impeded.


To date, the BCA is not particularly active in the context of cartel enforcement. In 2018, no cartel decisions were taken. As was the case in 2016 and 2017, the BCA carried out three dawn raids, which indicates that a number of investigations are ongoing and that decisions are forthcoming. For 2018, one of these dawn raids, concerning immunoglobulins, was carried out at the request of the Romanian competition authority, so no decision is to be expected in Belgium. The other dawn raid was carried out at the premises of one company only and related to fire safety equipment. The third dawn raid was a joint effort with the French competition authority and concerns the distribution of cosmetics. It is not clear whether any of these dawn raids are focusing on cartel behaviour or other infringements of Article IV.1 CEL. The latter, however, is more likely. In 2019, with regard to the

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Professional Body of Pharmacists (“PBP”), an infringement decision is expected as the Auditor filed its report on 31 October 2018. The Auditor finds that the PBP has infringed Article IV.1 CEL and Article 101 TFEU by engaging in all sorts of legal proceedings, engaging in defamatory practices, etc. against MediCare-Market, a new entrant into the market.1 This finding is all the more likely as the Competition College in 2017, in preliminary measures proceedings involving the same parties and facts, found that prima facie PBP infringed the cartel prohibition.2

As a reminder, in 2017, only two cartel decisions were taken: one concerning a public tender issued by Infrabel, the Belgian rail infrastructure operator; and the other concerning vertical resale price maintenance and exclusionary behaviour in the market for yeast. Both cases were settlement decisions. The total amount of the fines imposed was approximately €7.3 million. In 2016, two settlement decisions were taken, resulting in total fines of about €3.9 million. Similarly, in 2015, only one cartel decision was adopted, which was once again concluded via a settlement procedure.3 The BCA nonetheless imposed a record fine of €174 million.

The relatively low number of decisions is not surprising given the BCA’s decision practice in the past, where the number of cartel decisions was not necessarily higher. Furthermore, the BCA still had to deal with a larger number of cases started under the old authority. Many of those were dismissed. Reasons for dismissal include “limited resources and priorities”, lack of evidence or prescription. For instance, in 2015, 17 cases were dismissed by the college of auditors.

Furthermore, based on its recent investigative practice, these numbers are not expected to increase significantly in the near future.


As in most jurisdictions, the BCA has the discretionary power to decide whether it will pursue cases brought to its attention “in light of the available resources and priorities”.

The BCA announces its priority policy for the following year in an annual document. For 2018, the BCA intended to undertake action within the following five sectors (mainly coinciding with its priority policy in the preceding years): the liberalised sector of network-industries; the sector of mass distribution, including relations with suppliers; the sector of media and digital economy; the services sector; pharmaceuticals; logistics; and the sector of public procurement.

The BCA adds that it will investigate all serious competition law violations it deems necessary, regardless of its priority policy. In practice, the BCA will pursue both cases brought to its attention (through leniency applications or complaints) and cases initiated ex officio. The likelihood that a complaint might lead to a full-on investigation is nonetheless higher when it concerns a priority sector.

As to the nature of the infringements primarily pursued, no general trend can be identified. No settlement decisions were taken in 2018. The year 2017 saw one settlement decision following a cartel during a public tender process and one settlement following an issue of vertical resale price maintenance, client partitioning and exclusionary behaviour. Both cartel decisions in 2016 concerned agreements or concerted practices relating to price-setting, and were directly organised amongst competitors, either in the form of formal agreements or in the form of meetings and contacts leading to a common understanding.

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The cartel decision in 2015, however, concerned an indirect information exchange (hub-and-spoke) leading to a concerted practice. In particular, information concerning price increases was exchanged through a common supplier, which negotiated and arranged the ultimate concerted practice amongst distributors.

In September 2018, the BCA issued a draft guidance paper on information exchanges concerning markets and prices. Comments had to be submitted by 15 November 2018. A final version of the guidance paper is expected to come out in 2019.


A couple of issues in relation to the investigation and decision-making procedures, as implemented by the 2013 competition legislation, are worth mentioning.

An issue that has particularly occupied practitioners since 2013 concerns the means of appeal during the investigation phase. As the enforcement procedures are now conducted through a monistic rather than dual system, the Markets Court is considered to be an essential factor in the checks-and-balances in order to safeguard the procedural rights of the parties concerned. Evidently, the law provides for means of appeal against cartel decisions or dismissals by the Competition College. Regarding the investigation procedure, certain safeguards are put in place as well, for instance the possibility to have the Competition College review decisions of the Public Prosecution Service regarding confidentiality.

The 2013 competition legislation has nonetheless been criticised for not properly safeguarding the parties’ procedural rights during the investigation phase. This is especially due to the fact that no immediate means of appeal are available against a dawn raid which has been the subject of a lot of debate. According to Article IV.79 §1 CEL, an undertaking can contest a decision of the Public Prosecution Service to use data obtained through an inspection, but only after the grievances (i.e. statement of objections) are communicated and only as far as such data is used to prove said grievances. As expected, case law has been abundant on this matter. In 2014, the Constitutional Court ruled Article IV.79 §1 CEL to be compliant with the Constitution and the relevant human rights, as nothing in the CEL precludes national courts from suspending the decision in question pending the appeal, thereby preventing the Competition College from obtaining access to the disputed data in the meantime.4 One could read a recent judgment of the Brussels Court of Appeal as continuing to take issue against this point of view, and arguing for earlier appeal potential.5 It remains to be seen how case law will evolve on this matter.

Other issues in relation to the current legislative framework can also be identified. For instance, according to Article IV.45 §3, parties are not allowed to submit additional documents – not submitted during the investigation phase – to the Competition College (subject to certain exceptions). This may lead to inequality, as the Public Prosecution Service is not subject to any time limit to formulate its grievances, while the undertakings are expected to submit all necessary documents within a short period of time after the grievances are communicated. Furthermore, criticism has been expressed against the lack of a possibility to appeal by third parties against commitments and by the undertakings in question against cartel decisions concluded through a settlement procedure (a possibility which is nonetheless provided for under European competition law).

Finally, it is worth mentioning that Belgian case law accepts LPP for Belgian in-house counsel. Indeed, the Court of Cassation confirmed6 that advice provided by in-house counsel (members of the Belgian Institute for in-house counsel) is confidential, as a result of which such documents cannot be seized or examined by the BCA within the framework of a dawn raid. However, the privilege does not apply in case the BCA assists the European Commission in conducting inspections.

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As in most jurisdictions, Belgian competition law provides for a leniency regime similar to that of the European Commission. An undertaking is able to obtain immunity for, or reduction of, the fine it would normally risk, if it contributes to proving the prohibited practice and in identifying its participants, either by providing intelligence the BCA did not yet possess, by proving a prohibited practice the BCA did not yet know of, or by acknowledging the existence of such practice. The specific conditions in order to qualify for immunity for, or reduction of, the fine are set out in the BCA’s recently amended leniency guidelines and are identical to those of the European Commission. The reduction of the fine is proportionate to the undertaking’s contribution to proving the infringement.

In 2016, the BCA’s leniency guidelines were amended to extend the possibility of leniency to private individuals. As a result, private individuals can likewise request immunity for their fines, under similar conditions as undertakings. As immunity may also be granted to individuals cooperating with a leniency application of the undertaking he or she works for, applying for individual immunity is, in any event, advised if the individual’s undertaking decides to submit a leniency application. Importantly, an immunity request of an individual does not preclude undertakings from obtaining immunity.

The leniency regime can be considered a relatively important aspect of cartel enforcement in Belgium. Since 2013, there have been considerably more leniency applications than third party complaints or ex officio investigations. For instance, the total amount of complaints in relation to restrictive practices (therefore including cartels as well as abuses of dominance) in 2014 was six, compared to a total of 17 leniency applications (in 10 cases). Similarly, a total number of four complaints were lodged in 2015, compared to eight leniency applications. In addition, all major cartel cases that have been successfully prosecuted in recent years involved a leniency applicant. Indeed, in all four cartel decisions in 2015–2017, one undertaking was granted full immunity. Some of the other undertakings consequently obtained a fine reduction of between 50% and 20%, depending on their contribution and timing.


As stated above, all 2015, 2016, and 2017 cartel decisions were ultimately concluded through a settlement procedure (“transaction” according to the CEL). None were taken in 2018. In any given investigation (but prior to submitting its draft decision to the Competition College), the Public Prosecution Service may propose a time limit within which the parties can communicate their readiness to hold transaction talks. If so, a short version of the grievances are communicated and access is given to the relevant evidence. If a transaction turns out to be a possibility, the undertakings in question give a statement of transaction, wherein they admit their involvement, assume responsibility for the quoted infringement and accept the proposed sanction. The transaction is “rewarded” by a reduction of up to 10% of the initially calculated fine. In practice, the maximum of 10% is almost always granted. The settlement procedure ends with a transaction decision of the Public Prosecution Service addressed to all settling undertakings, against which no appeal is possible (see supra). The Competition College is therefore not involved in the procedure.

The settlement procedure is clearly distinct from the leniency procedure, both in law and in practice. They may also be combined, as a result of which the relevant fine reductions will be combined.

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According to Articles IV.41 and 42 CEL, complaints can be submitted to the Auditor-General by anyone who demonstrates their direct and immediate interest in the claim. There is no obligation to initiate a formal investigation procedure, but a formal dismissal decision nonetheless has to be adopted. The Public Prosecution Service is free to dismiss complaints based on its priority policy and the available means (see supra). In addition, complaints may be dismissed as unfounded, inadmissible or due to their prescription. When the Public Prosecution Service is considering dismissing a complaint, it may decide to hear the complainant. In case of dismissal, the complainant is notified and provided with the possibility to consult the procedural file and bring an appeal before the President of the Competition College.

Informal complaints are also possible. They will be analysed and inquired into by the Public Prosecution Service if so requested by the Auditor-General. Contrary to formal complaints, informal complaints can remain unanswered. Interestingly, whereas formal complaints are communicated to the undertakings concerned, informal complaints are not. As a result, if the Public Prosecution Service decides to investigate upon an informal complaint, a request for information will be sent to the undertakings without necessarily indicating the specific reasons for its sudden interest. Undertakings can therefore be tempted to be less careful in responding to such requests.

The expected decision in PBP referred to above will be the result of a successful complaint.


As stated above, the Competition College can impose a fine upon the undertakings concerned when ordering cessation of a restrictive competition practice, capped at 10% of their respective turnovers. Furthermore, it can accompany the cessation order with a periodic penalty payment, capped at 5% of the average daily turnover. According to the guidelines of the BCA, the Competition College will follow the “2006 Guidelines on the method of setting fines” of the European Commission, with a few (evident) alterations. The cap of 10% (respectively, 5% for the periodic penalty payment) is calculated based on the company’s turnover generated on the Belgian market and through export.

The aggravating or mitigating circumstances that might increase or decrease the fine are identical to those listed in the Commission’s guidelines. However, in relation to the aggravating circumstance of repetition, only infringements that have been the subject matter of a Commission decision, or a decision by a national competition authority in one of Belgium’s neighbouring countries, are taken into account.

The draft decision, including the fine claimed by the Public Prosecution Service, is sent to the parties simultaneously with its submission to the President of the Competition College. In case parties are prepared to settle, the minimum and maximum amount of the fine the Public Prosecution Service is considering to propose is communicated earlier, along with the grievances it is raising.

In relation to the imposition of administrative fines upon individuals, a fine of €100 to €10,000 can be imposed for negotiating or agreeing to, and on behalf of an undertaking with its competitors, to fix prices, limit production or sales, or allocate markets. As stated above, no criminal sanctions are available under Belgian law.


Parties can lodge an appeal against a cartel decision taken by the Competition College,

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including against the fines imposed therein. Such an appeal has to be lodged with the Market Court section of the Brussels Court of Appeal and is a “full merits” appeal regarding both the facts and the law. The Court assesses the situation as it existed at the time of the decision, based on the investigation file and formulated grievances of the Public Prosecution Service. It may not inquire into additional facts or evidence, nor reformulate the initial grievances.

The Court may substitute the cartel decision of the Competition College with its own decision, including a negative statement that no infringement is present. When the Court comes to the conclusion that an infringement of Article 101 TFEU is present (contrary to the BCA decision), it can only annul the relevant decision without rendering a substitute decision. Furthermore, in relation to an appeal against the fines imposed, it can be inferred that the Court is free to decrease the fine based on reasons of expediency, proportionality or legitimacy. However, it can be inferred that if it considers the fine too low, its only option is to annul the decision of the Competition College.

An appeal cannot be lodged against a transaction decision (see supra). As a result, and given that cases are often concluded through a settlement procedure, there is not a lot of case law on this matter. One appeal in relation to the fine calculation is nonetheless worth mentioning. In 2016, the Court of Appeal ruled that the principle of ne bis in idem might be relevant if another national competition authority has already imposed a fine, taking into account the Belgian turnover. In those cases, the BCA is in principle not precluded from imposing a fine in relation to the effects on the Belgian market. The Court nonetheless stated that the BCA had to calculate the fine in relation to the Belgian market, and could not therefore impose a lump sum penalty.7

The Court was quite active in overturning decisions taken during the investigation phase. As such, there have been cases wherein the Court ruled dawn raids conducted by the Public Prosecution Service illegitimate, primarily because no prior authorisation of an investigating judge was required under the previous legislation, and means of appeal were uncertain.8 Similarly, the Court – as confirmed by the Court of Cassation9 – ruled on the illegitimacy of seizing documents containing advice of in-house counsels or based on a “fishing expedition” without predetermining their relevance to the subject matter.10

Cross-border issues

To date, neither the BCA, nor national courts attempt to exert their competition law jurisdiction extraterritorially. Decisions are therefore limited to the infringing facts related to (a part of) the Belgian territory.

Cooperation efforts within the European Competition Network should be mentioned, however. In particular, the BCA has already assisted in several inspections of the European Commission, conducted multiple inspections upon request of other national authorities, and answered numerous questions of other national authorities. The BCA rarely seems to ask assistance of other national authorities itself, however. Regardless, cartels have already been successfully prosecuted in the past, (partly) based on information provided by the European Commission.11


As in most EU jurisdictions, private enforcement is still a developing area rather than a significant source of competition law cases. Private enforcement of Belgian or European competition law through national courts is nonetheless an existent feature. However, more

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prominent in this regard are actions attempting to achieve the annulment of an agreement contrary to competition law (as opposed to third-party enforcement actions).12

By the Act of 6 June 2017, Belgium finally transposed the EU Directive on antitrust damages actions (“Damages Directive”). The Act entered into force on 22 June 2017. Any procedural rules introduced by this Act will not be applied to claims for damages filed before 26 December 2014. The Belgian Act is mainly in line with the Damages Directive, with a few interesting deviations, including: the impact of voluntary damage payments on the fine calculation by the Belgian Competition Authority; and the fact that the definition of a cartel also included hub-and-spoke cartels.

* * *

Endnotes

1. Press release BCA 38/2018, 8 November 2018.

2. BCA Decision of 19 June 2017, ABC-2017-V/M-24.

3. BCA Decision of 22 June 2015, Case CONC-I/O-06/0038 – Hausses coordonnées des prix de vente de produits de parfumerie, d’hygiène et de droguerie, No. ABC-2015-I/O-19-AUD.

4. Constitutional Court, 10 December 2014, No. 179/2014.

5. Brussels Court of Appeal, 9 July 2015, No. 2014/MR/1, TBM 2016, vol. 1, p. 48, §31.

6. See i.a. Brussels Court of Appeal, 9 July 2015, No. 2014/MR/1, TBM 2016, vol. 1, p. 48 and Brussels Court of Appeal, 18 February 2015, No. 2013/MR/19, 22, 24–25, TBM 2015, vol. 1–2, p. 73.

7. In relation to the flour cartel, see Brussels Court of Appeal, 30 June 2016, No. 2013/MR11-15, not published.

8. Court of Cassation, 22 January 2015, AR C.13.0532.F.

9. Court of Cassation, 22 January 2015, AR C.13.0532.F.

10. Brussels Court of Appeal, 5 March 2013, 2011/MR/3, not published.

11. See, e.g., BCA Decision of 30 August 2013, Case CONC-I/O-05/0075 – Cimenteries, No. 2013-I/O-24.

12. See, e.g., Brussels Court of Appeal, 28 April 2010, TBH 2011, vol. 8, p. 808; Antwerp Court of Appeal, 2 December 2013, No. 2010/AR/1938, TBM 2014, vol. 4, p. 335.

Laga Belgium



Laga Belgium


Hendrik Viaene Tel: +32 2 800 70 42 / Email: [email protected] Hendrik Viaene is a partner at Laga, where he mainly focuses on European and Belgian competition law (merger control, cartels and abuse of dominant position), state aid and EU internal market provisions. He regularly assists clients before the Court of Justice, the General Court, the European Commission, national courts and administrative authorities. Mr. Viaene has published various contributions relating to the application of European and Belgian competition law. He is a member of the board of editors of the Revue de la Concurrence Belge and an editor of the EU Competition Law Handbook. He also teaches competition law in the framework of the Brussels Bar Association.

Gateway Building, Luchthaven Nationaal 1J, 1930 Zaventem, Belgium Tel: +32 2 800 70 70 / Fax: +32 2 800 70 71 / URL: www.laga.be

Laga


Canada


Statutory regime

Cartel conduct is a serious criminal offence in Canada, attracting the highest penal and financial penalties of any “corporate crime” in Canada. Canada’s cartel prohibitions are set out in Part IV of the Competition Act (the “Act”),1 which is a federal law of general application that applies to all conduct which either occurred in, or has effects in Canada.2

The main prohibition is set out under section 45, which criminalises agreements between competitors or potential competitors to fix or control prices or output, or to allocate sales, territories, customers or markets for the supply of any good or service. Section 45 is a per se offence, such that proof of anti-competitive effects is not required to establish culpability. Given the provision’s reference to supply, the Canadian Competition Bureau (the “Bureau”) has indicated in its guidelines that section 45 does not apply to agreements which relate only to the purchase of products, i.e., joint purchasing agreements.3

A corporation is also prohibited under section 46 from implementing a “directive, instruction, intimation of policy or other communication” from a person outside of Canada to give effect to a “conspiracy, combination, agreement or arrangement” that would have contravened section 45 had it occurred in Canada. The communication must come from a person who is “in a position to direct or influence the policies of the corporation”.

Section 47 criminalises agreements to submit pre-arranged bids or providing that one or more of the parties will not submit a bid or will withdraw a bid. As with the conspiracy provision, bid rigging is per se a criminal offence. Section 49 prohibits federal financial institutions from entering into certain agreements related to interest rates, loans, and other services.

The Commissioner of Competition (the “Commissioner”) and his department, the Bureau, are responsible for investigating alleged violations of the Act, including the cartel provisions. They can refer cartel matters to the Public Prosecution Service of Canada (the “PPSC”) for prosecution.

As with other criminal offences, Canadian constitutional law affords protections to firms and individuals under investigation or being prosecuted for cartel conduct (e.g., the presumption of innocence, the protection against self-incrimination, the right to counsel, etc.).4

While cases may be prosecuted in either the provincial superior courts or the Federal Court Trial Division, contested cartel cases in Canada are uncommon and more typically, prosecutions are resolved by way of a plea agreement submitted to a provincial superior

Joshua A. Krane, Chris Dickinson & Gillian Singer Blake, Cassels & Graydon LLP



court.5 In the case of international cartels, a company typically will enter into a plea agreement in Canada once it has pled guilty to conspiracy in the US, or sometimes elsewhere. While there is no limitation period for the prosecution of cartel conduct in Canada, the Bureau can exercise its discretion to discontinue an investigation and not refer past conduct to the PPSC.6

The Bureau has published several guidelines in respect of its enforcement approach to the cartel provisions of the Act. In May 2009, the Bureau published its Competitor Collaboration Guidelines which describe the Bureau’s approach in applying the cartel and competitor collaboration provisions of the Act, and outline the competition issues that may arise from collaborations.7 In June 2015, the Bureau published an updated Corporate Compliance Programs bulletin, setting out the Bureau’s view of the essential components of a credible and effective programme and appending a model compliance programme framework for companies to use, a certification letter for employees, and a due diligence checklist.8 The Bureau also released a final version of its Competition and Compliance Framework bulletin in November 2015, which explains the outreach, enforcement and advocacy instruments the Bureau utilises to promote compliance with the Act.9 The Bureau recently updated its Immunity and Leniency Programs, to reflect the Bureau’s current approach to the administration of these programmes. In September 2018, the Bureau released a revised version of its Immunity and Leniency Program bulletin, which is discussed in greater detail below.10

Penalties

The penalties for a violation of the cartel provisions are potentially quite severe. A violation of section 45 (conspiracy) or section 47 (bid rigging) carries a possible term of imprisonment of 14 years. Maximum fines for conspiracy are Can$25m per count (and a person may be convicted on multiple counts), and there is no maximum fine for bid rigging (or the implementation of a foreign directive). A plea agreement may contemplate sanctions other than those prescribed by the Act, including the disqualification of individuals from holding certain offices within a company or asset forfeiture.

The fundamental principle of sentencing in Canada is that a sentence must be proportional to the gravity of the offence and the degree of responsibility of the offender. The general principles of sentencing law in Canada require that judges consider sentences imposed on similar offenders in similar circumstances; however, there are no formal sentencing guidelines or rules. It is standard practice in Canada for the PPSC to make formal submissions on sentencing to the court considering the plea agreement, if one exists.11

The magnitude of the economic harm caused by a cartel goes to the gravity of the offence. The usual notion of “economic harm” from a cartel is the “overcharge”. This is the amount paid by victims of the cartel over-and-above what they would have paid for the products in the absence of the conspiracy. The Bureau will normally recommend that the fine be greater than the overcharge to ensure that the fine is not “simply a cost of doing business” and to ensure that an appropriate level of punishment and deterrence is achieved.

In most cases it is difficult to quantify the overcharge resulting from cartel behaviour. In such cases, the Bureau typically will use 20% of the volume of commerce affected in Canada (e.g., the value of the conspirator’s sales of the products in Canada over the relevant time period) by the cartel participant as a proxy for the economic harm and as the starting point for its sentencing assessment (provided it is not above the maximum allowable fine); this is said to be made up of 10% for the assumed overcharge and 10% for deterrence.

In a conspiracy matter involving multiple counts, the resulting fines may exceed the statutory

Blake, Cassels & Graydon LLP Canada



maximum for one count. In dealing with multiple counts, the Bureau will consider the totality of the conduct and surrounding circumstances to arrive at the appropriate sentencing recommendation.

In reasons delivered in R v. Maxzone Auto Parts (Canada) Corp,12 Crampton C.J. emphasised the need for a full evidentiary record and detailed submissions for the court to become satisfied that a sentence arrived at by plea agreement is in the public interest and would not bring the administration of justice into disrepute.13 The submission should set out the aggravating, mitigating and other sentencing considerations, some of which are not always submitted as a matter of course, including the amount of illegal profits attributable to the conduct, the economic harm attributable to the conduct, and whether the corporate defendant has paid restitution. Additional requirements may need to be met with respect to individual defendants. The Commissioner has stated publicly that despite the greater detail required in sentencing submissions, companies have continued to come forward seeking leniency, and the Bureau and cooperating parties have managed to work with the framework set out by Crampton C.J. Indeed, since the release of the decision, there does not appear to have been a significant change in the number or type of cases resolved by plea in Canada.

In addition to criminal penalties, plaintiffs in third-party civil actions can recover damages, as well as investigation costs and costs to bring the proceeding. Moreover, provincial asset forfeiture statutes allow for the confiscation by the Crown of proceeds of crime as well as offence-related property.14

There are business implications to convictions as well. For example, bidders for federal government contracts must comply with the requirements set down by Public Services and Procurement Canada (“PSPC”), the department that provides procurement services to the Canadian Federal Government.15 These requirements prohibit any bidder from bidding on a contract where it or its affiliates have been convicted of certain offences, including criminal offences under the Act and even equivalent foreign offences. These requirements are part of the Government of Canada’s Integrity Regime, which outlines requirements for suppliers contracting with the Federal Government.16 The regime has been enhanced several times since first published. In the fall of 2018, the Government released a draft updated policy, which was followed by a public consultation.17 The final enhancements are expected to come into effect in January 2019. The enhancements:

• introduce greater flexibility in debarment decisions (rendering companies ineligible from receiving federal contracts or real property agreements);

• increase the number of triggers that can lead to debarment;

• explore alternative measures to further mitigate the risk of doing business with organised crime; and

• expand the scope of business ethics covered under the regime into key areas such as combatting human trafficking and the protection of labour rights and the environment.

Administrative settlement

Convictions in the context of cartels have to date been obtained almost exclusively through the plea bargaining process. In addition to, or in lieu of, a plea agreement for criminal conduct, section 34(2) of the Act provides a mechanism whereby a person can consent to a prohibition order. The order may appear very similar to a plea agreement (e.g., include conditions for the payment of a monetary penalty, a prohibition on individuals holding certain offices, etc.), but will not result in a criminal conviction or criminal record. The Bureau typically will not seek prohibition orders in lieu of plea agreements.




Alternative track

The Commissioner can also prosecute competitor collaborations under section 90.1 of the Act. Under this section, the Commissioner can apply to a specialised competition court, the Competition Tribunal (the “Tribunal”), to prohibit the continuation or entry into an agreement or arrangement between competitors. Responsibility for enforcing section 90.1 lies exclusively with the Commissioner and a decision to commence proceedings under section 90.1 bars the PPSC from prosecuting the conduct criminally.18 The Tribunal may issue a prohibition order where it finds that an agreement prevents or lessens, or is likely to prevent or lessen, competition substantially in a market. The Tribunal may not, however, impose other penalties (e.g., fines or imprisonment) and no private right of action for damages exists with respect to conduct governed by section 90.1.19

Cartel investigations

Fact-gathering tools

Cartel conduct typically will come to the Bureau’s attention in a number of ways. Most commonly, a person or firm will approach the Bureau under the Immunity Program (described below) and seek immunity in respect of cartel conduct. Sometimes companies that are affected by a cartel will complain to the Bureau about cartel conduct involving their suppliers or customers. If the Bureau finds the complaint to be credible, it can investigate the complaint using its many information-gathering powers. When cartel investigations in other foreign jurisdictions become public, the Bureau is increasingly pursuing investigations on its own accord. In addition, the Bureau may discover possible cartel conduct in the course of another matter such as a merger review.20

The Commissioner also has extensive powers to obtain information through search warrants, orders for the production of data, and records and wiretaps. Search warrants may be obtained by means of an ex parte application pursuant to section 15 of the Act. Under this section, the court must be satisfied that there are reasonable grounds to believe a criminal offence has been committed and that relevant evidence is located on the premises to be searched. It is a criminal offence to prevent access to premises in Canada or otherwise obstruct the execution of a search warrant. The Act also provides special procedures for sealing privileged documents and for determining the validity of privilege claims within a certain time frame. The Bureau also has the power to investigate cartel behaviour through wiretaps, although it requires prior judicial authorisation in order to do so.

Warrants are not subject to appeal, but can be reviewed where there has been material non-disclosure or misrepresentation in the affidavit supporting the Commissioner’s ex parte application. Targets may also request a retention or privilege hearing.

The Bureau can apply to the courts for production orders or orders for oral examination under section 11 of the Act. The Bureau will generally only use section 11 while in the initial fact-gathering stage. If the Bureau has a reasonable belief that a crime has been committed, it will typically obtain a search warrant instead.

Section 11(2) of the Act also provides that the Bureau may seek on an ex parte basis, and the courts may issue, a production order in respect of a foreign affiliate of a Canadian corporation when: (i) the Bureau has sought a similar order in respect of the domestic subsidiary; and (ii) the Bureau can establish that the foreign affiliate has records that are relevant to an inquiry.

In Canada (Commissioner of Competition) v. Pearson Canada Inc.21 and Canada




(Commissioner of Competition) v. Indigo Books & Music Inc.,22 Crampton C.J. provided guidance on the Bureau’s burden in obtaining production orders and a respondents’ ability to challenge such orders, notably rejecting challenges based on discovery being available in other ongoing proceedings or the existence of other persons who might have relevant information or records. In Canada (Commissioner of Competition) v. Bell Mobility Inc.,23 Crampton C.J. provided further guidance regarding the relevant time period for what constitutes an excessive, disproportionate or unnecessary burden on respondents in relation to a production order; specifically, he explained that the Commissioner’s information requirements should be tailored to the individual investigation and where a “reasonable efforts” standard is feasible (i.e., where a “reliable, representative amount” of information, as opposed to an order to produce all information over a lengthy time period, would be sufficient to prove the Commissioner’s case), it should be negotiated by the parties and applied.24

Section 29 of the Act protects the identity of informants and requires that the Bureau hold confidential any information provided by informants under the search and seizure powers of the Act.

In international cartel cases, the Bureau will often work closely with other competition agencies either through formal procedures, involving the application of mutual legal assistance treaties (“MLATs”), or through reliance on Canada’s competition cooperation agreements to obtain information. Currently, Canada has MLATs or competition cooperation agreements with most major jurisdictions including the US, the EU, Japan, Australia, Brazil and others.

Immunity and Leniency Programs

Canada’s Immunity and Leniency Programs are of integral importance to cartel enforcement. Although no statistics are available publicly, it can be safely assumed that the Immunity and Leniency Programs assist the Bureau in the vast majority of its investigations.

In Canada, the Bureau will assign an “immunity marker” to an individual or a company that is “first-in”, or first to request immunity, often called the “immunity applicant”. Where a party does not qualify for immunity (i.e., the party is not “first-in”) but the party cooperates with the Bureau, often called the “leniency applicant”, the Bureau typically recommends that the prosecution grant some form of leniency, in the form of a reduced financial penalty and/or deferral of prosecution of any individual related to the leniency applicant.

To obtain immunity or leniency, the requesting party must provide evidence of an offence of which the Bureau is currently unaware, or of which the Bureau is aware but on which the Bureau has not yet obtained enough proof to mandate a criminal referral to the prosecution (a “proffer”). The party also must terminate its participation in the illegal activity and must not have coerced others to be a party to the illegal activity. The party must commit to full cooperation throughout the entirety of the Bureau’s investigation and the PPSC’s prosecution of the case vis-à-vis any other party.

Once a party has received a marker and has indicated to the Senior Deputy Commissioner of Competition of Criminal Matters (the “SDC”) that it wishes to participate in the Immunity or Leniency Program, the SDC will confirm the continuation of the marker, usually for a period of 30 days, in order for the applicant to provide a proffer. If the proffer is not provided on a timely basis, the marker may be lost. Once the Bureau has concluded that the applicant has demonstrated its capacity to provide full cooperation, it will provide the Director of Public Prosecutions (the “DPP”) with a recommendation regarding the applicant’s eligibility. Under the new Immunity and Leniency programme released in September 2018, the DPP




will then decide whether it wants to grant the applicant a Grant of Interim Immunity (a “GII”).25 The GII is a conditional immunity agreement that sets out the applicant’s ongoing obligations it must fulfil before the DPP will finalise an immunity agreement. All identified current directors, officers or employees will be included under the GII if they admit their knowledge of or participation in the unlawful conduct and provide full cooperation. Former directors, officers and employees may qualify on the same terms, though the Bureau will decide on a case-by-case basis. This is a departure from the previous programme, where all directors, officers and employees received automatic immunity. The DPP may revoke the GII if the applicant does not comply with its terms. Once the applicant has satisfied its obligations under the GII, such that the applicant’s assistance is no longer required, the Bureau will make a recommendation for a final grant of immunity. The GII system is a departure from the previous programme, which involved a single and final grant of immunity.

Participation in the Immunity and Leniency Programs is voluntary, confidential, and on a (as against the participant) “without prejudice” settlement privileged basis. Applicants should be aware, however, that in 2015, the Ontario Superior Court in R. v. Nestlé held that “factual information” disclosed (as opposed to legal arguments or procedural submissions made) by a participant in the Immunity and Leniency Programs is not settlement-privileged and, even if it were settlement-privileged, an exception must be allowed to accommodate the Crown’s duty to disclose relevant evidence to a defendant in a criminal proceeding.26 The new Immunity and Leniency programme also introduces a protocol for identifying, reviewing and adjudicating privilege claims by applicants. After the GII stage, the applicant must provide notice to the Bureau of its privilege claims. The Bureau will then refer the information to the DPP. If the DPP is not persuaded by the applicant’s privilege claim, it will either agree to appoint an independent counsel to resolve the claim or ask a court to rule on the matter.

Immunity is granted only to the first participant involved in a conspiracy to come forward. Under the new Immunity and Leniency Program, all subsequent leniency applicants are eligible for a cooperation credit for up to a 50% reduction in the fine that would otherwise have been recommended by the Bureau to the prosecution. Rather than providing credit on a first-come, first-serve basis, under the new programme, the amount of credit awarded will be based on the value of the applicant’s cooperation. This is a significant change from the previous programme, where only the first leniency applicant received a 50% credit and subsequent applicants would be granted a reduced credit. As with immunity applicants, current directors, officers or employees must admit knowledge of or participation in the unlawful conduct and provide full cooperation to receive the benefit of a company’s leniency application. Former directors, officers or employees may also qualify under the same conditions, though the Bureau will decide on a case-by-case basis. In addition, the length of the offence period is typically a matter of negotiation with the authorities where the party cooperates with the investigation; the period determined to be relevant, for example, in US proceedings, can have a bearing on the period used in Canada. In addition, the Bureau may consider (and recommend that the courts consider) the pre-existence of a “credible and effective” compliance programme as a mitigating factor when assessing a fine against a firm charged with a cartel offence.

“Immunity Plus” is available should a company provide the Bureau with probative evidence of a second conspiracy or other criminal conduct unrelated to the Bureau’s current investigation, or in respect of products not presently being examined by the Bureau under its current investigation. Immunity Plus status provides immunity with regard to the “additional” conspiracy or criminal conduct, as well as an additional discount (generally in




the range of 5% to 10%) for the initial criminal conduct, although this amount may increase depending on the extent of the party’s cooperation.

The Bureau typically will not share the identity of an immunity or leniency applicant, or the information provided by the applicant with a foreign law enforcement agency, unless the applicant provides a waiver giving the Bureau consent to do so or it is required by law to do so. As part of an applicant’s ongoing cooperation, under either the Immunity or Leniency Program, the Bureau expects the applicant to provide waivers allowing communication of information with jurisdictions to which the applicant has made similar applications for immunity or leniency. The request for a waiver, however, is typically limited to the jurisdictions which are most relevant to the case in Canada. At times, the Bureau may be willing to accept a limited waiver (e.g., allowing the agencies to discuss only certain information), if legitimate reasons for doing so are provided. Eventually, however, the applicant may be required to provide a full waiver allowing for the sharing of any information the Bureau obtains in the course of cooperation, including documents. As a matter of practice, there tends to be minimal document exchange (the agencies have often received production of the same documents) and moderate oral exchanges between the agencies.

Strict confidentiality as to the identity of informants may reduce potential exposure to civil actions for immunity and leniency applicants; however, once guilty pleas are entered, leniency applicants are readily exposed to third-party actions for damages. The information provided by immunity and leniency applicants is subject to strict confidentiality agreements with the Bureau. Third parties seeking damages cannot require, without a court order which the Bureau will resist, the Bureau to disclose information obtained from leniency and immunity applicants in their investigations, and thus their exposure to damage actions is limited to the material made publicly available.27 Potential immunity and leniency applicants should be aware that plaintiffs in private actions may rely on the Supreme Court of Canada’s (the “SCC”) decision in Imperial Oil v. Jacques (discussed below) to obtain access to certain Bureau files and information obtained during a criminal investigation. However, such access is limited by Canada (Attorney General) v. Thouin (discussed below), where the SCC held that in a price-fixing class action in which the government is not a party, Bureau investigators cannot be compelled to be examined for discovery.

Duration of investigations

The duration of time from the receipt of an immunity marker to the end of the immunity applicant’s cooperation obligations is highly case-specific. Indeed, the timing has ranged anywhere from one to 10 years following the initiation of an investigation through, for example, a dawn raid(s).28 This timing will depend on a number of factors including: the number of participants in the cartel; the duration of the conduct; the affected volume of commerce; the extent to which that commerce directly or indirectly affects Canadian consumers; the jurisdiction where the conduct occurred; the location of the principal witnesses and evidence; and the timing considerations of other enforcement agencies (principally, the US Department of Justice).

Overview of cartel enforcement activity during 2018

Cartel enforcement activity can be measured in terms of new charges laid, convictions obtained, number of investigations under way, and international efforts.

Convictions obtained and charges laid

The PPSC obtained a total of two guilty pleas – one against a company and one against an individual, both in bid rigging cases (compared to a total of eight guilty pleas against one




individual and seven companies in 2018). The company’s conviction concluded the Bureau’s investigation of a series of international bid rigging conspiracies amongst car part suppliers. The company received a $1.3 million fine.29 The individual convicted was found guilty of bid rigging contracts for street lights in Québec.30 The conviction followed an investigation assisted by the Bureau’s immunity programme. The Superior Court of Québec also acquitted one individual charged with bid rigging. In the Court’s view, the prosecution failed to prove that the alleged bid rigging occurred in the context of a “call or request for bids or tenders”, because the invitation for bids did not contain the following essential attributes: (i) a close relationship between the request and the submitted bids; (ii) the project must be defined and sufficiently circumscribed; (iii) the person making the call or request must undertake to treat all bidders fairly; and (iv) there must be an expectation that the call for bids will create a contract between conforming bidders and the person making the call.31 Finally, in June 2018 four individuals were charged with bid rigging in the engineering industry.32

Investigations

In March 2018 the Competition Bureau initiated an investigation into an alleged conspiracy between newspaper companies Postmedia and Torstar. In November 2017, the companies announced the completion of a transaction involving the transfer of 41 community and daily newspapers in the Province of Ontario. The same day, the parties announced that 36 of the 41 newspapers would be closed immediately. In March 2018, the Bureau conducted searches at Postmedia and Torstar’s offices. Shortly thereafter it issued a statement confirming that it was investigating an alleged conspiracy and conducting a separate review under the merger provisions of the Act. In December 2018, the Bureau received a court order allowing it to interview several employees under oath in order to advance the investigation. As at the time of writing, no charges have been laid.33

The Bureau’s investigation into price-fixing of fresh commercial bread, which it initiated in October 2017, remains ongoing.34 As at the time of writing, the Bureau has yet to lay charges.

International efforts

In 2018, the Bureau advanced its inter-agency cooperation agenda by: (i) reinforcing existing relationships with the Department of Justice’s Antitrust Division and the Federal Trade Commission of the United States, the Federal Economic Competition Commission of Mexico and, the European Commission of the European Union and the Vietnam Competition Authority;35 (ii) participating in an interchange with the Australian Competition and Consumer Commission (“ACCC”) by welcoming an ACCC staff member to its senior management team as the Senior Deputy Commissioner of the Bureau’s Cartels and Deceptive Marketing Practices Branch;36 and (iii) promoting best practices in international cartel enforcement by participating in the Eurasian Antitrust Forum in Kazakhstan,37 the International Competition Network’s 17th Annual Conference,38 American Bar Association’s International Cartel Workshop,39 and a workshop by the Asia-Pacific Economic Cooperation’s Economic Committee in Vietnam.40

Private enforcement of cartel laws

The primary cause of action for the private enforcement of cartel laws is found under section 36 of the Act, which confers a private right of action on any person in Canada that has suffered a loss or damage as a result of a breach of one of the criminal provisions of the Act.41 In addition to damages suffered, plaintiffs can sue to recover investigation costs and costs to bring the proceeding, but unlike the US, a plaintiff is not entitled to treble damages.




Proceedings may be commenced in the provincial courts or the Federal Court and typically arise by way of class action. Limitation periods apply but case law is not settled on whether the discoverability principle applies to toll the period until concealed conduct is discovered,42 although the trend is clearly towards the application of this principle. The lack of a conviction or even the refusal of the Commissioner to investigate a potential violation of the cartel provisions does not bar a third-party action. That being said, a prior conviction for the offence is, absent evidence to the contrary, proof of liability. As a consequence, once a person or firm admits to cartel conduct as part of the Bureau’s Leniency Program, with such conviction, prima facie proof is made of the violation of the law. In practice, where an investigation becomes public or a conviction is announced, all potential participants, including an immunity applicant, become the subject of a class action in one (and normally more) provincial court(s) in Canada.

Key issues in Canadian cartel policy

In 2018, courts continued to confront key issues in Canadian cartel policy, including (i) the nature of harm that indirect purchasers must demonstrate to be certified as a class, (ii) whether umbrella purchasers are able to bring claims against price-fixing conspirators, (iii) whether the Act is a complete code intended to displace concurrent common law conspiracy causes of action, and (iv) the application of limitations and the discoverability principle to s.36 of the Act. These issues came to a head in December 2018, when the Supreme Court heard the Godfrey cases (Pioneer Corp. v. Godfrey43 and Sony Corp v. Godfrey44), which dealt with all four hotly debated competition issues. The Supreme Court is expected to provide additional clarity on these issues in its decisions, which had not been rendered as at the time of writing.

Indirect purchaser actions

In October 2013, the SCC issued its most anticipated decisions regarding competition law related private actions, allowing indirect purchasers to bring civil cases against upstream suppliers. In a trilogy of cases, Pro-Sys Consultants Ltd v. Microsoft Corporation, Sun-Rype Products Ltd v. Archer Daniels Midland Company and Infineon Technologies AG v. Option consommateurs, the SCC held that indirect purchasers are not foreclosed from claiming losses passed on to them, and that the risk of double or multiple recoveries in actions brought by both direct and indirect purchasers could be managed by the courts.45 However, the SCC noted that in bringing their actions, the indirect purchasers assume the burden of establishing that they have suffered loss. Whether they have met their burden of proof is a factual question to be decided on a case-by-case basis.

The SCC rejected the “robust and rigorous” standard used in the US to establish a common claim of loss at the certification stage and affirmed that the plaintiffs, at least in British Columbia and Ontario, need only advance a “sufficiently credible” methodology to do so. Although plaintiffs can point to multivariate regression as an accepted methodology to establish overcharge, establishing a methodology for pass-through will prove more difficult. In addition, the SCC required that the plaintiffs demonstrate the availability of underlying data to support the methodologies advanced by the certification expert. Such data may not always be in the defendants’ possession (and could very well be in the possession of foreign persons/companies), particularly if the defendants are located several levels up the distribution chain. Since the release of the SCC trilogy, the required standard of commonality for indirect purchasers has continued to raise confusion. Most recently, the BCCA in Godfrey adopted a broad interpretation of the trilogy, holding that the commonality requirement is




satisfied where the plaintiffs present a plausible method for demonstrating that the overcharge reached the indirect purchaser level of the distribution channel (and not each individual within that level).46 The Supreme Court is expected to address the issue in its decision.

Since the SCC trilogy, courts have certified class actions in cases involving contested issues significantly complicating the determination of commonality of injury, such as network effects and differences in bargaining power.47 In 2018, courts in British Columbia and Ontario continued to grapple with the issue of whether the ability to bring civil cases extended to so-called “umbrella purchasers”, i.e. individuals who did not buy products directly from the defendants but nonetheless claim damages based on the fact that the alleged conspiracy drove market prices up, including the prices they paid to non-conspirators. In 2017, the BCCA held in Godfrey that it is not plain and obvious that umbrella purchasers do not have a cause of action under the Act and upheld the certification of a class action including all purchasers, with non-umbrella purchasers as a sub-class.48 That same year, the Ontario Divisional Court had reached the opposite conclusion when it upheld the decision of a motions judge to deny certification of an umbrella purchaser claim on the basis that it would expose the respondents to indeterminate liability.49 In December 2018 the Ontario Court of Appeal overturned the Divisional Court and allowed the umbrella purchaser claims to proceed by way of class action.50

In the decision Ewart v. Nippon Yusen Kabushiki Kaisha, the British Columbia Supreme Court considered both issues – the certification of a class consisting of different levels of indirect purchasers, as well as a claim made on behalf of “umbrella purchasers”.51 The main focus of analysis was on the common issue requirement under section 4(1)(c) of the Class Proceedings Act, R.S.B.C. 1996, c. 50, which the court held is subject to a low threshold for purpose of certification, simply requiring the proposal of a credible and plausible economic model to show harm to the prospective class members (i.e. the indirect purchasers) as a group.52 Despite noting the low certification threshold, the court declined to certify the indirect purchaser action on the basis that the proper steps had not been taken to show the availability of the data required to apply the econometric methodology proposed by the plaintiff.53 Further, the court refused to certify the umbrella purchaser claim, finding that the plaintiff and its expert did not provide sufficient evidence of how harm to the umbrella purchasers could be shown.54 The case has been appealed to the BCCA, though a decision has not yet been released. Depending on the decisions rendered by the SCC in Godfrey and the BCCA in Ewart, the ongoing uncertainty regarding commonality of harm and umbrella purchaser claims may soon be resolved.

Complete Code

Another area of ongoing debate is whether the conspiracy provisions of the Act remove the plaintiffs’ ability to seek damages under common law for violations of the Act’s criminal provisions. At the heart of the debate is whether Parliament intended the Act to be a complete code, ousting other bases of civil liability. Most recently, the plaintiffs in Godfrey argued that a breach of section 45 of the Act can supply the unlawfulness element required for the common law tort of unlawful means conspiracy. The defendants argued that Parliament intended for the Act to form a complete code, displacing concurrent common law conspiracy causes of action. Bound by precedent, the BCCA ruled that the Act was not a complete code and that section 45 may fulfil the “unlawfulness” requirement under various common law causes of action.55 The SCC is expected to rule on the issue in the Godfrey appeal.

Limitations on civil liability

The Act imposes a two-year limitation period for civil actions. It begins from the later of




the day on which the conduct was engaged in, or the day on which any criminal proceedings relating thereto were finally disposed of. The way the limitation period is defined produces uncertainty since it is possible for a defendant to be faced with a civil lawsuit more than two years after the infringing conduct has ceased. In practice, however, private antitrust class actions are increasingly commenced at the early stages of related criminal proceedings, thereby reducing some of the uncertainty for defendants.

Another point of ambiguity in establishing limitation periods for civil actions under the Act is the concept of “continuing practices”. Garford Pty Ltd v. Dywidag raised the question of what behaviour constitutes a continuing offence under the Act.56 The Federal Court held that in order for an offence to be “continuing”, such that the limitation period had not yet commenced, ongoing acts in contravention of the statute would be required. A continued lessening of competition due to acts that are no longer occurring would not be sufficient to extend the limitation period.57 The Alberta Queens Bench (“ABQB”) recently applied Garford in Dow Chemical Canada ULC v. NOVA Chemicals Corporation.58 The court concluded that the agreement in question required ongoing acts by both parties, so an analysis of whether the agreement breached section 45 of the Competition Act was not restricted to the time that the agreement was formed. In that case, the defendant had entered the agreement with another party. The plaintiff (which happened to be the defendant’s largest competitor) later purchased the original party to the agreement, such that the agreement became a contract between two competitors. The court ultimately decided that (under the defendant’s interpretation of the agreement) certain provisions contravene section 45. Though the agreement was valid when executed, it became illegal following the plaintiff’s acquisition.59

Most Canadian statutory limitation periods include a “discoverability” provision whereby the limitation period begins to run from the time that the behaviour was discovered by the plaintiff. The Canadian courts have provided conflicting jurisprudence on the applicability of the discoverability principle to the Act. Notably in Garford, the Federal Court held that discoverability does not apply to actions brought under the Act. Given that section 36(4) of the Act is expressed as running from a particular date (the date of the impugned conduct or of the disposition of criminal proceedings), the court concluded that the limitation period commences on that date, regardless of the plaintiff’s knowledge of a potential claim.60 The SCC’s reasons in the indirect purchaser trilogy also seemed to support the view that the limitation period is strict, as it noted, in obiter, that the short, two-year limitation period makes the quantification of cartel damages a manageable exercise. In 2016, the Ontario Court of Appeal in Fanshawe released a judgment that conflicts with the “strict” limitation period view. In the process of affirming a Superior Court judgment that explicitly rejected the view in Garford, the court ruled that the discoverability principle applies to sub-paragraph 36(4)(a)(i) of the Act due to the fact that it expressly links the limitation period to conduct that gives rise to any damage or loss.61 After noting that sub-section 36(4)(a)(ii) provides an alternative event for the limitation period that is arguably not connected to the plaintiff’s cause of action or knowledge, the court acknowledged that it was probably not subject to discoverability, but that this was not necessarily a problem as there is no rule that suggests both limitation periods must operate in the same way.62 This approach was followed by the BCCA in Godfrey, which expressly adopted the ONCA’s reasoning in Fanshawe.63 The issue is expected to be addressed once again by the SCC in the Godfrey appeal.

Pre-Trial delay

In April 2017, the Superior Court of Québec in Les Industries Garanties limitée c. R, ruled that a lengthy delay between the laying of bid rigging charges and the anticipated end of




trial does not violate the constitutional right to be tried within a reasonable time.64 The court allowed the prosecution of a company and its employee to proceed despite a 40-month delay between the laying of charges and the trial, determining that the delay was not unreasonably long in view of the complexity of the case (arising from both the large volume of disclosure and the specific legal and evidentiary issues raised).65 Importantly, the prosecution was allowed notwithstanding the SCC’s ruling in R. v. Jordan, which established a ceiling of 30 months for cases going to trial in a superior court, beyond which delay is presumptively unreasonable.66 The finding that the bid rigging prosecution was more complex than a typical murder trial suggests that defendants in criminal prosecutions under the Act may face difficulty obtaining Charter relief for lengthy pre-trial delays.

Information flow

Controlling the flow of information to and from the Bureau can have important implications for companies that are involved in a cartel investigation. In addition to raising claims of settlement and work-product privilege, the Bureau and immunity and leniency applicants rely on section 29 of the Act to maintain confidentiality of any information voluntarily disclosed during proffers. That being said, following the Nestlé ruling (discussed above), immunity and leniency applicants must be cognisant of the fact that the Bureau may ultimately disclose the information they produce to the accused, notwithstanding the confidentiality assurances that were given when the information was originally provided.67

In June 2018, the Bureau released a bulletin on its general approach to requests for access to confidential information in its possession from persons involved in private actions under section 36 of the Act.68 The bulletin highlights the Bureau’s general position to not voluntarily provide information to persons contemplating or taking part in proceedings under section 36 of the Act, noting that opposing the production of such information is important to prevent interference with ongoing examinations, inquiries or enforcement proceedings and maintain the confidentiality of information the Bureau receives. The bulletin also reiterates that the Bureau will rely upon applicable privileges, including public interest privilege, to protect against the disclosure of information in its possession and control.

In September 2017, the SCC in Canada (Attorney General) v. Thouin held that Competition Bureau investigators, in their capacity as representatives of the Crown, could not be compelled to be examined for discovery in an action to which the government was not a party.69 The case involved a gasoline price-fixing class action in which the plaintiffs attempted to get an order permitting them to examine the Bureau’s chief investigator in its investigation into gasoline price-fixing. The court held that the Crown’s immunity from discovery was not lifted in proceedings in which it was not a party, and therefore, the Bureau investigator could rely on the Crown’s discovery immunity to refuse to submit to an examination for discovery. At the end of its decision, the SCC noted that the question they considered was different than the one decided in Imperial Oil v. Jacques,70 where the SCC allowed the disclosure of records of private communications intercepted by the Bureau in the course of a criminal investigation into allegations of a conspiracy affecting gasoline pump prices in Québec. In the course of its investigation, the Bureau obtained judicial authorisations from the court in Québec under the Criminal Code that enabled it to intercept and record more than 220,000 private wiretapped communications. Plaintiffs who had commenced a class action in the Québec Superior Court sought the disclosure of the recordings that had already been disclosed to the accused in the criminal proceedings. The SCC found that the specific circumstances of this particular case favoured the disclosure of the wiretap evidence. It referenced the rule in the Québec Code of Civil Procedure that




expressly allows records within the possession of a third party to be produced, but noted that whether records should be produced often involves a number of considerations, such as a determination of relevancy together with the consideration of confidentiality rights, privacy rights and the efficiency of the judicial process as against facilitating the search for truth. The court noted that (at least implicitly) before third-party records are produced, the court should engage in an analysis to ensure there are no factual or legal impediments that should militate against disclosure of the records requested and that courts always have the ability, responsibility and control to impose such measures and conditions on any disclosure as may be appropriate in the circumstances. It should be noted that, while section 29 of the Act prevents the Bureau from disclosing, among other things, information provided to the Bureau on a voluntary basis to third parties except “for the purposes of the administration and enforcement” of the Act, the wiretap evidence in this case was collected under the Criminal Code rather than the Act. Hence, section 29 of the Act was held not to apply. This decision should therefore not affect the Bureau’s ability to resist third-party discovery efforts of information it obtains under its Immunity and Leniency Programs.

Finally, it is important to note that, where a foreign-incorporated company has a branch office in Canada, the Bureau may invoke its authority under section 11(2) of the Act to issue production orders to the Canadian branch office for records or information, even if those records are in the possession or control of the foreign parent. In addition to the penalties for non-compliance, the issuance of a production order under section 11(2) is a matter of public record and the accompanying affidavit from the Bureau will set out, typically in great detail, the alleged criminal conduct being investigated and the involvement of the company being investigated. These affidavits have formed a roadmap for class counsel, even if a conviction has yet to be secured from the company.

Legislative and policy changes

As mentioned, in September 2018 the Bureau implemented a revised Immunity and Leniency Program, which includes significant departures from the previous programme.71 Most notably, the new programme incorporates the following changes:

• automatic coverage under a corporate immunity agreement for all directors, officers and employees will no longer be provided;

• introduction of the GII process – should the DPP accept a recommendation for immunity status from the Bureau, the applicant will not necessarily receive a final grant of immunity;

• every leniency applicant (not just the first applicant) may now be entitled to a cooperation credit of up to 50% of the fine it would otherwise receive. Credits will now depend on the value of cooperation the applicant provides; and

• the new programme implements a mandatory protocol for identifying, reviewing and adjudicating privilege claims by immunity applicants.

In 2018, the Bureau continued to focus on cartel and competition issues in relation to innovation and Canadian infrastructure. In November the Bureau published a draft version of its revised Intellectual Property Enforcement Guidelines (“IPEGs”) for comment, which clarify the Bureau’s approach to conducting investigations of alleged anti-competitive activities that involve intellectual property.72 In February the Bureau released a white paper on big data, innovation and competition policy.73 The white paper touched on the impact of emerging technologies on cartel enforcement, including the potential for technology to facilitate conspiracies by increasing the ease with which competitors can communicate. In




January, the Commissioner of Competition John Pecman delivered a speech at the Vancouver Competition Policy Roundtable on the integral relationship between competition and innovation.74 In it, he touched on targeting anti-competitive conduct that stifles innovation, including collaborative conduct that reduces the pressure for innovation. With regards to protecting Canadian infrastructure, in May the Bureau released its annual plan for 2018–19, titled “Building Trust to Advance Competition in the Marketplace”.75 In it, the Bureau named safeguarding federal infrastructure investments through detection, prevention and enforcement of bid rigging and price-fixing as a priority. To do so, it committed to strengthening collaboration with domestic partners.

* * *

Endnotes

1. Competition Act, RSC 1985, c C-34, as amended.

2. See Fairhurst v. Anglo American PLC, 2011 BCSC 705. The British Columbia Supreme Court has reiterated that foreign defendants are subject to the jurisdiction of Canadian courts for cartel conduct where harm is sustained in Canada. The Court found that its jurisdiction extended to a group of foreign defendants in a proposed class action, claiming that the defendants conspired to increase the price of diamonds. It was sufficient that harm was suffered in B.C. and that the defendants knew or should have known the diamonds would be shipped to B.C. in the ordinary course of distribution. See also Libman v. The Queen, [1985] 2 SCR 178. The Supreme Court held that in order for an offence to be subject to the jurisdiction of Canadian courts, it is sufficient that there exist a “real and substantial link” between the offence and Canada.

3. Competition Bureau, “Competitor Collaboration Guidelines” (8 May 2009) at 11, online: http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03177.html. A purchase side agreement could give rise to a section 45 offence if, for example, the parties enter into the agreement as a sham to control the production of a downstream product.

4. For example, prosecutors cannot use admissions made in the context of settlement discussions in future prosecutions against the firm or individuals making the admission.

5. For all convictions obtained under the Act, there is an automatic right of appeal to a provincial court of appeal or to the Federal Court of Appeal, depending on which court tried the indictment. The decision of any court of appeal generally may be brought, by leave, to the Supreme Court of Canada (although there is an automatic right of appeal when there is a dissenting opinion on the Court of Appeal). Given that convictions for cartel offences in Canada are obtained most often through the plea bargaining process, appeal courts do not often hear cases concerning matters of cartel enforcement.

6. Competition Bureau, “[t]hirteenth guilty plea concludes auto parts bid rigging investigations with fines totalling over $86 million” (19 October 2018), online: https://www.canada.ca/en/competition-bureau/news/2018/10/thirteenth-guilty-plea-concludes-auto-parts-bid-rigging-investigations-with-fines-totalling-over-86-million.html/.

7. Supra note 3.

8. Competition Bureau, “Corporate Compliance Programs – Bulletin” (3 June 2015), online: http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03942.html.




9. Competition Bureau, “Competition and Compliance Framework – Bulletin” (10 November 2015), online: http://www.competitionbureau.gc.ca/eic/site/cbbc.nsf/eng/03999.html.

10. Competition Bureau, “Immunity and Leniency Programs under the Competition Act” (27 September 2018), online: http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/04391.html.

11. See discussion in R v. Maxzone Auto Parts (Canada) Corp, 2012 FC 1117, [2012] FCJ No 1206 [Maxzone].

12. Maxzone, supra note 11.

13. Maxzone, supra note 11 at para. 4.

14. See, e.g., Civil Remedies Act, 2001, SO 2001, c 28.

15. SPC, “Government of Canada’s Integrity Regime” (11 October 2018), online: https://www.tpsgc-pwgsc.gc.ca/ci-if/ci-if-eng.html.

16. Similar “debarment” regimes also exist in certain Canadian provinces with respect to procurement by provincial governments. For example, in Québec since 2013, the Integrity in Public Contracts Act has required bidders for government contracts to obtain authorisation from the Autorité des marchés financiers (“AMF”) before entering into provincial government contracts. The AMF can withhold authorisation for entities found guilty of certain offences (including Competition Act offences) in the past five years. The AMF’s decisions are reviewable by courts and must meet the minimum requirements of procedural fairness, including disclosing the information on which it bases its decisions to allow an applicant to make a defence. See Terra Location inc. c. Autorité des marchés financiers, 2015 QCCS 509. In New Brunswick, under the Procurement Act, a supplier may be disqualified from provincial procurement for a period of up to five years if convicted of a cartel offence under the Competition Act as well as offences under five other federal statutes).

17. PSPC, “Proposed draft: Ineligibility and Suspension Policy for consultation” (11 October 2018–13 November 2018), online: https://www.tpsgc-pwgsc.gc.ca/ci-if/pp-pd-eng.html.

18. Competition Act, supra note 1, section 45.1.

19. Private parties could try to frame a section 90.1 matter as a conspiracy and seek damages on that basis.

20. For example, in March 2018 the Competition Bureau initiated an investigation into an alleged conspiracy between newspaper companies Postmedia and Torstar, shortly after a transaction between the companies that was followed by the closing of several community newspapers. See Competition Bureau, News Release, “Competition Bureau obtains court order to advance ongoing investigation of Postmedia and Torstar” (4 December 2018), online: https://www.canada.ca/en/competition-bureau/news/2018/11/competition-bureau-obtains-court-order-to-advance-ongoing-investigation-of-postmedia-and-torstar.html.

21. Canada (Commissioner of Competition) v. Pearson Canada Inc, 2014 FC 376, 119 CPR (4th) 313.

22. Canada (Commissioner of Competition) v. Indigo Books & Music Inc., 2015 FC 256.

23. Canada (Commissioner of Competition) v. Bell Mobility Inc., 2015 FC 990.

24. Note that the decision was issued in the context of the Bureau’s investigations into reviewable (non-criminal) practices in potential violation of the Act – though the principles articulated may apply for criminal investigations as well since sections 10




and 11 of the Act make no distinction between civil and criminal investigation in terms of enforcement or review standards for production orders.

25. Supra note 10.

26. R. v. Nestlé Canada Inc., 2015 ONSC 810 at paras. 69, 83 [Nestlé].

27. Middlekamp v. Fraser Valley Real Estate Board, [1992] BCJ No 1947, 96 DLR (4th) 227 (BCCA).

28. Competition Bureau, Press Release, “Embraco North America Inc. Pleads Guilty to Price-Fixing Conspiracy” (27 October 2012), online: http://www.competitionbureau. gc.ca/eic/site/cb-bc.nsf/eng/03307.html; Competition Bureau, Press Release, “SEC Carbon Pleads Guilty to Conspiracy” (9 November 2007), online: http://news.gc. c a / w e b / a r t i c l e - e n . d o ? c r t r. s j 1 D = & m t h d = a d v S r c h & c r t r. m n t h n d V l = & nid=360319&crtr.dpt1D=&crtr.tp1D=&crtr.lc1D=&crtr.yrStrtVl=2008&crtr. kw=&crtr.dyStrtVl=26&crtr.aud1D=&crtr.mnthStrtVl=2&crtr.yrndVl=&crtr.dyndVl=.

29. Supra note 6.

30. Competition Bureau, Month in Review – June 2018, “Guilty plea in bid-rigging of provincial street light contracts in Québec” (27 June 2018), online: http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/04332.html.

31. R. c. Rosseau, 2018 QCCS 640.

32. Competition Bureau, News Release, “Criminal charges laid against four individuals for bid-rigging in engineering industry” (26 June 2018), online: https://www.canada.ca /en/competition-bureau/news/2018/06/criminal-charges-laid-against-four-individuals-for-bid-rigging-in-the-engineering-industry.html.

33. Supra note 20.

34. CBC News, “New court docs outline what Competition Bureau says happened in bread price-fixing scheme” (29 June 2018), online: https://www.cbc.ca/news/business/bread-price-fixing-1.4728360.

35. Competition Bureau, Month in Review – March 2018 “Competition Bureau engages with global competition leadership and builds strong relationships in Vietnam” online: http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/04332.html; Competition Bureau, Month in Review – January 2018, “Competition Bureau promotes the use of economics in competition enforcement in the Asia Pacific”, online: http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/04332.html; Competition Bureau, News Release, “Competition Bureau meets with U.S. and Mexican competition authorities” (8 November 2018), online: https://www.canada.ca/en/competition-bureau/news/2018/11/competition-bureau-meets-with-us-and-mexican-competition-authorities.html.

36. Competition Bureau, Month in Review – June 2018, “Interchange with Australian Competition and Consumer Commission ends”, online: http://www.competitionbureau .gc.ca/eic/site/cb-bc.nsf/eng/04332.html.

37. Competition Bureau, Month in Review – March 2018, “Sustaining international dialogue on antitrust issues”, online: http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/04332.html.

38. Competition Bureau, Month in Review – May 2018, “Competition Bureau fosters exchanges between competition agencies”, online: http://www.competitionbureau .gc.ca/eic/site/cb-bc.nsf/eng/04332.html.




39. Competition Bureau, Month in Review – February 2018, “Competition Bureau advocates for best practices in cartel investigations on the world stage”, online: http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/04332.html.

40. Competition Bureau, Month in Review – January 2018, “Competition Bureau promotes the use of economics in competition enforcement in the Asia-Pacific”, online: http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/04332.html.

41. In the 2015 case of Airia Brands v. Air Canada, Justice Leitch considered whether plaintiffs could bring claims for a class including persons residing outside Canada, ultimately finding they could not due to the lack of any jurisdiction of the court over foreign class members not residing in Ontario or consenting to the court’s jurisdiction. Justice Leitch held in the alternative that even if such jurisdiction existed, she would stay the claims based on the real and substantial connection test (if applicable) not being met and based on forum non conveniens. Airia Brands v. Air Canada, 2015 ONSC 5332.

42. Compare Garford Pty v. Dywidag Systems International, 2010 FC 996 at para. 33 [Garford] (finding discovery principle does not apply) with Fanshawe College v. AU Optronics, 2015 ONSC 2046 at para. 115 [Fanshawe], and Godfrey v. Sony Corporation, 2017 BCCA 302, at para. 90 [Godfrey].

43. Pioneer Corporation et al. v. Neil Godfrey, 2018 Carswell BC 1456, Supreme Court of Canada, granting leave to appeal.

44. Sony Corporation, et. Al v. Neil Godfrey, [2017] S.C.C.A. No. 408, granting leave to appeal.

45. Pro-Sys Consultants Ltd v. Microsoft Corporation, 2013 SCC 57; Sun-Rype Products Ltd v. Archer Daniels Midland Company, 2013 SCC 58; Infineon Technologies AG v. Option consommateurs, 2013 SCC 59.

46. Godfrey, supra note 42 at para. 163.

47. Watson v. Bank of America Corporation, 2015 BCCA 362 at paras. 153–173.

48. Godfrey, supra note 42 at paras. 247–248, 257, aff’g 2016 BCSC 844, appealed to the SCC.

49. Shah v. LG Chem. Ltd., 2017 ONSC 2586 at para. 48, rev’g on other grounds 2016 ONSC 4670.

50. Shah v. LG Chem. Ltd., 2018 ONCA 819, at paras. 52 and 127 [Shah].

51. Ewart v. Nippon Yusen Kabushiki Kaisha, 2017 BCSC 2357 [Ewart]. 52. Ewart, supra note 51 at para. 34.

53. Ewart, supra note 51 at paras. 54–55.

54. Ewart, supra note 51 at para. 60.

55. Godfrey, supra note 42 at paras 184–185.

56. Garford, supra note 42.

57. Garford, supra note 42 at para. 39–45. See also, Eli Lilly and Co v. Apotex Inc, 2009 FC 991 at 736, aff’d 2010 FCA 240, leave to appeal to SCC ref’d [2010] SCCA No 434.

58. Dow Chemical Canada ULC v. NOVA Chemicals Corporation, 2018 ABQB 482 [Dow].




59. Dow, supra note 58 at paras 1370–1371.

60. See Garford, supra note 42 at paras. 31–33, following the same conclusion expressed in obiter in Laboratoires Servier v. Apotex Inc, 2008 FC 825 at 488, aff’d 2009 FCA 222, leave to appeal to SCC ref’d, [2009] SCCA No 403.

61. Fanshawe, supra note 42.

62. Fanshawe, supra note 42 at para. 47.

63. Godfrey, supra note 42 at paras. 89–90.

64. Industries Garanties limitée c. R., 2017 QCCS 1504 [Industries Garanties].

65. Industries Garanties, supra note 64 at paras. 78–82.

66. R. v. Jordan, 2016 SCC 27 at para. 49.

67. Nestlé, supra note 26.

68. Competition Bureau, “Information requests from private parties in proceedings for recovery of loss or damages” (11 June 2018), online: http://www.competitionbureau. gc.ca/eic/site/cb-bc.nsf/eng/04314.html.

69. Canada (Attorney General) v. Thouin, 2017 SCC 46 [Thouin].

70. Imperial Oil v. Jacques, 2014 SCC 66, [2014] SCJ No 66.

71. Supra note 10.

72. Competition Bureau, “Intellectual Property Enforcement Guidelines – Draft for public consultation” (1 November 2018–31 December 2018), online: http://www.competit ionbureau.gc.ca/eic/site/cb-bc.nsf/eng/04401.html.

73. Competition Bureau, “Big data and innovation: key themes for competition policy in Canada” (19 February 2018), online: http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/04342.html.

74. Competition Bureau, “Growing the new economy: the integral relationship between competition and innovation”, Speech at Vancouver Competition Policy Roundtable by John Pecman, online: https://www.canada.ca/en/competition-bureau/news/2018 /01/growing_the_new_economytheintegralrelationshipbetweencompetition.html.

75. Competition Bureau, “2018–2019 Annual Plan: Building trust to advance competition in the market place” (3 May 2018), online: http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/04356.html.






Joshua A. Krane Tel: +1 416 863 4187 / Email: [email protected] Joshua advises domestic and foreign firms on all aspects of Canadian competition law, including cartel investigations. He has extensive experience working with companies on internal investigations, preparing submissions to the Competition Bureau, responding to subpoenas under the Competition Act and negotiating resolutions with the Competition Bureau and civil plaintiffs. Before joining Blakes, Joshua worked for several government agencies, including the Competition Bureau − Legal Services Branch, the Ministry of the Attorney General of Ontario − Constitutional Law Branch, and the Federal Prosecution Service (now the Public Prosecution Service of Canada).

Chris Dickinson Tel: +1 416 863 3254 / Email: [email protected] Chris advises on all aspects of Canadian competition law, including cartel investigations and regulatory compliance matters.

Gillian Singer Tel: +1 416 863 6273 / Email: [email protected] Gillian advises on all aspects of Canadian competition law, including cartel investigations and regulatory compliance matters.

199 Bay Street, Suite 4000, Commerce Court West, Toronto, Ontario M5L 1A9, Canada Tel: +1 416 863 2400 / Fax: +1 416 863 2653 / URL: www.blakes.com

Blake, Cassels & Graydon LLP



Chile

A brief review of the most relevant aspects of cartels in Chile

In recent years, Chilean antitrust regulation has experienced significant changes that have improved the protection of competition. In this sense, it is a widespread belief amongst competition lawyers, judges and experts that the regime for the prevention, prosecution and punishment of cartels in Chile has reached a degree of maturity.1

In fact, 10 years ago, the most important issue for the competition agency Fiscalía Nacional Económica (“FNE”) was to gather the necessary evidence to file a complaint before the competition tribunal Tribunal de Defensa de la Libre Competencia (“TDLC”). At that time, the FNE did not have the necessary attributions to search, record and seize evidence from companies suspected of participating in a cartel.2

Then, Law No. 20.361 came into force in 2009 and modified Decree Law No. 211 – the regulation that establishes the rules for the defence of competition – including a series of intrusive measures for the FNE to investigate cartels.

These new powers consisted of: (i) the power of entry into public or private entities’ premises and, if necessary, search for and seizure of evidence; (ii) search and seizure of all kinds of objects and documents to prove the existence of the anti-competitive behaviour; (iii) authorisation of the interception of all kinds of communications; and (iv) the power to order any telecommunication company to provide copies and records of communications transmitted or received by the suspected offenders.

The impact of the intrusive measures has allowed the FNE to present strong cases before the TDLC and the Supreme Court, winning 100% of the collusion cases which it has brought.3 Further, in the past 10 years, the FNE has filed 20 complaints4 regarding collusive behaviours, covering several industries, such as public transportation, laboratories, supermarkets, medical services, shipping companies and toilet paper, among others.5

Thus, today the discussion no longer consists of the persecution of cartels,6 but rather the accreditation of cartels, the quantification of the damages they cause to society and the sanctions applicable to companies.

In this sense, the most relevant aspects regarding cartels in the last few years are related to: (i) the limits of the exchange of information between competitors; (ii) damages, as a result of the most notorious cases of collusion; and (iii) the graduation of fines and the application of possible criminal sanctions.

Exchange of information between competitors

The exchange of information between competitors has been a significant competition issue,

Luis Eduardo Toro Bossay, Francisco Borquez Electorat & Macarena Viertel Iñiguez

Barros & Errázuriz



since Decree Law No. 211 does not contain any regulation on this subject, nor any reference to the type of information whose transfer is considered anti-competitive.

Thus, it has been up to the competition authorities to provide guidelines in this regard. The TDLC has indicated that the exchange of information between competitors depend on the context in which they take place, and may result in various benefits for the industry and consumers.7

Furthermore, the FNE – in its Guía de Asociaciones Gremiales (“Trade Association Guidance”) – has indicated that the exchange of information does not necessarily entail risks for competition, since markets operate more efficiently in relation to the amount of information available to participants. However, the FNE indicates that certain information, depending on its nature, form and opportunity, may have negative consequences for competition.8

In that sense, it is understood that the exchange of commercially relevant information between companies may generate anti-competitive effects on the market. The FNE has defined this type of information as “any strategic information of a company which, if known by a competitor, would influence its behavioural decisions in the market”.9

Anyhow, the Chilean competition authorities follow international standards on this matter,10

sanctioning the exchange of information that contains commercially sensitive information, as discussed above.

In the last three years, the FNE has filed complaints in which the exchange of information between competitors has taken place in different ways. In the case Requerimiento de la FNE en contra de la Asociación Gremial de Cirujanos de la V Región y otros11 (“FNE vs. Association of Surgeons”), the defendant doctors acted jointly to set prices of medical consultation and surgical procedures of their specialty, through their respective Trade Association. As the FNE claims, the Trade Association did not only exercise an active role in the implementation of the medical fees, but also controlled and supervised its implementation, conditioning the continuity of the doctors in the trade association in case they did not comply with the agreement.12

Furthermore, regarding this case, the FNE requested for the first time to the TDLC the application of a fine to the Trade Association for unjustifiably failing to comply with the obligation to give a full and timely response to a request for information from the FNE during the investigation stage that later gave rise to the complaint for collusion filed by the FNE before the TDLC.13

Another interesting case of exchange of information is Requerimiento de la FNE en contra de Sociedad de Transportes Avda. Alemania-P. Nuevo S.A. y otros14 (“FNE vs. Transport Companies”). In this case, the FNE accused the cartel participants of agreeing to limit the supply of public transport buses to passengers. To supervise the compliance of the agreement, the transport companies reviewed the public registry of the Regional Ministerial Secretariat for Transport and Telecommunications of the IX Region, which included the number of machines registered to each participant of the cartel to operate the service. Thus, the publicly available information allowed the oversight of the agreement at a low cost.

Another mechanism for the exchange of information between competitors is that reported by the FNE in the case Requerimiento de la Fiscalía Nacional Económica en contra de Cencosud S.A. y otras (“FNE vs. Supermarkets”). In this case which is currently ongoing at the moment of this publication, the FNE has indicated that the cartel participants monitored the minimum sale price through suppliers, who acted actively in a hub and spoke scheme,15 in order to raise the price of chicken products.

Barros & Errázuriz Chile



Finally, the FNE has issued complaints denouncing the direct exchange between competitors of commercially sensitive information, with the purpose of restricting competition. Such are the cases of Requerimiento de la FNE en contra de FAASA Chile Servicios Aéreos Ltda. y otra (“FNE vs. Forest Firefighting Companies”),16 Requerimiento de la Fiscalía Nacional Económica en contra de Fresenius y Otros (“FNE vs. Laboratories I”),17 Requerimiento de la FNE contra CMPC Tissue S.A. y Otra (“FNE vs. Tissue Companies”),18 Requerimiento de la FNE contra CCNI S.A. y otras (“FNE vs. Shipping Companies”)19 and Requerimiento de la FNE contra Industrial y Comercial Baxter de Chile Ltda. y Otra (“FNE vs. Laboratories II”).20

In these cases, the exchange of information took the form of: (i) concerted meetings (FNE vs. Forest Firefighting Companies and FNE vs. Laboratories I); (ii) exchange of spreadsheets (FNE vs. Laboratories I); (iii) emails from ad hoc accounts (FNE vs. Tissue Companies); and (iv) personal messages containing instructions regarding the implementation of the cartel in question (FNE vs. Tissue Companies).21

From the foregoing, it is possible to appreciate that the FNE has had to accredit various methods of information exchange. These occurred not only directly between competitors, but also at the behest of third parties, such as trade associations, suppliers, or even facilitated by the publication of public information by an authority.

Damages

Other issues most discussed in recent years in Chilean competition law relate to the harm that cartels cause to society and the most appropriate way to compensate consumers. Before the modification of Decree Law No. 211 in 2016, in order to seek compensation of damages as a result of an enforceable judgment issued by the TDLC, such suit had to be filed in the corresponding civil court.22

In the FNE vs. Tissue Companies case, although the whistleblower was exempted from the payment of a fine on account of the leniency programme during the proceeding in the TDLC, a suit was filed in civil court seeking the compensation of damages.

This civil suit resulted in a settlement between the company, the consumer protection agency SERNAC and the consumers’ associations CONADECUS and ODECU. The settlement agreement determined that due to the anti-competitive actions carried out by the whistleblower, it must make available to consumers an amount equivalent to USD 150,000,000. Individually, each consumer would receive approximately USD 10.

Due to the nature of the collusion and given that the cartel participants controlled an important share of the market, the consumers affected by said acts constituted practically all of Chile’s population, according to the authority. Therefore, the compensation of damages was distributed among a universe of consumers over 18 years of age in Chile. In order to implement said agreement, consumers could request the deposit of the compensation to their respective bank accounts or request the corresponding amount personally from authorised financial entities.

Thus, it was clear that a more appropriate mechanism and tribunal was needed to enable consumers to bring an action for damages. That being said, one of the last modifications introduced by Law No. 20.945 consists of an action for damages arising from a TDLC’s final judgment.23

Law 20.945 changed the jurisdiction of the court from a civil court to the TDLC. Compensation for damages shall include all damages caused during the period in which the infringement has been extended. Likewise, the TDLC must base its decision on the facts established in the judgment that serves as a precedent to the lawsuit.




A relevant aspect of the rule is the assessment of the evidence to be provided by the TDLC, which must conform to the rules of a “reasoned judgment”. This analysis allows the discretion of the judge to assess the evidence, but is limited to three criteria: (i) experience criteria; (ii) rules of logic; and (iii) scientifically advanced knowledge.24

This is not a surprise for the Chilean legal system, since it is a regime already applied by judges and courts in labour, criminal and family law. In this sense, an action for damages in the context of competition law departs from the traditional civil system, in which the legal or appraised valuation of the evidence25 remains predominant. Further, the evidence’s appraisal system is already applied to contentious cases before the TDLC.26

To date, there is only one action for damages brought by the urban transportation company Línea Azul (“Plaintiff”) before the TDLC under Article 30 of Decree Law No. 211. The lawsuit is preceded by a complaint from the FNE against urban transport companies in 2011, with a subsequent condemnation by the TDLC in 2014.27 The damages claim is based on the exclusionary collusive behaviour of the major urban transport companies to the detriment of competition, in particular with respect to the Plaintiff, its nearest competitor.

The parties to the lawsuit reached a settlement and the TDLC approved the dismissal of the lawsuit. Thus, it seems that those who may seek damages regarding competition infringements will have to wait for another lawsuit, in order to obtain greater certainty of TDLC’s criteria.

Graduation of fines and the application of possible criminal sanctions

In the last few years, the public has become more aware of the negative consequences of cartels and the impact they have in most of the cases in the household economy. In order to channel this social discomfort, Law 20.945 introduced new rules related to the graduation of fines and the application of possible criminal sanctions.

Regarding the graduation of fines, originally article 26 of Decree Law No. 211 established a maximum amount for fines derived from a conviction for anti-competitive acts.28 Additionally, the final paragraph of Article 26 established the circumstances to be considered for the determination of the amount of the fine: (i) the economic benefit obtained by reason of the infraction; (ii) the seriousness of the conduct; (iii) the repeat offender’s status; and (iv) the cooperation that the offender provided to the FNE before or during the investigation.29

In practice, the FNE has added to its requirements the circumstance of the duration of the cartel, pointing out that the execution and implementation of the agreements in a sustained manner over time is a reflection of their stability and strength (FNE vs. Shipping Companies).

It is remarkable that, in some cases, the TDLC has applied fines higher than those requested by the FNE. This happened in FNE vs. Laboratories I, where TDLC noted the fines suggested by the FNE was lower than the double average financial gain obtained as a result of the cartel. As a result, the TDLC established that both laboratories should have higher fines, corresponding to the double economic benefit obtained.

The cooperation provided by investigated companies has also been a factor considered by the FNE when determining fines. In particular, the application of the leniency system was used in FNE vs. Shipping Companies and FNE vs. Tissue Companies. In both cases, the FNE requested exemption from the application of the fine for the companies that collaborated first and reduction of the fine for those that collaborated second.

With the modifications introduced by Law 20.945, the fines applied by the TDLC will




amount to 30% of the sales of the offender corresponding to the line of products or services associated with the infraction during the period for which it has been extended or up to double the economic benefit reported by the infraction. In the event that sales and profits cannot be determined, the TDLC may impose fines of up to USD 48 million approximately.

In addition, two new circumstances are formally incorporated to be considered in the application of a fine, consisting of the deterrent effect and the economic capacity of the infringer. These criteria have been collected in recent cases presented by the FNE (“FNE vs. Laboratories II, FNE vs. Surgeons Association”, “FNE vs. Forest Firefighting Companies and FNE vs. Transport Companies”).

The sanction of a fine may be accompanied by other types of sanctions.30 Thus, in recent years the FNE has requested sanctions such as the dissolution of the trade association (“FNE vs. Surgeons Association”), the establishment of codes of good practice31 (“FNE vs. Transport Companies”) and the implementation of a comprehensive compliance programme that includes the appointment of a compliance officer, affidavits from top executives, submitting an annual report to the FNE on programme compliance, among others (“FNE vs. Laboratories I”).

One of the most relevant additions to Decree-Law 211 which certainly caught the attention of several companies is the criminalisation of collusion.32 Article 62 of Decree Law No. 211 criminalises collusion, establishing criminal sanctions which consist of deprivation of liberty and temporary absolute disqualification from holding positions of director or manager in specific companies.

The National Economic Prosecutor has the exclusive power33 to file a complaint before the criminal courts, to the extent that it is preceded by a conviction handed down by the TDLC. To date, the FNE has not filed any criminal complaints. Likewise, and as for the administrative sanction, Article 63 of Decree Law No. 211 establishes the exemption from criminal responsibility or reduction in penalties for those who avail themselves of the benefit of the leniency programme.34

Finally, in order to make transparent the criteria used for the application of fines and for the filing of complaints for the crime of collusion, the FNE published two internal guides that provide the main guidelines in both circumstances.35

Conclusions

The regime for the prevention, prosecution and sanction of cartels has reached a degree of maturity since the FNE was granted intrusive measures. This definitely allowed the competition agency to bring stronger cases before the TDLC and the Supreme Court.

Therefore, the discussion in recent years does not lie in how to prosecute a cartel, but in its accreditation, sanction and the possible compensation to be paid to consumers affected by the infringement. In this sense, the recent modifications introduced by Law No. 20.945 come in a certain way to strengthen the cartel regime.

* * *

Endnotes

1. In the 2015 speech, the National Economic Prosecutor referred to the Chilean system of competition as ‘ecological’ or ‘mature’, in which each of the authorities involved fulfils its role. See http://www.fne.gob.cl/wp-content/uploads/2015/11/discurso.pdf.




Recently, experts in the area have indicated that in the 60 years of existence of competition law in Chile, the system has achieved maturity, independence and a high technical level that positions Chile among the most advanced countries in the region. See El Mercurio. The key days for competition in Chile. August 9, 2018. Available on: http://www.elmercurio.com/Inversiones/Noticias/Columnas/2018/08/09/Los-dias-claves-para--la-libre-competencia-en-Chile.aspx.

2. “In Chile, DL 211 prohibits collusion, but in practice, the implementation of this law had not been really effective until the 2009 reform that granted intrusive investigative powers to the National Economic Prosecutor’s Office, increased fines and introduced the compensated disclosure program”. See Public Policy Competition UC. Proposals for Chile. 2016. Available on: http://politicaspublicas.uc.cl/wp-content/uploads/2017 /04/Libro-Propuestas-para-Chile-2016_con-portada.pdf#page=88.

3. El Mercurio. In the last 10 years, FNE has won 100% of the cases of collusion in the Supreme Court. January 3, 2018. Available on: http://www.economiaynegocios.cl/ noticias/noticias.asp?id=431716.

4. This does not include cases of collusion investigated by the FNE that were closed. In the last three years, the FNE has initiated six investigations, of which two were declared inadmissible and four were closed by the FNE, due to lack of evidence or due to the statute of limitations.

5. Other industries denounced by the FNE are radio consortiums, tour operators, refrigerators, chickens, asphalt and firefighting and extinguishing services.

6. Article 3(a) of Decree-Law 211 provides that agreements or concerted practices involving competitors among themselves are competition infringements, when their purpose consists of: (i) fixing sale or purchase prices; (ii) limiting production; (iii) the allocation of areas or market shares; or (iv) affecting the outcome of bidding processes. Additionally, the final paragraph of Article 3(a) sanctions the agreements or concerted practices which, by conferring market power to the competitors, consist in determining marketing conditions or the exclusion of actual or potential competitors.

7. TDLC Resolution No. 45/2014.

8. Fiscalía Nacional Económica, 2011. Asociaciones Gremiales y Libre Competencia. P. 13.

9. Fiscalía Nacional Económica, 2011. Asociaciones Gremiales y Libre Competencia. P. 14. The FNE considers as relevant information that which refers to current or future pricing policies, cost structures, production volumes, whether current or projected, expansion and investment plans, import policies, client lists, discount policies, terms and conditions of payment, commercial strategies, among others.

10. OECD. Tools for the Assessment of Competition. Available on: https://www.oecd.org /daf/competition/98765433.pdf.

11. FNE complaint against the Association of Surgeons of V Region and Others. Case No. C-353-2018. Available on: http://consultas.tdlc.cl/lexsoft/do_search?proc=3&idCausa =42113.

12. FNE complaint against the Association of Surgeons of V Region and Others. P. 14.

13. FNE. For the first time, TDLC imposes a sanction for failing to provide information requested by the FNE in an investigation. Available on: http://www.fne.gob.cl/por-primera-vez-tdlc-impone-sancion-por-no-entregar-antecedentes-solicitados-por-la-fne-en-una-investigacion/.




14. FNE complaint against Transport Company Avda. Alemania-P. Nuevo S.A. and Others. Case No. C-361-2018. Available on: http://consultas.tdlc.cl/lexsoft/do_search?proc= 3&idCausa=42127.

15. In accordance with the FNE complaint, the required supermarket chains sought to consciously and systematically influence the behaviour of their competitors by using communications with their common suppliers. In effect, through these communications the supermarkets monitored whether the competition sold products at low cost, seeking to eliminate the independence with which each one made its strategic decisions. FNE. Complaint against Cencosud and others. Available on: http://www.fne.gob.cl/wp-content/uploads/2016/01/requ_01_2016-1.pdf.

16. FNE complaint against Faasa Chile Servicios Aéreos Ltda. and Others. Case No. C-358-2018. Available on: http://consultas.tdlc.cl/lexsoft/do_search?proc=3&idCausa= 42122.

17. FNE complaint against Fresenius and Others. Case No. C-312-2016. Available on: http://consultas.tdlc.cl/lexsoft/do_search?proc=3&idCausa=42053.

18. FNE complaint against CMPC Tissue and Others. Case No. C-299-2015. Available on: http://consultas.tdlc.cl/lexsoft/do_search?proc=3&idCausa=41603.

19. FNE complaint against CCNI S.A. and Others. Case No. C-292-2015. Available on: http://consultas.tdlc.cl/lexsoft/do_search?proc=3&idCausa=41292.

20. FNE complaint against Industrial y Comercial Baxter de Chile Ltda. and Others. Case No. C-321-2017. Available on: http://consultas.tdlc.cl/lexsoft/do_search?proc= 3&idCausa=42069.

21. In the cases FNE vs. Tissue Companies and FNE vs. Laboratories I, the TDLC sanctioned the involved companies (TDLC Decision No. 160/2017 and Decision No. 165/2018). The other cases are currently in process or in a state of judgment.

22. This legal action depended on the outcome of the sentence issued by the TDLC, i.e., it could only refer to the infringements on competition and the conducts and facts established in the judgment.

23. With the introduction of article 30 in Decree Law No. 211, no civil actions may be brought in possible criminal proceedings arising from a case of collusion.

24. Experience criteria consist of hypothetical definitions of general content, which constitute probabilistic criteria. The rules of logic consist of universal, stable, objective criteria, structured on maxims. Finally, scientifically advanced knowledge consists of variable criteria, taking into consideration the advances of science, forming part of a progressive process. For further references, see http://www.fne.gob.cl/wp-content/uploads/2017/11/FNE-Libro.pdf, p. 305 et seq.

25. In a legal or appraised valuation system, the law confers value on the various means of evidence.

26. The final paragraph of article 22 of Decree Law No. 211 states that the TDLC will assess the evidence according to the rules of reasoned judgement.

27. TDLC Decision No. 134/2014.

28. The former article 26 of Decree Law No. 211 established fines of up to 20,000 Chilean Annual Tax Units (equivalent to approx. USD 16 million) and in the case of collusion, the fine could reach 30,000 Chilean Annual Tax Units (equivalent to approx. USD 24 million).




29. In addition, Article 39 bis of Decree Law No. 211 refers to the Chilean leniency system. The FNE’s leniency programme allows individuals or companies who engaged in collusive conduct to be exempted from the relevant sanctions, or to have them reduced, provided that the applicant provides information that can be used to prove the conduct and identify the parties involved. More information is available at: http://www.fne.gob.cl/wp-content/uploads/2017/03/Guidelines_Leniency_Cartel_ Cases.pdf.

30. With regard to cartels, Article 26 also provides for sanctions relating to: (i) the modification or termination of acts, contracts, agreements, systems or agreements that are contrary to competition; (ii) the modification or dissolution of companies, corporations and other legal persons governed by private law that have intervened in the acts, contracts, agreements, systems or agreements referred to; and (iii) the prohibition of contracting with the State or other administrative authority.

31. According to the survey carried out by the “Fundación Generación Empresarial” foundation among 32 companies, only 53.13% of them had a code of conduct regarding competition at the beginning of 2018. Subsequently, the same foundation held a working group in November 2018, with the objective of strengthening a pro-competitive culture within companies. Along these lines, companies were warned of the importance of implementing a programme of better corporate practices around competition and, in short, the importance of respecting the rules of competition, established to protect market agents, consumers and society as a whole. See La Tercera. Business priorities in good practice. February 3, 2018. Available on: https://www.latercera.com/negocios/noticia/las-prioridades-las-empresas-buenas-practicas/56581/; and Generación Empresarial working group prepares guide on competition. November 2, 2018. Available on: https://www.latercera.com/pulso/noticia/mesa-trabajo-generacion-empresarial-elabora-guia-libre-competencia/385385/.

32. The decision to criminalise collusion was controversial in the academic world, mainly because it meant repealing the derogation from the criminalisation of collusion carried out in 2003. However, the bill sought to bring Chilean competition law into line with international competition standards. The centre for public studies “CEP Chile” The CEP compiled the views of six experts in the field. In this regard, see CEP. Jail for collusion? Six opinions. August 2015. Available on: https://www.cepchile.cl/cep/ site/artic/20160304/asocfile/20160304101409/pder409_RBergoeing-LSierra.pdf.

33. This attribution is of an exclusive nature, for which reason criminal liability may not be invoked by individuals or any other state prosecutor office other than the FNE.

34. Each person exempted from criminal liability as declared by the TDLC has a duty to provide information in the criminal venues. Therefore, the beneficiaries of the leniency should provide to the corresponding criminal court the same information that was previously provided to the FNE. Also, according to article 63 of Decree Law No. 211, the beneficiaries must state as a witness. In the event that he or she does not attend the criminal court or refuses to ratify the information, he or she will be deprived of the exemption from criminal responsibility.

35. The FNE’s Internal Guide to Fine Applications is currently in public consultation. Available at: http://www.fne.gob.cl/wp-content/uploads/2018/11/Gu%C3%ADa_ multas_-noviembre_2018.pdf. For its part, the Internal Guide to Filing Complaints for the Crime of Collusion, June 2018, is available at http://www.fne.gob.cl/wp-content/uploads/2018/06/Gu%C3%ADa-de-Querellas-final-definitiva.pdf.






Isidora Goyenechea 2939, Piso 10, Las Condes, Santiago, Chile Tel: +56 2 2378 8900 / URL: www.bye.cl

Barros & Errázuriz

Luis Eduardo Toro Bossay Tel: +56 2 2378 8925 / Email: [email protected] Luis Eduardo, partner at Barros & Errázuriz, has experience in several areas of practice, such as contract law, crimes, consumer law, commercial matters and antitrust. He is a renowned lawyer, standing out in competition and antitrust and complex commercial arbitrations. In the field of litigation, he has extensive experience in telecommunications, energy, contractual liability and damages, among others.

Francisco Borquez Electorat Tel: +56 2 2378 8940 / Email: [email protected] Francisco has focused his practice on antitrust, both in cartel investigations, unilateral conduct and concentration operations before the National Economic Prosecutor’s Office, and contentious and non-contentious proceedings before the Competition Tribunal. He advises clients from a wide range of industries, with a solid and consolidated practice in the field of antitrust before national authorities.

Macarena Viertel Iñiguez Tel: +56 2 2378 8900 / Email: [email protected] Macarena has focused her practice on antitrust, both in cartel investigations, unilateral conduct and concentration operations before the National Economic Prosecutor’s Office, and contentious and non-contentious proceedings before the Competition Tribunal.


China


The Anti-monopoly Law delineates the legal framework for the prohibition of cartels

In China, the Antimonopoly Law (“AML”), which was promulgated on 30 August 2007 and entered into force on 1 August 2008, delineates the legal framework for the prohibition of cartels. Prior to the adoption of the AML, there existed several laws and rules regulating competition issues, such as the Anti-Unfair Competition Law (1993), the Pricing Law (1998) and the Law on Bid Invitation and Bidding (2000). Most of them remain in force after the enactment of the AML. These laws set out provisions to govern price-related cartel behaviours as well as other anti-competitive practices. The AML does not explicitly repeal those existing laws and regulations; instead, it coexists with them, and together they comprise the PRC competition law system.

As the foundation of China’s antitrust regime, the AML provides several fundamental rules regarding cartels. According to Article 13 of the AML, competing undertakings are prohibited from entering into the following monopoly agreements:1

1. fixing or altering the prices of commodities;

2. restricting the production or sale volume of commodities;

3. dividing the sales market or procurement market of raw materials;

4. restricting the procurement of new technologies and new equipment or restricting the development of new technologies and new products;

5. jointly boycotting transactions; and

6. any other monopoly agreements as determined by the anti-monopoly enforcement agency of the State Council.

Article 14 of the AML governs vertical monopoly agreements, inter alia, the price resale maintenance practice, so it falls outside the scope of the present analysis.

In addition, Article 16 of the AML makes explicit that industry associations are prohibited from organising the undertakings in the respective industries to engage in cartel conducts.

Besides this, Article 15 of the AML stipulates the circumstances in which an exemption may be granted to specific cartel behaviour. Specifically, a cartel may be exempted if it simultaneously fulfils the following three conditions.

(a) The agreement has any of the following contents: 1. improving technology, or researching and developing new products; 2. improving product quality, reducing costs, enhancing efficiency, harmonising

product specifications and standards, or dividing work based on specialisation;

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3. enhancing the competitiveness of small and medium-sized enterprises; 4. serving social public interests such as energy saving, environmental protection and

disaster relief; 5. alleviating severe slumps in sales or overcapacity in production in periods of

economic downturn; 6. protecting legitimate interests in foreign trade and economic cooperation; or 7. any other circumstances stipulated by the laws and the State Council.

(b) For an agreement having the contents of (1)–(5), it shall not restrict competition substantially.

(c) Such agreement shall also be able to share the benefits to the consumers.

In addition, the AML provides the basic rules on the investigation procedures and sanctions of China’s antitrust enforcement agencies for cartel violations.

As the AML enters its 10th anniversary, many achievements have been made in the past decade in China. A senior antitrust official disclosed at the 7th China Competition Policy Forum that since the enactment of the AML, antitrust authorities have investigated into and closed 163 cases of monopoly agreements and 54 cases of abuse of market dominance, imposing a total fine of RMB 11 billion. The merger control authority has reviewed 2,283 concentrations with a total transaction value of RMB 40 trillion.2 With regard to civil antitrust lawsuits, approximately 700 cases have been heard at the first instance trial stage, with 630 of them concluded in final binding judgments, according to a senior judge of the Supreme People’s Court at the Symposium Marking the 10th Anniversary of the AML.3 These achievements have helped in preventing anti-competitive practices.

Meanwhile, there has been an increasing consensus for a revision of the AML given the challenges encountered and the experience accumulated in antitrust enforcement. The need for a revision becomes especially acute after the establishment of the State Administration for Market Regulation (“SAMR”), which is outlined in the next section.

The establishment of the State Administration for Market Regulation

The biggest institutional reform implemented in 2018 is the establishment of the SAMR on 21 March, which consolidated the former State Administration for Industry and Commerce (“SAIC”), the State Food and Drug Administration, the State Administration for Quality Control and Quarantine, and other relevant government agencies. Of particular importance to antitrust practitioners is the consolidation within the SAMR of the antitrust functions of the three former antitrust bureaus under the SAIC (for non-price-related enforcement), the National Development and Reform Commission (“NDRC”, for price-related enforcement), and the Ministry of Commerce (“MOFCOM”, for merger control), respectively. According to the finalised plan issued on 9 August 2018 for consolidating the functions, institutions and personnel of the former antitrust agencies, two bureaus will be established under the SAMR that are specifically devoted to the enforcement of the AML and other anti-unfair competition laws – the Antimonopoly Bureau and the Price Supervision and Anti-unfair Competition Bureau.4 The Antimonopoly Bureau will comprise 10 divisions: three divisions responsible for merger review; one for monopoly agreements; one for abuse of market dominance; one for administrative monopoly; one for the supervision of conditional-cleared mergers and the guidance of Chinese undertakings in dealing with overseas antitrust challenges; one for general affairs; one for rulemaking and international exchange; and one for the daily work of the State Council’s Anti-monopoly Commission.

The establishment of the SAMR has been hailed by lawyers and academics as the first unified

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antitrust authority in China. According to the finalised consolidation plan, it will be tasked with:

• drafting supplementary antitrust rules and guidelines;

• carrying out antitrust enforcement;

• guiding enterprises to respond to and cope with antitrust investigations or litigations in foreign jurisdictions; and

• organise and guide fair competition reviews.

The SAMR Antimonopoly Bureau is expected to push forward the revision of the AML and the adoption of supporting regulations, according to a senior official at the 7th China Competition Policy Forum.5 The existing regulations issued by the three former antitrust agencies are expected to be streamlined and harmonised, enhancing the consistency and predictability of antitrust enforcement. The combined human capital is expected to be utilised more efficiently. The various long-awaited draft guidelines and regulations are expected to be finalised and adopted soon, as set out in more details in the next section.

Regulations issued by enforcement agencies enrich the regime relating to cartels

As the former public enforcement agencies responsible for cartel cases, as well as other antitrust behaviours, the NDRC and the former SAIC enacted a series of substantive and procedural rules regarding the implementation of the AML. The relevant rules and regulations include:

1. the NDRC’s Regulations on Anti-Price Monopoly;

2. the NDRC’s Regulations on Procedures for Enforcement of Administrative Law on the Anti-Price Monopoly;

3. the SAIC’s Regulations on the Prohibition of Monopoly Agreements;

4. the SAIC’s Regulations on Procedures for Enforcing the Prohibition on Monopoly Agreements and Abuse of Dominance; and

5. the SAIC’s Provisions on the Prohibition of Abuse of Intellectual Property Rights for the Purpose of Eliminating or Restricting Competition.

Furthermore, 2016 saw more “soft law” efforts being made with regards to cartels. The NDRC has already separately posted the following guidelines (including draft guidelines) on its official website: “The Guidelines for Industry Association Price Behaviour”;6 “The Draft Guidelines on Active Pharmaceutical Ingredients (“APIs”) and Drugs Prone to Shortages”;7 “The Draft Guidelines for the Abuse of Intellectual Property Rights”;8 “The Draft Guidelines for Application of the Leniency Regime to Cases of Horizontal Monopoly Agreements”;9 “The Draft Guidelines for Automobile Industry”;10 “The Draft Guidelines on the General Conditions and Procedures for Monopoly Agreement Exemption”;11 and “The Draft Guidelines on Recognizing the Illegal Gains Obtained by Business Operators from Monopolistic Acts and Determining the Amount of Fines”.12

According to the Industry Association Price Behaviour Guidelines, industry associations are required to formulate the rules in compliance with price and antitrust laws and regulations, with their pricing conduct subject to the guidance and supervision of relevant government departments. By restricting or excluding competition, the following behaviour may violate relevant laws and regulations:

1. organising market players to reach price monopoly agreements;

2. exchanging price information for members or other peers;




3. organising operators to reach price monopoly agreements through unified preferential terms or time limits;

4. releasing price guidance, base prices, reference prices, and recommended prices;

5. imposing limitations on cost composition and profit rates by publicising price calculation formulae;

6. formulating rules, decisions, notices, and criteria that could exclude and limit price competition; and

7. requiring or encouraging operators to implement price monopoly agreements through a penalty mechanism.

Assumption of liability by industry associations will not exempt business operators that engage in unlawful practices who will be subject to heavy penalties. Industry associations that severely breach price and antitrust laws and regulations run the risk of being blacklisted by price supervision departments, and may face joint penalties imposed by multiple relevant agencies.

Although other guidelines are only at a draft stage at this point, they have the reference value to some extent. Therefore, key contents of the draft guidelines will be briefly introduced as follows.

According to Article 4 of the Draft Guidelines on APIs and Drugs Prone to Shortages, business operators of drugs in short supply and active pharmaceutical ingredients with a competitive relationship shall not reach any horizontal price-related monopolistic agreement by:

1. fixing or changing any prices or changing the range of prices;

2. fixing or changing any tender prices;

3. fixing or changing agency expenses, market discounts and other expenses influencing any prices;

4. fixing the price benchmark for a transaction with any third party;

5. agreeing upon a standard formula of calculation for any drug prices;

6. controlling any prices by limiting output or sales volume;

7. controlling any prices by dividing the market;

8. controlling any prices by means of boycotting transactions;

9. controlling any prices by restricting the purchase of new technology or equipment, or the development of technology or products; and

10. fixing or changing any prices in any other disguised form.

However, where a business operator of drugs in short supply or active pharmaceutical ingredients can prove that any agreement signed by it conforms to Article 15 of the AML, the above provisions on monopolistic agreements will not apply.

According to the Draft Guidelines for the Abuse of Intellectual Property Rights, in order to determine whether agreements related to intellectual property rights may obtain exemption according to Article 15 of the AML, the positive effects of such agreements on promoting innovation and improving efficiency shall be the focus for consideration. It is usually the case that undertakings with low market shares may not seriously exclude or restrict competition by entering into agreements related to intellectual property rights. Therefore, in order to increase the efficiency of anti-monopoly law enforcement, and provide clear expectations for market participants, if an agreement related to intellectual property rights




entered into by undertakings meets one of the following conditions, it is assumed that those agreements can be exempted according to Draft Guidelines for the Abuse of Intellectual Property Rights:

1. the combined market share of the competing undertakings in the relevant market does not exceed 15%; and

2. the market share of each of the non-competing undertakings in any of the relevant markets involved in the agreements does not exceed 25%.

If the agreements related to intellectual property rights entered into by the undertakings constitute monopoly agreements expressly stipulated in Article 13 and 14 of the AML, and price restriction stipulated in the Draft Guidelines for the Abuse of Intellectual Property Rights, the above-mentioned presumption of legality does not apply. If the relevant agreements involving intellectual property rights are in line with the above-mentioned circumstances for the presumption of exemption, but evidence shows that the requirements of Article 15 of the AML are not satisfied, exemption cannot be obtained.

The Draft Guidelines for Application of the Leniency Regime to Cases of Horizontal Monopoly Agreements are formulated in accordance with Article 46 of the AML, according to which business operators who voluntarily report information about monopoly agreements and provide important evidence to enforcement agencies may be granted mitigation or exemption of penalty. For the purpose of providing guidance in the application of the aforesaid regulations in cases involving horizontal monopoly agreements, these guidelines cover the applicable scope, agencies dealing with business operators’ applications for leniency, prior communication between business operators and the enforcement agency, materials to be submitted by business operators for application for leniency, preliminary report for application for leniency, method of application for leniency, registration and acceptance of applications for leniency, other eligibility conditions for leniency hearings and review by the enforcement agency, and mitigation or exemption of penalty on business operators by the enforcement agency; all of which should improve the level of transparency in the administrative work of the enforcement agency, and facilitate business operators’ applications for leniency.

According to the Draft Guidelines for Automobile Industry, in order to reduce the cost of administrative law enforcement and the compliance costs of operators, the Draft Guidelines for Automobile Industry set forth several circumstances where geographical restrictions and customer restrictions apply to operators without prominent market strength and to which Article 15 of the AML may be presumed to be applicable. Law enforcement practices and theoretical study both show that making allowances for such circumstances can generally improve the quality of dealing services and the efficiency of dealing, as well as the business efficiency and competitiveness of medium and small-sized dealers, and will not substantially restrict the competition in relevant markets in general, thereby enabling consumers to share the benefits derived therefrom in conformity with the conditions stipulated in Article 15 of the AML.

In evaluating whether or not a business operator has prominent market strength, setting a determining standard for this based on a fixed market share would not be a scientific, reasonable or operable approach in practice. However, as an example, the competition evaluation of vertical agreements, law enforcement practices and theoretical study show that an operator possessing a market share of less than 25%–30% of a relevant market is likely to be determined to have no prominent market strength. In addition to this:

1. Some types of horizontal agreements, such as research and development agreements, specialisation agreements, technology standardisation agreements, joint production




agreements and joint procurement agreements, can usually improve efficiency, promote competition and help to increase the welfare of consumers. For instance, horizontal cooperation agreements in the course of research, development and production of new energy automobiles can help competitors share investment risks, improve efficiency and serve in the public interest. Therefore, operators in the automobile industry entering into any of the above-listed horizontal agreements that could improve efficiency and promote competition may show that their agreements should be exempt from Article 13 of the AML in accordance with Article 15 thereof.

2. The competition analysis of horizontal monopoly agreements in the automobile industry is not obviously different from that in other industries and, therefore, is not further detailed under the Draft Guidelines for Automobile Industry. The anti-monopoly regulation of horizontal monopoly agreements in the automobile industry is handled by the enforcement agency of the State Council in accordance with the AML, the Provisions on Anti-Price Monopoly, the Provisions of Industrial and Commercial Administrative Law Enforcement Agencies on Prohibition of Monopoly Agreements and Conducts and other relevant laws and regulations.

The Draft Guidelines on the General Conditions and Procedures for Monopoly Agreement Exemption are formulated, pursuant to the AML, with a view to specifying the general conditions and procedures for monopoly agreement exemption, stipulated with reference to self-judgment, competent authorities, time of application, application materials, and other aspects.

When reviewing whether an agreement falls under any of the circumstances for exemption, an anti-monopoly law enforcement agency shall mainly consider the following factors:

1. the specific form and effect by which the agreement falls under any of the circumstances of exemption prescribed by items (1) through to (6) of Paragraph 1 of Article 15 of the AML;

2. causation between the agreement and the circumstance as realised;

3. the importance of the agreement to realising the circumstance; and

4. other factors that serve to prove that the agreement falls under the relevant circumstance for exemption.

In addition to this, to prove that an agreement falls under the circumstance of exemption specified in item (7) of Paragraph 1 of Article 15 of the AML, the applicant shall also submit relevant laws and provisions of the State Council, and prove that the agreement belongs to the circumstances prescribed therein.

According to the Draft Guidelines on Recognizing the Illegal Gains Obtained by Business Operators from Monopolistic Acts and Determining the Amount of Fines, the enforcement agency shall determine the amount of fines to be imposed on a business operator who has committed illegalities according to three steps:

1. firstly, determining the sales revenue of the business operator in the preceding year;

2. secondly, determining the base percentage of fines by considering the nature and duration of the illegalities committed; and

3. thirdly, adjusting the base percentage of fines by considering other aggravating factors or factors to which lighter or mitigated punishments may apply, and making adjustments according to the extent of the illegalities, to determine the finalised fine percentage and calculate the fine amounts accordingly.




Different types of monopoly agreement are reached and implemented for different purposes, and exclude or restrain competition in different ways. Therefore, the illegal nature of monopoly agreements shall be determined mainly by considering the types of such agreement as follows:

1. where a business operator implements a monopoly agreement prohibited under Items (1), (2) or (3) of Article 13 of the AML, and fixes or changes the prices of products, limits the production volume or sales volume of products, or divides the sales market or the raw materials procurement markets, the enforcement agency shall determine an initial fine percentage of 3%. This is mainly because monopoly agreements under the foregoing circumstances are usually for the purpose of excluding or restraining competition, are the most damaging to competition, have almost no pro-competitive effects, and will not enable consumers to share in the benefits arising therefrom; and

2. where a business operator implements a monopoly agreement prohibited under Item (4), (5) or (6) of Article 13 of the AML, the enforcement agency shall determine an initial fine percentage of 2%. Where a business operator implements a monopoly agreement prohibited under Article 14 of the AML, the enforcement agency shall determine an initial fine percentage of 1%.

Besides this, the Draft Guidelines on Recognizing the Illegal Gains Obtained by Business Operators from Monopolistic Acts and Determining the Amount of Fines also regulate the definition of illegal gains, major factors to be considered in recognising illegal gains, special circumstances for recognising illegal gains, circumstances under which it may be recognised that no illegal gain has been generated, circumstances under which illegal gains shall not be confiscated, adjustment of the base percentage of fines according to aggravations, and determining the finalised percentage of fines based on the extent of illegalities and mitigated punishments, amongst others.

Sanctions for cartel behaviours and role of the courts

Under the AML, the enforcement agencies may impose cease and desist orders, confiscate the illegal gains, and/or impose fines between 1–10% of an undertaking’s annual turnover in the preceding year for an infringement of the AML rules on a horizontal/vertical monopoly agreement. However, based on antitrust enforcement practice and the draft “Guidelines on Recognizing the Illegal Gains Obtained by Business Operators from Monopolistic Acts and Determining the Amount of Fines (“the draft illegal gain penalty guidance for monopolies”)”, published by the NDRC in June, 2016, where there are no mitigating circumstances and the monopoly agreement has been implemented, the fine may not be lower than 3% of the relevant turnover for the previous financial year (for price cartels, cartels on restriction of production or sales volume, as well as cartels on market division).

Despite not yet having come into effect, the Draft Guidelines further provide that illegal gains can be taken as referring to the additional income obtained, or expenditure saved, as a result of the cartel conduct, subject to the further methods outlined for their recognition. Fines, on the other hand, can be determined by setting a base percentage depending on the nature and duration of the cartel, and adjusting it up or down depending on other aggravating or mitigating factors. It remains to be observed if and how the rules will be laid out in the final and official version of guidelines to be released.

In the case that an industry association has violated the rules by organising the member companies to enter into a cartel, the enforcement agencies may impose a fine of not more than RMB 500,000. It is worth noting that there is no criminal sanction for cartel violations under the AML. According to Article 50 of the AML, the People’s Courts are entitled to




hear antitrust cases brought by individuals and entities harmed by anti-competitive conducts. However, considering the plaintiffs’ heavy burden to prove the existence of cartels, public enforcement is still the major instrument to curb cartels, though the institutional arrangement of private damages action is available to the victims.

Overview of investigative powers in China

For most companies in China, the big and scary threats come from the antitrust authority’s policing, which used to be carried out by the antitrust departments under the NDRC and SAIC, and is now consolidated at the SAMR antitrust bureau. Even though the antitrust authority can initiate a formal investigation by serving a notice of investigation, the first time many targets learn they are under investigation is when investigators show up at their offices demanding information. These “dawn raids” currently are getting popular among regulators, and they have used them to collect information from the investigated targets, Microsoft, Qualcomm, and Mercedes, just to name a few. Regulators are fond of these raids because they preserve the element of surprise, preventing companies from disposing of evidence. Moreover, dawn raids in China are relatively easy to initiate, since the antitrust authorities do not need to get a warrant from a judge or any other third-party supervisors in advance.

Targets of the raids are allowed to consult with their lawyers

After a dawn raid, regulators will review the collected documents and sometimes demand additional documents where necessary. Usually at this stage, the regulators will reveal what issues they are investigating. They will also allow the investigated companies to submit explanations and defences in written form.

In cases of refusing to submit relevant materials and information, submitting fraudulent materials or information, concealing, destroying or removing evidence, or refusing to be investigated during the course of inspection and investigation by enforcement authorities, the authorities are entitled to impose a fine up to RMB 1 million upon non-cooperating entities or up to RMB 100,000 upon individuals. In August 2018, Guangdong Provincial Development and Reform Commission issued the country’s first penalty against individuals for refusing to cooperate in antitrust investigations. Two senior executives at a local car dealership were fined RMB 12,000 and 8,000, respectively, for unplugging the memory disk from a computer under examination and for instructing other employees to cut off the power charger and internet connection from a computer under examination. They also refused to provide other materials requested by the investigators and refused to sign on the investigative records.13

There is no limit on how long investigations can last, so probes can drag on for months or years. For instance, the Milk Powder case was closed within six months of commencement of the investigation, while the Tetra Pak case and Microsoft case investigated by the SAIC lasted for more than three years. If the regulators find companies have violated the AML, penalties can range from 1% to 10% of their turnover in the previous year, as aforesaid.

A penalised company is entitled to apply for an administrative review if they are not satisfied with authorities’ decisions. However, according to Article 14 of the Administrative Review Law, when refusing to accept a specific administrative decision taken by a department under the State Council, such as the the newly established SAMR, the applicant shall apply to the relevant departments for administrative review. Article 14 also provides that when refusing to accept a decision made after administrative review, the applicant may bring an administrative lawsuit before a court, or apply to the State Council for a final adjudication. However, it is not easy to prevail over the regulators or to get the State Council to overturn its department’s decisions.





The antitrust law enforcement has continuously strengthened in 2018. The law enforcement focuses on anti-competitive conduct in industries directly linked to people’s everyday lives, such as healthcare, education, automobile and public utilities like gas, electricity, water supply, funeral and telecommunications. The law enforcement agencies carried out special rectification campaign in public utilities industries and investigated and handled significant cases of monopolistic agreements and abuse of market dominance.

Cartel Cases Concluded by the NDRC, SAIC and the SAMR from Sep. 2017 to Sep. 2018


The NDRC issued trade association pricing guidelines

In July 2017, NDRC issued the Guidelines on Industry Associations’ Pricing Behaviors, which

Cases Date Investigating

Authority

Penalty in Total (RMB)

Two providers of VAT-invoicing systems (Hunan Baiwang Jinfu Technology Co., Ltd. and Hunan Aisino Co., Ltd.)14

28-09-2017 Hunan AIC 1,123,622.33 (total)

Huannai Freight Chamber of Commerce15 29-12-2017 Anhui AIC 100,000

Six home furnishing retailers (Shandong East Asia Furniture, Shandong Inzone Green Home, Shandong Inzone Green Home (Home Center), Red Star Macalline Group (Jinan), Jinan Hongjida Furniture, and Beijing Easyhome Investment Holding Group (Jinan))16

21-03-2018 Shandong AIC 600,000 (total)

13 Accounting firms (including 12 Rizhao accounting firms and one Jinan accounting firm)17

07-05-2018 (date of notice)

Shandong AIC 413,526 (total)

Four tugboat companies (Shenzhen Yantian Tugboat, Shenzhen Lianda Tugboat, Shenzhen Chiwan Tugboat and Shenzhen Dachan Bay Tugboat)18

11-06-2018 SAMR 12,857,638 (total)

Two tallying-service companies (China Ocean Shipping Tally Shenzhen and China United Tally (Shenzhen))19

09-07-2018 SAMR 3,163,108 (total)

Shanghai Health Affairs Service Centre and Shanghai Medical and Health Development Foundation20

10-07-2018 Shanghai AIC Shanghai AIC started to investigate the two institutions’ suspected boycott behaviour on 8 May 2017. The probe was suspended on 22 Jan 2018 and terminated on 10 July 2018 after the investigated parties fulfilled their commitments




encourage and advocate for proper pricing behaviours by industry associations that contribute to industry development and market competition and safeguard the legitimate rights and interests of consumers. The Guidelines also remind industry associations of the risks of violating the Price Law and the Anti-Monopoly Law. The Guidelines will guide the industry associations in assessing the legality of various pricing practices.

The pharmaceutical industry and public sector are under continuing scrutiny by antitrust authorities

Over the past year, the pharmaceutical industry continued to be on the radar of China’s antitrust enforcement authorities.

With regard to legislation, in November 2017, the National Development and Reform Commission issued Guidelines on the Pricing Behaviors by Operators of Scarce Drugs and APIs, clarifying that operators in the field of under-supplied drugs and APIs should not implement monopolistic behaviours such as monopolistic agreements and abuse of market dominance.

In terms of law enforcement, the Shanghai AIC initiated the investigation on suspected boycott behaviour by Shanghai Health Affairs Service Centre and Shanghai Medical and Health Development Foundation on 8 May 2017. The probe was suspended on 22 January 2018 and terminated on 10 July 2018 after the two institutions fulfilled their commitments.

The State Council Anti-monopoly Commission is expected to publish guidelines involving the auto industry this year, following the publication of an initial draft in March 2016. The Guidelines will cover antitrust compliance issues in the motor vehicle sales market and the aftersales service market, including auto parts supply and aftersales maintenance. As such, they are expected to place new compliance requirements on manufacturers. The auto guidelines will also serve as a guidance for other industries, such as pharma and medical device manufacturers, with similarly structured distribution networks. Whether the guidelines will trigger more enforcement actions is also worthy of attention.

IPR-related issues and SEPs become hotspots

Due to monopoly concerns rapidly arising in relation to intellectual property rights over the recent years, which have attracted the attention of antitrust authorities both nationwide and internationally, the Chinese agencies have taken a proactive approach towards IP-related issues. The SAIC has promulgated provisions to deal with matters concerning antitrust and intellectual property issues, namely the Provisions on Prohibiting the Abuse of Intellectual Property Rights to Exclude and Restrain Competition.

It is noteworthy that the SAIC’s Provisions provide a “safe harbour” principle for IP-related cartel behaviours. According to Article 5 of the Provisions, unless there is evidence to the contrary to prove that the agreement has the effect of eliminating or restricting competition, the exercise of intellectual property rights (“IPRs”) may not be determined as cartels or vertical monopoly agreements, if the combined market share of the competing undertakings in the relevant market does not exceed 20% or there exist at least four independently controlled and substitutable technologies that are available at a reasonable cost in the relevant market.

Furthermore, under the lead of the Anti-Monopoly Commission of State Council (“AMC”), in 2016 the NDRC, the SAIC, MOFCOM, and the State Intellectual Property Office (“SIPO”) each drafted a version of antitrust guidelines relating to IPRs, particularly addressing some issues regarding standard essential patents (“SEPs”). These drafts were then submitted to the AMC. In March 2017, the AMC published the consolidated draft of the IP antitrust guidelines for public comment and then held a series of meetings in the same




year to garner input from lawyers, businesses and trade associations.

In addition, according to the speech of Zeng Chuan, an official of SAMR, at the Frontier Issues in China’s Competition Policy and AML Enforcement Forum in Beijing during 20–21 September, 2018, SAMR is working on improvements to the draft guidelines to regulate pricing behaviour involving standard-essential patents, or SEPs. Since last year, China’s competition authorities have conducted broad research and discussions on SEP-related pricing behaviours with a view to roll out guidelines to prevent price discrimination and other business practices that could harm competition and the rights of market participants.


From a procedural perspective, protection of procedural rights of the undertakings concerned is a key issue in relation to cartel investigation and decision-making under the AML.

Rights of the concerned undertakings in laws and regulations

Article 43 of the AML stipulates that the undertaking(s) concerned being investigated and stake-holders have the right to express their opinions to the administrative enforcer(s) of the AML. The administrative enforcer(s) shall verify the facts, reasons and proofs being given by undertakings concerned and/or third interested parties being investigated.

The rights of the investigated undertakings are stipulated by the Administrative Punishment Law of the People’s Republic of China (“Administrative Punishment Law”).

1. The concerned parties have the right to be informed before the issuance of a decision containing sanction upon the party concerned.21

2. The concerned parties have the right to defend themselves before the administrative enforcer.22

3. The law provides a relatively detailed procedure of hearing.23

4. After the investigation, if the administrative enforcer decides to impose a sanction, the concerned parties must be informed in writing.24

5. The Administrative Punishment Law, as well as the AML, stipulate that the investigated parties are obliged to cooperate with the administrative enforcer and may not reject or hamper the investigation.25

Based on the above articles, the main rights of the concerned parties under the AML are the right to be informed and the right to defend.

Rights of the concerned parties in practice

In practice, the main questions raised by concerned parties (especially foreign entities) are focused on the lack of transparency in antitrust enforcement. The parties are most worried about the possibility of unfair treatment in investigations or decision-making procedures when their rights could not be fully exercised. For instance, the SAIC, which is one of the predecessors of SAMR, does not always disclose their case proceedings, especially at its provincial level. It is notable that there is no explicit right by law to access the enforcers’ file or the legal professional privilege during the course of AML investigation, which are provided for in both EU and US antitrust enforcement regimes. Given that the new enforcement authority has officially begun to perform its duties, more detailed rules on the rights possessed by the parties in the investigation could be provided in the near future so as to bestow undertakings with more legal certainty.


Although the new SAMR has formally operated, it still needs time to enact new antitrust




regulations. For now, the leniency rules adopted by the former NDRC and SAIC antitrust departments are still in effect and they are quite similar.

The SAIC rules may grant full immunity or a reduction of fines in the following circumstances:

1. The administrative authorities for industry and commerce may exempt or reduce fines imposed on the company if it voluntarily stops the conclusion of monopoly agreements.

2. The administrative authorities for industry and commerce may decide to grant full immunity to the first company that voluntarily reports on the monopoly agreement.

3. To obtain such leniency, the company should provide important evidence to the agencies and cooperate fully with the investigation. “Important evidence” refers to evidence that is crucial for the agencies to launch an investigation or to determine the conclusion of a monopoly agreement, including companies involved in the monopoly agreement, the scope of products involved, the content of the monopoly agreement and the way in which agreement is to be reached and the implementation of the agreement, etc.

It should be noted that the organiser of a monopoly agreement is expressly excluded from the benefits of the leniency.

The NDRC rules may grant full immunity or a reduction of fines in the following situations:

1. For the first company which voluntarily reports on the conclusion of the price-related monopoly agreement and provides important evidence, punishment may be fully exempted.

2. For the second company which voluntarily reports on the conclusion of the price-related monopoly agreement and provides important evidence, a reduction of no less than 50% punishment may be granted.

3. For other companies which voluntarily report on the conclusion of the price-related monopoly agreement and provide important evidence, a reduction of no more than 50% punishment may be granted.

In addition to the foregoing, the NDRC published the Draft Guidelines for Application of the Leniency Regime to Cases of Horizontal Monopoly Agreements (the Draft Leniency Guidelines) on 3 February 2016. With regard to the amnesty rules in China, the NDRC published a draft of the “Guidelines on the General Conditions and Application Procedures for Exemption for Monopoly Agreement” by the State Council’s Anti-Monopoly Commission (“the Draft Exemption Guidelines”) on 12 May 2016.

The detailed provisions have been stated previously. It should be noted that the Draft Leniency Guidelines and the Draft Exemption Guidelines have not yet taken effect, and the extent to which these provisions will be incorporated into the final released versions remains uncertain, for example, in terms of determining who should be regarded as the first leniency applicant and who would be the second and so forth, how to define “important evidence”, what types of materials should be submitted, and whether the evidence submitted in the leniency application could lead to an adverse effect in potential follow-up antitrust litigation, etc.


Legal basis for administrative settlement of antitrust cases

In China’s antitrust regime, there is no administrative settlement as in the US or the EU. However, Article 45 of the AML provides that, as for a suspicious monopolistic conduct that the enforcement authority is investigating, if the undertaking under investigation promises




to eliminate the effects of the conduct through the use of concrete measures within the time limit accepted by the authority, the authority may decide to suspend the investigation.

Where the antitrust authority decides to suspend an investigation, it shall supervise the implementation of the commitments offered by the undertakings under investigation. If the commitments are properly and fully implemented, the authority may decide to terminate the investigation.

However, under any of the following circumstances, the antitrust enforcer shall resume the investigation:

1. the undertaking fails to implement the commitment;

2. significant changes have taken place to the facts on which the decision to suspend the investigation was based; or

3. the decision to suspend the investigation was made on the basis of incomplete or inaccurate information submitted by the undertaking under investigation.

With a view to guiding the application of the procedures for business operators’ commitments as well as the suspension and termination of investigation, the NDRC drafted the Guidelines for Business Operators’ Commitments in Anti-monopoly Cases (“The Draft Guidelines for Business Operators’ Commitments”) in February 2016. The Draft Guidelines for Business Operators’ Commitments specifies that antitrust regulators shall not accept commitment proposals from business operators if the relevant monopolistic behaviour has already been verified in an investigation. The Draft Guidelines for Business Operators’ Commitments also stipulate that regulators shall not accept commitment proposals or suspend investigation if a case involves horizontal agreements on price-fixing, production or sales restriction, or market division.

Administrative settlement in practice

A most recent case involves two members of a group purchase alliance of pharmaceuticals in Shanghai, where the municipal administration for industry and commerce suspended and finally terminated the investigation after overseeing the undertakings fulfil their commitments. Upon being investigated for allegedly boycotting drug companies that fell outside the drug purchase list, the two alliance members, Shanghai Health Affairs Service Centre and Shanghai Medical and Health Development Foundation, submitted proposals in December 2017 that would rectify the collective boycott practices and make the purchase mechanism more transparent. The Shanghai AIC suspended investigation in January 2018 and finally terminated the probe in July 2018 after the undertakings fulfilled their remedial commitments under the Shanghai AIC’s supervision.

Below is a summary of administrative settlement cases observed in recent years:




Undertaking

under

Investigation

Conduct

under

Investigation

Investigating

Authority

Commitments Suspension Termination

Agricultural Bank of China, Neimenggu Branch

Abuse of market dominance by bundling insurance policies to loan disbursement

SAIC, Neimenggu Branch

Cessation of abusive conduct and rectification of past conduct

8 Jan 2018 10 Aug 201826




Undertaking

under

Investigation

Conduct

under

Investigation

Investigating

Authority

Commitments Suspension Termination

China Mobile, Neimenggu Branch

Abuse of market dominance by resetting customers’ data balance to zero


Cessation of abusive conduct and providing more choices in customer service

1 Sep 2015 20 Dec 201727

State Power Grid, Shandong Branch

Abuse of market dominance by designating trading counterparties

SAIC, Shandong Branch

Cessation of abusive conduct and compliance training

26 Dec 2016 30 Jun 201728

China Mobile Tietong, Ningxia Branch

Abuse of market dominance with bundled sales

SAIC, Ningxia Branch

Cessation of abusive conduct and transparency campaign with customers

14 May 2015 9 Dec 201629

Erdos Sanya LPG Company

Horizontal collusion


Termination of horizontal agreement

28 June 2016 14 Dec 201630

Concluding remarks

The foregoing analysis suggests that a suspension mechanism exists in China’s antitrust enforcement regime. At the current stage, however, no instances of resumed investigation have been witnessed. The three criteria listed in Article 45 of the AML for resumption of investigation are quite general. The lack of detailed guidelines and published cases makes the suspected violators who want to make commitments worry about whether the investigation will be resumed when the antitrust authority deems that the commitments are not implemented properly. To this end, the result after a suspension of an antitrust investigation is not clear: the investigation may be terminated or resumed. The discretion is largely in the hands of the antitrust authority.


Article 38 of the AML provides the general principle of third party complaints, namely, “all units and individuals shall have the right to report to the authority for enforcement of the Anti-monopoly Law against suspected monopolistic conduct and the latter shall keep the information confidential. If the report is made in writing and relevant facts and evidence are provided, the authority for enforcement of the Anti-monopoly Law shall conduct necessary investigation”.

With regard to the procedures for a third party to file a complaint with an antitrust agency, according to Article 5 of the NDRC’s Regulations on Administrative Enforcement Procedures against Price Monopoly, any organisation or individual may report acts allegedly involving a price monopoly to the price regulatory authority, and the authority shall keep the complainant’s information confidential. Where the reporting is in writing and relevant facts and evidence is provided, the authority shall conduct necessary preparatory investigation.




The items for preparatory investigation shall include:

1. whether the complainant has reported the same issue to another administrative agency or brought a lawsuit before the people’s court for this issue;

2. basic information on the reported person;

3. related facts and evidence provided by the complainant; and

4. other items that need to be investigated.

Article 5 of the SAIC’s Provisions on the Procedures for the Administrative Organs for Industry and Commerce to Investigate Cases Concerning Monopoly Agreements and Abuses of Dominant Market Positions provides a more detailed instruction:

“Where the informant comes forward with information in written form, the following shall be included:

1. Basic information of the informant.

Where the informant is an individual, he/she shall provide such information as his/her name, address and contact information.

Where the informant is a business operator, it shall provide such information as its name, address, contact information, major industry, products or services, etc.

2. Basic information of the entity suspected of monopoly.

Such information shall include the name, address, major industry, products or services of the business operator suspected of monopoly.

3. Relevant facts with respect to the monopoly.

Such facts shall include those with respect to the implementation of the monopoly conduct by the suspected entity in violation of laws, regulations and rules and the time and place of the alleged conduct, etc.

4. Relevant evidence.

Such evidence shall include documentary evidence, physical evidence, witness testimonies, visual and audio materials, computer data and appraisal reports, etc., and the relevant evidence shall be signed by the provider and the source of the evidence shall be indicated.

5. Whether the same facts have been reported to another administrative organ or a lawsuit has been lodged with the relevant people’s court.”

After receiving the complaints from a third party, the agencies will have to send feedback on what the decision is to the real-name complainant, but there is no clear time requirement for the feedback. In consideration of the rampant anti-competitive behaviour in China and the hard-pressed enforcement capacity, it is inevitable that the authorities will set priorities on the enforcement focus. A variety of factors may come into play in the making of an enforcement decision, but it appears that, among others, the ties to the people’s daily livelihood, the sufficiency of evidence and the coordination with industrial policies, have played more important roles.

With regard to the procedures for a third party to file a complaint with a court, Article 56 of the Civil Procedure Law provides that “[i]f a third party considers that he has an independent claim to the subject matter of the action of both parties, he shall have the right to bring an action”. Article 2 of Provisions of the Supreme People’s Court on Certain Issues Relating to the Application of Law in Hearing Cases Involving Civil Disputes Arising out of Monopolistic Acts also provides that “[a] people’s court shall accept a civil lawsuit directly filed by a plaintiff, or filed by a plaintiff after a decision by the antimonopoly enforcement




agency has become legally effective which affirms the relevant act as constituting monopolistic conduct, as long as such lawsuit satisfies other case acceptance conditions prescribed by law”. Generally speaking, under the principle that the party who raises the claims bears the burden of proof, the burden of proof on the plaintiff is relatively heavy in terms of showing that the defendant has entered into the monopoly agreement, or that the defendant is dominant in the relevant market and has abused its market dominant position. For the defendant’s burden of proof, where the alleged monopolistic act falls under any types of monopoly agreement prescribed in Items (1) through (5) of Paragraph 1 of Article 13 (monopoly agreement) of the Anti-monopoly Law, the defendant concerned shall bear the burden of proof to show that the relevant agreement has no effect of excluding or restraining competition. Where the alleged monopolistic act qualifies as an abuse of market dominant position prescribed in Paragraph 1 of Article 17 of the Anti-monopoly Law, the defendant shall bear the burden to prove that there are justifiable reasons for its acts as a defence.


According to the AML, the enforcement agencies may impose cease and desist orders, confiscate the illegal gains, and/or impose fines between 1% and 10% of an undertaking’s annual turnover in the preceding year for reaching cartel agreements.

On 17 June 2016, the NDRC published the draft illegal gain penalty guidance for monopolies, as aforementioned. While the final and official version has yet to be released, it provided an analytical framework and basic methods for anti-monopoly law enforcement agencies to recognise illegal gains and determine the amount of fines when investigating and handling cases under which business operators reach and implement monopoly agreements or abuse market dominance.

In China, the key sanctions on horizontal monopolistic behaviours include the following cases:

• RMB 12.86m – in 2018, a fine totalling RMB 12.86m was imposed on four tug companies for a price cartel.

• RMB 0.41m – in 2018, a fine totalling RMB 0.41m was imposed on 14 accounting firms for a horizontal monopoly agreement.

• RMB 457m – in 2017, a fine totalling RMB 457m was imposed on 18 PVC manufacturers for a price cartel.

• RMB 0.57m – in 2017, a fine totalling RMB 0.57m was imposed on Hechi Insurance Association and nine insurance companies for the conclusion of a horizontal monopoly agreement.

• RMB 0.66m – in 2016, five fireworks distributors were ordered to disgorge RMB 0.86m in illegal gains, and a fine of RMB 0.66m was imposed.

• RMB 0.41m – in 2016, three cipher device suppliers were ordered to disgorge RMB 29.35m in illegal gains, and a fine of RMB 0.41m was imposed.

• RMB 0.2m – in 2016, a fine of RMB 0.2m was imposed on Insurance Industry Association of Hubei Province for the conclusion of a monopoly agreement.

• RMB 2.6m – in 2016, a fine totalling RMB 2.6m was imposed on three pharmaceutical firms for reaching estazolam monopoly agreements.

• RMB 407m – in 2015, a fine totalling RMB 407m was imposed on eight companies in an ocean shipping cartel investigation.

• RMB 6.88bn – In 2015, a fine totalling RMB 6.88bn was imposed on Qualcomm Incorporated for abuse of a dominant market position.




• RMB 123m – In 2015, a fine totalling RMB 123m was imposed on Dongfeng-Nissan for reaching and implementing a monopoly agreement on market segmentation.

• RMB 407m – In 2015, a fine totalling RMB 407m was imposed on Nippon Yusen co. and seven other companies for implementing price monopoly agreements. RMB 278m – in 2014, FAW-Volkswagen and some Audi distributors were fined RMB 278m for conducting a price-related monopoly agreement.

• RMB 114m – In 2014, a fine totalling RMB 114m was imposed on three cement companies in Jilin Province for concluding a horizontal monopoly agreement.

• RMB 110m – In 2014, a fine totalling RMB 110m was imposed on Zhejiang Insurance Association and several insurance companies for the conclusion of a horizontal monopoly agreement.

• RMB 1.24bn – In 2014, a fine totalling RMB 1.235bn was imposed on 12 Japanese auto parts manufacturers for colluding over prices of auto parts and bearings.

• RMB 353m – In 2013, six multinational LCD panel makers were ordered to disgorge RMB 172m of illegal gains, and a fine was imposed of RMB 353m.

In general, the investigated party gets to know the likely amount of a fine when the antitrust enforcement agency issues the Pre-notification on Administrative Penalty. After receipt of the pre-notification, the investigated is entitled to submit a written statement or application for a hearing within three days if it does not agree with the potential penalty.

In practice, it is possible that the antitrust enforcement agency may cut the level of the fine or disgorgement if the grounds proposed by the investigated party before formal issue of the administrative penalty prove to be appropriate and reasonable. The auto parts case is a good example of this, in which Sumitomo received a fine reduction of around RMB 50m after presenting a convincing line of reasoning to the authority. In the Insurance Industry Association of Hubei Province case, the Insurance Industry Association of Hubei Province received a fine reduction of RMB 0.3m after presenting a convincing line of reasoning in a written statement. In the cipher device suppliers’ cartel case, Sunyard System Engineering Co., Ltd asserted, during the hearing, that the calculation of illegal gains was inappropriate and the illegal gains should be calculated according to the actual sales amount (revenue) based on a unite price of RMB 330 per device. Following further review and study, Anhui AIC adopted Sunyard System Engineering Co., Ltd’ assertion. Additionally, the fine will generally not be increased by submitting a written statement or application of hearing.


Article 50 of the AML stipulates that a business operator that caused damages to others by engaging in monopolistic conduct shall bear civil liability under the laws. However, unlike in the U.S. where treble damages can be sought, civil damages for antitrust infringements in China are limited to the actual damages suffered by the plaintiff and the reasonable costs incurred by the plaintiff in investigating and restraining anticompetitive conduct.31

A civil defendant that has been found to be liable under the antitrust law has the same right of appeal as defendants in other civil lawsuits. Under Article 164 of the Civil Procedure Law, a party has the right to file an appeal with the appellate court within 15 days of being served the first instance judgment. Under Article 170 of the Civil Procedure Law, the appellate court may review findings of fact, applications of law, and compliance with procedures of the first instance court.

Regarding the administrative decision with penalties and sanctions, theoretically speaking,




the investigated party can apply for an administrative review or bring an administrative lawsuit before the court, after the administrative penalty is officially issued.

According to the Administrative Review Law and the Administrative Procedure Law, the subject may apply for administrative review within 60 days from the date when it receives the official administrative penalty, or directly bring an administrative lawsuit before the court within three months from the date when it receives the official administrative penalty.

In addition, the investigated party can bring an administrative lawsuit before the court or apply to the State Council for adjudication where it does not agree with the result of the administrative review. In case of applying to the State Council for adjudication, the State Council shall give a final ruling in accordance with the provisions of the Administrative Review Law.

Theoretically, in the administrative review and administrative lawsuits, both the procedure and the substance of the decision will be reviewed, which is known as a comprehensive review.

In practice, however, the investigated party rarely launches an administrative review or lawsuit to challenge the decision of the antitrust enforcement agency in China. There have been administrative lawsuits before – such as that brought by cement manufacturers before Nanjing Intermediate court in December 2014. But as reported, the court ended up dismissing the case on the grounds of exceeding the limitations period. In 2016, seven accounting firms filed a lawsuit demanding that the court order the Shandong AIC to revoke the penalty decision imposed for reaching and implementing a monopoly agreement on market segmentation. In June 2017, the final judgment dismissed the lawsuit on the grounds that the penalty decision by the Shandong AIC had ensured procedural fairness and was based on sound facts and evidence, and correct application of law and regulations. 2017 also saw a fodder company sue the Hainan Price Bureau, challenging its penalty of RMB 200,000 in a vertical monopoly agreement case. Seven other franchisers were together punished by the agency. The penalty decision was overturned by the court of first instance, Haikou Intermediate Court, because it found that the plaintiff lacked sufficient market influence as to restrict competition. However, the court of second instance, Hainan High Court, reversed the lower court’s ruling and upheld the decision of Hainan Price Bureau.

Nevertheless, an investigated party still has a chance of success. For instance, Henan Juyou Net Service Company filed a lawsuit asking the court to revoke the penalty decision imposed by the Zhengzhou AIC in 2015. While the first instance court dismissed the case on the same grounds as the Shandong court as previously mentioned, in April 2017, the Zhengzhou Intermediate Court vacated the lower court’s judgment and ordered the Zhengzhou AIC to revoke its decision.

Criminal sanctions

Even though there are no criminal sanctions available in respect of antitrust infringements in China, obstruction of law enforcement during the antitrust investigation may result in criminal liability.

Article 52 of the AML provides that, “[w]here, during the review or investigation conducted by the authority for enforcement of the AML, an entity or individual refuses to provide relevant materials and information, or provides false materials and information, or conceals, destroys, or transfers evidence, or resists and obstructs investigation in any other manner...; and if a crime is committed, criminal liability shall be prosecuted in accordance with relevant laws”.

Cross-border issues

Extraterritorial effect of the AML

Article 2 of the AML provides a general principle that the law applies not only to




monopolistic acts in the domestic market, but also acts committed outside of China that have an anti-competitive effect within China. Thus, China’s antitrust regime has adopted an extraterritorial effect doctrine. However, since the enactment of the AML, neither China’s legislature nor its enforcement agencies have promulgated any specific regulations on the interpretation or implementation of the doctrine.

Communication and cooperation with counterparts in other jurisdictions

Prior to the restructuring of the antitrust agencies, the MOFCOM, NDRC and SAIC attached great importance to the international information exchange and cooperation with agencies of other antitrust regimes. The MOFCOM, NDRC and SAIC have, independently or collectively, signed MOUs with the enforcement authorities in the US, EU, the UK, South Korea, Russia, Australia, and Brazil, putting in place the institutional framework for international cooperation and coordination.

After the establishment of the SAMR, Gan Lin, deputy director of the new body, expressed at the 7th China Competition Policy Forum that SAMR will further strengthen consultations on multilateral and bilateral competition policies and law enforcement issues, and promote a global system of competition governance, demonstrating the SAMR’s intention to broaden and enhance international cooperation. In fact, the Anti-monopoly Bureau under the SAMR will have two divisions specifically devoted to cross-border issues. One division will guide Chinese undertakings in dealing with overseas antitrust challenges, and the other division will be responsible for international exchange.


Article 50 of the AML provides that, “[b]usiness operators that engage in monopolistic conduct causing damages to others shall bear the civil liability in accordance with relevant laws”. Thus, the AML authorises individuals and entities to bring antitrust claims before the courts. The most prominent litigations have been focused on abuse of dominant position, such as YingDing v. SINOPEC,32 Qihoo 360 v. Tencent,33 and Huawei v. IDC.34 A number of cases have involved vertical agreements, such as Beijing Ruibang Yonghe Technology & Trade Co., Ltd. v. Johnson & Johnson,35 and Rijing Electric v. Panasonic.36 However, private litigation against cartels is still rare.

Some difficulties are noted for plaintiffs in private enforcement actions.

Low prevailing rate for plaintiffs

Under Article 7 of the Provisions on Application of Law in Hearing Civil Disputes over Monopolistic Conduct issued by the Supreme People’s Court, in cartel litigation, the defendant shall bear the burden of proof to show that the alleged agreement does not exclude or restrict competition. However, this provision does not completely relieve the plaintiff of the burden of proof. Under Articles 64 and 65 of the Civil Procedure Law, a party shall provide evidence without undue delay to support their allegations. Furthermore, Article 90 of the Supreme People’s Court’s Interpretations on the Application of the Civil Procedure Law provides that, “[w]here a party under the burden of proof fails to furnish any evidence to prove the facts alleged or where the evidence furnished is insufficient to prove the facts alleged before a judgment is issued, that party shall be subject to adverse consequences”.

In fact, evidence of monopolistic behaviour is mostly in the hands of the accused monopolist, rendering it difficult for plaintiffs to obtain evidence essential to winning the case. For example, in August 2018, a court in Shenzhen ruled in favour of the defendant, Tencent Technology Company, in a suit filed by an online commerce promotion company. The

plaintiff accused Tencent of abusing its dominant market position by blocking the plaintiff’s accounts on Tencent’s platform. As the court ruled in favour of Tencent on the issues of relevant market definition, market dominant position, and abuse of dominant position, it is lamentable that the plaintiff failed to produce sufficient evidence on these key issues; neither did it apply to the court for assistance in evidence collection.

The admissibility of documents submitted in leniency application

Although no specific rule currently in effect specifies whether documents submitted in leniency applications may be admitted as evidence in private enforcement actions against cartels, according to the Draft Leniency Guidelines, such materials may not be made public without the consent of the leniency applicant; neither may they be accessed by any other agencies, organisations or individuals or be used as evidence in civil proceedings. However, considering that the draft guidelines, even if formally issued, are not binding on courts, uncertainties still linger in this regard.

Another notable case in 2018 where the plaintiff lost is the suit against Hankook Tire filed by one of its distributors. This is the first time in China where the defendant is accused of both implementing a vertical monopolistic agreement and abusing its dominant market position. The Shanghai Intellectual Property Court held in July 2018 that, although the plaintiff established a prima facie case that Hankook Tire engaged in resale price maintenance, the competition in automobile tyre market is so intense that, given Hankook Tire’s relatively small market share, it was unable to acquire sufficient market power as to restrict or exclude competition. An agreement that does not have an anticompetitive effect cannot be found to be a monopolistic agreement for the purposes of the Anti-Monopoly Law. Antitrust observers note that the Shanghai Intellectual Property Court in effect followed the precedent set by the Shanghai Higher People’s Court in Ruibang v. Johnson & Johnson in 2013, where a Chinese court for the first time ruled that a vertical resale price maintenance agreement must have anticompetitive effect before it can be found to have violated the Anti-Monopoly Law.37

Reform proposals

The enforcement against cartels in China is developing towards a deeper level and into more diverse areas. However, as a young antitrust regime, China is expected to carry out the following reforms:

• Enhanced transparency. As mentioned above, both the former antitrust departments at the NDRC and SAIC were in charge of enforcement against cartels. The former SAIC launched an anti-monopoly case release platform dating back to 29 July 2013. Previously, the NDRC merely rendered press releases giving limited details and reasoning of the cases. In September 2014, the authority started to make public a series of final decisions, e.g., on the 2013 insurance cartel cases and the 2014 auto parts cartel cases, which cover the fact findings and the underlying rationales. However, the publication of official decisions has not become the norm, as the most recent decisions on the vertical resale price maintenance cases made by local DRCs, are not released on the NDRC’s official website and only partially released on local DRC websites.38 A unified platform for decision releases is highly anticipated of the newly established SAMR. Also, given that Article 44 of the AML stipulates that where the enforcement authority makes a decision that a suspected conduct constitutes a monopolistic conduct, the said authority may make the matter known to the public, regular and full publication of official decisions, whether made by central or local authorities, is highly expected of the SAMR anti-monopoly bureau.




• More sufficient, professional, and stable manpower. There are hundreds of staff members working in prestigious antitrust agencies such as the US’s DOJ and FTC, the EU’s DG Comp, and South Korea’s KFTC, and most of them are trained in either law or economics. The reality in China is that the human capital of the authorities is relatively thin compared to their counterparts in advanced antitrust regimes. Thus, the reform of human resources aimed at forming a sufficient, professional and stable human capital is expected.

• More sectors under the antitrust radar. As competition policy develops towards maturity, more sectors should come under the antitrust radar, with legislative efforts towards both innovative and livelihood-related areas being encouraged, such as the domains of big data, the sharing economy, human resources, etc. Areas that are not officially regulated but are seeing anti-competitive effects have come to the attention of counterparts in the US and EU. Since a similar situation can be seen here in China, proactive action by the Chinese agencies is highly anticipated.

• More specific and clear regulations. It has been more than 10 years since the AML took effect in 2008. Compared with the US and EU, China’s antitrust regime is still in its developing phase. Comprehensive and explicit rules and regulations are the first step towards the maturity. There is a clear need for the authorities to provide additional details on their enforcement activities and more procedural guidelines.

Enhance the private enforcement. The Supreme People’s Court issued the Provisions of the Supreme People’s Court on Certain Issues Relating to the Application of Law in Hearing Cases Involving Civil Disputes Arising out of Monopolistic Acts in 2012, in which the 16-article provisions clarify issues such as prosecution, case acceptance, jurisdiction, distribution of the burden of proof, evidence in litigation, civil liability and limitations period. While the judicial interpretation sets up an antitrust litigation framework, it should be noted that it is necessary to further detail how to calculate damages and to impose a higher liability on cartels. Furthermore, the heavy burden of proof on the plaintiff and a lack of class action and punitive damages mechanism which may dilute the private enforcement effort remain to be solved or improved going forward.

* * *




Endnotes

1. Under the AML, cartels are named “horizontal monopoly agreements”, which are defined as “agreements, decisions and other concerted conducts between competitors”.

2. Speech by Gan Lin, Vice Minister of the State Administration for Market Regulation at the opening ceremony of the 7th China Competition Policy Forum, http://www.zggpjz.com/domestic/4047.html.

3. Zhu Li: Civil Lawsuits Have Become an Important Part of Antitrust Enforcement in China, http://cclp.sjtu.edu.cn/Show.aspx?info_lb=672&info_id=4391&flag=648.

4. Provisions on the Functional, Institutional and Personnel Arrangements of the SAMR, available at http://www.gov.cn/zhengce/2018-09/10/content_5320813.htm.

5. See endnote 2.

6. http://www.ndrc.gov.cn/yjzx/yjzx_add.jsp?SiteId=129.

7. http://www.ndrc.gov.cn/yjzx/yjzx_add.jsp?SiteId=141.

8. http://jjs.ndrc.gov.cn/gzdt/201602/t20160201_774051.html.



11. http://jjs.ndrc.gov.cn/fjgld/201605/t20160512_801559.html.

12. http://jjs.ndrc.gov.cn/fjgld/201606/t20160617_807541.html.

13. Administrative Penalty Decision by the Guangdong Development and Reform Commission, Yue Fa Gai Jia Jian Chu [2018] No. 7, http://www.gddrc.gov.cn /zwgk/zdlyxxgkzl/jgzf/pgpt/201809/t20180903_478125.shtml.

14. Monopoly Agreement Case of Hunan Baiwang Jinfu Technology Co., Ltd. and Hunan Aisino Co., Ltd. (Competition Law Enforcement Announcement No. 13 of 2017), http://home.saic.gov.cn/fldyfbzdjz/jzzfgg/201712/t20171211_271076.html.

15. Case of Anhui Huainan City Freight Chamber of Commerce Organizing Industry Operators to Reach Monopoly Agreement (Competition Law Enforcement Announcement No. 2 of 2018), http://home.saic.gov.cn/fldyfbzdjz/jzzfgg/201801/t2018 0131_272157.html.

16. Monopoly Agreement Case of Six Shopping Malls Including Shandong Inzone Green Home, etc. (Competition Law Enforcement Announcement No. 6 of 2018), http://home.saic.gov.cn/fldyfbzdjz/jzzfgg/201804/t20180403_273501.html.

17. Monopoly Agreement Case of Shandong Rizhao Self-discipline Committee Member Units (Competition Law Enforcement Announcement No. 7 of 2018), http://home.saic.gov.cn/fldyfbzdjz/jzzfgg/201806/t20180605_274487.html.

18. SAMR Issued Administrative Penalty Decisions on Four Shenzhen Tugboat Companies (Guo Shi Jian Jia Jian Chu Fa [2018] No. 1, Guo Shi Jian Jia Jian Chu Fa [2018] No. 2, Guo Shi Jian Jia Jian Chu Fa [2018] No. 3, and Guo Shi Jian Jia Jian Chu Fa [2018] No. 4), http://samr.saic.gov.cn/gg/201806/t20180625_274741.html.

19. SAMR Issued Administrative Penalty Decisions on Two Shenzhen Tallying Service Companies (Guo Shi Jian Jia Jian Chu Fa [2018] No. 5 and Guo Shi Jian Jia Jian Chu Fa [2018] No. 6), http://samr.saic.gov.cn/gg/201807/t20180720_275163.html.

20. Decision on Terminating Investigation against Suspected Monopolistic Behavior of Shanghai Public Medical Institutions and Pharmaceutical Group Purchasing Alliance




(Competition Law Enforcement Announcement No. 8 of 2018), http://home.saic. gov.cn/fldyfbzdjz/jzzfgg/201807/t20180717_275084.html.

21. Article 31 of the Administrative Punishment Law.


23. Article 42 of the Administrative Punishment Law provides that public hearings are to be organised according to the following procedure: 1) if a public hearing is requested by the parties concerned, the request shall be submitted within three days after the parties concerned are notified by the administrative organ in charge; 2) the administrative enforcer(s) shall notify the parties concerned of the time and venue of the hearing seven days before it is held; 3) with the exception of cases involving state secrets, business secrets or individual privacy, hearings shall be held in public; 4) public hearings are to be chaired by a person appointed by the administrative enforcer(s) in charge and who is not one of the investigators of the case in question, if the parties concerned deem that the person chairing the hearing has a straight connection to the case, they have the right to submit a request for withdrawal; 5) the parties concerned may personally attend the hearing or may ask one to two persons to represent them; 6) at the hearings investigators present the facts and evidence of violation of law by the parties concerned, and suggest administrative punishments; the parties concerned defend themselves and confront the investigators; and 7) a transcript on the public hearing shall be made, checked by the parties concerned, and signed by them or affixed with their seals.


25. Article 42 of the AML and Article 37 of the Administrative Punishment Law.

26. The administrative decision is available at http://home.saic.gov.cn/fldyfbzdjz/jzzfgg/2 01809/t20180929_276159.html.

27. The administrative decision is available at http://home.saic.gov.cn/fldyfbzdjz/jzzfgg/2 01801/P020180122590009009828.pdf.

28. The administrative decision is available at http://home.saic.gov.cn/fw/bsdt/gg/jzzf/201 707/t20170717_267671.html.

29. The administrative decision is available at http://home.saic.gov.cn/fw/bsdt /gg/jzzf/201702/t20170216_231640.html.

30. The administrative decision is available at http://home.saic.gov.cn/fw/bsdt/gg/jzzf/201 703/t20170328_260778.html.

31. Article 2 of Provisions of the Supreme People’s Court on Certain Issues Relating to the Application of Law in Hearing Cases Involving Civil Disputes Arising out of Monopolistic Acts.

32. The court of second instance: Yunnan Higher People’s Court, (2017) Yun Min Zhong No. 122.

33. The court of second instance: the Supreme People’s Court of The People’s Republic of China, (2013) Min San Zhong Zi No. 4.

34. The court of second instance: Guangdong Higher People’s Court, (2013) Yue Gao Fa Min San Zhong Zi No. 305.

35. The court of second instance: Shanghai Higher People’s Court, (2012) Hu Gao Min San (Zhi) Zhong Zi No. 63.




36. The court of first instance: Shanghai No.1 Intermediate People’s Court, (2014) Hu Yi Zhong Min Wu (Zhi) Chu Zi No. 120.

37. The judgment of the Ruibang vs. Johnson & Johnson case is available at http://www.hshfy.sh.cn/shfy/gweb2017/flws_view.jsp?pa=adGFoPaOoMjAxMqOpu6a438PxyP0o1qop1tXX1rXaNjO6xSZ3c3hoPTUPdcssz.

38. The Shanghai Municipal Development and Reform Commission has publicised all decisions regarding the Chrysler resale price maintenance case, but on the Hubei Price Bureau’s website, there is only a press release.






Dr. Zhan Hao Tel: +86 10 8567 5966 / Email: [email protected] As the pioneer competition lawyer in PRC, Dr. Zhan Hao has extensive experience in the fields of antitrust private litigation, investigation, concentration filing and compliance. He has represented clients in high-profile litigations, including Sinopec in the first antitrust litigation in China’s petroleum sector and Panasonic in a case brought by its distributors. Currently, Dr. Zhan is assisting clients in several multinational intellectual property-related cases, such as the Hitachi Metals rare earth case. Dr. Zhan also specialises in counselling clients for antitrust investigations, including China’s first antitrust investigation against a price cartel where he obtained investigation suspension, China’s first follow-up investigation into LCD price cartels, NDRC investigation involving a Japanese auto parts maker where he successfully obtained a fine reduction, and NDRC investigations against PVC manufacturers and port companies. Dr. Zhan has also assisted multinational and state-owned enterprises in concentration filings in China and secured approvals for all transactions he represented.

Song Ying Tel: +86 10 8567 5979 / Email: [email protected] Ms. Song Ying specialises in antitrust and anti-unfair competition law, providing a wide range of services, including defence for investigation, private antitrust litigation, concentration notifications and competition compliance. Ms. Song has accumulated abundant experience in handling high-profile cases when she represented SINOPEC, Panasonic, and Hitachi Metals on complicated issues such as standard essential patents. She is also a veteran attorney with regard to concentration filings and counselling clients for antitrust investigations. Ms. Song filed the concentration notification for the ChemChina/Syngenta deal with MOFCOM, the biggest deal of SOEs in 2016, and successfully obtained the unconditional clearance for the clients. She also handled cases in the sectors of LCD, telecom, milk powder, auto parts, PVC and ports.

Stephanie (Yuanyuan) Wu Tel: +86 10 8567 5988 / Email: [email protected] Stephanie Wu is a partner at AnJie Law Firm’s Shanghai Office, specialising in antitrust/competition law and advising clients on all aspects of anti-monopoly law, including compliance, investigations, merger notification, private litigation and fair competition review. Stephanie is experienced in advising both multinationals and Chinese companies on antitrust issues pertaining to the compliance of companies’ daily operations and business practices in China, covering supply and distribution, horizontal cooperation, information exchange, sales and marketing, and after-sales service. Stephanie has also advised clients on the formation of tailor-made antitrust compliance systems, responses to investigations and complaints, in addition to providing training and internal audits. Her clients range from medical devices, chemicals, and pharmaceuticals to electronics, motor vehicle and aviation.

19/F, Tower D1, Liangmaqiao Diplomatic Office Building, No. 19 Dongfangdonglu, Chaoyang District, Beijing 100600, P.R. China

Tel: +86 10 8567 5988 / URL: www.anjielaw.com

AnJie Law Firm


Denmark


Danish competition law is to a large extent equivalent to EU competition law. Sections 6 to 8 of the Danish Competition Act correspond to Article 101 TFEU and are interpreted in accordance with practice from the European Commission and the European Court of Justice. Non-authoritative versions of the Act and the most relevant Executive Orders issued pursuant to the Act have been made available by the Danish competition authorities in English on www.kfst.dk (it must be noted that the translations do not always include the latest legislative amendments).

The main sanctions for infringement of competition law are criminal sanctions under Danish law, and the sanctioning procedure is thus largely governed by the Danish rules on criminal procedure.

The Danish competition authorities consist of: (i) the Danish Competition and Consumer Authority (“the DCCA”); (ii) the Danish Competition Council (“the Council”); and (iii) the Danish Competition Appeals Tribunal (“the Appeals Tribunal”). In general, the DCCA investigates and prepares competition cases for the Council, which decides competition cases in the first instance. Decisions from the Council may be appealed to the Appeals Tribunal, and in turn to the ordinary courts.

The Danish competition authorities have the power to decide whether agreements and concerted practices are in breach of competition law, and they may order undertakings to end practices found to be contrary to competition law. The competition authorities do not have the power to impose criminal sanctions or to fine undertakings or individuals administratively, but may offer – with the acceptance of the State Prosecutor for Serious Economic and International Crime (“the State Prosecutor”) – undertakings and individuals a fine in lieu of prosecution.

If the Danish competition authorities find that competition law has been breached intentionally or grossly negligently, and if the case cannot be closed with a fine in lieu of prosecution, the authorities may report it to the State Prosecutor who may charge the undertaking and/or the responsible individual formally and bring the case to court.

The Danish authorities increasingly bring charges against involved management members, and more senior employees where possible. In recent years, management members have been fined in approximately half of the cases where undertakings have been sanctioned.

All cases where sanctions are imposed are published on the website of the DCCA; the names of any individual(s) are omitted.

In 2012, an extensive amendment of the Danish Competition Act implying stricter

Olaf Koktvedgaard, Frederik André Bork & Søren Zinck Bruun & Hjejle Advokatpartnerselskab



sanctioning was adopted. Effective as of 1 March 2013, the level of fines was raised dramatically, and custodial sentences for cartel activities (or attempted cartel activities) of up to one-and-a-half years of imprisonment (and up to six years of imprisonment for particularly serious cartels) were introduced. Custodial sentences for cartel offences can only be imposed if the necessary specific intent can be proven and the other conditions for imposing a criminal sanction under Danish law are satisfied. Custodial sentences are expected to be used primarily against members of the board and members of the management.

Overview of investigative powers in Denmark

In most Danish cartel investigations, the DCCA conducts a dawn raid to secure evidence. The DCCA is entitled to conduct dawn raids at the premises of undertakings (or associations of undertakings), including making a forensic copy of a company’s IT system, upon presenting a court order containing information on the subject-matter and purpose of the inspection. Further, the authority may request employees to present the contents of their pockets and briefcases and may access company vehicles.

However, contrary to dawn raids conducted under EU law in accordance with Regulation 1/2003, the DCCA has currently no access to private homes or private cars when conducting dawn raids under Danish law.

The DCCA can demand that the company’s employees answer questions of a factual nature, e.g., where specific documents are stored. The DCCA may also request oral statements from the employees. However, no-one is obliged to answer questions involving any acceptance of guilt.

The DCCA may report a suspected cartel to the State Prosecutor – and if the suspicion is sufficiently substantiated and concrete must do so. The State Prosecutor may choose – subject to court approval – to conduct searches, including at private homes, pursuant to the Danish rules on criminal procedure. This has happened in several cases even where the DCCA has previously conducted a dawn raid to investigate the same alleged offence.

As an important corollary to the introduction of custodial sentences for cartel offences, the State Prosecutor was in 2013 given new and more invasive powers of investigation. Subject to court orders, these powers include: the possibility of wiretapping; searches at the premises of individuals not suspected of participating in a cartel; monitoring (including filming persons at non-public locations and registration of individuals’ locations based on mobile phones); and the installation of “sniffer programs” on computers. There is at present no public information on whether these new measures have been used.


During the last 12 months, the following decisions on horizontal agreements have been published by the Danish competition authorities.

On 13 April 2018, the Appeals Tribunal upheld the Council’s decision that the Danish Camping Board (in Danish: Campingrådet) had illegally restricted competition by adopting that camping sites should require their guests to buy – at a fixed price – a “camping pass” issued by the Danish Camping Board. The illegal practice comprised almost 90 per cent of the Danish camping sites. The Council ordered the Danish Camping Board to terminate the restrictive practice and referred the case to the Danish State Prosecutor for Serious Economic and International Crime for criminal prosecution.

Bruun & Hjejle Advokatpartnerselskab Denmark



On 14 June 2018, the Appeals Tribunal upheld the Council’s decision that Mediacenter Danmark A/S (MCD) and MPE Distribution ApS (MPE) had violated Danish competition law in 2013 and 2014 by agreeing that MPE should not pursue MCD’s customers on the market for the purchase and sale of distribution of unaddressed mail to end customers (advertisers). In January 2015, MPE had contacted the Council with information on potential anti-competitive infringements, following which the DCCA conducted dawn raids at the premises of six suspected media agencies in August 2015. During these dawn raids, the DCCA only found evidence of an agreement between MCD and MPE. According to the Council, the investigation showed that MCD and MPE had entered into a customer-sharing agreement on the Danish market for the purchase and sale of unaddressed mail to end customers. The Council found that the agreement constituted a restriction of competition by object and that customers would have less choice on the market, which could lead to a decrease in service and/or increase in price. The Council decided to report the case to the State Prosecutor for criminal prosecution.

On 27 August 2018, the Danish Maritime and Commercial High Court found that LKF Vejmarkering A/S (LKF) and Eurostar Danmark A/S (Eurostar) had not violated the prohibition against anti-competitive agreements by submitting a joint bid through a consortium in a tender for road marking thereby overturning the prior decisions of the Council and the Appeal Tribunal from 2015 and 2016, respectively. The tender consisted of three contracts each covering a part of Denmark and each organised with the option of submitting a bid for just one of the contracts. The consortium of LKF and Eurostar submitted a bid for all three contracts and won the tender as the consortium’s prices were overall the lowest. LKF and Eurostar were, at that time, the largest and second-largest contractors in the market for road marking. The Appeals Tribunal found that LKF and Eurostar could have submitted individual bids for the individual districts, and that, consequently, LKF and Eurostar were actual and/or potential competitors – regardless of whether LKF and Eurostar individually had the capacity and possibility to submit a bid for all three districts. The Court, however, disagreed and held that the mere fact that LKF and Eurostar had the capacity to submit individual bids for individual districts did not preclude them from entering into a consortium and submitting a joint bid for all districts as a whole. The assessment of whether LKF and Eurostar could have submitted individual bids for all three districts (and not some of the districts) was thus the decisive factor as to whether the joint bid had violated competition law. In September 2018, the Council decided to seek permission to appeal the Danish Maritime and Commercial High Court’s decision to the Supreme Court of Denmark.

On 12 September 2018, the Appeals Tribunal overturned the Council’s decision that four players on the Danish market for roof felt and roof foil had illegally restricted competition by entering into an agreement and/or a concerted practice with the purpose of foreclosing competitors and limiting product supply. The Appeals Tribunal found that the Council’s analysis of the economic and legal context was insufficient as it was limited to what the Council considered strictly necessary to establish that the agreement had an anti-competitive object. However, the Tribunal found that the Council had not demonstrated with the requisite certainty that the agreement constituted a “by-object” infringement. Consequently, the Tribunal annulled the decision and remitted the case to the Council.

On 19 September 2018, a Danish city court delivered the first ever judgment in a case with a motion for imprisonment for competition law violations. However, the court dismissed the prosecutor’s motion for imprisonment and instead imposed (a minimum) fine of DKK 100,000 for the violation. The case was about the 76-year-old former owner of a Danish demolition company who had requested and received information on a competitor’s bid and




used the information to submit a higher bid. This kind of bid rigging is known as “borrowed prices” (in Danish: “lånepris”), which is sometimes used by companies that cannot calculate and submit a bid in due time. The court found that the conduct with “borrowed prices” constituted a concerted practice, that the concerted practice amounted to a cartel and that the former owner had acted with intent. The question for the court to consider was then whether the cartel was of a “severe nature” and thus an offence punishable by imprisonment. However, as it was a one-off violation, as the former owner did not stand to profit and as the former owner had not played a leading role, the cartel was not of a severe nature and thus did not constitute an offence punishable by imprisonment. The court instead imposed a fine of DKK 100,000.


Given the low number of published decisions by the DCCA on cartel enforcement, it is difficult to point to key issues in relation to enforcement policy. However, the DCCA has for several years focused on trade associations. In 2014, the DCCA published a set of guidelines on information activities in trade associations in order to provide an overview of the most important criteria for the DCCA’s assessment of the exchange of information within trade associations. The guidelines state that when assessing the exchange of information, it is relevant whether the information provided to the members is aggregated, or whether data on individual competitors can be identified. Collusion will be less likely if only aggregated data is provided. Information of a less recent date is also less likely to have an impact on competition than information of a more recent date. Finally, the availability of the information is taken into account, and the sharing of publicly available information is thus less likely to violate competition rules.

Further, in September 2015, the DCCA started an investigation into the competition between medicine wholesalers in Denmark, which should be seen in connection with the DCCA’s focus in recent years on the pharmaceutical industry. The DCCA has also recently looked into the competition between medical specialists in private practice and possible anti-competitive conduct through their trade association.

In recent years, the DCCA has also displayed an increased focus on consortia and the distinction between a legal consortium and an illegal cartel. In 2014, the DCCA issued the first guidelines on consortia, which were followed up by specific cases in 2015. Following requests from trade associations for guidelines providing more legal certainty and increasing political interest, the DCCA published revised guidelines on how to assess joint bidding under competition law in April 2018. Due to the above-mentioned judgment of the Danish Maritime and Commercial High Court on 27 August 2018, the guidelines were revised again in October 2018.

Finally, the DCCA regularly carries out sector inquiries and publishes their findings in an article or a full report. The main purpose of the sector inquiries is to provide the DCCA with a better understanding of a given market and to examine whether competition on that market is working as it should. Sector inquiries may indicate the current enforcement focus of the DCCA. Recent sector inquiries have looked into (i) competition on the Danish mortgage market, (ii) the potential for increased competition and savings on the Danish market for dental services, and (iii) the effect of minority shareholdings on competition.


Similar to the EU rules on legal privilege the DCCA does not have the right to review




correspondence with an undertaking’s external legal counsel regarding the undertaking’s compliance with competition rules. The same applies to documents that summarise or pass on such information within the undertaking. Though the exact delimitation of the legal privilege under Danish law may in specific cases give rise to discussions with the DCCA, the limits have not been tested on appeal yet.

During searches by the State Prosecutor in a criminal case, the State Prosecutor does not have access to any correspondence between the company and the company’s defence counsel. It has, however, not been settled in case law whether the State Prosecutor will have access to prior correspondence with the company’s external counsel concerning the company’s compliance with competition law (as covered by legal privilege).

As regards the proposed Directive to empower the competition authorities of the Member States to be more effective enforcers and to ensure the proper functioning of the internal market, Danish law is already in line with the Directive in a number of areas. However, some changes to the Danish investigation and decision-making procedures will have to be made if the Directive is passed in its current form. This will, inter alia, include changes regarding (i) investigations in private homes, which the DCCA is currently not allowed to conduct, and (ii) increased assistance from and to other competition authorities.


A leniency regime much like the EU leniency regime was introduced in Denmark in 2007. However, until now, the Danish leniency regime has only been used to a limited extent.

According to a government report from 2012, the Danish competition authorities and the State Prosecutor had received, during the period from the introduction of the leniency regime in 2007 until the end of 2011, only 11 leniency applications, of which five were summary applications in cases where the applicants had originally applied for leniency to the European Commission. We have seen no statistics on the development subsequent to 2012.

Under the Danish leniency regime, the first leniency applicant may obtain total immunity from fines, whereas subsequent applicants may only have their fines reduced provided they submit new, relevant information. Following a recommendation from the OECD, an amendment to the Danish Competition Act was introduced with effect as of 1 January 2018, permitting preliminary leniency applications (“markers”). The amendment makes it possible for a cartel participant to “reserve” its place in the queue while putting together a final leniency application.

Leniency from custodial sentences is possible, but full immunity can only be obtained by the first applicant. Any subsequent applicant may only receive a reduction of the penalty. Plea bargaining as such does not exist under Danish law, thus any reduction in custodial sentences to those who report a cartel subsequent to the first report will be decided by the courts.


Undertakings and individuals may accept a fine in lieu of prosecution before either the State Prosecutor or the DCCA, and thereby avoid criminal trial in open court (penalty notices issued by the DCCA are subject to approval by the State Prosecutor). Undertakings that contact the DCCA in order to settle will generally be granted a reduction of the fine.


The Council may initiate cartel investigations on its own initiative or based on complaints




from, inter alia, third parties. In 2013, the DCCA introduced a new feature on its website, which makes it possible for employees – or others who may have knowledge of a cartel – to inform the DCCA anonymously. An IT system operated by a third party enables the submission of evidence and two-way communication without revealing the identity of the whistleblower. The DCCA has not published information on the actual use of the system.

In practice, the Council’s investigations are conducted by the DCCA. Decisions from the Council on the initiation or closing of an investigation cannot be appealed to the Appeals Tribunal.


Civil or administrative penalties do not exist under Danish competition law, but criminal sanctions may be imposed on both undertakings and individuals for intentional or grossly negligent breaches of competition law.

The DCCA may report cartels to the State Prosecutor at any time.

A substantial increase in the level of fines and an introduction of custodial sentences for cartel offences were introduced with effect for infringements committed after (or, as regards continuous crimes, extending beyond) 1 March 2013.


Cartel infringement decisions can be made either by the Council; based on investigations by the DCCA; or directly by the courts in a criminal trial.

The Council’s decisions may be appealed to the Appeals Tribunal, which conducts a full and thorough review and may substitute/change the Council’s decision.

Decisions from the Appeals Tribunal may, under strict time limits, be challenged before the courts. The courts seem to be moving towards a more rigorous review and seem more willing to substitute the authorities’ decisions, if the courts find it necessary.

The Competition Council has the authority to report a cartel to the State Prosecutor. This will in practice either be done at an early stage or, in more complicated matters, upon a decision on the substance from the Council (with possible appeals to the Appeals Tribunal and on to courts). Such decisions are not formally binding on the court in a criminal trial, but they will have a substantive persuasive effect.

In relation to subsequent actions for damages, a final Danish decision on the existence of a cartel from either the competition authorities or a court is deemed to have irrefutably established the infringement for purposes of actions for damages, just as such final decision will generally be considered evidence that the participating undertakings have acted negligently and thus constitute a basis for liability.

Criminal sanctions

In 2012, the Danish Parliament passed a new Act on sanctions for competition law violations. The object of the new Act was to increase the fines for undertakings and individuals and to introduce custodial sentences in cartel cases.

The change entered into force on 1 March 2013; the rules apply both to incidents after 1 March 2013 and to incidents commenced before 1 March 2013 and continuing after this date. Many of the incidents recently investigated by the DCCA, including the major construction cartel, relate to events prior to 1 March 2013.




Increased fines With regard to the increased fines, the following table shows the changes in the basic amounts from 1 March 2013:

The above-listed basic amounts may be adjusted depending on (i) the duration of the infringement, and, for legal entities, and (ii) the worldwide turnover of the legal entity. According to the explanatory notes to the Danish Competition Act, a fine issued to a legal entity should generally not exceed 10 per cent of the entity’s worldwide turnover. Under current Danish law, there is no parent company liability.

Imprisonment

In addition to increased fines, custodial sentences in cartel cases were introduced. Cartel agreements (or attempts to enter into such agreements) are punishable by imprisonment if the participation in the cartel was deliberate, and if the offence is grave due to its scale and the adverse effects it is capable of causing. The maximum sentence is one-and-a-half years of imprisonment or, in case of aggravating circumstances, up to six years of imprisonment.

The custodial sentence is expected primarily to be directed towards involved members of the management and members of the board. The State Prosecutor has unofficially stated that it will, in general, ask for unconditional imprisonment in cartel cases. In the State Prosecutor’s view, the custodial sentence of up to one-and-a-half years applies if the estimated total value of the crime (e.g. a price-fixing cartel) is more than DKK 10,000, (approx. EUR 1,300), whereas the custodial sentence of up to six years applies if the estimated value of the crime is more than DKK 500,000 (approx. EUR 67,000). However, it remains yet to be seen what level of sanctions the State Prosecutor will ask for in the specific cases and whether the courts will follow the views of the State Prosecutor. In the only reported case where the State Prosecutor asked for a custodial sentence, the city court only set a fine of DKK 100,000 based on a concrete assessment. See above on the city court’s decision of September 2018.




Gravity Examples Previous

indicative level

New indicative

level

Indicative level

of fines for

individuals

Less grave Exclusive purchase obligations lasting more than five years.

Up to DKK 400,000

(approx. EUR 54,000)

Up to DKK 4 million


Minimum DKK 50,000

(approx. EUR 6,700)

Grave Resale price maintenance.

Non-compete clauses in joint production agreements.

DKK 400,000 to 15 million

(approx. EUR 54,000 – 2m)

DKK 4 million to 20 million

(approx. EUR 540,000 – 2.7m)

Minimum DKK 100,000


Very grave Coordination of prices, production, customers or bids. Certain types of abuse of dominance.

More than DKK 15m

(approx. more than EUR 2m)

More than DKK 20m

(approx. EUR 2.7m)

Minimum DKK 200,000


Cross-border issues

The Danish competition authorities generally investigate cartel behaviour taking place in or outside Denmark to the extent that such behaviour affects the Danish market.

Further, Denmark is part of the European Competition Network (ECN) and participates in the cross-border cooperation between the national competition authorities of other Member States and the European Commission. Additionally, the DCCA participates in the informal cooperation of the European Competition Authorities.

On a Nordic level, the Danish competition authorities cooperate with Norway, Sweden, Finland, Iceland, Greenland and the Faroe Islands with the main purpose of exchanging legislative experience and discussing cases and subjects of common interest. In this context, an annual meeting between the national authorities of each nation is held.

Furthermore, a formal agreement on the exchange of confidential information between Denmark and the national competition authorities in Sweden, Norway and Iceland has been entered into.


On 27 December 2016, the Danish Act on Actions for Damages for Infringements of Competition Law (“the Damages Act”) implementing the Damages Directive (Directive 2014/104/EU) entered into force. The Danish Parliament has chosen to maintain consistency between Danish competition law and EU competition law, and the rules thus apply to infringements of the Danish Competition Act as well as Articles 101 and 102 TFEU.

Following the entry into force of the Damages Act, the right to claim damages for competition law infringements in Denmark will generally be subject to (i) the Damages Act, and (ii) the general principles of the law of liability under Danish law where a matter is not regulated by the Damages Act (e.g. the basis of liability, causation and proximate cause). The Act entails a number of changes to Danish law, including (i) an extension of the limitation period to five years, whereas the general statute of limitation for damages in Denmark is only three years, (ii) the burden of proof is reversed as cartel infringements are now presumed to result in harm, (iii) reduction of the joint and several liability for small and medium-sized companies, and (iv) reduction of the joint and several liability for immunity recipients.

The substantive provisions of the Act do not apply to actions for damages for competition law infringements committed before 27 December 2016. However, the substantive provisions will apply to competition law infringements commenced before 27 December 2016 and continuing after this date (continuous crimes). The procedural provisions of the Act apply to actions for damages brought before a court after 25 December 2014.

In our view the general awareness of the possibilities as regards compensation is rising in Denmark. This development has only been further enhanced by case law at the EU level such as the Kone judgment (C-557/12), which prohibits Member States from rejecting compensation claims based on umbrella pricing argumentation, and the recent implementation of the Damages Directive.

Reform proposals

An amendment to the Danish Competition Act entered into force on 1 January 2018. The amendment introduced, inter alia, the following alterations: (i) a change in the Danish de




minimis thresholds from being turnover-based to being market share-based; (ii) the addition of a rule permitting preliminary leniency applications; and (iii) limitation of the right to “own access” (the right to obtain access to files in cases mentioning an individual’s or an undertaking’s name) in the DCCA’s cases.

Furthermore, if the above-mentioned proposed Directive on empowering national competition authorities is adopted in its current form, a number of changes to Danish competition law will be required. The gravity of the required changes will to some extent depend on whether the Danish Parliament will choose to maintain consistency between Danish competition law and EU competition law. The required changes will include changes to (i) the competition authorities’ access to private homes, (ii) parent company liability, (iii) the right for the DCCA to participate in the hearing of appeal cases before the civil courts, and finally the changes will mean (iv) that companies may be fined if they negligently infringe competition law (currently only gross negligence may result in fines).






Olaf Koktvedgaard Tel: +45 30 18 87 24 / Email: [email protected] Partner and competition practice head at Bruun & Hjejle, Olaf Koktvedgaard advises on a wide range of issues under EU and competition law. He has extensive experience in merger issues, dominance issues, state aid and cartel investigations and follow-on damages litigation. He is admitted to the Danish Supreme Court and regularly acts before the Danish competition authorities, Danish courts, the European Commission and the European Courts in Luxembourg.

Frederik André Bork Tel: +45 29 90 15 03 / Email: [email protected] Partner Frederik André Bork provides specialist advice on all aspects of EU and Danish competition law. His experience includes cartel investigations, merger filings, major abuse cases and several very large and multi-jurisdictional follow-on damages cases. He is the former Head of Division at the Danish Competition Authority and has a comprehensive insight in the authorities’ administrative and business procedures.

Søren Zinck Tel: +45 51 21 19 34 / Email: [email protected] Partner Søren Zinck renders specialist advice within all aspects of competition law. His experience includes merger filings, some of the most well-known abuse cases in EU and state aid issues. He regularly litigates before the European Court of Justice and the Danish courts, and during recent years he has litigated several of the major, leading Danish competition cases.

Nørregade 21, 1165 Copenhagen, Denmark Tel: +47 33 34 50 00 / URL: www.bruunhjejle.dk

Bruun & Hjejle Advokatpartnerselskab



European Union


Article 101(1) of the Treaty on the Functioning of the European Union (“TFEU”) prohibits any agreement or concerted practice between undertakings, or decision of an association of undertakings, which has as its object or effect the prevention, restriction or distortion of competition, and which has an effect on trade between EU Member States. This prohibition applies across the 28 Member States (including the UK, until it formally leaves the EU) and may also apply to anti-competitive activity taking place outside the EU if it has an impact within the EU (which is not uncommon, for example, in relation to international cartels).

Article 101(1) TFEU may be engaged by a range of horizontal or vertical arrangements, but cartel activity is considered to be confined to the most serious forms of horizontal infringement. It is illegal simply to enter into a cartel, regardless of its subsequent “success” or even its implementation. Although a prima facie anti-competitive agreement may theoretically still benefit from an exemption where the cumulative conditions in Article 101(3) TFEU are met (i.e. the efficiencies generated by the agreement outweigh the restriction of competition), in practice, it is extremely rare for cartel-type arrangements to be justifiable and fulfil the exemption conditions.

The key legislation governing the powers of the European Commission (“Commission”) to enforce Article 101 is Council Regulation (EC) No 1/2003 (OJ (2003) L1/1) (“Regulation 1/2003”). The Commission has wide-ranging powers to investigate suspected cartels and other competition law infringements to order that the illegal agreement be brought to an end. It also has powers to fine an infringing business up to 10% of its aggregate worldwide group turnover.

Jurisdiction to enforce Article 101 TFEU is shared between the Commission and the national competition authorities as well as the courts of the Member States. In broad terms, the Commission tends to handle cartels with a significant cross-border element and international cartels stretching beyond the EU borders, leaving cartels with a narrower geographic reach to national competition authorities (“NCAs”).

Overview of investigative powers in this jurisdiction

The Commission’s investigative powers are set out in Regulation 1/2003 and include:

• Requests for information: The Commission may request information either by formal decision or (more commonly) by an informal request. Requests for information may be directed at businesses which are suspected of an infringement and also third parties. The Commission’s powers to request information extend to “all necessary information” for the purposes of enforcing the prohibition contained in Article 101.

Euan Burrows, Irene Antypas & Jessica Bracker Ashurst LLP



• Unannounced inspection of business premises – “dawn raids”: The Commission has wide powers to “conduct all necessary inspections of undertakings and associations of undertakings”. These include the power to: • enter any premises, land and means of transport used for the business; • examine business books and records; • take or obtain copies or extracts of such books or records (whether hard copy or

electronic), including forensic copies of entire hard drives for subsequent review. The inspectors are accompanied by forensic IT experts and bring forensic IT tools (software or hardware) to collect, search and copy relevant data;

• seal business premises and books or records where the dawn raid lasts more than one day; and

• ask a person for explanations of facts or documents relating to the inspection, and record the answers.

The Commission may conduct inspections empowered either by an authorisation, or a formal Commission decision. A person may refuse to submit to an inspection on the basis of an authorisation, but not to an inspection based on a formal decision. The Commission is usually assisted by officials from the national competition authority of the Member State in which the raid is taking place, who will often obtain a warrant or other judicial authorisation permitting the Commission to enter and search premises by force if necessary.

• Inspection of non-business premises: The Commission may be authorised by formal decision to inspect any other premises, land or means of transport, including the homes of directors, managers and other members of staff, where there is a “reasonable suspicion” of a “serious violation” of Article 101. However, these powers cannot be exercised without prior authorisation from the judicial authority of the relevant Member State (e.g. via the issue of a warrant).

• Asking questions and interviews: The Commission can ask questions or seek explanations about documents, but this is a limited power which arguably does not permit the Commission to ask questions that go beyond the contents of the document concerned. Where the person consents, the Commission has further power to take a statement by voluntary interview from a natural or legal person about the subject matter of the investigation. The statement must be recorded and the person being interviewed given an opportunity to correct or approve the record of the statement.

The Commission’s investigative powers are subject to three overarching limits. First, the Commission has no power to seek or access any information which is not relevant to the subject matter of its investigation, as set out in its authorisation document or decision, in terms of product/service, geographic area and timeframe. This is a significant protection for businesses in practice, as it prevents “fishing expeditions” beyond the scope of the Commission’s existing evidence. However, as discussed further below, inspection decisions will usually be drafted very broadly, and this approach has been accepted by the EU Courts. Secondly, legal professional privilege will apply to the investigation. The EU rules of privilege (which apply when the powers under Regulation 1/2003 are being exercised, regardless of the Member State territory in which the raid is taking place), protect written communications (including emails) between a client and an independent EU qualified lawyer, provided that it is closely linked to the subject matter of investigation. Communications between a business person and in-house counsel are not protected as the in-house lawyer is not considered to be independent, given his contractual obligations to the business as an employee. Advice from an external lawyer who is not qualified in one of the EU Member States will also not be protected under the EU privilege rules, although in

Ashurst LLP European Union



practice the Commission does not generally insist that privileged advice from external lawyers established outside the EU should be disclosed. Thirdly, individuals and legal persons subject to the investigation benefit from the privilege against self-incrimination, under which the Commission cannot require an answer which constitutes acknowledgment of participation in illegal activity. This privilege does not, however, extend to pre-existing incriminating documents.

It should be noted in this context that confidentiality does not provide grounds for refusing to disclose information to the Commission. Confidential information may be reviewed and copied by the Commission inspectors, and must be provided in response to a formal information request. However, the Commission is generally prevented from disclosing such information to third parties pursuant to the duty of professional secrecy, subject to certain exceptions, as discussed further below.

Failure to comply with a formal Commission decision requesting information, the supply of incorrect, incomplete or misleading information, or failure to respond within the required time limit may be punished with financial penalties of up to 1% of worldwide aggregate group turnover, as can breaches of procedural requirements during dawn raids (discussed further below). In addition, the Commission can choose to treat interference, resistance or non-co-operation as an aggravating factor when it is calculating the fine to be imposed for the substantive infringement, increasing the fine accordingly.

Further details about the law, procedure and policies applied by the Commission to cartel enforcement are set out in the sister volume to this book, the International Comparative Legal Guide to: Cartels and Leniency 2019, at chapter 11.


Number of dawn raids: The Commission does not publish statistics on the number of dawn raids undertaken, but press releases indicate that unannounced dawn raids took place in relation to at least four cases involving suspected cartel activity in 2018 (multiple dawn raids are often carried out simultaneously on various parties in respect of the same case, so many more than four businesses will have been raided).

Number of ongoing investigations: Publicly available information indicates that, as at 20 December 2018, there are at least 22 ongoing Commission investigations into alleged cartel activity. This figure may omit newer cases which are not yet in the public domain.

Number of final cartel decisions and total value of fines imposed: As at 20 December 2018, four cartel decisions have been issued by the Commission in 2018, with total fines of €800 million (a significant decrease on the total for 2017). In 2017, seven cartel decisions were issued and total fines of €1,946 million (close to half of the total for 2016) were imposed. In 2016, six cartel decisions were issued and total fines of €3,727 million (a tenfold increase on the total for 2015).

Level of individual fines imposed: In 2018, the highest individual cartel fine was €207.3 million imposed on WWL-EUKOR for its involvement in the Maritime car carriers cartel. This is significantly higher than the highest individual cartel fine imposed in 2017 which was a fine of €880.5 million imposed on Scania for its involvement in the Trucks cartel. The 2016 fine of €1,008.8 million on Daimler is still the highest fine ever imposed by the Commission, with the second highest being €880.5 million imposed on Scania and the third highest being €752.7 million imposed on DAF, all resulting from the Trucks cartel. Previously, the highest fine was €715 million, imposed on Saint Gobain in 2008 for its part in the Car Glass cartel (reduced from €880 million on appeal in 2014).





Most of the key issues which have arisen in the last years regarding cartel enforcement in the EU relate to investigation and decision-making procedures and fining policy, as discussed in other sections of this chapter. However, there are a few wider “policy” issues which practitioners should be aware of.

Proposals to enhance enforcement powers of NCAs

As discussed in detail in the fifth edition of Global Legal Insights – Cartels, in 2015, the Commission conducted a consultation on whether NCAs in EU Member States should be given additional powers to enforce EU competition law. The 2015 consultation considered whether and how the powers of NCAs should be enhanced to ensure that NCAs:

• can act independently when enforcing EU competition rules and have the staff and resources required to do their work;

• have an adequate “competition toolbox” to detect and tackle infringements;

• can impose effective fines on companies which break the rules; and

• have leniency programmes that work effectively across Europe.

Following the consultation, in March 2017, the Commission published a proposal for a new Directive designed to empower Member States’ competition authorities to be more effective enforcers. In 2018, the European Parliament and the Council backed the Commission proposal. As at 12 December 2018, the Directive still had to be signed by the Presidents and Secretaries-General of the European Parliament and Council. After signature, the text will be published in the Official Journal and become official. Following the entry into force of the Directive, Member States will have two years to issue new legislation or amend existing legislation in order to comply with requirements.

In line with the Commission’s proposal, the Directive provides for a set of minimum standards with which Member States must ensure their national legislation complies, including the following powers and guarantees:

• NCA’s powers must be subject to appropriate safeguards in respect of undertakings̕ rights of defence (including the right to be heard and to be informed of the preliminary objections raised against them in a statement of objections) and the right to an effective remedy before a tribunal;

• guarantees of independence of NCAs, including protecting NCA staff against external influence and ensuring that NCAs have the necessary resources to apply EU antitrust rules;

• minimum effective powers to investigate (comprising powers to inspect business and non-business premises, to issue requests for information and to conduct interviews); to take decisions (comprising powers to adopt prohibition decisions and commitment decisions, and to impose structural and behavioural remedies and interim measures) and to impose effective sanctions for non-compliance;

• powers for NCAs to adopt fining decisions directly or for such decisions to be taken by a court in non-criminal judicial proceedings;

• when calculating antitrust fines, a common legal maximum of no less than 10% of worldwide turnover and a requirement for NCAs to have regard to the gravity and duration of the infringement when setting the fine;

• powers to impose fines on parent companies and legal and economic successors of undertakings;




• powers for NCAs to grant immunity from or reduction of fines and accept summary applications under the same conditions, and protection from individual sanctions for co-operating employees and directors of companies filing for immunity;

• improved arrangements for effective co-operation and mutual assistance between NCAs;

• suspension of NCA limitation periods for the duration of proceedings before another NCA or the Commission, to ensure that NCAs are not prevented from subsequently acting as a result of their proceedings being time-barred; and

• limitations on the use of information collected in the course of investigations, including leniency statements and settlement submissions.

Focus on enforcement in the automotive and e-commerce sectors

In the automotive sector, following the record-breaking fines imposed for the Trucks cartel in 2016 and 2017 as well as the Alternators and Starters cartels in 2016, the Commission’s interest in the automotive sector has continued in 2018:

• in February 2018, the Commission fined three companies €76 million in settlements for a cartel involving the exchange of sensitive information and the fixing of supply prices for spark plugs to car manufacturers;

• the Commission imposed fines of €75 million in settlements on three car part suppliers in February 2018 in respect of two hydraulic and electronic braking systems cartels; and

• in the aftermath of the ‘Dieselgate’ scandal, the Commission opened in September 2018 an in-depth investigation into possible collusion between BMW, Daimler and the VW group on clean emission technology after carrying out inspections at the premises of German car manufacturers in September 2017.

E-commerce remained a focus also in 2018. Commissioner Vestager again highlighted the problem of algorithms that are used to automatically adjust online pricing, which could be used to implement, or enforce, price-fixing agreements. She indicated in a speech that the Commission “would like to have [its] own algorithms” in order to be able to “[look] into the market, figuring out if there has been collusion taking place”. Also during 2018, the Commission adopted the Regulation 2018/302 on geo-blocking and fined, in four separate decisions, consumer electronics manufacturers Asus, Denon & Marantz, Philips and Pioneer €111 million for imposing fixed or minimum resale prices on their online retailers. The Commission is also continuing its revision of the EU rules on online sales and has in particular commenced the review of the EU Vertical Block Exemption Regulation which is due to expire in 2022.

Close co-operation with other regulators

Many cartels are now cross-border in nature, which means that effective enforcement increasingly requires co-operation between regulators around the world. The European Competition Network (“ECN”) provides a very useful forum for the exchange of information between the Commission and NCAs of EU Member States. In 2018, as part of the cooperation within the ECN, the German Bundeskartellamt for instance referred its ongoing cartel proceeding concerning metal packaging to the Commission since the suspected anticompetitive behaviour may have extended to markets outside Germany, affecting several Member States.

The Commission also actively co-operates with regulators outside the EU, through bilateral




co-operation agreements, memoranda of understanding, and also more informal co-operation. There is a clear policy at EU level to promote international co-operation between regulators, and it is anticipated that the level of co-operation, in particular information sharing, will continue to expand in the years to come. During 2018, the Commission entered into an administrative agreement on cooperation with Mexico in the area of competition law and enforcement. Also, during the International Competition Network (“ICN”)’s 2018 Annual Conference, the members approved various work products, including guiding principles on procedural fairness, a new annotated guidance document on investigative process and an interim report on key elements for efficient and effective leniency programmes.


Scope of Commission’s information gathering powers

The scope of the Commission’s information-gathering powers under Regulation 1/2003 has been the subject of a number of challenges before the EU Courts, as discussed in previous editions of Global Legal Insights – Cartels.

The key current issues are:

• the legality of broadly drafted requests for information;

• the legality of broadly drafted inspection decisions;

• the legality of dawn raids carried out on the basis of information obtained by the Commission in the course of carrying out an earlier dawn raid, in the context of a very broad inquiry;

• whether the powers of the Commission extend to taking away forensic copies of entire computer hard drives for subsequent review at the Commission’s premises;

• at what stage an undertaking may challenge the Commission’s actions in connection with a dawn raid;

• the Commission’s ability to rely on evidence transmitted by national authorities, including non-competition authorities; and

• the authenticity of the evidence relied on by the Commission.

Each of these is discussed further below.

• Legality of broadly drafted requests for information

When making a written request for information (“RFI”), the Commission must set out the legal basis and purpose of the request, what information is required, and the time limit within which it is to be provided. This is important in order to show that the request for information is justified but also to enable companies to judge the scope of their duty to co-operate and their rights of defence. In, inter alia, Case C-247/14 P HeidelbergCement and others v Commission (EU:C:2016:149), the European Court of Justice (“ECJ”) assessed the adequacy of the Commission’s statement of reasons in its decision to issue formal RFIs in an investigation into a possible cartel in the cement industry. The ECJ found that the Commission’s RFIs (which were over 100 pages in length and requested the provision within 12 weeks of detailed data covering a 10-year period) did not, clearly and unequivocally set out the suspicions which justified their adoption, and did not make it possible to determine whether the requested information was necessary for the purposes of the investigation.

The level of detail required in a statement of reasons will depend on the stage of the investigation at which the RFI is sent. At an early stage, it is not essential for an RFI to set




out a precise market definition, or the exact legal nature, or period of, the infringement, as this information may not yet be available to the Commission. However, if, as in the cement cases, the investigation has been open for several months, or the Commission has already gathered information through previous RFIs and inspections, a succinct, vague and generic statement of reasons is unlikely to meet the requisite legal standard.

• Legality of broadly drafted inspection decisions

The Commission is required to restrict its searches during a dawn raid to activities relating to the matters covered in the inspection decision: if it locates documents not relevant to these matters, as a general rule it cannot review or copy these. The Commission is not entitled to go on a “fishing expedition”, and the scope of the suspected cartel indicated in the inspection decision must be limited to what is supported by the Commission’s case file at the time of the inspections. (Case C-583/13 P Deutsche Bahn AG v Commission (EU:C:2015:404)). In the 2012 Nexans judgment (T-135/09 Nexans v Commission (EU:T:2012:596)), the General Court (“GC”) ruled that the Commission only had information indicating a potential infringement in respect of high voltage underwater and underground cables, so the Commission’s decision to conduct dawn raids in relation to electric cables more generally was illegal. In June 2018, the GC partially upheld the Czech national rail operator’s appeals against one of two Commission inspection decisions (Case T-325/16 České dráhy v Commission (EU:T:2018:368)). The GC confirmed that reasonable grounds to suspect one type of infringement could not constitute a valid reason for extending the purpose of the inspection to other forms of infringement. The Commission’s inspection decision was thus too broadly drafted insofar as it related to infringements “including” that for which it possessed evidence. The Commission’s decision was equally annulled insofar as it related to routes “including, without limitation” the specific route to which its evidence related.

Several French retailers lodged appeals against the Commission’s inspection decisions, and its refusal to provide access to the underlying documents on which it based its decision to conduct those inspections (Cases T-249/17 Casino, Guichard-Perrachon and EMC Distribution; T-254/17 Intermarché Casino Achats; T-255/17 Les Mousquetaires and ITM Entreprises). Judgment is awaited in these cases.

• Legality of using information obtained in one dawn raid to justify further dawn raids

There is an exception to the general rule against “fishing expeditions”, in that Commission inspectors are not required to be blind to evidence of a previously unsuspected violation if they “happen to obtain” such evidence during a dawn raid (and may use any such evidence to start an investigation into the new matter) (Case 85/87 Dow Benelux (EU:C:1989:379)). However, the ECJ confirmed in Deutsche Bahn that this exception must be narrowly interpreted and is only applicable in cases of genuine coincidence.

Having confirmed the legality of the first of two inspection decisions addressed to the Czech national rail operator (as discussed above), the GC confirmed that the Commission was entitled to use legally obtained materials in the context of a first inspection into alleged infringements of Article 102 as the basis for a decision to conduct an inspection relating to suspected infringements under Article 101 TFEU (Case T-621/16 České dráhy v Commission (EU:T:2018:367)).

• Powers to take forensic copies of entire computer hard drives

As discussed in more detail in the second edition of Global Legal Insights – Cartels, it is (in the authors’ view) highly debatable that the Commission’s dawn raid powers extend to removing and copying entire computer hard drives for subsequent review at the




Commission’s premises, given the breadth of scope of information which any PC or laptop will typically contain, including personal data, human resources and internal management documents, information about commercial activities and possibly privileged external legal advice. However, this practice continues to be envisaged in the Commission’s Explanatory Note on its dawn raid procedures (paragraphs 12 and 14), and is regularly applied by the Commission in cases where it is not possible to complete the dawn raid at the undertaking’s premises within a few days. In July 2018, the GC confirmed that it was within the Commission’s powers to take a copy of all data stored on a hard drive for the purposes of indexing those data, so long as indexation was intended to facilitate the search for documents relevant to the Commission’s investigation (Case T-449/14 Nexans v Commission (EU:T:2018:456)).

• Timing of a challenge to a dawn raid decision

An undertaking can challenge the legality of an inspection decision as soon as it had been notified of it. However, the Commission’s conduct during the inspection (such as the copying of hard drives, or the questioning of individuals) does not itself constitute a reviewable act where it does not cause a change in the undertaking’s legal position (Case T-135/09 Nexans v Commission, discussed above). A challenge to such measures may only be brought as part of an appeal against the final infringement decision. Alternatively, the GC has (somewhat audaciously) suggested, an undertaking could obstruct the Commission’s inspection, thereby prompting the Commission to issue a penalty decision, which would then be open to an immediate appeal.

• The Commission’s ability to rely on evidence transmitted by national authorities

Article 12 of Regulation 1/2003 provides that the Commission and NCAs may share information for the purposes of applying Article 101 and 102 TFEU and national competition law. The ECJ’s judgment in Case C-469/15 P FSL Holdings v Commission (EU:C:2017:308) demonstrates that the Commission may also rely on evidence transmitted to it by national authorities other than competition authorities, such as the Italian customs and finance police. This is the case even if the information was obtained by that national authority for another purpose, as long as the transmission has not been ruled unlawful under the relevant national law. In July 2018, the American container-lid producer Silgan challenged a Commission inspection decision, inter alia, on the grounds that it was based on information provided to the Bundeskartellamt in the context of the undertaking’s cooperation in national proceedings, which, it argued, cannot be shared with the Commission under Article 12 (Case T-415/18 Silgan Closures and Silgan Holdings v Commission, judgment awaited).

• The authenticity of the evidence relied on by the Commission

The ECJ recently provided further clarification on the burden of proof when challenging the authenticity of evidence used by the Commission. In Case C‑99/17 P Infineon Technologies v Commission (EU:C:2018:773) the ECJ confirmed that an undertaking challenging the authenticity of the Commission’s evidence must prove, to the requisite legal standard, both the existence of the circumstance alleged to affect the probative value of that evidence and the impact of that circumstance on the probative value of that evidence, unless the Commission’s own conduct prevents the undertaking from doing so. Infineon had provided the Commission with an expert report challenging the authenticity of an email relied on by the Commission. The applicant argued that, in light of its concerns, the Commission was required to request its own independent report to satisfy itself of the authenticity of the email in question. However, the ECJ confirmed that the Commission was not required to establish that the applicant’s concerns were unfounded; the burden of proving the inauthenticity of the Commission’s evidence rests on the undertaking.




Access to the file and protection of confidential business information

Access to the Commission’s administrative case file is granted to the parties (and their lawyers) as part of their rights of defence, prior to responding to the Commission’s statement of objections (“SO”), pursuant to Article 27(2) of Regulation 1/2003 and Articles 15 and 16 of Regulation 773/2004. The framework for the exercise of this right is set out in the Commission’s Access to File Notice. Access to the file generally includes access to all documents which the Commission has obtained or produced in the course of its investigation, except for internal working documents, communications about the case between the Commission and any NCAs, corporate statements from leniency applicants and settlement submissions in cartel cases. However, access to the file may be restricted where documents contained in the file contain business secrets or other confidential business information (“CBI”) which the Commission is required to protect under its duty of professional secrecy (Article 339 TFEU). In such circumstances, access will usually only be given to non-confidential versions of the relevant documents. Alternatively, a data room may be set up to provide limited access to the confidential information to a “confidentiality ring” (usually external counsels or the economic advisers of the party being granted access). In 2018, the Commission published two guidance papers on access to its files; one covering the use of confidentiality rings and the other updating the Commission’s 2012 guidance on confidentiality claims.

• Rights of third parties

Third parties do not benefit from rights of defence in this context (see the ECJ judgment of 16 June 2016 in Case C-154/14 SKW v Commission (EU:C:2016:445)). Therefore, third parties are not entitled to access the case file under the same rules as addressees of the SO, although they may be involved in competition investigations, usually on a consensual basis, for example, through written submissions and/or attendance at oral hearings.

However, third parties may request access to the Commission’s case file under the general EU legal framework on access to documents held by EU institutions, which is set out in Regulation 1049/2001 (the “Transparency Regulation”). The Transparency Regulation provides that, as a general starting point, the widest possible public access should be given to documents held by EU institutions. However, this is subject to certain limitations designed to protect public or private interests (in particular, to protect CBI of the parties involved). In this regard, the Commission is entitled to rely on general presumptions relating to the protection of the commercial interests of the undertakings involved in the investigation and the protection of the purpose of the investigations relating to the proceedings, in order to deny requests from third parties for access to the file (confirmed by the ECJ in Case C-365/12 P Commission v EnBW (EU:C:2014:112)). This is evident from the GC’s rejection of Deutsche Telekom’s appeal under the Transparency Regulation against the Commission’s refusal to grant it access to third party and internal documents on the administrative file (Case T-210/15 Deutsche Telekom v Commission (EU:T:2017:224)). The Commission had conducted dawn raids of Deutsche Telekom’s premises in connection with a suspected infringement of Article 102, but subsequently closed its investigation without issuing an SO. The GC found that the Commission was entitled to refuse Deutsche Telekom access to the entire set of documents, based on a general presumption that disclosure would be likely to undermine both the commercial interests of the undertakings involved and the purpose of inspections, investigations and audits; the Commission was not required to assess the documents individually. In 2018, the GC confirmed that these presumptions equally apply to documents relating to the case file such as the table of contents (Case T-611/15 Edeka-Handelsgesellschaft Hessenring v Commission (EU:T:2018:63)).




Another possible route for complaints regarding access to the Commission’s file in cartel cases may be through the European Ombudsman, which investigates complaints about maladministration by EU institutions, including the Commission (see European Ombudsman Case 520/2014/PMC, discussed in more detail in the fifth edition of Global Legal Insights – Cartels).

The Damages Directive (discussed later in this chapter) also seeks to facilitate damages claimants’ access to evidence by ensuring national courts have powers to require disclosure of Commission infringement decisions and other information from the Commission’s case file.

• Protection of confidential business information

Article 8 of Decision 2011/695 on the functions and terms of reference of the Hearing Officer in competition proceedings provides that where an undertaking objects to the disclosure of information which it considers constitutes CBI, it may refer the matter to the Hearing Officer who will determine whether the information constitutes CBI and, if so, whether there is an overriding interest in disclosing it. The Hearing Officer must examine any objection to disclosure based on the rules of EU law concerning the protection of confidential information and professional secrecy, as well as EU principles of broader application such as the protection of legitimate expectations and equal treatment (Case C-162/15 P Evonik Degussa v Commission (EU:C:2017:205)).

Co-operation between the Commission and NCAs and access to their communications

The Commission and Member State NCAs have parallel powers for the purpose of the application of EU competition rules. A system of close co-operation has been laid down in Regulation 1/2003 and further detailed in the Commission Notice on co-operation within the Network of Competition Authorities (the “Network Notice” (OJ C 101, 27.04.2004)). The objective is to have an effective network of competition authorities in the EU (the ECN) to ensure an optimal attribution of cases and ultimately an effective application of EU competition rules.

The Commission and Member State NCAs enjoy considerable discretion as to how they deal with complaints relating to alleged competition law infringements and, subject to national procedural rules, may reject complaints on policy/prioritisation grounds. Neither Regulation 1/2003 nor the Network Notice create rights or expectations for an undertaking to have its case dealt with by a specific competition authority. Given the broad degree of discretion, review by the courts is necessarily only marginal, i.e. limited to verifying whether the decision is based on materially incorrect facts or is vitiated by an error of law, a manifest error of appraisal or misuse of powers. The EU Courts are competent to review the legality of decisions taken by the Commission, whereas the review of NCA decisions is a matter for national courts alone.

Developments in relation to legal classification of infringements in cartel cases

• Developments in relation to object infringements

Article 101(1) TFEU can apply to agreements on two different bases, namely where either their “object” or “effect” is anti-competitive. These two possibilities are alternatives and not cumulative. One of the significant advantages from a competition authority’s point of view of an “object” analysis is that there is no requirement to undertake a detailed economic analysis of the effects of the alleged restriction on competition. Important clarification of the legal concept of an “object” infringement and how it must be established was provided by the ECJ in its judgment of September 2014 in Case C-67/13 Cartes Bancaires v Commission (EU:C:2014:2204).




The ECJ made clear in its Cartes Bancaires judgment that the restriction must reveal “a sufficient degree of harm” for it to constitute a by-object infringement so that there is no need to examine its effects. The expectation of a sufficient degree of harm should be clear from the restriction itself (and essentially experience showing that such behaviour harms consumers), but seen also in “the economic and legal context of which it forms part”. An effects analysis is thus required only where analysis of the conduct does not in itself reveal a sufficient degree of harm to competition. Importantly, the ECJ also confirmed that the concept of a restriction by object should be interpreted restrictively. These points were recently confirmed by the ECJ in Case C‑179/16 Hoffmann-La Roche (EU:C:2018:25).

With respect to patent settlement agreements, the GC recently clarified the circumstances in which the provisions of these agreements may constitute a restriction by object in T‑691/14 Servier v Commission (EU:T:2018:922). This ruling confirmed the three criteria previously applied by the Commission: (i) whether the parties to the settlement are potential competitors; (ii) whether the settlement agreement contains non-contestation and non-commercialisation clauses; and (iii) whether the originator obtained these commitments in exchange for a value transfer. The GC emphasised that the use of these clauses in the context of a patent settlement does not, in its self, constitute a by object restriction of competition so long as their scope coincides with the scope of the patent at issue. Conversely, incitement to accept these clauses through “inverse payments” would be indicative of a by object restriction.

With respect to information sharing, the GC judgment in Case T-180/15 ICAP v Commission (EU:T:2017:795) serves as a reminder that an exchange of information which is capable of removing uncertainty between participants regarding their conduct on the market, even where there is no direct link between that practice and consumer prices, will have an anti-competitive object. The GC found that both (i) the coordination of the JPY LIBOR panel submissions (which was intended to influence the extent of the payments due by, or to, the banks concerned), and (ii) the exchange of confidential information regarding panel banks’ future JPY LIBOR submissions (which gave the banks concerned a competitive advantage on the JPY derivatives market) constituted object restrictions. Equally, the ECJ’s judgment in Case C‑179/16 Hoffmann-La Roche (EU:C:2018:25) confirms that arrangements between competitors to disseminate misleading information may also constitute a by object restriction. The arrangements at issue concerned the dissemination of misleading information, in a context of scientific uncertainty, relating to the adverse reactions resulting from the use of one of Roche’s products for the treatment of eye diseases. These arrangements had been entered into with a view to reducing the competitive pressure caused by the off-label use of Roche’s product on a competitor’s product marketed specifically for the treatment of eye diseases.

• Developments in relation to the notion of concerted practice

In Case C-74/14 Eturas and others v Lithuanian Competition Authority (EU:C:2016:42), the ECJ delivered a preliminary ruling on a question from the Lithuanian court of whether the imposition of a restriction on discounts through a common online booking system used by a number of travel agents constitutes a concerted practice for the purposes of Article 101 TFEU. This is a rare example of the ECJ being asked to clarify the concept of a concerted practice. The ECJ held that Article 101(1) TFEU must be interpreted as meaning that travel agents who had been sent a message within the online system about the automatic discount cap may, if they were aware of that message, be presumed to have participated in a concerted practice, unless they publicly distanced themselves from that practice, reported it to the




administrative authorities or adduced other evidence to rebut that presumption, such as evidence of the systematic application of a discount exceeding the cap.

However, it is a matter for the national court to examine, on the basis of the national rules governing the assessment of evidence and the standard of proof (subject to the European law principles of equivalence and effectiveness), whether, in view of all the circumstances before it, the dispatch of a message may constitute sufficient evidence to establish that the addressees of that message were aware of its content. The presumption of innocence, enshrined in Article 48(1) of the Charter of Fundamental Rights of the European Union (“Charter”), precludes a national court from considering that the mere dispatch of that message constitutes sufficient evidence to establish that its addressees ought to have been aware of its content. However, in light of other objective and consistent indicia, the dispatch of the message may justify a presumption that the travel agencies were aware of the content of that message from the date of its dispatch, provided that those agencies still have the opportunity to rebut that presumption.

• Developments in relation to the concept of a cartel facilitator

There is no requirement under Article 101(1) TFEU that cartelists must be active on the same market, or that an undertaking’s contribution to a restriction of competition must take place on the same market on which the restriction occurs. Liability for cartel facilitators was confirmed in Case C-194/14 P AC Treuhand v Commission (EU:C:2015:717), in which the ECJ set out two requirements: (i) that the undertaking concerned intended to contribute by its own conduct to the common objectives pursued by all the cartel participants; and (ii) that it was aware of the actual conduct planned or put into effect by other undertakings in pursuit of the same objectives or that it could reasonably have foreseen it and that it was prepared to take the risk.

In the ICAP case (Case T-180/15, discussed above), the GC restated this test and confirmed that, in circumstances where: (i) ICAP knew about the existence of collusion between two banks; and (ii) there was a complementary relationship between the conduct of the two banks concerned (i.e. manipulation of their own JPY LIBOR submissions) and ICAP’s conduct (i.e. attempts to manipulate the submissions of other panel banks); it followed that ICAP intended to contribute to the achievement of their common objective. However, the GC annulled the Commission’s finding in respect of ICAP’s participation in one cartel, because the Commission had not proved, to the requisite legal standard, that ICAP was aware or could reasonably have foreseen that certain conduct was the result of collusion between banks.

• Developments in relation to the concept of “single and continuous infringement”

The concept of “single and continuous infringement” is used by the Commission to treat a series of illegal actions as a single cartel, rather than as a series of separate cartels. Thus a cartel which operates continuously on the same basis for many years is clearly a single and continuous infringement, but there is also a series of related actions where the cartel arrangements change and evolve over time, but have a common anti-competitive objective and there is a link of complementarity between the various actions, meaning that they all contribute to the common objective.

The concept has significant ramifications for liability, since a party to one aspect of the cartel during one period of its duration can be treated as liable for the whole cartel. Also, it impacts on the definition of the cartel since it allows, for example, more than one product to be covered by the cartel. It also impacts on the calculation of the fine because it drives the duration of the cartel. In particular, the concept permits the Commission to overcome a gap




in conduct or an absence of evidence in relation to certain time periods provided that the overall plan continued. However, it does not permit the Commission to ignore a period in which an undertaking’s participation in the cartel was interrupted: in such cases, an undertaking may be liable for a “single repeated infringement” instead. In the ICAP case (Case T-180/15, discussed above), the GC made clear that, where there is a gap in the evidence for the participation of a cartel member, the Commission must adduce evidence of facts “sufficiently proximate” in time to the evidential gap for it to be reasonable to consider that infringement continued uninterruptedly. “Sufficient proximity” will depend on the operation of the particular cartel: as ICAP’s participation related to the manipulation of the JPY LIBOR rates, which were set on a daily basis, the GC found that an absence of evidence of intervention by ICAP for a seven-week period should have indicated an interruption in its participation. This is important, as the Commission cannot include the period of interruption in the duration of a “single repeated infringement” in its calculation of fines.

Moreover, if the Commission does identify a single and continuous infringement, an undertaking participating in this infringement can be held liable for only parts of it. This point was confirmed by the ECJ in Case C‑99/17 P Infineon Technologies v Commission (EU:C:2018:773). Infineon was considered to have played a minor role in the smart card chip cartel giving rise to the litigation; its participation was based on 11 contacts, only five of which were confirmed by the GC on appeal. Accordingly, the undertaking was considered liable solely on account of those contacts and was not attributed liability for the infringement as a whole.

The presumption of innocence in hybrid settlements

“Hybrid settlements” are cases where not all the cartel participants decide to settle, leading to the Commission adopting a settlement decision against the certain parties (based on a simplified procedure) and a full infringement decision against the non-settling parties (based on the standard procedure). In “staggered” hybrid cases, the Commission will breach the presumption of innocence (discussed above) in favour of a non-settling party where an earlier settlement decision sets out the Commission’s views on the legality of that non-settling party’s conduct (Case T-180/15 ICAP v Commission, discussed above). Therefore, despite the likely speed and efficiency benefits connected with the settlement procedure, in hybrid cases, the Commission may be required to delay its settlement decision until it is ready to take a decision against the non-settling party (as it did in the Animal feed phosphates case). The GC has a further opportunity to assess the impact of the staggered procedure on undertakings’ rights of defence in the context of the Commission’s steel abrasives cartel investigation (Case T-433/16 Pometon v Commission, judgment awaited). A ruling from the ECJ is also expected on this point, following the Commission’s appeal against the GC’s judgment in ICAP (Case C-39/18 P Commission v ICAP, judgment awaited). In any event, a breach of the presumption of innocence will usually not lead to annulment of the Commission’s decision unless it can be shown that, but for the Commission’s bias, the decision would have been substantively different.

Thoroughness of judicial review in cartel cases

The EU judicature has a jurisdiction that empowers it to substitute its own appraisal for the Commission’s and, consequently, to cancel, reduce or increase any fine or periodic penalty payment imposed by the Commission for infringement of the EU competition rules.

An effective system of judicial review is particularly important where competition law enforcement is in the hands of the Commission, which acts simultaneously as investigator, prosecutor, jury and final decision-maker, and which has the power to impose severe

Ashurst LLP European Unionv



financial penalties. This structure raises important questions about an undertakings’ right to a fair trial under Article 6 of the European Convention on Human Rights (“ECHR”), incorporated into EU law by the Charter.

As discussed in more detail in the third and fifth editions of Global Legal Insights – Cartels, several key judgments of the EU Courts have advocated a more intensive review of Commission infringement decisions (Case T-442/08 CISAC v Commission (EU:T:2013:188), Case C-67/13 P Groupement des Cartes Bancaires v Commission (EU:C:2014:2204) and Case T-9/11 Air Canada v Commission (EU:T:2015:994)):

• In the CISAC case, the GC considered that the Commission had failed to demonstrate an infringement to the required standard of proof. The GC closely examined the evidence used by the Commission in support of its infringement finding and found it inadequate to render implausible the defendants’ alternative explanation for the parallel conduct.

• In the Cartes Bancaires case, the ECJ criticised the GC for failing to conduct a sufficiently intensive review of the Commission findings, referring to the principle of effective judicial protection enshrined in Article 47 of the Charter. The ECJ emphasised that, in light of this principle, when examining whether the legality of an infringement finding under Article 101 TFEU is made out, the GC must undertake: “on the basis of the evidence adduced by the applicant in support of the pleas in law put forward, a full review of whether or not the conditions for applying that provision are met” (paragraph 44 of the judgment).

• In the Air Canada case, the GC annulled the Commission decision because the Commission had failed to clearly and precisely state in the operative part of the decision the infringement attributed to each company, which is a requirement to protect undertakings’ rights of defence.

The trend towards a more intensive review of Commission infringement decisions continues.

In 2018, the ECJ set aside the GC’s judgment in Case T-758/14 Infineon Technologies (EU:T:2016:737) insofar as it related to the applicant’s claim for a reduction of the Commission’s fine. The GC had erred in law by failing to address the applicant’s argument on the proportionality of the fine, without providing reasoning to that effect, but also insofar as it confined itself to reviewing only five of the 11 alleged bilateral contacts on which the fine was based (Case C-99/17 Infineon Technologies v Commission (ECLI:EU:C:2018:773)). With respect to the evidence used by the Commission, the GC recently confirmed in Joined Cases T‑379/10 RENV and T‑381/10 RENV Keramag Keramische and others v Commission (EU:T:2018:400) that the GC is required, in the context of its overall assessment of the Commission’s evidence, to examine whether, taken as a whole, that evidence supports the Commission’s conclusions. On appeal (Case C‑613/13 P Commission v Keramag Keramische (EU:C:2017:49), the ECJ had criticised the GC for failing to ascertain whether the evidence relied on by the Commission could be mutually supporting.


Access to the file/inclusion of information provided in leniency applications in infringement decisions

The ability of damages claimants to obtain copies of leniency applications or related information has been a major “hot topic” in EU competition law, raising tensions between the push to encourage private enforcement and the need to ensure that leniency regimes




remain an effective way for competition authorities such as the Commission to detect cartels. In particular, there have been a number of challenges before the EU Courts relating to the inclusion of information in non-confidential versions of Commission infringement decisions which was originally obtained from a leniency applicant. This is considered further below, in the context of developments in private enforcement of antitrust laws.

Application of the Leniency Notice: adding “significant value” to the Commission’s investigation

The Commission has emphasised (for example, in a speech on cartel enforcement given to the 7th Annual Chicago Forum on International Antitrust Issues in June 2016) that a company is not entitled to a reduction simply because it provides evidence at a certain point in time in the order of those confessing their involvement, or because it uses its best endeavours to co-operate. A leniency applicant must provide the Commission with evidence which offers significant added probative value relative to the information which it already has at that time on its file. Whether the information offered by a business is of significant value to the investigation is therefore treated as a relative concept, and is judged by reference to what the Commission has already received. The relativity of the value of new evidence to evidence already collected was highlighted in the Gas Insulated Switchgear cartel appeal, where the General Court observed that “the added value of the contribution from an undertaking that decides to co-operate with the Commission, and therefore its reward, will always be dependent on what knowledge the Commission already has of the cartel(s) at issue” (Case T-251/12 EGL Inc v Commission (EU:T:2016:114) at para. 182).

Co-operation between the European Commission and NCAs in relation to leniency applications

The Commission co-operates with NCAs in relation to leniency applications, through the “summary application” procedure, which is provided for under the Model Leniency programme, issued by the ECN. Summary applications are short form leniency applications submitted to NCAs at the same time as a full leniency application to the Commission, in order to protect an applicant’s place in a national leniency queue if the Commission subsequently decides not to pursue the case. The Directive to empower Member States’ competition authorities to be more effective enforcers (referred to above) includes provisions that:

• require Members States to put in place leniency programmes and to ensure that leniency and immunity can only be granted by NCAs if the applicant complies with certain general conditions which reflect the conditions applied at EU level;

• require NCAs to permit companies to apply for a “marker”, granting the applicant a place in the leniency queue;

• ensure that companies that have applied to the Commission for leniency can file summary applications with NCAs in relation to the same cartel; and

• require Member States to protect co-operating employees and directors of immunity applicants from criminal and administrative sanctions in respect of their involvement in the cartel.

Note also that in March 2017, the Commission launched a new anonymous whistleblower tool to make it easier for individuals to alert the Commission to potential infringements. The tool uses an encrypted messaging system designed to preserve the anonymity of the whistleblower, which also permits the Commission to ask follow-up questions.





Under the Commission’s 2008 Settlement Notice, cartelists may benefit from a modest 10% reduction in fines in return for conceding guilt, waiving certain rights of defence, and accepting the Commission’s summary outline of the key elements of the infringement. This enables the Commission to adopt succinct decisions under a simplified and shortened procedure. A settlement does not protect cartel members against follow-on damages claims brought before national courts by companies harmed by the cartel (e.g. customers and suppliers). This is nicely illustrated by the large number of damages claims brought before national courts in several jurisdictions, including the UK, Germany and the Netherlands, seeking compensation from the truck manufacturers who settled with the Commission in July 2016 for a record €2.9 billion cartel fine.

Since its introduction in June 2008, the use of the settlement procedure has increased over the years, now covering more than half of the cartel cases, with a total of 28 settlement decisions adopted to date. In 2018, the Commission closed a total of four cartel cases, of which three were settled. In particular, in February 2018, the Commission reached a settlement with five maritime car carriers fining them €395 million for their involvement in a cartel in the market for deep sea transport of vehicles. On the same date, the Commission reached two further settlements with suppliers of spark plugs (automotive electric devices built in petrol car engines) imposing a total fine of €76 million and with car part suppliers who were fined €75 million for their involvement in two cartels relating to braking systems. In 2017, the Commission had already settled four car parts cartel cases imposing a total amount of cartel fines of €284 million. As mentioned, in 2016, the Commission settled with five leading European truck manufacturers and imposed a record fine of €2.9 billion (Case AT.39824 – Trucks). The standard cartel procedure continued against Scania, the only truck manufacturer that decided not to settle. This resulted in a fine of €880 million for Scania in 2017 (the second highest cartel fine ever imposed on a single undertaking). Scania’s appeal against this decision is still pending before the GC (Case T-799/17 Scania and Others v Commission).

The Commission enjoys a broad discretion in determining whether a cartel case is suitable for settlement. The Commission can also decide to discontinue settlement discussions, as it did in 2014 in the Smart Card Chips case (Case AT.39574). Parties have neither the right nor the duty to settle. The Commission generally seeks to agree settlement with all parties, and avoid so-called “hybrid” cases, where some but not all of the parties choose to settle. Such cases significantly reduce the benefit of settlement from the Commission’s perspective since, rather than conducting one pared-back procedure, the Commission team still has to run a full procedure respecting the rights of the defence for the non-settling addressees. Although the Commission tries to avoid settlement discussions in cases where it appears unlikely that all parties are prepared to co-operate, this has not prevented cases where one or more parties decided to opt out of settlement at a late stage. Seven “hybrid” settlement cases exist to date: Animal Feed Phosphates (Case AT.38866); Yen Interest Rate Derivatives (Case AT.39861); Euro Interest Rate Derivatives (Case AT.39114); Steel Abrasives (Case AT.39792); Canned Mushrooms (Case AT.39965); Trucks (Case AT.39824); and Alternators and Starters (Case AT.40028).

A persistent issue in “hybrid” settlement cases is the Commission’s degree of impartiality in its standard cartel investigation into the non-settling parties after settling with the other parties. The sixth edition of Global Legal Insights – Cartels discussed the GC’s judgment upholding the nearly €60 million fine imposed on Timab, the non-settling party, and




confirming the Commission’s discretion in deciding on the final amount of the fine imposed on the non-settling party (Case T-456/10 Timab Industries and CFPR v Commission (EU:T:2015:296)). This judgment was upheld in 2017 by the ECJ on appeal (Case C-411/15 P Timab Industries and CFPR v Commission (ECLI:EU:C:2017:11)). In another hybrid settlement case, the GC found that the Commission had acted in breach of the presumption of innocence by referring to the conduct of a non-settling party who would receive its non-settlement infringement decision only two years later (Case T-180/15 Icap and Others v Commission (ECLI:EU:T:2017:795)). The Court confirmed that a hybrid settlement procedure must be carried out with respect for the presumption of innocence of the non-settling party. The Court suggested that this could be achieved in practice by the Commission adopting settlement and non-settlement decisions on the same date. An appeal by the Commission against the Icap judgment is currently pending, but not on this point (Case C-39/18 P Commission v Icap and Others).

Settlement decisions are subject to judicial review by the EU Courts, but appeals are relatively rare. As parties are required to admit liability, challenges focus on the Commission’s calculation of the fine. In December 2016, the GC issued a judgment for the first time annulling a Commission settlement decision. The Court annulled the settlement decision adopted in December 2014 against Printeos in the paper envelope cartel for failure to give adequate reasons which, the Court recalls, constitutes an essential procedural requirement. In view of its broad discretion, the Commission has a duty to explain the factors taken into account when setting the fine and to justify any different treatment of undertakings (e.g. application of different fine reduction rates) (Case T-95/15 Printeos and others v Commission (EU:T:2016:722)). Following the judgment, the Commission issued a new decision in June 2017 re-imposing the same fine on Printeos as under the 2014 decision. Printeos’ appeal against the new Commission decision is currently pending before the GC (Case T-466/17 Printeos and Others v Commission).


The Commission’s extensive fining powers

Fines remain the most important tool in the Commission’s “enforcement toolbox” to sanction cartel conduct. The EU Courts have consistently held that the Commission enjoys considerable discretion in setting cartel fines, although the exercise of that discretion is limited by the general fining methodology set out in the 2006 Guidelines on the method of setting fines (OJ (2006) C 210/2).

Both in 2017 and 2018, the GC sanctioned the Commission for insufficiently motivating its reliance on paragraph 37 of the Guidelines which allows the Commission to depart from the general fining methodology set out in the Guidelines in view of “particularities of a given case” or “the need to achieve deterrence in a particular case”. The sixth edition of Global Legal Insights – Cartels reported on the 2017 GC judgment annulling the fines imposed in the Yen interest rate derivatives (YIRD) cartel for insufficient reasoning of the application of paragraph 37 of the Guidelines (Case T-180/15 Icap and Others v Commission (ECLI:EU:T:2017:795). The Commission’s appeal against this judgment is pending. The Commission argues that the GC’s judgment imposes a stricter obligation on the Commission to motivate in more detail the methodology used in calculating fines, especially when applying paragraph 37 of the Guidelines. The Commission claims that this would be detrimental to its ability to determine adequate fines (Case C-39/18 P Commission v Icap and Others). Also in 2018, the GC annulled a €1.1 million fine imposed by the Commission




on one of the participants in the Shrimp cartel in application of paragraph 37 of the Guidelines (Case T-58/14 Stührk Delikatessen Import v Commission (ECLI:EU:T:2018:474)). In 2018, the GC also annulled the 2016 Commission decision re-imposing a fine of €3.3 million on the GEA group for its involvement in the Heat Stabilisers cartel (Case T-640/16 GEA Group v Commission (ECLI:EU:T:2018:700)). The Commission was found to have breached the principle of equal treatment by disproportionately re-allocating the joint and several liability for the reduced fines between cartelists. In 2018, the ECJ partly upheld Infineon’s appeal against the GC judgment in the Smart card chips cartel and referred the case back to the GC for a re-examination of the fine (Case C-99/17 Infineon Technologies v Commission (ECLI:EU:C:2018:773)).

Parent liability

A parent company can be held jointly and severally liable for the cartel conduct of its subsidiary where it can be demonstrated that, at the time of the infringement, the parent could in fact exercise decisive influence over its subsidiary (or joint venture). As a consequence, the Commission can hold the parent jointly and severally liable for payment of the fine imposed on the subsidiary, in which case the 10% upper fine limit is calculated using the parent’s turnover.

In line with settled EU case law, the Commission systematically establishes parent liability on the basis of a rebuttable presumption of actual exercise of decisive influence where the parent owns (nearly) 100% of the subsidiary’s share capital (Case 97/08 Akzo Nobel v Commission (EU:C:2009:536)).

A purely financial investor may escape the application of the presumption of parental liability only where it can demonstrate that it has in fact refrained from management and control of the subsidiary. In 2018, the GC ruled that Goldman Sachs had failed to do so in respect of its subsidiary’s involvement in the Power Cables cartel and upheld the Commission’s finding of parental liability (Case T-419/14 The Goldman Sachs Group v Commission (ECLI:EU:T:2018:445)). An appeal has been brought against this judgment and is currently pending (Case C-595/18 P The Goldman Sachs Group v Commission).

The presumption has proven virtually impossible to rebut in practice since it requires proof that the subsidiary acted independently at the material time. This requires evidence on the organisational, economic and legal links between parent and subsidiary showing that they do not form a single economic entity. The Commission must, however, provide sufficient reasoning to support the finding that the factual and legal arguments invoked by the companies concerned do not suffice to rebut the presumption (Case 457/16 P Global Steel Wire v Commission (EU:C:2017:819)). Beyond the presumption, the Commission can invoke other elements to prove the fact that the parent has exercised decisive influence over its subsidiary.

In the Evonik Degussa judgment, the ECJ clarified that the presumption cannot be rebutted only by showing that the subsidiary acted against its parent’s instruction (including the explicit instruction not to engage in anti-competitive conduct). This confirms previous case law according to which decisive influence does not require the subsidiary to carry out all the parent’s instructions, as long as the failure to carry out instructions is not the norm (Case C-155/14 P Evonik Degussa and AlzChem v Commission (EU:C:2016:446)).

EU Courts have clarified in recent years that a parent’s financial exposure, where its liability is based exclusively on the subsidiary’s conduct, can in principle not exceed that of its subsidiary. Accordingly, the GC held in its UTi Worldwide judgment that it was wrong for the Commission to impose a fine on UTi Worldwide, as parent company, which was higher than the sum of the amounts for which its subsidiaries were liable (the difference was due




to the rounding down of the duration of the subsidiaries’ participation resulting in a reduction of about one month) and on this basis reduced the fine for the parent (Case T-264/12 UTi Worldwide and Others v Commission (EU:T:2016:112)). In certain situations the liability of the parent company may nevertheless exceed that of its subsidiaries even where its liability is purely derivative of that of its subsidiaries (Case C-516/15 P Akzo Nobel v Commission (EU:C:2017:314)).

Successor liability

A parent company can be held liable only for conduct committed when it controlled the subsidiary. Successive parent companies thus cannot themselves be held jointly and severally liable for cartel conduct pre-dating their acquisition of the subsidiary. The former parent company may remain jointly and severally liable for the conduct of its subsidiary whilst under its ownership, even if, when the decision finding the infringement is adopted, another person has subsequently assumed responsibility for operating the company. In a 2017 judgment, the ECJ recalled that where the infringing undertaking is acquired by another undertaking, the Commission must take account of the specific turnover of the infringing subsidiary for the period prior to the acquisition in order to apply the 10% ceiling for fines (Case C-637/13 P Laufen Austria v Commission (EU:C:2017:51)). In other words, the ceiling must be applied solely in respect of the turnover of the subsidiary, in respect of the fine which is imposed exclusively on it, in relation to the period prior to its acquisition by the parent company.

According to the principle of personal liability, liability for cartel conduct in principle follows the entity that actually committed the infringement. On the basis of this principle, the EU Courts have taken the view that, as a rule, the infringing undertaking is liable as long as it remains in existence and has significant economic activities. The principle of personal liability was confirmed in 2018 with the GC upholding Coveris’ liability for its participation in the 2015 Retail food packaging cartel and the corresponding fine, even though certain assets had been transferred to an independent undertaking and Coveris was no longer active in the sector (Case T-531/15 Coveris Rigid France v Commission (ECLI:EU:T:2018:885)). The Court reaffirmed that the need to ensure an effective enforcement of competition law may exceptionally justify a derogation from this general principle, penalising an entity that is not responsible for the infringement, in particular where the entity that has committed the infringement has ceased to exist, either in law or economically (principle of economic continuity). Consequently, when the assets of a legal entity that participated in an infringement are transferred to independent undertakings, liability follows those assets only in exceptional cases, where the legal entity that owned those assets has ceased to exist in law or has ceased all economic activities.

Criminal sanctions

The Commission has no jurisdiction to impose criminal sanctions on individuals or businesses. However, fines imposed for competition law infringements have been characterised by the European Court of Human Rights as “quasi-criminal”, and the requirement of a full review by an independent court under Article 6 of the ECHR must be respected. The EU Courts’ position is more nuanced. For instance, in its Sasol case, the GC ruled that “while competition law is indeed similar to criminal law, it is not at the ‘heart’ of criminal law. Outside the ‘hard core’ of criminal law, the guarantees in matters of criminal law laid down in Article 6 of the ECHR will not necessarily apply with their full stringency” (Case T-541/08 Sasol and Others v Commission (ECLI:EU:T:2014:628)).




Many EU Member States have criminal sanctions for competition law infringements, but it is not common for a national criminal prosecution to follow on from civil infringement proceedings at EU level. This may be because the national rules of evidence for a criminal prosecution are stricter than the procedures followed by the Commission. However, cross-border investigations, particularly those involving the US authorities, will often collect evidence to the criminal standard from the outset. In such cases it is not uncommon for criminal charges to be brought against European individuals in the US courts, and European citizens have served time in US jails for their part in international cartel activities. In the Marine Hose case, three individuals were sentenced in the UK as criminal cartelists, following on from their prosecution and conviction in the US.

Six former Deutsche Bank and Barclays traders were sentenced to five and eight years imprisonment in the UK in 2018 in connection with the rigging of the Euribor interest rate benchmark. The rigging of Euribor was also the subject of a Commission Article 101 investigation, which resulted in a €1.04 billion settlement with Barclays, Deutsche Bank, RBS and Société Générale in 2013, and a further €485 million of fines imposed on non-settling parties in December 2016. The Commission’s ongoing investigation into manipulation of the foreign exchange market is also being conducted in parallel with a criminal investigation by the US Department of Justice.


As discussed in the previous editions of Global Legal Insights – Cartels, there is a policy at both EU and Member State levels to promote the private enforcement of competition law and encourage individuals who have suffered harm as a consequence of a competition law infringement to take direct action before national courts to enforce their rights before the national courts by way of a declaration of illegality, an action seeking injunctive relief, or an action seeking damages for loss suffered.

Against this background, key issues at EU level in relation to private enforcement of competition law this year also related mainly to:

• disclosure (in particular, disclosure of leniency information); and

• requests by damages claimants for access to the Commission’s case file.

Disclosure

The extent to which incriminating documents provided to the Commission to obtain leniency should be disclosed to damages claimants in proceedings before national courts falls within the scope of the Damages Directive (discussed in detail in the third and fourth editions of Global Legal Insights – Cartels). Thus, Member States are required to ensure that under national law, corporate leniency statements and settlement submissions are immune from disclosure (both directly from the addressee and the Commission), and that a grey list of other documents prepared for and submitted during the administrative procedure should also be required to be held back, subject to assessment of the appropriateness and proportionality of disclosure.

Member States were required to implement the Damages Directive by 27 December 2016. Quite how these protections will be deployed in practice at the national level still remains to be seen. In many jurisdictions the provisions of the Damages Directive will not take effect on cartels subject to existing infringement decisions, so there is likely to be considerable delay before the new procedures take effect. In this regard, the ECJ is currently considering a question submitted under Article 267 TFEU concerning the applicability of




the Damages Directive to infringements taking place and damage actions issued prior to the deadline for implementation (Case C-637/17 Cogeco Communications Inc. v Sport TV Portugal and Others, judgment awaited). Moreover, in practice, the corporate leniency statement is not required to bring a successful damages action: for example, in England & Wales, the courts now regularly require a redacted version of the Commission infringement decision and other “non-leniency” documents from the Commission’s case file (in the possession of the addressees) to be disclosed into a confidentiality ring (which includes legal representatives of the claimants and addressees). This process appears to be sufficient to permit such actions to proceed and, in the main, settle.

The issue of disclosure of documents to damages claimants also arises in the context of proceeding before courts outside the EU, in particular, class actions brought in the US (where the disclosure process is known as “discovery”). Many international cartels investigated by the Commission are active in the US as well as in the EU, and civil class actions will often be filed in the US whilst an investigation by the Commission is still ongoing.

Requests for access to the file

As noted above, third parties are increasingly seeking to rely on the Transparency Regulation to obtain access to documents contained in the Commission’s case file to assist them in bringing damages actions. Such requests are generally rejected by the Commission on the basis of the general presumptions relating to the protection of the commercial interests of the undertakings involved in the investigation and the protection of the purpose of the investigations relating to the proceedings.

Acknowledgment

The authors would like to thank Zac Davies ([email protected]) for his invaluable contribution to this chapter.






Euan Burrows Tel: +44 207 859 2919 / Email: [email protected] Euan Burrows is a partner and Head of the Ashurst EMEA Competition & EU law department, based in London and Brussels. He specialises in all aspects of EU and UK competition litigation and competition law. He has considerable experience in dealing with the English Courts, European Commission and national competition authorities. He has acted on a number of high-profile cartel cases before the European Commission, including leniency and settlement cases. Euan is Vice Chairman of the UK Competition Law Association and also sits as a member of the Competition Appeal Tribunal User Group Advisory Panel.

Irene Antypas Tel: +32 2 641 9966 / Email: [email protected] Irene Antypas is a counsel in Ashurst’s Competition & EU law department, based in Brussels. She has extensive knowledge and experience advising on EU competition and regulatory matters, and acts for major companies in a variety of sectors, including agrochemicals, pharmaceuticals and consumer goods. Litigation before national and EU Courts forms an integral part of Irene’s work.

Jessica Bracker Tel: +32 2 641 9937 / Email: [email protected] Jessica Bracker is an associate in Ashurst’s Competition & EU law department, based in Brussels. She advises on all aspects of EU competition law (including antitrust investigations and merger control) as well as on State aid and regulatory matters. She has experience in dealing with the European Commission, the French Competition Authority, national and EU Courts.

Broadwalk House, 5 Appold Street, London EC2A 2AG, United Kingdom Tel: +44 20 7638 1111 / Fax: +44 20 7638 1112 / URL: www.ashurst.com

Ashurst LLP


Finland


Legislation

Cartel prohibition is based on both national statutory law and EU law. At the national level, cartels are prohibited in the Competition Act (Kilpailulaki 948/2011). At the EU level, Article 101 of TFEU prohibits cartels. The cartel prohibition in the Finnish Competition Act is of an administrative nature and the law does not prescribe any criminal sanctions to undertakings or individuals.

There have been some major changes in Finnish competition legislation in the past 10 years. In 2004, the Finnish competition legislation of the time was harmonised with EU legislation (current Articles 101 and 102 of the TFEU). In 2011, the former Competition Act, the Act on Competition Restrictions (Laki kilpailunrajoituksista 480/1992) was repealed and the current Competition Act entered into force. The purpose of the Competition Act is to protect sound and effective economic competition from harmful restrictive practices.

Section 5 of the Competition Act provides that “[a]ll agreements between business undertakings, decisions by associations of business undertakings and concerted practices by business undertakings which have as their object the significant prevention, restriction or distortion of competition or which result in the prevention, restriction or distortion of competition shall be prohibited”. In addition to the general prohibition on anti-competitive contracts, an example list of agreements, decisions and practices that are always deemed to be especially anti-competitive is provided. The example list is in line with Article 101 of TFEU and prohibits, for instance, direct and indirect price-fixing, and limiting or controlling production, markets, technical development or investment.

In Sections 8–11 of the Competition Act, the Finnish Competition and Consumer Authority (“the FCCA”, Kilpailu- ja kuluttajavirasto) has been given jurisdiction to: 1) prohibit the implementation of a restraint on competition; 2) order a competition restriction to be terminated and obligate an undertaking to deliver a product to another with non-discriminatory conditions; 3) impose commitments to be binding on undertakings or associations; and 4) withdraw the application of a block exemption regarding an undertaking.

A new act 1077/2016 governing actions for damages for infringements of the competition law entered into force on 26 December 2016 (“Damages Act”). The Damages Act is based on the “Damages Directive” (2014/104/EU) and it does not have retroactive effect. The Damages Act will be applied to actions based on infringements of national and EU competition law. It aims to, inter alia, clarify and ease the prosecution of actions for damages and to ensure full compensation for the harm suffered. Actions for cartel-based damages are brought before civil courts. In practice, the existence of a cartel is firstly evaluated in

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an administrative process by the FCCA; it is followed by court processes in the Market Court and possibly in the Supreme Administrative Court, and the damages are thereafter evaluated in a separate civil court process. In general, the right to claim damages expires within 10 years of the date on which the violation ended. There may also be other grounds for compensating damages than those provided in the Competition Act.

Main bodies responsible for investigation, prosecution, decision-making and imposing sanctions

The FCCA is the main investigative authority regarding cartels in Finland. Section 41 of the Competition Act provides that, in addition to the FCCA, the Regional State Administrative Agencies (Aluehallintovirasto) shall investigate competitive conditions and restraints on competition, and with the FCCA’s authorisation, take other measures to promote competition within their region. The role of the Regional Administrative Agencies has been insignificant in competition law-related investigations and it has been limited to conducting some minor measures regionally.

The FCCA does not have the power to impose competition infringement-related sanctions on undertakings. The FCCA is, however, the only authority that has the right to propose a penalty payment to be imposed on an undertaking. The Market Court renders the actual decision on a penalty payment, and the payment is made to the Finnish State. Regardless of the important role of the FCCA as an investigative authority, the Market Court is not bound by the FCCA’s proposals and considers competition matters independently.

A judgment of the Market Court can be appealed to the Supreme Administrative Court, as enacted in the Administrative Judicial Procedure Act. The Supreme Administrative Court’s judgment is the final decision on the matter. As there are only a few cartel cases in the history of Finnish competition law, cartel cases are usually appealed to every instance.

Damage claims are handled in civil courts; such claims could, thus, be handled in three instances, as infringement claims are handled in only two instances. The process of handling damage claims is a separate legal process from the administrative process. In the civil process the courts shall, inter alia, rule on a cartel victim’s right to claim damages, and the possible and proper amount of damages to be paid by the undertakings that have been involved in a cartel.

Sanctions

The Market Court may impose, on the proposal of the FCCA, a penalty payment for an undertaking or association of undertakings infringing provisions of Sections 5 or 7 of the Competition Act or Articles 101 or 102 of TFEU. The maximum amount of a penalty payment is 10% of an infringing undertaking’s or association of undertaking’s annual turnover.

The Market Court may also impose, either on the proposal of the FCCA or on its own proposal, a periodic penalty payment to an undertaking or association of undertakings to enforce a condition set, or an order, prohibition, or obligation issued by the FCCA. The amount of a periodic penalty payment is not enacted in the Competition Act. A periodic penalty payment may not be imposed on a natural person.

Overview of investigative powers in Finland

The FCCA can investigate competition restrictions either on its own initiative or in response to a request for action. A competitor or any other legal or natural person can make a request for action on the FCCA’s website or through other means. Over the past few years, the initiative to cartel investigations has generally been triggered through tip-offs, but also the FCCA’s own operation reveals anticompetitive behaviour.

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The FCCA can obtain information on the alleged anti-competitive behaviour through inspections (usually referred to as dawn raids). Inspections on all premises are carried out by officials of the FCCA or by the Regional State Administrative Agencies. Officials can also authorise other persons to participate in the inspections. If needed, the police may provide executive assistance during the inspections. Inspections can also be carried out by the European Commission.

The inspections in business premises are subject to an authorisation from the head of the FCCA and, for inspections elsewhere than in business premises, the FCCA and Regional State Administrative Agencies must have an authorisation from the Market Court.

Dawn raids can be targeted to business premises, storage facilities, land and means of transport controlled by an undertaking. The officials of the FCCA and the Regional Administrative Agencies may also gain access to other premises (e.g. homes of the management of a company) if there is a justified reason to suspect that, for example, bookkeeping or other documents related to the business are held in such premises and the documents are of material relevance to the investigation of the alleged competition infringement.

During inspections, the officials of the FCCA must be permitted to assess business correspondence, bookkeeping, computer files and other relevant data and to take copies of documents under investigation. The FCCA may also utilise special search software to investigate the content of computers. Since 2015, the FCCA has had the right to obtain information from outsourced services, such as business information stored on external service providers’ servers and cloud services.

The FCCA may seal business premises or data if it is necessary to secure the execution of the inspection. The personnel can also be interviewed during inspections and the authorities are allowed to record the interviews.

When conducting an inspection in premises other than business premises, the FCCA can enter the premises, examine materials and take copies. In non-business premises, the FCCA is not allowed to seal the premises or request explanations or make records during inspection.

The undertaking under investigation has the right to have a legal representative present during an investigation but the presence of the representative is not a precondition for the execution of an investigation.

An undertaking or association of undertakings is obliged to submit, on request of the FCCA, all the relevant information and documentation needed for the investigation of a competition restraint to the FCCA or to the Regional Administrative Agencies. The FCCA has the right to hear a representative of an undertaking or association of undertakings or another person if there is a justified reason to suspect that a representative or a person has been involved in the execution of a cartel. The hearings are generally recorded.


During 2017, The FCCA conducted/finalised cartel investigations in relation to, inter alia, the sale of electric energy, mobile payment services and housing management services. In 2018, the FCCA has investigated the effects of pricing and rate-setting by Matkahuolto on long-distance coach travel.

In addition, the Market Court gave a decision on the so-called bus cartel, whereby the original penalty payment proposal of the FCCA was significantly reduced by the Court. The judgment of the Market Court was given on 14 December 2017 and the FCCA has appealed




against the judgment to the Supreme Administrative Court of Finland. Other pending cases in the Supreme Administrative Court of Finland related to cartels are the case regarding the Finnish Bakery Federation (Suomen Leipuriliitto ry) and the case regarding Eltel Networks Oy ja Eltel Group Oy / Empower Oy ja TPI Holding Oy.

In relation to cartel damages claims, the Finnish Supreme Court has made a landmark request for a preliminary ruling to the European Court of Justice on the issue of the applicability of the doctrine of economic succession in antitrust damages cases.


The FCCA prioritises cases brought to its attention and it does not have a legal duty to act on every request for action. A case will not be investigated if it is likely that no restriction of competition has taken place, competition in the relevant market is considered functional even though a restriction of competition has taken place, or the request for action is manifestly unjustified. The FCCA has held that the prioritisation norm has been successful and has enabled the FCCA to intervene with hard-core restraints of competition.

The FCCA’s strategic focus is to intervene when there is harmful market behaviour, which can relate to, inter alia, cartels, abuse of dominant position and concentrations. As cartels usually endanger effective competition in the market, it is improbable that the FCCA would deprioritise a cartel investigation in Finland. As the case law illustrates, the FCCA usually intervenes with cartels even when they are small in scope.

The FCCA has not concentrated its investigative measures on any specific key sectors. The recent cartel enforcement judgments have been in the field of industry, for instance, the raw wood cartel, the asphalt cartel and the alleged power line manufacturing cartel. Recent investigations of the FCCA shows that also alleged smaller scale infringements, which include hard-core restrictions like cartels, are monitored and intervened.


Investigation procedure

An undertaking or association of undertakings is obliged to provide all the relevant information on request to the FCCA. An undertaking has a duty to give all such information and documents as are needed to investigate the content, purpose and impact of a competition restraint, and to assess a concentration.

An undertaking under inspection has the right to defence and to be heard. An undertaking is to be informed of its position in the investigation and the inspected infringement. In practice, an undertaking is to be informed at the earliest possible stage on what infringement it is accused of and what its status is in the investigation. An undertaking has the right to receive information from the documents concerning the investigation and on the phase of the proceedings insofar as it cannot harm the investigation in the matter. The information the FCCA has obtained during its investigation can be utilised only for the purposes for which it has been gathered (unless the FCCA has initiated another investigation).

The FCCA cannot force an undertaking or association of undertakings to confess to an infringement violating the Competition Act.

An undertaking under investigation has the right to keep legally privileged documents (confidential correspondence between an external legal consultant and the undertaking) confidential.




An undertaking under investigation has the right to be heard before a proposal on penalty payment is submitted to the Market Court. The “statement of objections” procedure was introduced in 2011. In practice it is unlikely that an undertaking’s comments on the FCCA’s proposal have a significant influence on the FCCA’s evaluation but at least the undertakings have the possibility to correct possible misleading information and to safeguard their business secrets.

Decision-making procedure

When deciding whether an undertaking or association of undertakings has been involved in a cartel, the FCCA analyses evidence gathered during inspections. The evidence could be, for instance, financial statements, bookkeeping, IT devices, other documents and data that could be of particular relevance in showing that a cartel has taken place. The FCCA may also hear representatives of an undertaking under investigation. The FCCA also utilises information and documentation provided by leniency applicants in its decision-making.

The Competition Act does not provide any time frames during which a cartel investigation or a proposal for penalty payment must be made. The procedures are generally long (several years in duration) but the FCCA has been focusing on shortening its processing times.

Even though the FCCA is the main investigative authority with respect to anti-competitive behaviour, it is not entitled to impose any sanctions on undertakings or associations of undertakings. Only the Market Court and the Supreme Administrative Court have jurisdiction to impose penalty payments and periodic penalty payments regarding cartels and other competition infringements. On the other hand, the Market Court may impose a penalty payment only on the basis of the FCCA’s penalty payment proposal.

The right to appeal is stipulated in Section 44 of the Competition Act. Only the undertakings to whom the decision is addressed or whose rights, obligations or interests are directly affected by the decision, can appeal. In general, a competitor is not able to appeal the FCCA’s cartel decision, because the decision is not addressed to it. Also, only the final decisions of the FCCA are subject to appeal.

The Act on Openness of Government Activities (julkisuuslaki, 621/1999) applies to the documentation utilised in the FCCA’s investigation and the written statements of the parties during court proceedings. The documentation shall, however, not be publicised before the investigation has officially ended and for as long as it could jeopardise the investigation or the handling of the case. In addition, business secrets are held confidential throughout the FCCA’s investigation, the court proceedings and even afterwards as long as the information is relevant (e.g. pricing information of the year 2014 can be held confidential during that year and possibly also the next, but the information can no longer be relevant from the point of view of an undertaking’s business secrets in 2020).

The penalty payment

A penalty payment can amount to a maximum of 10% of an undertaking’s or association of undertakings’ annual turnover. Under the FCCA’s guidelines, penalty payments have two aims. Firstly, a penalty payment is of punitive nature, i.e. punishing undertakings which have breached the competition norms. Secondly, the possibility if imposing a penalty payment should prevent an undertaking’s or association of undertakings’ potential cartel participation, or renewal of any anti-competitive behaviour on the market. Therefore, penalty payments are regarded as having a general preventive purpose as well as an individual preventive purpose.

When the FCCA assesses the proper amount of the penalty payment, it takes into account




all the relevant aspects on the subject matter. The nature, extent, degree of gravity, degree of participation, renewal and measures to end the infringement are taken into consideration when the FCCA makes its proposal to the Market Court on the right amount of the penalty payment. The FCCA may mitigate and adjust the amount of the penalty payment in a cartel and in other competition restriction cases via a case-by-case analysis. In practice, the Market Court has wide discretion in assessing the amount. In certain circumstances, the Market Court may also decide not to impose a penalty payment even if an undertaking was found to have infringed competition laws. Under the Administrative Judicial Procedure Act, the Market Court is entitled to reduce or even withdraw a penalty payment if the administrative and investigation process of the FCCA has been delayed and an undertaking’s right to access to justice has been infringed.

A penalty payment may also be imposed on an undertaking or association of undertakings to whom a business activity involved in the infringement has been transferred due to a transaction.

Leniency regime

The leniency procedure enables the first undertaking or association to reveal a cartel to obtain full immunity from the penalty payment. Granting full leniency requires that an undertaking submits an application for leniency to the FCCA and provides the FCCA new information on the cartel. Information provided by the applicant must present sufficient grounds for the FCCA to conduct a dawn raid or, after an executed dawn raid, present such evidence as enables the FCCA to state that a cartel has taken place. Regardless of granted leniency, the undertaking subject to leniency may later be held liable to compensate for damages caused by the cartel.

In addition to the criteria relating to the quality of information, certain behavioural commitments may be demanded from a leniency applicant. In order to obtain leniency, the applicant must immediately end its participation in the cartel. It must also co-operate with the FCCA through the whole investigation and provide additional information when necessary. The applicant must not destroy any evidence before or after the delivery of its leniency application. Finally, the applicant must keep the submission of its leniency application confidential.

The FCCA grants conditional leniency to an applicant until the investigation is finished. The final decision on full or conditional leniency is concluded at the end of the investigation.

Leniency can be either full or partial. The first leniency applicant to provide sufficient information to the FCCA obtains full immunity. Any possible succeeding applicants with new information may be granted partial leniency. The second, third and fourth undertakings or associations to unveil a cartel may obtain rebates amounting to 30–50% (to the second applicant), 20–30% (to the third applicant) and a maximum of 20% of a penalty payment to the fourth applicant. The criteria to submit information and other behavioural obligations apply to both partial and full leniency. Consequently, the Finnish leniency policy is in line with that of the European Commission.

There is no defined form for an application for leniency. However, it is essential that the moment of the provision of information to the FCCA can be determined in order for it to define the order of priority in granting leniency. Therefore, an application should be delivered either in person (by a representative of the undertaking or an external counsel) or electronically to the FCCA.




The leniency regime is applied occasionally in Finland. In 2014, Empower Ltd revealed a cartel in the power line market and was granted immunity from the penalty payment. In the spare part cartel of 2009, Arwidson Ltd acted as a whistleblower and a penalty payment was not proposed by the FCCA.

One of the biggest Finnish cartels, the asphalt cartel, was revealed without any of the cartel members coming forward. The FCCA initiated investigations based on tip-offs.


The Competition Act does not entitle the FCCA to enter into a settlement with an undertaking. According to the preparatory works of the Competition Act, such procedures would not offer substantial benefits for handling infringement cases and would not fit well into the existing legal framework or the Finnish legal tradition.


In addition to leniency applications, third parties may also reveal a cartel to the FCCA. In principle, anyone can make a request for action to the FCCA or unofficially tip-off the FCCA. A private person would, however, not benefit directly from making a request for action as there is no threat of competition law sanctions for private individuals. Moreover, an official tip-off does not necessarily lead to the initiation of an investigation, as it is at the FCCA’s discretion to decide whether or not to open an official investigation.


The main penalty for breaching the Competition Act is the administrative sanction of penalty payment imposed by the Market Court. Apart from penalty payments and despite granting leniency, a member of a cartel may be held liable to pay damages to cartel victims. The only sanction that may be passed in the civil process is the duty to pay damages to cartel victims. The Finnish legal system differs from some other jurisdictions in which a criminal sentence is also possible as a result of a competition law infringement.

The damage claims are brought before civil courts and usually handled after the administrative process has ended. The district courts are reluctant to evaluate whether a cartel has taken place as they are not specialists in competition law matters. If a damages claim is exceptionally filed in a district court before the administrative investigation on the matter has been finalised, it is likely that the court will delay its ruling until the FCCA has conducted its investigations and (at least) the Market Court has ruled on the case.

Under the Damages Act, any natural or legal person who has suffered harm caused by an infringement of competition law is entitled to claim and obtain full compensation for the harm. Full compensation covers the right to compensation for actual loss as well as for loss of profit, including interest.

Under the Damages Act, an infringement of competition law found in a final decision by a national competition authority (the FCCA) or by a review court is deemed to be irrefutably established for the purposes of an action for damages brought before their national courts under Articles 101 or 102 TFEU or under national competition law. Where a final decision is taken in another Member State, it should be presented before their national courts, at least as evidence that an infringement of competition law has taken place.

There is a new section about the qualification of harm. Under the Damages Act, it shall be presumed that cartel infringements cause harm. The infringer shall have the right to rebut




the presumption. It shall also be ensured that neither the burden, nor the standard of proof required for the quantification of harm, render the exercise of the right to damages practically impossible or excessively difficult.

Joint and several liability is also a new feature. It means that undertakings which have infringed competition law through joint behaviour are jointly and severally liable for the harm caused by the infringement of competition law; with the effect that each of those undertakings is bound to compensate for the harm in full, and the injured party has the right to require full compensation from any of them until he has been fully compensated. There are some exceptions for small or medium-sized enterprises.

An infringer may recover a contribution from any other infringer, the amount of which shall be determined in the light of their relative responsibility for the harm caused by the competition infringement. The amount of contribution of an infringer which has been granted immunity from fines under a leniency programme shall not exceed the amount of the harm it caused to its own direct or indirect purchasers or providers.

The passing-on of overcharges means that ensuring the full effectiveness of the right to full compensation, compensation of harm can be claimed by anyone who suffered it, irrespective of whether they are direct or indirect purchasers from an infringer, and that compensation of harm exceeding that caused by the infringement of competition law to the claimant, as well as the absence of liability of the infringer, are avoided. The burden of proving that the overcharge was passed on is on the defendant.


As damages claims are brought before civil courts, they can ultimately be handled in three instances, first in a district court, and thereafter appealed to the Court of Appeal and the Supreme Court. Usually the administrative process takes place before the damage claim process, which means that cartel-related proceedings can take up to several years.

Criminal sanctions

Cartels are currently not criminalised in Finland. There has, however, been discussion on the criminalisation of cartels, and two reports on the issue were published in spring 2014.

Cross-border issues

The ECN (the European Competition Network) consists of the European Commission and the competition authorities in the Member States. The FCCA, as the national competition authority, is part of the ECN. The FCCA also co-operates actively with the other competition authorities in the Nordic countries and the OECD (Organization for Economic Cooperation and Development).

Participating in international co-operation enables the FCCA to provide and receive executive assistance in relation to competition restriction investigations. According to the FCCA’s website, the FCCA handles annually several competition matters that have a cross-border element. In addition, it participates in ca. 50 international working groups’ activities.


There are three significant, legally valid cartel decisions given by either the Market Court or the Supreme Administrative Court in the past years: the raw wood cartel judgment; the asphalt cartel judgment; and the spare part cartel judgment. In addition, the Market Court found in December 2017 that a bus cartel had existed in Finland since 2008.




In the asphalt cartel case, the Helsinki District Court’s judgment covered over 140 damages claims. The Court ruled that most of the claimants were entitled to claim damages but dismissed, for instance, the damage claims of the State as it was considered to have been aware of the cartel. The Court developed important interpretations on the applicable compensation norms, the general statutory limitation norms and the distribution of liability of undertakings which have ceased their operations. The Supreme Court made a landmark request in the case for a preliminary ruling to the European Court of Justice on the issue of the applicability of the doctrine of economic succession in antitrust damages cases in December 2017. The oral hearing in this case (C-724/17 Skanska Industrial Solutions e.a.) was held on 16 January 2019.

In the raw wood cartel case, over 600 cartel victims have filed claims for damages. The district court, as the court of first instance, dismissed in total 13 damage claims in March 2014 as they were considered to fall under the statute of limitations. In November 2014, the Helsinki Court of Appeal held that the cartel victim’s right for compensation had, in fact, not expired. The Helsinki Court of Appeal stated in its decision that the statute of limitations period had begun only after the Market Court’s cartel judgment had become legally valid on 4 January 2010, whereas the Helsinki District Court had interpreted that the statute of limitations period had commenced when the FCCA published its news release on 25 May 2004. The matter was returned to the Helsinki District Court, which subsequently dismissed most of the forest owners’ claims for damages in August 2017. The Finnish Forest and Park Service appealed to the Helsinki Court of Appeal but it did not amend the judgment of the Helsinki District Court. The judgment of the Helsinki Court of Appeal was given on 21 May 2018.

In the bus cartel case, the Market Court held in December 2017 that the bus companies and the association of bus companies had sought to restrict competition by excluding competitors from certain travel services, such as information and ticketing services, and by not granting cargo rights. However, the Market Court also dismissed many of the FCCA’s claims, as well as drastically reducing the Authority’s original proposal for a 38 million euro penalty payment. The FCCA has appealed the decision to the Supreme Administrative Court.

Reform proposals

The Ministry of Employment and the Economy has appointed a working group to investigate a reform of the Finnish Competition Act, as a result of which a government proposal on amending the Competition Act has recently been presented. The proposal sets forth, inter alia, amendments which would empower the FCCA to investigate mobile devices and enable the FCCA to investigate mobile devices and enable the FCCA to continue inspections of digital evidence at the FCCA’s premises. With the reform it is pursued to increase the exchange of information between different authorities.






Ilkka Aalto-Setälä Tel: +358 20 713 3545 / Email: [email protected] Ilkka has worked for over 20 years with antitrust and merger control matters. Ilkka advises companies and governmental agencies on competition and marketing law issues at national and EU level, including merger control, abuse of dominant position, cartels, state aid and public procurement. Prior to joining Borenius, he was a Local Partner at the Helsinki office of an international law firm and worked as the head of its competition law practice. Ilkka has also worked for the Merger Task Force of the European Commission. Ilkka is the chairman of the Competition Law Expert Group of the Finnish Bar Association. He is currently also a member of the working group investigating changes to the current Competition Act.

Henrik Koivuniemi Tel: +358 20 713 3269 / Email: [email protected] Henrik advises clients on questions related to competition law and public procurement. Henrik joined Borenius in 2017, and before that he worked as a Research Officer at the Finnish Competition and Consumer Authority. Before graduating, Henrik has also worked as an associate trainee at Hannes Snellman and as a legal trainee at the Finnish Competition and Consumer Authority.

Eteläesplanadi 2, FI-00130 Helsinki, Finland Tel: +358 20 713 33 / URL: www.borenius.com

Borenius Attorneys Ltd


France

Overview of the law and enforcement regime relating to cartels in France

In France, cartels are prohibited by Article L.420-1 of the French Commercial Code (the “FCC”), and by Article 101 of the Treaty on the Functioning of the European Union (the “TFEU”). Similar to Article 101 of the TFEU, Article L.420-1 of the FCC prohibits “concerted actions, conventions, agreements” whether “express or tacit” implemented by undertakings or associations of undertakings, that “have as their object or may have the effect to prevent, restrict or distort the free play of competition on a market”.

When the practices at stake are capable of affecting trade between Member States, both Article 101 TFEU and Article L.420-1 FCC cumulatively apply, while only Article L.420-1 FCC applies when the practices affect the domestic market. In practice, and even if the FCA tends to apply Article 101 of the TFEU when the alleged cartel has a purely national dimension, such distinction has no particular relevance given that Article L.420-1 of the FCC and Article 101 of the TFEU are similar in substance.

The French Competition Authority (“FCA”) is entrusted with the public enforcement of the above provisions. Pursuant to Article L.464-2 FCC, the FCA is entitled to impose pecuniary sanctions on the undertakings involved in a cartel, up to 10% of their worldwide turnover. Sanctions can also be imposed on individuals by Criminal courts: Article L.420-6 of the FCC provides that the fact of taking a “personal and decisive part” in an anticompetitive practice is a criminal offence that can be punished by a prison sentence of four years and a fine of €75,000. In practice, such provision is only applied when the French State is the victim of an anticompetitive practice and has never lead to a prison sentence.

The FCA’s decisions are subject to judicial control by the Paris Court of Appeal. Appeals against decisions of the Court of Appeal must be brought before the Supreme Court (the “Cour de cassation”).

National courts (some of them having special jurisdiction over competition matters) are also entitled to apply Article L.420-1 of the FCC and Article 101 of the TFEU, in connection with stand-alone or follow-on actions (private enforcement). In the case of a stand-alone action, national courts cannot impose fines but can only award damages. Following the implementation in France of the Directive 2014/104/EU on actions for damages under national and EU competition law through Order 2017-303 and Decree 2017-305 of 9 March 2017, an increasing number of actions for damages is expected in France.

Finally, it is worth noting that the Minister for the Economy, through its Directorate General for Competition, Consumer Affairs and Prevention of Fraud (the “DGCCRF”), has a residual competence in the field of cartels as it has the power to fine (through a settlement) anticompetitive practices which have a small and local dimension, i.e. when (i) the market

Pierre Zelenko & Jérémie Marthan Linklaters LLP



affected by the practice has a “local dimension”, and (ii) the turnover of each of the undertakings concerned does not exceed €50m in France and their aggregate turnover does not exceed €200m. If the accused undertaking refuses to settle, the case is then dealt with by the FCA. In 2018, two cases were dealt with simultaneously by the DGCCRF and, for the undertaking having refused to settle, by the FCA.

Overview of investigative powers in France

The FCA may initiate a cartel investigation ex officio, following a leniency application, a prior investigation led by the DGCCRF or a third party complaint.

The FCC provides for two types of investigations: (i) the simple investigations, mostly carried out in practice by the DGCCRF; and (ii) “dawn raids” which are more relevant in the field of cartels and which are, in practice, mostly carried out by the FCA.

Pursuant to Article L.450-4 FCC, the FCA is entrusted with significative investigative powers, but dawn raids can only be conducted under a prior Court warrant. In fact, before the commencement of the inspection, the FCA notifies the undertaking suspected of cartel activity of the Court warrant, which describes the alleged cartel practices and the scope of the investigation.

Such inspections, where police assistance is compulsory, can be carried out from 6.00 am in any premises (including means of transport), whether professional or personal (investigators can search employees’ homes). The FCA can search the premises, place seals (only in professional premises), seize any original document and collect digital/forensic evidence on any medium, except documents covered by legal privilege. However, unlike the European Commission, the FCA has the power to seize whole sets of electronic data (such as mailboxes) for further sifting at their offices. Therefore, restitution of some electronic data (in particular, data that is irrelevant to the investigation or legally privileged) can only be reclaimed after the dawn raid.

In addition, investigators of the FCA can ask questions during the inspection but two limitations have to be taken into consideration: only the occupying person of the premises can be asked questions (i.e., the person to whom the court warrant is notified or his or her legal representative), and questions should only be addressed in the presence of a police officer entrusted with judiciary powers (“officier de police judiciaire”).

Such inspections, as well as the Court warrant, can be challenged in court (with no suspensive effect). However, such appeals are only rarely successful.

According to Article L.464-2 FCC, obstructing an investigation can lead to a fine of a maximum of 1% of the global turnover. To date, such provision has only been applied in one single case in 2017 (commodity chemicals1) but this decision is currently challenged before the Paris Court of Appeal.

Based on press releases published by the FCA, five dawn raids were carried out by the FCA in 2018: in the inter-island air passenger traffic sector; the sector of production, import and distribution of tobacco products; the cosmetics distribution sector; the road freight transport sector; and the sectors of engineering and technology consulting, IT services and software publishing. However, the FCA does not systematically publish press releases in the case of dawn raids.

In addition to dawn raids carried out by the FCA on the basis of Article L.450-4 FCC, it is worth noting that since the adoption of the law n° 2014-344 of 17 March 2014, FCA’s investigators may receive rogatory orders from the public prosecutor in cases where both

Linklaters LLP France



criminal and competition law infringements (only by physical persons) are suspected. In such cases, inspections are carried out pursuant to criminal law rules, which are less protective of the rights of the suspected persons than competition law rules. For example, a criminal law inspection cannot be challenged in court. Likewise, contrary to inspections launched by the FCA, the inspected undertakings or persons cannot receive copies of the data seized by the investigators and cannot impose the presence of their attorney. The increasing use of the criminal procedure in competition law matters has recently attracted some criticism from competition law practitioners.


In 2018, the FCA adopted six cartel decisions, imposing overall fines of approximately €205 million. The highest individual fine, €56 million, was imposed on Whirlpool. However, among these six decisions, only one decision, adopted in the sector of household appliances, led to high fines: €189 million, which amounts to 92% of the total cartel fines of the year.

As a comparison, in 2017, the FCA adopted only one cartel decision, with a total fine of €302.3 million.

In Decision 18-D-02, the FCA found that five companies rigged a tender for the maintenance of green spaces in Martinique. The total fine imposed by the FCA was €80,000.

In Decision 18-D-05, the FCA found that several security companies exchanged confidential information between competitors to enable them to allocate the market. In March 2018, the FCA imposed a total fine of €46,000.

In Decision 18-D-06, the FCA sanctioned the professional syndicate of Côte du Rhône winemakers for having established and disseminated pricing instructions to its members. A fine of €20,000 was imposed on the syndicate in May 2018.

In Decision 18-D-15, the FCA sanctioned three major wholesale distributors of veterinary medicinal products and their professional association for market sharing and price-fixing agreements. Overall sanctions imposed by the FCA amounted to approximately €16 million.

In Decision 18-D-19, the FCA concluded that three companies entered into bid rigging agreements in the public lighting sector. In September 2018, the FCA imposed a fine of €19,000.

In Decision 18-D-24, the FCA sanctioned six household appliance manufacturers (BSH, Candy Hoover, Eberhardt Frères (Liebherr), Electrolux, Indesit, Whirlpool) for exchange of confidential information and price-fixing agreements. For the first time, the FCA applied the notion of “Leniency Plus”: besides the reduction of fine due to its leniency application, BSH was granted an additional reduction of fine for its active cooperation in the investigation. Overall sanctions imposed by the FCA in December 2018 amounted to €189 million (the highest individual fine, €56 million, was imposed on Whirlpool).

Meanwhile, the DGCCRF adopted 10 decisions of sanction in 2018, two of which led to a decision of sanction of the FCA for the undertaking having refused to settle.



2017 2018

Number of cartel decisions One Six

Total value of cartel fines €302 million €205 million

Highest individual cartel fines €165 million €56 million



In 2018, the FCA focused on certain sectors or activities such as prices overseas, the health sector, the media sector and the digital economy. However, these enforcement priorities are less dedicated to cartels than competition issues in general.

In fact, as the FCA, unlike the European Commission, is bound by a principle of a legality whereby the FCA is obliged to deal with each complaint, the FCA’s activity with respect to cartels necessarily covers a wide range of sectors and various types of infringement. For example, in 2018, the FCA sanctioned various types of anticompetitive arrangements including bid rigging, cartels on prices and market-sharing, in a wide variety of sectors.

However, it is worth noting that, in June 2018, the FCA and the German Competition Authority launched a joint project on algorithms and their implications on competition. The project will take a careful look at the use of algorithms as they may facilitate collusion and assist in the implementation of cartels.


The FCA is an independent administrative authority, entrusted with the power to enforce competition law. As many other competition authorities in Europe, France has indeed adopted a monist administrative model, whereby one single authority investigates cases and takes enforcement decisions.

However, within the FCA, a full functional separation between investigative and decision-making bodies has been set up, where their respective competences are carried out independently from one another.

In practice, the investigative body of the FCA (headed by the “Rapporteur Général”) will conduct the investigation, issue a Statement of Objection (“SO”) or negotiate settlements independently from the decision-making body of the FCA (the “College”). In turn, the College of the FCA will assess and balance the inculpatory evidence as well as the undertakings defences and may overturn the accusation outlined in the Statement of Objection. In the framework of their defence, accused undertakings can contest the facts, their legal and economic analysis by the investigative body but also any violation of their procedural rights in the course of the investigation. However, in practice, such procedural arguments are very rarely successful.

In addition, the accused undertakings have the possibility to call on a Hearing Officer if they deem that some procedural facts or actions have raised issues relating to their rights. However, the Hearing Officer does not make any decision insofar as this prerogative can only be exercised by the College of the FCA.

As before the European Commission, access to file is granted at the time of issuance of the SO.

The FCA does not have to investigate or decide cases in a specific time frame. In practice, the length of an investigation depends on the specific circumstances of the case and on the workload of the investigators. It is worth noting that the FCC provides for some time frames, but which only constrain the accused undertakings, to the exclusion of the investigative body of the FCA. For example, while the accused undertaking has generally two months to reply to the SO, the investigative body does not have to reply to it in a specific time frame. In practice, this can lead to lengthy proceedings, which can last for several years.

The decision of the FCA can be appealed before the Paris Court of Appeal.





In France, the Leniency Program was introduced in 2001 by the Law on New Economic Regulations. So far, the FCA has issued 13 decisions based on leniency applications. In 2018, only one decision whose investigation was initiated by a leniency application was issued (one in 2017 and none in 2016).

Over the years, the number of leniency applications before the FCA decreased as illustrated in the table below.

To enhance the attractiveness of this proceeding, Article L.483-5 of the FCC provides that national judges, in charge of awarding damages, cannot be provided with a leniency application.


Law 2015-990 of 6 August 2015 for Growth, Activity and Equal Economic Opportunities amended the provisions of III of Article L.464-2 of the FCC by creating a new settlement procedure that replaced the previous no contest of objections procedure.

Article L.464-2, III FCC, now provides: “where a body or company does not dispute the reality of the objections notified to it, the General Rapporteur may submit to it a settlement proposal setting out the minimum and maximum amount of the financial penalty envisaged. When the company or body commits to change its behaviour, the General Rapporteur may take this into account in their proposed settlement. If, within a time limit set by the General Rapporteur, the body or company agrees to the proposed settlement, the General Rapporteur shall propose to the FCA, which shall hear the company or body and the representative of the Minister of the Economy without first drawing up a report, to impose the financial penalty provided for in I within the limits set by the settlement.”

On 21 December 2018, the FCA issued a procedural notice on the settlement procedure.

In practice, when an undertaking receives a SO, it is its responsibility to determine whether it wishes to waive its right to contest the objections and to request the General Rapporteur to implement the settlement procedure, and this without having to explain the reasons for such an action.

However, the General Rapporteur is not required to respond favourably to a request to implement the settlement procedure. Indeed, it has broad discretionary powers to assess the appropriateness of using this procedure in a specific case and the relevance of each request submitted by an undertaking. For example, in the case where the objections are attributed to more than one undertaking, the number of parties involved wishing to benefit from the settlement procedure is also a critical factor as the procedural gains linked to the implementation of such a procedure are obviously more limited when, in the same case, one or more other parties contest the notified objections.

When the General Rapporteur considers that a case is suitable for the implementation of the settlement procedure, discussions are initiated with each of the parties concerned, in particular on the reduction in fines likely to result from implementation of the settlement



2010 2011 2012 2013 2014 2015 2016 2017

Leniency applications 7 4 3 7 1 1 7 1


procedure, with a view to signing a settlement record. Both parties remain, however, free to terminate these discussions at any time.

If the General Rapporteur considers that the settlement can be implemented, they shall submit to the undertaking concerned a proposal for a settlement, setting out the minimum and maximum amount of fine envisaged. The amount of the penalty reduction attached to the implementation of the settlement procedure is not predetermined and depends on the circumstances of each case. In the event that the undertaking in question has also offered commitments, the General Rapporteur shall assess whether it is relevant to take them into account in its proposed fine range. It also takes due account, when relevant, of the leniency notice and the contribution of the leniency applicant to the investigation when preparing the settlement proposal.

The agreement reached between the undertaking pursued and the General Rapporteur is recorded in a settlement report which contains the no contest of objections statement.

At the hearing, the College of the FCA shall examine the facts and notified objections, as well as the settlement report. If it considers that the conditions for imposing a fine are met, it shall impose a fine within the range set by the settlement report. If, in light of the notified objections and the settlement report, the College considers that the conditions for imposing a fine within the range indicated in the settlement report are not met, or that the objection or objections are unfounded, it may decide to refer the matter back for investigation in accordance with ordinary law procedure. This referral for investigation then invalidates the previously signed settlement report.

The settlement decision adopted by the FCA remains a decision of sanction. As a result, as every decision of sanction, it can be appealed before the Paris Court of Appeal. However, given the nature of the settlement procedure, whereby the undertaking pursued accepts to not contest the infringement, such an appeal remains highly unlikely. To date, no settlement has been the object of an appeal.


Pursuant to Article L.462-5of the FCC, only companies can file a complaint before the FCA. Individuals can only draw the FCA’s attention to an alleged cartel behaviour, potentially leading the FCA to open an investigation on its own initiative. Official complaints have to be submitted in written form.

As the FCA does not currently enjoy the power to choose the cases on the basis of what is considered to be a priority, it is obliged to launch proceedings subsequently to the reception of the formal complaint. However, a complaint which is not sufficiently grounded will be rejected by a public decision. Such rejection decision can be appealed before the Paris Court of Appeal.

Complainants have a formal status in the proceedings, as they are considered, to some extent, as a party. They therefore participate in the investigation, receive the non-confidential version of the SO and are invited to the oral hearing before the College of the FCA where they will be heard.


Pursuant to Article L.464-2 FCC, the FCA may impose fines ranging up to 10% of the undertaking’s worldwide consolidated turnover and €3 million where the infringer is not an undertaking.

The FCC provides that financial penalties are to be set in accordance with four criteria: (i)




the seriousness of the facts; (ii) the importance of the harm done to the economy; (iii) the situation of the sanctioned entity or undertaking or of the group to which the undertaking belongs; and (iv) the reiteration, if any, of anticompetitive practices.

In order to enhance transparency on the way that the FCA exercises its power of appraisal in practice when setting financial penalties, the FCA issued a procedural notice on the method of calculation of fines on 16 May 2011.

First, the FCA sets the “basic amount” of the financial penalty for each undertaking or entity at stake, in view of the seriousness of the facts and of the importance of the harm done to the economy. In practice, the basic amount corresponds to a proportion (between 15 and 30% in case of cartel infringement) of the value of the sales made by each undertaking or entity at stake, of the products or services to which the infringement relates, multiplied by the number of years of participation in the infringement. Various parameters are taken into account to set the proportion of the value of sales, including the scale of the infringement, the nature of the activities (public activities, sectors recently open to competition, etc.), the objective features of the infringement (secrecy, degree of refinement, etc.), its consequences and its impact on the economy. To date, the maximum proportion applied in cartel cases has been 20%.

The FCA then adjusts the basic amount in order to take into account mitigating (e.g. the infringement has been authorised or encouraged by public authorities) or aggravating circumstances (e.g. the undertaking has played a role of leader), if relevant, as well as other relevant factors relating to the individual situation of each undertaking or entity (e.g. importance of the size of the pursued undertaking).

In case of reiteration, the amount can be increased by 15% to 50% depending, in particular, on the period of time from the starting point of the practice at stake to the prior finding of infringement, as well as on the nature of these different infringements. However, the FCA does not apply reiteration to an undertaking when this period of time exceeds 15 years.

Finally, the final amount of the financial penalty is checked against the legal maximum (10% of the global turnover). It is then adjusted, if applicable, in consideration of the total or partial immunity granted on account of leniency and of the reduction granted on account of a settlement.

The FCA can, however, when justified, depart from this method in specific cases, especially in the case of classic settlement.


Cartel infringement decisions of the FCA can be appealed before the Court of Appeal, which is exclusively competent. Given this exclusive jurisdiction, the Paris Court of Appeal is highly specialised, and its decisions reflect its strong competition law expertise.

Appeals of FCA decisions do not have a suspensive effect.

The Court of Appeal can annul totally or partially an FCA decision. In the latter case, the level of the fine will be lowered.

According to the principle of non-aggravation of the fine, the Court of Appeal cannot, however, raise the amount of the fine, except if the Minister for the Economy appeals the decision and requests it (which is extremely rare).

The table below shows the percentage of success of appeals against cartel decisions of the FCA (in terms of aggregated level of fines) since 2011. Appeals of the 2018 FCA’s decisions are still pending. Therefore, no figure can be provided.




Criminal sanctions

Article L.420-6 of the FCC provides that the fact, for a physical person, of taking a “personal and decisive part” in an anticompetitive practice is a criminal offence that can be punished by a prison sentence of four years and a fine of €75,000.

In practice, however, there are only an extremely limited number of cases each year, mainly related to bid rigging and where the French State is the victim. So far, this provision has never led to a prison sentence.

Cross-border issues

The FCA actively cooperates with competition authorities of other jurisdictions (including in particular the European Commission) and is a member of both the European Competition Network (“ECN”) and the International Competition Network (“ICN”).

Coordination between European Competition authorities is increasing: for example, on 19 June 2018, the FCA and the German Bundeskartellamt launched a joint project on algorithms and their implications on competition.


Directive 2014/104 of 26 November 2014 on rules governing actions for damages under national law for infringements of competition law has been transposed into French legislation by the 9 December 2016 law on transparency, fight against corruption and for modernisation of economic life, so called “Sapin II” law and in particular, Article 148, by virtue of which the French Government was entitled to transpose this Directive by means of order.

Hence, Order 2017-303 and Decree 2017-305 of 9 March 2017 set out rules allowing any person who has suffered harm caused by an infringement of competition law to effectively exercise the right to claim full compensation for the prejudice. Pursuant to the new Article L.481-2 FCC, an anti-competitive practice established by the FCA in its final decision sets an irrebuttable presumption of civil fault. Pursuant to the new Article L.481-3 FCC, the harm suffered includes loss, lost profit, loss of opportunity and non-material damage.

To date, no such action based on this provision has been brought before the courts regarding cartels. It will probably take several years for a decision to be issued based on these provisions since the anti-competitive practices must have occurred after the coming into force of the order on 11 March 2017.



Year Aggregated level of fines imposed

by the FCA subject to appeal

Aggregated level of

fines after appeal

% of fine

Reduction following

appeal

2011 €387,105,690 €378,445,605 3%

2012 €246,392,590 €139,412,000 43%

2013 €84,576,493 €25,511,472 30%

2014 €961,711,840 €869,853,183 10%

2015 €881,338,000 €816,988,000 7%

2016 €12,130,000 €11,825,000 2%

2017 0 0 0%

2018 - - N/A


Reform proposals

The main reform proposal under discussion is linked to the future Directive to “empower the competition authorities of the Member States to be more effective enforcers and to ensure the proper functioning of the internal market” (the so-called ECN+ Directive).

However, given the already high level of sophistication of the FCA, only minor amendments to the current regime in force are expected. Firstly, the FCA should, as the European Commission, be granted with a priority setting mechanism, i.e. the power to choose the cases on the basis of what is considered to be a priority. Secondly, the FCA should be granted with the power to act on its own initiative to impose interim measures (whereas currently the FCA can only act upon a formal request). Thirdly, the FCA will have the power to impose structural remedies in case of antitrust infringement. Finally, the maximum fine for every undertaking will be 10% of their worldwide turnover: the €3 million maximum fine applicable to the associations will be removed.

* * *

Endnote

1. Decision 17-D-27 of 21 December 2017, chemical products sector.






Pierre Zelenko Tel: +33 1 56 43 56 43 / Email: [email protected] Pierre is a partner in the Competition/Antitrust practice of Linklaters in Paris, specialising in EU and French competition law. Pierre has been involved in major cartel cases such as the Euribor and Libor case or dominance cases such as the two recent ENGIE cases in the gas sector in France. He also provided merger control advice on big ticket M&A deals, such as the merger between Nestlé’s ice cream activities and those of R&R, the acquisition of International Power by GDF Suez, the acquisition of joint control between the CDC and the French Republic over La Poste and the merger between Suez and Gaz de France. Pierre teaches competition law at the French prominent business school, HEC, and at the University of Paris-Assas. He has also published books on the oil sector and on the French and European Institutions.

Jérémie Marthan Tel: +33 1 56 43 56 43 / Email: [email protected] Jérémie is Counsel in the Competition/Antitrust practice of Linklaters in Paris, specialising in EU and French competition law. Jérémie has been involved in major cartel cases both before the European Commission (such as the Euribor case) and the French Competition authority. Particular sectors where Jérémie has expertise includes: energy; infrastructures; media; and telecommunications. Jérémie also has extensive experience in complex merger control cases. Recent transactions in which Jérémie has been involved includes the recent merger between KME and MKM, which has been cleared in phase 2 without commitments. Jérémie has published various articles and academic papers in the field of competition law and is also a lecturer at the Toulouse School of Economics and at the Institut d’Etudes Politiques (“Sciences Po”) in Paris.

25 rue de Marignan, 75008 Paris, France Tel: +33 156435643 / Fax: 33 143594196 / URL: www.linklaters.com

Linklaters LLP


Germany


Germany has a long tradition of rigorously and effectively enforcing the prohibition of cartels. In 2017, the German Federal Cartel Office (FCO) uncovered and investigated a large number of different competition law infringements in many different industries. The total fines imposed in 2017 have been relatively low compared to previous years. This, however, does by no means indicate that public enforcement is declining in Germany. Quite the contrary: the FCO repeatedly announced that cartel enforcement will continue to be a top priority on its enforcement agenda.

The competition act in Germany is the Gesetz gegen Wettbewerbsbeschränkungen (Act against Restraints of Competition (ARC)), in its current version of 5 June 2017. The prohibition of cartels is contained in section 1 et seq. ARC, which prohibits all agreements, concerted practices or decisions by associations of undertakings which have as their object or effect a restriction of competition. Since 2005, section 1 et seq. ARC has been largely aligned with article 101 TFEU. Cartels are not criminalised under German law. Rather, cartels generally qualify as an administrative offence, with one important exception: bid rigging constitutes a criminal offence under section 298 of the German Criminal Code and can be sanctioned with up to five years in prison.

The FCO has published the following guidelines in respect of important aspects of public cartel enforcement, which are available on the FCO’s website (www.FCO.de) and are also available in the English language:

• Leniency Programme (Bonusregelung) – Notice No. 9/2006 which entered into force on 15 March 2006.

• Fining guidelines (Bußgeldleitlinien) which entered into force on 25 June 2013.

• De minimis guidelines (Bagatellbekanntmachung), Notice No. 18/2006 which entered into force on 13 March 2007. It should be noted insofar that the FCO’s de minimis guidelines do not apply to hardcore restrictions; however, other than the EU Commission, the FCO has not (yet) amended its de minimis guidelines following the ECJ’s Expedia judgment of 13 December 2012 in order to explicitly clarify that “by object” restrictions are not caught by the FCO’s de minimis guidelines.

The prohibitions laid down in the ARC are mainly enforced by the FCO, an independent higher federal authority assigned to the Federal Ministry of Economics and Energy. The FCO is organised into 12 operative units, the so-called “decision divisions”. Nine of these decision divisions are responsible for the application of general antitrust rules and merger control provisions in specific industries and sectors. Three decision divisions deal

Prof. Dr. Ulrich Schnelle & Dr. Volker Soyez Haver & Mailänder Partnerschaft m.b.B.



exclusively with the cross-sector prosecution of cartels and hardcore restrictions. The decision divisions are independent bodies that take their decisions without any instructions from above. The three cartel enforcement decision divisions are supported by a special unit for combatting cartels, the main purpose of which is to assist during the investigative phase, in particular in preparing and executing dawn raids.

The FCO may impose monetary fines on undertakings or individuals for wilful or negligent infringements of the prohibition to restrict competition, pursuant to section 1 ARC. Fines levied on individuals for wilful participation in a cartel may not exceed €1m. In cases of negligent infringements, the maximum fine is 500,000 euros. Not all individuals may be fined, only directors, officers and certain senior employees. However, if lower-ranking employees have committed the cartel offence and cannot be held responsible, directors or officers can be sanctioned with a fine for breaching their duty to supervise. The FCO may impose fines on undertakings of up to 10% of the worldwide (group) turnover in the most recent fiscal year. There are as yet no criminal sanctions against individuals, nor are there any disqualifications of directors resulting from sanctions for participating in cartels.

In 2013, the FCO published new fining guidelines. Under the new guidelines, the group-wide annual turnover of the company, as well as the turnover which it achieved in the cartelised market during the infringement period, is taken into consideration in the fine calculation. Hence, the size of the company and the affected “volume of commerce”, as well as the seriousness and duration of the infringement, will be crucial factors in setting the level of fine. It should be noted in this respect that the fining guidelines are not binding and that judges of the German Federal Supreme Court have publicly questioned the adequacy and legality of the new fining guidelines, in that they do not sufficiently link the level of the fine to the guilt of the undertaking concerned. It is also still possible to waive or reduce a fine if a company that participated in the infringement submits an application for leniency. A reduction of 10% of the fine can be granted for an agreement to have the proceedings terminated by settlement. When setting the fine, the FCO also takes into account the undertaking’s financial capacity. Provided that the undertaking provides sufficient evidence that it is unable to pay the fine in the short or medium term, the FCO usually offers that the fine may be paid in instalments.

Infringements of section 1 ARC become time-barred after five years. The opening of an investigation by the FCO, the EU Commission or a competition authority of another EU Member State, suspends this limitation period.

On 9 March 2017, the German Parliament adopted the 9th amendment of ARC. This act became effective on 9 June 2017. It introduces a number of changes in different areas of competition law. The majority of new provisions implement Directive 2014/104/EU through certain rules concerning private enforcement of cartel damages claims under national law (for details see below). In addition, the 9th amendment to the ARC introduces new rules on corporate liability. First, the reform establishes liability for fines for any company that had “decisive influence” over a company found guilty of a cartel infringement. This is likely to capture parent companies in most cases. Second, the liability of successor companies has been extended. This means that the legal successor of an addressee of a fine can in all cases also be held liable for the addressee’s conduct. In addition, the economic successor of the infringing entity shall be liable for the conduct. The provision on economic successors specifically aims to address restructuring cases in which the infringing business is transferred by way of an asset deal and the acquirer continues the business following the transaction. Thus, a loophole that was commonly referred to as the “sausage gap” is now closed. This

Haver & Mailänder Partnerschaft m.b.B. Germany



loophole became part of the political agenda after a sausage producer successfully escaped a fine liability through an internal corporate restructuring.

Overview of investigative powers in Germany

In order to fully investigate a suspected infringement, the FCO may use all the evidence that is generally available in criminal proceedings. In particular, the FCO may take testimonies from witnesses and accused suspects, and it may address information requests to undertakings. However, witnesses can refuse to testify to the extent that they might incriminate themselves. Accused suspects generally have the right to remain silent on the allegations that form the subject matter of the investigation, and do not have to provide any assistance or information whatsoever to the FCO. In case they do agree to be heard, they are not obliged to make accurate or complete statements. Interrogated witnesses and accused suspects must generally be instructed about their rights to remain silent/not to incriminate themselves.

The FCO may furthermore dawn raid offices and search private premises and objects. As a general rule, any such searches have to be ordered by a judge. Only in exigent circumstances may the FCO conduct these searches without a judicial warrant. In addition, the FCO may seize objects which could be of importance as evidence in the investigation, and make copies of any relevant documents. Again, a seizure order by a court is required if the material is not handed over voluntarily, and only in cases of exigent circumstances may the FCO itself order the seizure of objects or documents. The investigative powers in respect of search and seizure also apply to material in electronic form. Computers and company servers may be searched and relevant files may be copied. Also private locations, such as residences, automobiles, briefcases and persons can be searched.

If necessary, the FCO may use the coercive force as laid down in the Code of Criminal Procedure in order to enforce its investigative powers.

Accused undertakings and natural persons have a right to be heard, which comprises in particular the possibility to submit statements to the FCO. The right to be heard also encompasses a right of access to documents in the possession of the FCO. Such access to documents is, however, only granted to the lawyer of the accused suspect, not to the suspect itself. Access to the documents can be denied if the investigation has not been formally completed and if full access would endanger the objective of the investigation.

The parties have a right to legal representation throughout the entire proceedings. Whilst in theory, when conducting dawn raids, the investigators of the FCO do not have to await the arrival of the defence counsel, in practice they normally do consent to wait up to one hour.


In 2017, the FCO imposed fines amounting to approx. 66 million euros. It concluded its investigations against manufacturers of industrial batteries, harbour towage service providers and automotive part manufacturers. The authority has received 37 applications for leniency and numerous indications of possible infringements of competition law. It carried out 11 dawn raids at a total of 60 companies. In the current year 2018, several cartel proceedings were closed and new proceedings were initiated. Until the end of September 2018, the FCO has carried out seven dawn raids at 21 companies and four private residences. Fines amounting to approx. 273 million euros, among them initial fines in the proceedings against stainless steel manufacturers and technical building services, have been imposed on 17 companies and 14 private individuals.




On 12 July 2018, the FCO imposed fines totalling approx. 205 million euros on six special steel companies, a trade association and 10 individuals for concluding price-fixing agreements and exchanging competitively sensitive information. The trade association concerned has meanwhile been liquidated. Investigations into four other companies and a trade association are still ongoing. The proceeding was initiated in November 2015 with a sector-wide dawn raid following a leniency application. The companies are producers or processors and traders of special steel products. Among the products covered by the agreements are long steel products, in particular engineering steel, tool steel and high-speed steel as well as stainless steel (i.e. rust, acid and heat-resistant steel). At least from 2004 until at latest the dawn raid in November 2015, the steel producers had jointly agreed on and implemented the uniform method of calculation of the scrap and alloy surcharges for special steel products across the sector. There was also a basic agreement between the companies that the surcharges be passed on to the customers on a 1:1 basis. The investigations showed that representatives of the steel producers also exchanged information on increases in the base price, at least for engineering steel. In addition, further sensitive information was exchanged, e.g., on the current order situation, customer stock levels, capacities, production stoppages and planned price increases, which was of relevance for the companies’ competitive behaviour.

In early May 2018, the FCO imposed fines totalling 13.2 million euros on two potato and onion packaging companies for fixing prices. The proceeding was initiated in May 2013 with a sector-wide dawn raid following a leniency application. The activities of the packaging companies include the purchase of the raw product, washing, sorting, packaging and to some extent cold-storing the goods and finally selling the packed potatoes and onions primarily to the food retail sector. At least since early 2005 and until the proceedings were initiated on 7 May 2013, the persons responsible at the companies had been in regular telephone contact with one another. In their telephone calls the company representatives informed one another of their purchase prices for potatoes and onions (so-called “raw product prices”) and agreed to use the same raw product price both for potatoes and onions as the basis for their internal calculations of offer prices. In addition, they agreed to apply the same or approximately the same amounts for other cost items in their internal offer price calculations. The proceedings against other potato and onion packaging companies suspected of price-fixing in their supply to food retailers were terminated for discretionary reasons.

As part of the cooperation within the network of European Competition Authorities (ECN), the FCO has referred its ongoing cartel proceeding concerning metal packaging to the European Commission. The FCO is no longer continuing the national investigation proceeding which it initiated in spring 2015 against several metal packaging manufacturers while the European Commission has initiated its own formal cartel proceeding on the suspicion that the manufacturers have violated European competition law (Article 101 TFEU).

The FCO had initiated an investigation proceeding under competition law against a number of metal packaging manufacturers on the basis of an anonymous tip-off. The tip-off raised the suspicion that national and European competition law provisions had been violated over several years on the respective markets in Germany. From March 2015, the FCO had therefore conducted a number of dawn raids at different production sites of metal packaging manufacturers, including manufacturers of cans made of tin plate and aluminium for filling with foodstuffs or chemical-technical substances and manufacturers of vacuum seals for jars. Subsequently, there was increasing evidence that the alleged offences were not limited to German markets but also affected a number of other EU Member States.




On 18 December 2017, the FCO imposed fines amounting to approx. 13 million euros on three harbour towage service providers. The investigations had shown that at least between 2002 and 2013, the harbour towage companies divided orders and turnover earned from several German harbours among themselves. The companies set quotas based on turnover which they used to allocate orders between them. The quotas were set in 2000/2001 after Dutch harbour towage companies had started operating on the Elbe and Weser rivers. All the major towage companies in the respective harbours had participated in the quota allocation. As Dutch companies were also involved in the cartel, the FCO cooperated closely with the Dutch Authority for Consumers and Markets in this case. Harbour tugs are relatively small, very manoeuvrable boats with powerful engines, which in a harbour tow larger vessels to their berth and out of the harbour again. The customers of these services are the shipping companies that use the respective harbours, in particular the liner shipping companies. Fines are generally calculated according to the gravity and duration of the infringement. In this particular case, in addition to the small geographical market, the powerful position of the opposite market side, in particular the liner shipping companies, was taken into consideration in the companies’ favour. In setting the fine the FCO also took into account that the three companies fined had cooperated with the authority within the scope of its leniency programme and had each concluded a settlement with the authority.

In late 2017, the FCO prohibited CTS Eventim the use of exclusive contracts which it had concluded with organisers of live entertainment events and advance booking offices. CTS Eventim is known particularly for its ticket online shop “eventim.de”. The company also provides ticketing services for event organisers and advance booking offices, and organises events itself, especially rock/pop tours and festivals. The clauses in question stipulated that the contracting parties may only sell tickets exclusively or to a considerable extent via CTS’s “eventim.net” ticket sales system. The FCO regarded these contractual agreements as an abuse of market power under competition law and has now ordered CTS Eventim to amend its contracts within four months. 60–70% of all tickets which are distributed via ticketing systems in Germany are sold through CTS Eventim’s system. The other ticketing system providers are significantly smaller, operate mainly regionally and sometimes depend on cooperations with CTS. As the operator of the largest ticketing system in Germany, CTS Eventim holds a dominant position in the market and by demanding from its contract partners to sell tickets exclusively via its own ticketing system, the company abuses its market power to the detriment of competition. According to the requirements set by the FCO, CTS Eventim’s contract partners must have the possibility in future to sell at least 20% of their annual ticket volume at their own discretion via third party ticketing systems, provided that the contracts are for longer than two years or unlimited.


There does not seem to exist any particular enforcement priorities for the FCO. Rather, the FCO’s most recent activities seem to reflect an overall balanced approach which equally tackles different types of infringements.

The FCO has sanctioned various types of horizontal anti-competitive arrangements including price-fixing cartels, customer/market allocation schemes, bid rigging, and the exchange of commercially sensitive information. As regards the latter, somewhat disappointingly, the FCO seems to increasingly employ the concept of “exchange of commercially sensitive information” as a fall-back argument in case it cannot prove the existence of an agreement or concerted action. This is even more worrying, given that the FCO generally considers




exchanges of commercial information to imply anti-competitive purposes, and thus shifts the burden of proof towards the undertakings involved in any such information exchange. This seems problematic not just from an in dubio/fair trial perspective; it has also led to significant legal uncertainty for companies.


As in many other jurisdictions, the FCO does not operate with different bodies for the investigation and decision of its cases, respectively. Rather, the same decision body that investigates a potential competition law infringement is also competent to decide the case and – where applicable – to impose administrative fines. Here lies a significant structural shortcoming in the public enforcement proceedings, the downsides of which can be observed in many cases. Even though in theory the FCO is obliged to conduct its investigations in an unbiased and objective manner, in practice the FCO officials who decide to open an investigation do show a strong commitment to close any such case with a decision finding a competition law infringement.

The only type of “peer review” that exists is a review by the FCO’s litigation division. Such review, however, only focuses on whether or not the envisaged decision would stand in court. It does not, in turn, question the quality or completeness of the investigative process, or the evidence on which the decision is based.

The FCO does not have to investigate or decide cases in a specific time frame. Rather, the length and depth of an investigation can be adapted to the individual circumstances of the case. In practice, this can lead to lengthy proceedings which can easily go on for several years. On average, investigations by the FCO take some 20 months between the first investigative measure and the final decision.

German law protects correspondence with defence counsel from seizure and review by the FCO. However, the law only protects correspondence between an outside counsel and his client that directly relates to the investigation at hand and which was created after the opening of the proceeding. All correspondence dating from before the opening of the proceeding is not protected, and nor is internal correspondence by in-house counsel, regardless of when it was created. In order to obtain access to non-privileged documentary evidence, the FCO has in the past even dawn-raided law firms.

In general, any investigative measures undertaken by the FCO can be appealed by the companies concerned. The competent court for hearing any such appeals is the local court in Bonn, the seat of the FCO. In practice, however, appealing investigative measures undertaken by the FCO is normally in vain. The local court in Bonn has conceded to the FCO broad discretionary powers when it comes to determining whether and how to investigate a given case.

As mentioned above, some investigative measures – such as dawn raids – require prior approval by the local court in Bonn, which is normally granted if the FCO can substantiate that the respective investigative measure might yield relevant evidence in relation to a suspected competition law infringement. The standards of substantiation that the FCO must meet in its application for the relevant court warrant are rather low.


The FCO operates a leniency programme broadly similar to the one used by the EU-Commission. The leniency notice is available also in English on the FCO’s webpage




(www.bundeskartellamt.de). The notice sets out the conditions for immunity from, or reduction of, fines for leniency applicants in cartel procedures. The conditions for full immunity differ depending on whether the FCO already has sufficient knowledge of a cartel. A leniency applicant is guaranteed full immunity if it reports a cartel to the FCO of which the latter had no prior knowledge, provided that the applicant submits sufficient information and evidence that enables the FCO to obtain a search warrant. If the FCO already has sufficient evidence at its disposal to obtain a search warrant, it will grant immunity from a fine to the first applicant, unless the available evidence already allows the FCO to prove its case, and provided that no other cartel participant has received full immunity under the first alternative. Full immunity is not available for undertakings that were the ringleaders of the cartel, or that have coerced others to participate in the cartel. Full immunity always requires that the applicant cooperates fully and on a continuous basis with the FCO.

Cartel participants who are not eligible for full immunity may still obtain a significant reduction of the fine by up to 50%, provided that they provide the FCO with verbal or written information and, where available, evidence that represents a significant contribution to proving the offence, and provided that the applicant cooperates fully and on a continuous basis with the FCO. The amount of the reduction will be based on the value of the contributions to uncovering and proving the infringement and the sequence of the applications.

A cartel participant can contact the head of the special unit for combatting cartels or the chairman of the competent decision division to declare his willingness to cooperate (marker). The marker can be placed verbally or in writing, in German or English. The timing of the placement of the marker determines the rank of the application. If the FCO accepts an application in English, the applicant is obliged to provide a written German translation without undue delay. A leniency application filed by an undertaking is also considered by the FCO as one made on behalf of individuals participating in the cartel as current or former employees of the undertaking. Joint applications by cartel participants are inadmissible.

The FCO asks for basic information on the cartel when the marker is placed, such as the type and duration of the infringement, the product and geographic markets affected, and the identity of those involved. The FCO also asks for clarification as to whether and – where applicable – with which other competition authorities leniency applications have been, or are intended to be filed. Upon placement of the marker, the FCO grants a time period of up to eight weeks within which a full leniency application has to be submitted.

The FCO confirms in writing that a marker has been placed and that a leniency application has been submitted, including date and time of receipt. In case of an application for full immunity where the FCO does not have sufficient evidence to obtain a search warrant, the FCO will confirm that the applicant will be granted full immunity, provided that the applicant continues to fully cooperate with the FCO. In all other cases, the FCO will inform the applicant of his provisional position in the ranking order and that he is in principle eligible for immunity or a reduction. A final decision as to whether a possible reduction in the fine will be granted and – where applicable – to what extent, will only be taken by the FCO at the very end of the investigative phase, i.e. once the FCO is in a position to evaluate the received input in view of the established infringement.

The FCO endeavours to assure the confidentiality of the process and will seek to avoid revealing the identity of leniency applicants. However, once the FCO issues a statement of objections, the addressees of such statements of objections have the right to fully access the case file, including all confidential information, and in particular all and any leniency




applications. If the FCO has to rely on statements of a leniency applicant as evidence to prove its case, it also has to disclose the identity of the leniency applicant in its decision.

As mentioned before, leniency applicants must cooperate fully and continuously with the FCO. Unless requested otherwise by the FCO, they must end their involvement in the infringement immediately, and they must hand over to the FCO all information and evidence available to them. They must also name all the current and former employees involved in the cartel agreement, and take the necessary measures that all employees, from whom information and evidence can be requested, cooperate fully and on a continuous basis with the FCO during the proceedings. Leniency applicants are also required to keep their leniency application confidential.


In recent years, an informal practice has evolved that provides a possibility for companies under investigation to enter into a settlement with the FCO. However, other than the EU Commission, the FCO has not published formal settlement guidelines. Even though there is no formal settlement procedure in place, there are a number of general principles that govern the settlement process. A settlement requires in the first place a guilty plea on the part of the undertaking that wishes to settle the case. In return, the FCO grants a reduction of a potential fine of up to 10%, in addition to any reductions granted under the leniency notice. The companies concerned usually also waive their rights for complete access to the file and for a complete statement of objections. However, the Federal Court of Justice has held that a waiver to appeal the final decision by the FCO may never be a part of a settlement agreement. The final decision of the FCO in settlement cases would normally only contain a short summary of the relevant facts, which makes it more difficult for third parties to extract from the decision any information that may be relevant for the preparation of follow-on actions. Settlements are always individual in character. Nothing prevents the FCO from settling a case with one company but ending settlement discussions with another. The FCO is principally bound by the settlement, unless new facts arise ex post which would justify re-opening the case.


Complaints can be lodged by anyone in any form: orally; by fax; email; phone; or in writing. There are no legal requirements for lodging a complaint, as it is only regarded as an incitement for the FCO to open a formal proceeding. Even anonymous complaints are acceptable. However, in practice, a complaint is unlikely to trigger an investigation if it lacks details and exact determinations regarding the alleged infringement. Thus a written complaint, with enclosed copies of all documents/files with potential relevance, increases the chances of success significantly.

The FCO is not obliged to take action on each complaint that it receives. Rather, it has wide discretionary powers in this respect. It is only required to exercise the said power in an objective, thorough and dutiful manner.

In June 2012, the FCO launched an online whistleblower system which allowed it to receive anonymous tip-offs of cartel law infringements. The system guaranteed the anonymity of informers, while still allowing for continual reciprocal communication with FCO investigators via a secure electronic mailbox. The FCO’s new whistleblowing hotline has been criticised for lacking a sound legal basis, and for incentivising false accusations by competitors, customers or even frustrated employees.




Penalties and sanctions

Infringements of competition law can be sanctioned with administrative fines of up to 10% of the total group turnover. In contrast to European law, according to a February 2013 court order issued by the German Federal Court of Justice, this 10% limit is not a cap but, interpreting it in conformity with German constitutional law, the upper limit of the fining range. As a reaction to this judgment by the German Federal Court, the FCO has issued the new fining guidelines of June 2013, which have been dealt with in detail above.

An issue which is, to a certain extent still open at the moment, is the issue of liability of parent companies to their subsidiaries’ infringement of cartel rules. Even though it seems to be generally accepted that a parent is liable for violations by a wholly owned subsidiary, the courts still have to deal with individual aspects, in particular with respect to 50:50 joint ventures, and on the precise reconciliation of the European notion of an “undertaking” which, in this field, is still foreign to the German substantive and procedural rules to law.

Right of appeal against FCO decisions

Decisions of the FCO can be appealed before the Higher Regional Court in Düsseldorf, which is exclusively competent. An appeal against a decision imposing a fine produces suspensory effects. During the appeal procedure, it is possible to introduce new facts and evidence. In general, the court is also open to the introduction of economic expert evidence, whilst in some cases the court has claimed sufficient knowledge to assess important economic aspects of the case on its own.

Given that the Higher Regional Court in Düsseldorf is exclusively competent for hearing appeals against decisions by the FCO, the court is highly specialised and its decisions reflect profound competition law knowledge and expertise. Whilst the appeal procedure is generally highly effective and straightforward, it can also entail significant efforts and costs for the parties involved. In a recent case (Flüssiggas, LPG), the oral hearing before the Higher Regional Court in Düsseldorf took almost three years, and more than 130 sessions.

The Higher Regional Court in Düsseldorf is, in practice, not shy in overturning or rectifying FCO decisions. In a ruling of 26 June 2009 in relation to the cement cartel case, for instance, the court reduced the FCO’s original fine of €660m to €328.5m. On the other hand, the court is also entitled to increase the level of the fine, and has not hesitated to do so. In the LPG-case mentioned above, the court increased some of the fines that were originally imposed by the FCO by 80%. It should be noted, however, that the legality of such reformatio in peius is highly questionable. However, the Higher Regional Court in Düsseldorf, in essentially all cases in the last two to three years, has increased the fines as compared to the fines issued by the FCO.

Under certain circumstances, the decisions of the Higher Regional Court in Düsseldorf can be appealed – confined to points of law – before the German Federal Court of Justice. The long duration of the appeal proceedings before the Higher Regional Court in Düsseldorf, and the “openness” of the decisions, have largely contributed to the significant increase in settlement proceedings before the FCO.

Criminal sanctions

Cartels are not criminalised under German law. Rather, cartels generally qualify as an administrative offence, with one important exception: bid rigging constitutes a criminal offence under section 298 of the German Criminal Code and can be sanctioned with up to five years in prison.




Cross-border issues

The FCO traditionally cooperates rather closely with US and ECN authorities. It is to a certain extent remarkable that this cooperation has not yet triggered major complaints by undertakings in cartel cases. On the other hand, there are no noteworthy examples of cartels of an international character sanctioned by the FCO.


In June 2017, the 9th amendment to the ARC entered into force and implemented the EU cartel damages Directive 2014/104/EU. The following changes are of particular relevance: firstly, it is now presumed that a cartel infringement leads to damages. However, the cartel defendant has the right to rebut this presumption. Secondly, it is now expressly stipulated that the defendant (cartel member) may invoke the passing-on defence against (direct) customers. For the benefit of any claimant that is an indirect purchaser, there is a rebuttable presumption that the damage was passed on. Thirdly, for (potential) claimants, as well as for defendants, the new law provides tools to require the other party to disclose some of its internal information or documents. Third parties can also be required to disclose certain evidence. The claim is, however, limited by the principle of proportionality. Also, leniency applications and settlement documents are not captured by the disclosure provisions. Fourthly, whereas leniency applicants thus far only benefited in relation to the imposition of fines, applicants will now also benefit from restricted civil damages liability. In this regard, they only have to compensate for damages incurred by their direct or indirect purchasers. In relation to other damaged parties, leniency applicants are liable only if these parties cannot obtain full compensation from the other cartelist. Fifthly, the 9th amendment also intends to make settlements more attractive. The settlement of one cartel member with a damaged party will now prevent not only the damaged party from bringing further claims concerning the damage caused, but will also prevent the other cartel members from recourse in terms of their contribution claims regarding damages covered by the settlement. Consequently, the liability of the other cartel members is reduced by the damage caused by a settling cartel member. Sixthly, the regular limitation period for cartel damages claims is extended from three to five years after the end of the year in which the claim arose and the claimant gained knowledge. Seventhly, in Germany, the losing party generally bears all court costs, including those incurred by the counterparty. This approach led in the past to a relatively high financial risk exposure, given the fact that often participating cartel members join the defendant (third-party intervention). Thus, the imminent costs of bringing a claim are often unforeseeable for the claimant. To reduce this risk, the reform introduces a limitation: a claimant is now only liable for the cost of one additional intervening third party.

On 12 July 2016, the German Federal Court of Justice delivered its judgment in the Lottoblock II case. With this judgment the court has further clarified the scope of the binding effect of decisions by the competition authorities, as well as the requirements for subsequent follow-on actions. The underlying case concerned a follow-on action in a boycott/refusal to deal case. The defendants had on one single occasion taken the joint decision not to deal with the claimant in the future. This decision was later on found to be in violation of the applicable German and European competition rules. The claimant lodged an action for damages in respect of the lucrum cessans that it had allegedly suffered as a result of the boycott. In the first place, the German Federal Court of Justice held that the binding effect of a competition authority’s decision is not confined to the operative provisions of the decision but rather also comprises the factual and legal findings contained in the body of




the decision. The court then clarified that the mere existence of a prohibition decision does not as such in every single case imply that the infringement had actually been put in practice and executed for a certain time period. The court recalled in this respect that under the applicable laws, a prohibition decision could even be issued in order to prevent a future restriction of competition.

However, the German Federal Court of Justice held that there exists a general legal presumption that anti-competitive agreements which are aimed at permanently restricting competition and are indeed executed by the cartelists for as long as the cartelists do not take action which clearly evidences that they stopped acting in line with the cartel arrangement. On this basis, the court rejected the defendants’ argument that the single agreement not to deal with the claimant had ceased at the latest on the day when the German cartel office issued its prohibition decision. Rather, the court found that the mere issuance of the prohibition decision was not sufficient to assume that the joint boycott had indeed stopped. In order to rebut the legal presumption that the anti-competitive boycott was permanently executed, the defendants would rather have been required to explicitly and undoubtedly distance themselves from the cartel arrangement, which had not happened in the case at stake. The practical relevance and importance of this judgment cannot be overestimated. It basically opens the door widely for the recovery of so-called “post cartel” damages claims. Whereas until today the general view had been that cartel infringements and their respective anti-competitive effects would normally cease on the day of the dawn raids and that cartel damages claims going beyond this point of time would be limited to a rather short “cartel shadow” period, this will no longer apply in the future. Rather, claimants will in the future regularly be able to recover damages also for longer time periods after the cartel activity has ceased.

A common misunderstanding is that actions for declaratory judgments in the context of private competition litigation are not possible in Germany. In practice, this misunderstanding has led in many cases to actions being brought before the courts of other EU Member States (in particular, in The Netherlands) notwithstanding the fact that the case had its closest links to Germany, and even German substantive law was applicable.

In its judgment of 9 November 2016, the Higher Regional Court of Karlsruhe has – in line with a number of earlier judgments by other regional and higher regional courts – made clear that actions for declaratory judgments are very well admissible in private competition litigation – and not only in exceptional cases but rather as a general rule. The claimants in this case sought a declaratory judgment from the court finding that the members of a cartel in respect of ready-mix concrete were jointly and severally liable for compensating the claimant for all losses resulting from the cartel. The defendants argued that such action for a declaratory judgment was inadmissible in view of the German law principle that actions for declaratory judgments are only possible where the claimant is unable to bring an action for (specific) damages (principle of primacy of damages actions). The defendants alleged that the claimant was very well in a position to calculate/estimate its losses so that it would be obliged to bring a proper damages action. The Karlsruhe court, however, rejected the defendants’ argument. It held that the claimant did not have sufficient knowledge from the publicly available information which would allow it to determine the precise scope of its damage, nor to provide the court with sufficient information in order to allow it to estimate the damage according to section 287 German Code of Civil Procedure. In the court’s view, the claimant would have had to conduct extensive investigations, or to engage economic experts in order to obtain sufficient information for the determination of its damages, and




that requiring claimants to do so would illegitimately undermine their protection under the civil law system.

In more general terms, the court then continued by saying that – irrespective of the individual circumstances of the case at stake – one must not apply too strict standards when assessing the admissibility of actions for declaratory judgments in private competition litigation. In line with the jurisprudence of the German Federal Court of Justice in unfair competition cases, claimants should be entitled to bring actions for declaratory judgments if they can substantiate that they have been affected by anti-competitive behaviour “with a certain likelihood”.

Secondly, the court found that cartels presumably produce their anti-competitive effects during a period of at least one year after the infringement ceased. This finding is in line with the Federal Supreme Court’s judgment of July 2016 in which the Federal Supreme Court found that there existed no presumption whatsoever that the opening of a cartel investigation or even a prohibition/fining decision would automatically eliminate all anti-competitive effects. Whereas the Supreme Court found, however, that the anti-competitive effects would normally persist as long as the cartelists have not pro-actively returned to normal competition, the Higher Regional Court of Karlsruhe applied a more conservative approach in that it deems the “cartel shadow effect” to be generally limited to one to two years.

Thirdly, according to the Higher Regional Court of Karlsruhe, a general presumption for umbrella effects exists. The court argued insofar that under normal competitive conditions, companies would always set their prices in relation to their competitors’ prices. Only under unusual circumstances – for which the defendants would bear the burden of proof – exceptions from this general rule are conceivable.

Fourthly, in respect of the passing-on defence, the court confirmed prior jurisprudence by other German courts according to which a defendant must meet very high standards if it wishes to raise a passing-on defence successfully. The court emphasised in this respect that the defendant has to substantiate and prove all relevant market parameters such as, in particular, demand elasticity, price developments, and product specifications in order to show that the passing-on of the cartel overcharge is more than just a hypothetical theory but rather a likely scenario. But that’s not all: the defendants are also required to show that the passing-on of the cartel overcharge has not resulted in other types of damages for the direct purchasers, such as, for instance, volume effects.

Fifthly, the court took the view (and insofar contradicted the Higher Regional Court of Düsseldorf) that a mere competition authority’s press release does normally not suffice in order to convey “sufficient knowledge” so that the subjective, at that time still applicable, three-year limitation period would start upon publication of such press release. Rather, sufficient knowledge generally requires, in the court’s view, access to the file. Hence, only if the claimant has not taken the appropriate measures in order to be granted access to the file within a reasonable time frame, can it be deemed to “ought to have” sufficient knowledge which would trigger the start of the knowledge-based three-year limitation period.

On 12 June 2018, the Federal Court of Justice rendered a landmark judgment with respect to the statute of limitations of cartel damages claims (Grey Cement II). The Court ruled, in deciding controversies among various Higher Regional Courts, that the rules on the tolling of the statute of limitations by investigations of the EU Commission or any national competition authority, which were introduced on 1 July 2015 would also apply to any and all claims which had come into existence before that date. This judgment is in favour of




plaintiffs since in this way quite a number of claims which had come into existence in many larger cartels, in particular in the trucks cartel, may still be successfully brought.

Reform proposals

Given that the most recent reform of the GWB became effective only a few months ago, there are currently no reform proposals on the table which have any reasonable chance of being pursued in the imminent future. In this context, it is worth mentioning that the legislator did not follow certain proposals, in particular those which advocated the non-application of competition law to certain fields of business such as public broadcast.

The efforts of both the FCO and the Ministry for a 10th amendment of the GWB focus on the law against abuse of a dominant position in the market. The idea of certain expert reports is to strengthen the position of the FCO and of counts with respect to strong internet companies.






Prof. Dr. Ulrich Schnelle Tel: +49 711 227 4427 / Email: [email protected] Ulrich Schnelle is a partner in the Stuttgart Office of Haver & Mailänder and head of the practice group for competition, public procurement and state aid law. He specialises in EU and German Competition Law and has extensive experience in defending companies in cartel investigations before the EU Commission and the German Federal Cartel Office. Another focus of his work is the practice in cartel damages actions. He also advises clients on merger control issues and has particular expertise in cases of abuse of a dominant position. A further field of activity is his advice to clients seeking to cooperate with competitors or with suppliers and/or customers in horizontal or vertical contractual relationships. Ulrich Schnelle graduated from the University of Freiburg in 1992, obtained his doctoral degree there in 1992 and was admitted to the Bar in the same year. He is an alumnus of the University of Geneva, the University of Illinois (LL.M.) and the University of Passau as well as Freiburg.

Dr. Volker Soyez Tel: +32 263 947 15 / Email: [email protected] Volker Soyez is a partner in the Brussels Office of Haver & Mailänder. He specialises in EU and German competition law and has extensive experience in defending companies in cartel investigations before the EU-Commission and the German Federal Cartel Office. A particular focus of Dr. Soyez’ practice is cartel damages actions. He has represented claimants in various cases, e.g., “elevators”, “coffee roasters”, and “fire trucks”. Dr. Soyez is the founder and member of the Editorial Board of Global Competition Litigation Review. Another area of particular expertise of Dr. Soyez is competition law compliance. He heads the working group “antitrust compliance” in the German Compliance Association. Dr. Soyez graduated from Frankfurt University in 2000, obtained his Ph.D. in 2002, and was admitted to the Bar in 2002. He is an alumnus of Université de Fribourg and Universidad Complutense de Madrid.

Lenzhalde 83–85, 70192 Stuttgart, Germany Tel: +49 711 22744-0 / Fax: +49 711 299 1935 / URL: www.haver-mailaender.de

Haver & Mailänder Partnerschaft m.b.B.


India


Competition law in India is governed by the Competition Act, 2002 (Competition Act) and related rules and regulations. The Competition Act aims to prevent anti-competitive practices, promote and sustain competition, protect interests of the consumers and ensure freedom of trade in markets.

The Competition Commission of India (CCI) is the statutory authority entrusted with the enforcement of the Competition Act. The National Company Law Appellate Tribunal (NCLAT) is the appellate authority, with a further appeal lying to the Supreme Court of India (Supreme Court). In certain circumstances, the CCI’s orders may also be challenged before the High Courts.

Law relating to cartels under the Competition Act

Section 3 of the Competition Act prohibits anti-competitive agreements which cause or are likely to cause an appreciable adverse effect on competition (AAEC) in India. Such agreements include horizontal agreements between competitors, including cartels. The Competition Act defines the term “cartel” to include an association of producers, sellers, distributors, traders or service providers who, by agreement amongst themselves, limit, control or attempt to control the production, distribution, sale or price of, or trade in goods or provision of services.

There are four categories of horizontal agreements prohibited under Section 3; these are agreements which:

(i) directly or indirectly determine purchase or sale prices;

(ii) limit or control production, supply, markets, technical development, investment or the provision of services;

(iii) share the market or source of production or provision of services by way of allocation of the geographical area of the market, type of goods or services, or number of customers in the market or in any other similar way; or

(iv) directly or indirectly result in bid rigging or collusive bidding.

The term “agreement” is broadly defined under the Competition Act. The CCI has stated that even a “nod or a wink” is sufficient to establish the existence of an agreement. Since the nature of penalties imposed under the Competition Act are administrative rather than criminal, the CCI applies a lower standard of proof than that of “beyond reasonable doubt” as required in criminal cases. The CCI and the NCLAT’s current position, re-affirmed by the Supreme Court in (Rajasthan Cylinders1) is that the standard of proof is “preponderance of probability”.

Naval Satarawala Chopra, Manika Brar & Nitika Dwivedi Shardul Amarchand Mangaldas & Co.



Once a horizontal agreement under Section 3 of the Competition Act has been established, a presumption that this has an AAEC is triggered.

The presumption of an AAEC is rebuttable, and parties to the agreement have the opportunity to prove that their agreement does not have an AAEC. However, the shifting of the burden of proof on to the defendants remains an important weapon in the CCI’s anti-cartel armoury.

In determining whether an agreement causes an AAEC in India, the CCI is required to consider a number of “negative” and “positive” factors listed under Section 19(3) of the Competition Act. The “negative” factors are: (i) the creation of barriers to entry; (ii) driving existing competitors out of the market; and (iii) foreclosing competition by hindering entry into the market. The “positive” factors are: (i) accrual of benefits to customers; (ii) improvement in production or distribution; and (iii) promotion of technical, scientific and economic development.

Treatment of joint ventures under the Competition Act

Under the Competition Act, the presumption of an AAEC for horizontal agreements does not apply to “any agreement entered into by way of joint ventures if such agreement increases efficiency in production, supply, distribution, storage, acquisition or control of goods or provision of services”. The onus to prove that the joint venture agreement is efficiency enhancing lies on the parties to such an agreement.

Overview of the investigation process before the CCI

An investigation into alleged anti-competitive conduct can be initiated by the CCI either: (i) on its own motion (suo moto); (ii) on the basis of a complaint (known as an “Information”) filed by any party; or (iii) following a reference from the government, or a statutory authority. Cartel investigations can also be initiated pursuant to a leniency application where the CCI typically treats the case as a suo moto investigation (the leniency regime in India is discussed separately below).

If, on the basis of the evidence available before it, the CCI forms a prima facie view that a contravention of the Competition Act has taken place, it will order a detailed investigation into the matter through its independent investigative wing, the office of the Director General (DG). In the absence of a prima facie case being made out, the CCI will close the case at this threshold stage.

On receipt of a direction from the CCI to investigate a case, the DG must conduct the investigation in a time-bound manner and submit a report to the CCI containing its findings on the allegations (DG’s Report). The DG typically conducts an in-depth and invasive investigation, including, if necessary, issuing summons to individuals to record their statement on oath and conducting cross examinations, and search and seizure operations. The Competition Act provides for penalties for failure to comply with the directions of the DG and for non-furnishing of information.

Upon receipt and analysis of the DG’s Report, the CCI can either dismiss the allegations against the parties or forward the DG’s Report to the parties concerned, giving them an opportunity to respond to the DG. Upon receiving a response from the parties/statutory authority, the CCI conducts oral hearings. If the CCI is not satisfied with the DG’s Report, it may conduct its own inquiry or may require the DG to conduct further investigation before forwarding the final Report to the parties.

Once oral hearings in the matter are concluded, the CCI must, as far as practicable, pass its decision in the matter within 21 days of the date of final arguments. However, this is rarely adhered to in practice, and the CCI often takes much longer in issuing its final orders.

Shardul Amarchand Mangaldas & Co. India



Sanctions imposed by the CCI

There are no criminal sanctions for a cartel violation under the Competition Act. However, the CCI is empowered to impose remedies and/or monetary penalties. If the CCI concludes that an agreement is in breach of Section 3 of the Competition Act, it can pass any or all of the following orders:

(a) direct the parties involved to discontinue and not re-enter into an anti-competitive agreement – a “cease and desist” direction;

(b) impose a penalty of up to 10% of the average turnover of the contravening enterprise for the three preceding financial years. Where the CCI finds a cartel it may, alternatively, impose a penalty of up to three times the cartel participant’s profits, or 10% of its turnover, for each year of the continuance of the cartel, whichever is higher;

(c) direct the modification of the terms/clauses of an anti-competitive agreement;

(d) direct the enterprises to abide by the directions of the CCI, including payment of costs; and/or

(e) pass any other order or direction, as the CCI may deem fit.

Contravention of the orders of the CCI can lead to further penalties extending up to a penalty of INR 100 million (approximately USD 1.3 million). The CCI may also file a criminal complaint for a contravention of its orders, or for failure to pay a fine, which could result in imprisonment for up to three years, or a fine which could extend to INR 250 million (approximately USD 3.5 million).

Personal liability for contraventions by a company

Individuals can also be investigated for cartel infringements in India. Where a company has contravened the provisions of the Competition Act, every person who at the time of the contravention was in charge of and was responsible to the company for the conduct of the business of the company, shall be deemed to be guilty and punished accordingly. However, such a person will not be liable to any punishment if he or she proves that the contravention was committed without his or her knowledge or that he or she had exercised all due diligence to prevent the commission of such contravention. In addition, where the contravention is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such persons, shall also be deemed to be guilty of the contravention and be punished accordingly.

Overview of investigative powers in India

As explained previously, the CCI can initiate an investigation either on its own motion, or on the basis of a complaint. To investigate such cases, the CCI has been vested with wide powers of investigation, equal to those of a civil court, includes powers of summoning and enforcing the attendance of any person and examining them on oath, requiring the discovery and production of documents, receiving evidence by way of an affidavit, issuing commissions for the examination of witnesses or documents and requisitioning any public record or document, or copy of a public record or document from any office. These powers have also been vested in the CCI’s investigative arm, the DG.

Expansive scope of investigation

Under the Competition Act, the DG’s investigation is circumscribed by the prima facie order of the CCI which directs it to investigate a case. However, the CCI words its orders flexibly, to enable the DG to conduct more thorough investigations. In practice, the DG often




conducts investigations into the role of other companies (including those not initially identified) or extended time periods, before arriving at a final recommendation. This approach has also been upheld in a recent decision of the Delhi High Court in Cadila Healthcare.2

Use of electronic evidence during investigation

During the investigation, the DG has not shied away from exercising the whole range of the powers with which it has been vested. In addition to sending requests for detailed information around economic parameters (such as cost, production, pricing, and dispatch) the DG has also sought and relied upon email records, telephone records obtained from telecom providers, travel logs, expense claims and credit card/bank statements.

Additionally, email and other electronic evidence are now being analysed in a systematic manner with specialised software to allow the CCI and the DG to sieve through large amounts of data. The CCI has also used forensic experts and is in the process of setting up an advanced in-house forensic and cyber laboratory. Through these efforts, detection of both traditional and digital avenues of collusion is expected to improve.

Summons and depositions of individuals

As mentioned above, the CCI and the DG have the power to obtain statements from individuals on oath. Summons are typically issued by the DG to the key officials of the alleged cartel participants and third parties. The DG also reaches out to both Indian as well as overseas officers of international companies, including both present and former employees. Attempts to delay responding to summons, as with other acts of non-cooperation with the investigation, has attracted penalties.

In 2018, the Delhi High Court’s decision in Oriental Rubber Industries Case3 provided clarity on the hotly contested issue of the right of counsel during a deposition by the DG. Previously, the DG had adopted the position that the person whose statement was being recorded did not have the right to have a counsel present during the deposition. However, the Delhi High Court has affirmed that the consequences of an investigation by the DG are so far reaching and drastic, that the right to be accompanied by an advocate cannot be taken away. However, the High Court has also prescribed certain limitations on this right, such as ensuring that the counsel sits at some distance from the person being examined, keeping in mind the need to protect the efficacy of the investigations. In practice, the DG has permitted counsel to be present only as a witness and has not even allowed note-taking during the deposition.

Sanctions for non-cooperation with the investigation

The CCI can impose a penalty under Section 43 of the Competition Act for failure to comply (without reasonable cause) with the directions of the CCI or the DG. Such a penalty can extend to INR 100,000 (approximately USD 1400) for each day during which such failure continues, subject to a maximum of INR 10 million (approximately USD 1,40,000).

Dawn Raids

Under Section 41 of the Competition Act, the DG has the power to carry out unannounced visits of an enterprise, with the prior authorisation of the Chief Metropolitan Magistrate, New Delhi. The power to conduct unannounced dawn raid can be invoked if there are reasonable grounds to believe that the books and papers which are useful for evidentiary purposes may be destroyed or the parties are not cooperating with the investigation. During a dawn raid, the DG may use reasonable force to access premises, direct production of documents, search for information, examine documents, seize originals or take copies of




devices and documents, seal business premises, and obtain books or records, and summon witnesses on oath.


Despite being a relatively young authority, the CCI has always been active in the investigation and prosecution of cartels as well as other contraventions of the Competition Act. In 2018, the CCI passed 24 decisions on cartels. Of these, the CCI found an infringement in nine cases, with no infringement in one case. Further, in two cases the CCI closed the investigation, and in 10 cases the CCI did not find a prima facie violation. It is not clear how many cartel investigations are ongoing as the prima facie orders in cartel cases are confidential and not published on the CCI website.

Penalties

In terms of penalties, the CCI has adopted the approach of Excel Crop Care and has been levying them on the basis of the relevant turnover of the infringing enterprise, after a careful consideration of the aggravating and mitigating circumstances. The total penalties imposed by the CCI on enterprises found to be cartelising in 2018 was INR 568.81 crores (approximately USD 85.52 million) with the highest individual fine of INR 38 crores (approximately USD 53.69 million).4 In all of the six leniency decisions of the CCI, the penalties were further reduced for the parties who made successful leniency applications.

Detection of cartels

In the early years, the CCI’s detection of cartels was heavily reliant on complaints received from private parties, or government references relating to bid rigging in public procurement. Whilst these were good avenues to begin developing the law on cartel enforcement, the CCI did not have much success during its early years in detecting secretive cartels. In the last year or so, the CCI has used leniency as the basis of detecting cartels. Of the nine cases where the CCI found an infringement, in six cases the CCI discovered a cartel through the parties having approached the CCI under leniency provisions of the Competition Act.

The CCI has also increased its advocacy efforts, in an effort to increase awareness in the industry. The CCI is actively considering conducting market surveys and studies,5 undertaken by third parties to identify structural and behavioural screens to aid detection of cartels which will help it to initiate ex officio or suo motu investigations. The use of screens has guided the CCI’s decision-making process in a majority of its orders, and the CCI has relied upon screens (such as the level of concentration in the market, the presence of trade associations or an abnormal increase in profits) in nearly 80% of the cartel cases.6

There has been a strong attempt to encourage whistleblowers to come forward and reveal the existence of cartels. The CCI has introduced a module on its website to encourage individuals to submit complaints anonymously. To prevent tracing of the source of the complaint, the CCI has also advised individuals to avoid using company computers or the intranet to submit complaints. This is expected to encourage employees to come forth anonymously to disclose cartels in which enterprises may be involved. However, there is no data available on the number of communications the CCI receives through this module, or has been acted on.

Sectoral regulators vis-à-vis the CCI

The CCI is the only regulatory body to address and adjudicate on competition law issues in India. However, recently, the jurisprudence of the CCI has given rise to issues with respect to concurrent jurisdiction of few other sectoral regulators in the field of telecom, intellectual




property, and insurance. Some of these issues are pending adjudication before the Supreme Court and it is expected that these issues will settle with time based on judicial pronouncements.


Some of the significant ones are set out below:

(a) Absence of a case prioritisation policy

Under the present scheme of the Competition Act, the CCI has a legal duty to consider and issue orders in relation to all information and references received by it. CCI does not have the power to prioritise cases like the Competition Markets Authority (CMA) in the UK, where the “Prioritisation Principles for the CMA” prescribe a range of factors that the CMA is required to consider before commencing an investigation. Under the Competition Act, where the CCI determines that a prima facie case of contravention is made out, it must issue an order to the DG to investigate the matter irrespective of the DG’s existing case load, importance or insignificant nature of the issues in question, etc. This creates a situation where the DG has to simultaneously investigate a large number of cases. Due to the scarcity of investigative resources and short timelines given to the DG for conducting the investigation, the DG often fails to apply itself completely to any case. At times, the DG is forced to send out extremely broad information requests which can be challenged as a fishing and roving exercise in High Courts. Further heavy caseloads also lead to inconsistencies and procedural irregularities in investigations which are later challenged, leading to the CCI’s findings being overturned. This results in unnecessary litigation leading to wastage of time and resources. This also adversely affects the productivity of business which has been recognised by the Delhi High Court in a decision involving Google.7

(b) Lack of penalty guidelines

Despite the Supreme Court having ruled in the Excel Crop Care8 that while calculating the penalty, the turnover to be considered should be “relevant turnover” and not “total turnover”, there are still no guidelines issued by the CCI on the factors to be taken into account while calculating the penalty. The CCI should formulate clear and specific guidelines on the factors to be considered when deciding the quantum of penalty which currently is developing on a case-by-case basis.

(c) Penalising individuals

The CCI is increasingly penalising responsible individuals and office bearers under Section 48 of the Competition Act for their involvement in breaches by their companies/associations. In fact, there have been a number of cases in the last few years where the CCI has imposed penalties on office bearers who were responsible for running the affairs of the entity and actively participated in giving effect to the anti-competitive decision or practice. However, the CCI has not followed a consistent approach when penalising the individuals. In some cases, even though the DG has investigated the individuals and has collected evidence of their alleged complicity, the CCI has only held the company to be liable.

Sectors under focus of investigation

Since the provisions of the Competition Act governing anti-competitive agreements came into force on 20 May 2009, the highest number of infringement decisions (16) were in the entertainment sector, which is not usually regarded as being prone to cartelisation. Public procurement through online tendering saw 15 cases with eight infringement findings, and transport (excluding railways) saw 14 cases with seven infringement findings. Another sector is pharmaceuticals distribution, with 13 cases and 11 infringements.




The CCI has taken a keen interest in regulating the pharmaceutical sector and is investigating various practices including excessive pricing, anti-competitive conduct of the chemist and druggist associations and cartels between pharmaceutical companies. In October 2018, the CCI recently published a policy note on “Making Markets Work for Affordable Healthcare”9 identifying key issues in this sector.

In 2018, the seminal Cement Cartel Case was finally decided at the appellate level by the NCLAT which upheld the CCI’s finding that the Cement Manufacturers Association and 11 cement manufacturers colluded to hike cement prices, created an artificial scarcity of cement in the market and exchanged sensitive price, production and dispatch related information to this end. The NCLAT recognised that the standard of proof was one of preponderance of probability. The CCI had imposed a penalty of INR 6,300 crore (approximately USD 915 million), which the NCLAT upheld on the basis that it was the “mere minimum penalty”.

The CCI’s cartel investigations have also been focused on bid rigging in public procurement cases as public procurement accounts for 30 per cent of Indian Gross Domestic Product owing to continued government involvement in sectors like railways, healthcare and telecommunications, which in many developed economies are dominated by private players.10 Out of the nine infringements found by the CCI in the last year, four of them related to bid rigging in public procurement.11 Rajasthan Cylinders was the first case decided by the Supreme Court on bid rigging in public procurement. The Court overturned the decision of the erstwhile Competition Appellate Tribunal (COMPAT) which had found 45 suppliers of LPG cylinders to have engaged in bid rigging with respect to a tender floated by a government entity despite there being the evidence of an association and meetings attended by competitors. The Supreme Court held that the CCI had wrongly inferred collusive bidding based on parallel pricing, contemporaneous trade association meetings and general market conditions. The Supreme Court considered that the LPG suppliers operated in a market controlled by a small number of powerful buyers (an oligopsony) and, given this market structure, therefore parallel pricing alone by suppliers could not lead to a conclusion that there was a concerted practice.

Information exchange

The CCI has also come out with its first decision on pure information exchange. Despite there being two leniency applications in this case, the CCI held that pure information exchanges in itself does not to amount to sufficient evidence of price-fixing. In a case involving flashlight manufacturers,12 the CCI held that, despite two leniency applications being filed, the mere exchange of information was not sufficient evidence to find a cartel.

Therefore, in the absence of evidence that the parties to an agreement have in fact acted in a coordinated manner and/or given effect to an agreement to raise prices, exchange of information in itself is not sufficient to establish a cartel. However, where CCI finds other circumstantial evidence pointing to the existence of a cartel, information exchange maybe considered as a “plus factor” to conclude that there is an agreement under Section 2(a) of the Competition Act. The CCI appears to have followed its earlier approach13 where an agreement to fix prices will be in breach of Section 3 of the Competition Act only where it is implemented.


Whilst the CCI has the power to regulate its own procedure, it is to be guided by the principles of natural justice. Unlike some relatively mature jurisdictions, there is no equivalent of a “hearing officer” where grievances of procedural irregularities can be raised.




In exceptional cases, the courts may interfere in ongoing investigations using their extraordinary writ jurisdiction to stay investigations, however, this is not exercised on a regular basis. Unfortunately, often defendants in an investigation are rendered without any recourse other than to engage with the DG on a without prejudice basis, so as to avoid the separate penalty proceedings for non-cooperation.

Issues with investigation procedure

(a) Expansive powers of the DG

The Competition Act and the related regulations do not lay down clear guidelines on the scope of DG’s powers and the procedure for investigation. The Supreme Court in the Excel Crop Care case has clarified that the DG has the power to expand the scope of the investigation beyond the allegations mentioned in the prima facie order provided that the order is worded broadly enough. In the Cadila Healthcare Case, the Division Bench of the Delhi High Court has followed the broad approach of Excel Crop Care and held that the DG could, in inquiring into a matter pursuant to a prima facie order, investigate conduct and parties other than those specified in that order. As a result, the CCI’s prima facie orders are now worded not only to allow the DG to investigate into the role of individuals before arriving at a finding of contravention on part of the company, but also allows the DG to extend the investigation to parties not mentioned in the order.

(b) Investigating officers

The staff at the DG’s Office is largely made up of officers on deputation from other government departments who join for a short duration of time. This leads to a situation where there is no fixed base of officers who have training on procedures, issues of natural justice and the law itself. Refusal of the DG to supply a copy of the CCI’s prima facie order to the defendant, conducting a fishing and roving exercise and issuing notices to individuals before coming to a finding of violation by the companies are some of the common issues faced by the party being investigated.

(c) Unrealistic timelines to respond to notices

It has become a practice of the DG’s Office to demand voluminous information from the parties’ often unrelated to the stated scope of the investigation, which raises jurisdictional concerns. The DG’s Office unilaterally sets short deadlines for providing extensive and historical information which are usually difficult to comply with. These unrealistic timelines of the DG are frequently accompanied with threats of initiation of proceedings for non-compliance for failing to provide the information in time.

Dawn Raids

As explained previously, in India, dawn raids are conducted as “search and seizure” operations by the DG’s Office, where there is a strong suspicion that relevant material (such as, documents, records, mobile phones, computers, servers, tablets, etc.) may be destroyed, or altered by the enterprises and individuals under investigation. Failure to provide documents/information or cooperate could result in imprisonment of up to six months and fines of up to INR 25,000 (approximately USD 350) and a further fine of INR 2,000 per day (approximately USD 30). Therefore, in view of the penalties prescribed for non-cooperation during investigation, it is advisable to cooperate with the officers conducting the raid.

The DG is empowered to investigate cases only after the CCI has arrived at a prima facie case of a contravention of the Competition Act and referred the matter for investigation. Further, the DG must obtain a search warrant for conducting any search and seizure operation from the Chief Metropolitan Magistrate, Delhi and demonstrate that there are reasonable




grounds to believe that there may be destruction of evidence. The officials from the DG’s Office are accompanied by local police officers and independent witnesses.

So far three dawn raids are known to have been conducted in India. In the first dawn raid conducted at the premises of JCB India, the DG claimed that the company was not cooperating with the investigation process. The warrant was only issued for search, and not for seizure. The High Court observed that the seizure was a “drastic action” and restrained the CCI from using the seized documents for investigation. The matter is now pending before the Supreme Court.

The DG conducted its second dawn raid at the corporate offices of Eveready Industries and other battery manufacturers pursuant to a leniency application filed with the CCI. The DG also recently raided offices of several beer manufacturers pursuant to a leniency application filed on behalf of a beer company.

Access to files

During the course of the investigation, the parties can access the order file of the CCI which may contain the prima facie order, interim order or any administrative order passed by the CCI. The parties may also be given access to the non-confidential version of the informant’s file (other than in case of a leniency). However, the parties can access the evidence collected during the course of the investigation only after the DG’s Report has been circulated to the parties subject to the grant of confidentiality over the documents submitted to the CCI and the DG, as the case may be.


The Competition Act provides for the imposition of “lesser penalties” on enterprises and individuals who provide information which helps to prosecute a cartel, under the Competition Commission of India (Lesser Penalty) Regulations, 2009 (Lesser Penalty Regulations). In 2017, the CCI delivered its very first cartel enforcement decision which involved an application for lesser penalty, but also made important amendments to the Lesser Penalty Regulations. Recently, the Indian leniency regime has taken great strides forward – in the last year six of the CCI’s nine cartel enforcement decisions involved leniency applications.

Lesser Penalty Regulations

Under the Lesser Penalty Regulations, the CCI has the power to impose a “lesser penalty” on a member of an alleged cartel if such a member has made a “full, true and vital” disclosure with respect to alleged violation of Section 3 of the Competition Act.

The Lesser Penalty Regulations were amended in 2017 to make it clear that, in addition to an enterprise itself, individuals involved in a cartel on behalf of an enterprise, could benefit from leniency.14 As matters stand, the first in line applicant may receive up to a 100% reduction in penalty, the second may receive up to a 50% reduction and third and subsequent applicants may receive up to a 30% reduction.

The first applicant for leniency may be granted up to a 100% reduction in administrative fines if it satisfies the following conditions:

(a) the applicant makes vital disclosure by submitting evidence of a cartel enabling the CCI to form a prima facie opinion regarding the existence of a cartel, where the CCI did not have the evidence to form such an opinion, or establish a violation of the Competition Act by providing evidence that the DG did not have;

(b) the applicant co-operates with the DG throughout the investigation;




(c) the applicant ceases participation in the cartel from the time of the disclosure unless directed otherwise; and

(d) the applicant does not destroy, conceal, manipulate or remove any relevant documents.

If according to the CCI, the leniency applicant fails to comply with any of these conditions, they may not secure any leniency.

There is a sliding scale of leniency under the Lesser Penalty Regulations. Subsequent applicants may have their fines reduced on submitting evidence which may, in the opinion of the CCI, provide “significant added value” to the evidence already in the CCI/ DG’s possession. Applicants must also continuously co-operate throughout the investigation. The CCI continues to enjoy discretion on the amount of reduction. Although the CCI has been consistent in granting the full 100% leniency to first-in-line applicants who disclose the existence of a cartel to the CCI,15 applicants who apply when the investigation is under way have received lower deductions.16

Decisional practice of the CCI

The decisional practice involving lesser penalty applications suggests that the CCI has had considerable success with unearthing and prosecuting cartels under the leniency regime. In its Dry Cell Batteries case17 the CCI was tipped off about the existence of a six-year long cartel as a result of a leniency application filed by one of the parties. In Nagrik Chetna Manch,18 the CCI received information from leniency applicants which allowed it to separately prosecute a second bid rigging cartel. In Cartelization of Sports Broadcasters,19 the CCI granted reduction in penalty to Globecast for disclosing cartel activities between its errant employee and a competitor.

In terms of the reduction that is granted by the CCI to the leniency applicant, the decisions taken in the past year clarify that reduction would be based on: (i) timing of the application; (ii) the quality of the disclosures made; and (iii) continued cooperation offered by the applicant.

When filing a leniency application

The parties should bear in mind that filing a leniency application signifies that the party is willing to provide full cooperation to the CCI and the DG’s Office. In the absence of a leniency application, failure to co-operate will result in the investigation process being much harsher, especially for the all individuals suspected of participation in the cartel. Further, there is no provision in the statute which may give the company benefit of a reduced penalty for co-operating outside the leniency programme.

Along with the benefits of filing a leniency application, there are certain drawbacks as well. The applicant is required to make an unqualified admission of an infringement of the cartel provisions of the Competition Act, together with exhaustive details in relation to the conduct. Further, if the applicant is unable to provide evidence which adds significant value to the evidence already in the possession of the CCI or the DG, there is a risk of insignificant reduction in a penalty being granted. The grant of or the level of reduction in penalties is at the sole discretion of the CCI. Belated filing of the application, evidence already in possession of the CCI/DG, quality of information provided, and failure to cooperate completely may result in the applicant not receiving any reduction or less than the maximum percentage of penalty reduction available. Further, the applicant will not be able to appeal to the NCLAT in respect of anything it has admitted/not contested in the leniency application and ongoing investigation, and only a limited appeal lies to the NCLAT. Lastly, a leniency will not prevent compensation claims against the company if breach of the Competition Act is finally established.





The CCI does not provide for settlement of cases or for fast track procedures. Even in cases where parties have settled the dispute, the CCI’s position is that it is empowered to continue with the proceedings under the Competition Act. The CCI’s consistent position in this regard has been that the proceedings initiated before it are in rem, i.e. the proceedings affect the market as a whole and are not initiated against any specific party.20 Further, the CCI has held that there is no provision under the Competition Act which permits withdrawal of information by parties.

However, the CCI may in some cases considered cooperation by parties during the investigation as a mitigating factor in the imposition of penalties.

Even though the CCI does not have a procedure for settlement of cases, the parties have the option to settle the dispute at the appellate stage.21


The Competition Act allows any person, whether directly aggrieved or not, to file an information before the CCI to bring to light an alleged infringement of the Competition Act. The CCI has also recently launched a module on its website for the submission of anonymous complaints, a move which is likely to provide an impetus to the submission of information to the CCI.

There is no case prioritisation policy that has been implemented in India, and the CCI has to undertake a prima facie assessment of the allegations and pass orders in every case filed before it. There are certain checks that have been put into place in the regulations, however, the risk of the admissibility of untested and unchallenged evidence being relied upon to launch an invasive inquiry does exist.

Right of appeal

Under the scheme of the Competition Act, the CCI’s decision to launch an investigation on the basis of prima facie satisfaction of the existence of a cartel is not appealable to the NCLAT. However, parties may approach the CCI to exercise its inherent powers to review or recall its prima facie decision. The CCI’s decision on such a review and recall application can only be appealed by way of a writ petition before the High Courts.

However, a decision closing the case at a prima facie stage itself is appealable before the NCLAT.

Third party access to documents

In cases where the applicant is not a party to the proceedings, access to documents may be allowed on demonstration of “sufficient cause”. It may be noted that in most circumstances, the CCI does not allow third parties access to the documents and only parties to the proceedings are permitted access to inspect the documents subject to the confidentiality provisions under the Competition Act and related regulations.


Upon arriving at a finding, the CCI has the power to impose a penalty of up to 10% of the turnover of the enterprise for each year of continuance of the cartel, or of up to three times its profits for each year of the continuance of the cartel, whichever is higher. In the Excel Crop Care decision, the Supreme Court held that, while levying a penalty involving multiproduct firms, the “relevant” turnover relating to the products or services covered by




the infringement must be considered, rather than the “total” turnover. This has provided a degree of certainty to enterprises.

After the decision of the Supreme Court in Excel Crop Care which calls upon the CCI to impose penalties in a proportionate manner, the CCI has largely adopted a more tempered approach towards penalties and is no longer imposing penalties with little or no explanation of how it has arrived at the amount of penalty. Penalties imposed by the CCI are most often justified by the need to: (i) deter anti-competitive conduct; and (ii) punish the erring entity, especially when there has been harm to consumers or loss to the public exchequer. The CCI has also increasingly been calculating penalties with due regard to the aggravating and mitigating circumstances of a case such as nature, gravity and extent of the contravention, role of the infringer, nature of the product, market shares, profit derived from the contravention and the bona fides of the entity.


The right to appeal against orders of the CCI is not available in all cases. It is a statutory right and only available against orders that are appealable under the Competition Act, which are:

(a) orders where the CCI closes a case at the prima facie stage;

(b) orders where the CCI finds parties guilty of contravention of the provisions of the Competition Act;

(c) interim orders passed by the CCI;

(d) rectification orders; and

(e) penalty orders.

Any appeal under the Competition Act to the NCLAT is a full merits appeal, on both findings of fact as well as points of law. After examining the facts and evidence, the NCLAT can either dismiss the appeal or set aside the order in whole or in part, substitute the CCI’s findings with its own, or remand the case back to the CCI. In almost all cases where the CCI has found a Section 3 violation the final orders of the CCI are appealed to the NCLAT.

In July 2018, the NCLAT upheld the CCI’s decision in the Cement Cartel Case and also declined to interfere with the penalty imposed by the CCI.22

Further appeals from the NCLAT’s decision lie with the Supreme Court. In October 2018, the Supreme Court allowed the Rajasthan Cylinders appeal. In its final decision, the Supreme Court disagreed with the findings of both the CCI and the erstwhile COMPAT. The Supreme Court held that there need not be direct evidence of cartelisation since such agreements are entered into in secret and the standard of proof required is that of balance of probabilities. However, the Supreme Court held that the presumption of anti-competitiveness attached to horizontal agreements is rebuttable by parties through evidence. It further held that the LPG manufacturers had been able to discharge the onus as the parallel pricing in question could have been explained by the market conditions which existed.

Earlier, appeals from the orders of the CCI were being heard by the Competition Appellate Tribunal (COMPAT); however, after its merger with the NCLAT by the Government of India a new competition bench has been constituted. Due to the heavy workload of the NCLAT which also considers appeals from company and insolvency matters, the NCLAT is struggling to devote time to competition matters. So far the NCLAT has disposed of 29 appeals from the decisions of the CCI; of this only on relates to a cartel.




Criminal sanctions

As previously mentioned, the CCI does not have the jurisdiction to impose criminal sanctions on entities for cartel infringements.

The Competition Act allows criminal sanctions only for: (i) contravention of the orders or directions of the CCI; and (ii) the non-payment of fines imposed on entities for contravention of the CCI’s orders or directions. In such cases, persons are punishable with imprisonment for a maximum term of three years or a maximum fine of INR 250 million (approximately USD 3.4 million), or both. However, the power to imprison defaulters is only with the Chief Metropolitan Magistrate, New Delhi and the CCI can only act as a litigant in such cases.

Cross-border issues

Under Section 32 of the Competition Act, the CCI has been given extraterritorial powers. Notwithstanding whether an agreement referred to in Section 3 of the Competition Act has been entered into outside India, or the party(s) to the agreement are outside India, the CCI can inquire into such agreements if they cause or are likely to cause any AAEC in India.

Exercising its powers of extra-territorial jurisdiction, the CCI has reportedly initiated investigations against several automotive spare-parts companies located overseas for anti-competitive conduct that is believed to have taken place overseas, but which may have anti-competitive effects in India. Some of these investigations have been challenged before the High Courts on procedural grounds of limited access to file due to blanket confidentiality granted by the CCI and for violation of principles of natural justice.


The Competition Act does not provide for private standalone enforcement actions to be pursued by parties before the CCI; however, this can be done at the appellant stage before the NCLAT.

The government, or local authority, or any enterprise or any person, affected by a contravention of the Competition Act which has been proven before the CCI or the NCLAT on appeal, may file a claim before the NCLAT for compensation for loss or damage suffered as a result of the contravention.

These provisions have not been extensively used in India. To date, only three compensation claims relating to abuse of dominance have been brought before the NCLAT. However, it is too early to say what the outcome of these will be. There have been no reported compensation claims following cartel decisions.

Reform proposals

The Competition Act has been in operation for nearly 10 years and is in need of an overhaul. To address these limitations, the Indian Government has undertaken active measures and has established the Competition Law Review Committee comprising of various industry experts to review the Competition Act, 2002 “in view of changing business environment and to bring necessary changes, if required”. The Committee will study international best practices in relation to anti-trust and submit a report.

Some of the suggested areas of reform are:

Adoption of prioritisation principles

The CCI should be given the power to prioritise cases so as to ensure the most efficient allocation of investigative resources.




Quantum of penalty

Following more mature jurisdictions such as the UK and the EU, the CCI should frame guidelines on the imposition of penalties. These guidelines will provide helpful guidance to enterprises when they are determining their exposure to liability and will also reduce the appeals that are being filed purely on the question of reasonableness of the amount of penalty being imposed and the treatment of aggravating and mitigating factors.

Withdrawal/settlement of complaints before the CCI

Some complaints before the CCI have no competition law relevance and are more in the nature of consumer law issues or other areas of law. In such cases, the CCI is tasked with utilising its resources in disposing of complaints with no cause of action before the CCI. This leads to wastage of time and resources of the CCI and the parties defending such claims. Under such a scenario, the CCI should evolve a method of imposing costs on parties with frivolous complaints and for settlement of cases at the CCI stage.

Amount of leniency

The amendment to the Lesser Penalty Regulations has bought about some long-awaited changes to the leniency regime, and the recent leniency decisions of the CCI provide comfort on guaranteed leniency. However, the discretion available to the CCI to determine the quantum of leniency creates uncertainty for the applicants since the regulations only provides the maximum level of reduction in penalty that can be granted. Defining a clear leniency policy, providing certainty on the application of the leniency programme and educating stakeholders on these aspects should be an important part of laying the foundation for an effective cartel enforcement regime.

Procedural guidelines for the CCI and the DG

Detailed procedural guidance should be provided for carrying out enquiries and proceedings by the CCI which should be published and adhered to. Whilst the DG has an Investigation Manual, it is not available in the public domain. It is not possible for the parties to identify specific irregularities with the investigation process. The procedure for the investigation conducted by the DG should be made available to the advocates/parties. These guidelines should cover issues including the nature and timeframe for which information can be sought by the DG, the manner of collecting and submitting information, the procedure for dawn raids, the manner of taking depositions and conducting cross-examination, etc. Additionally, the DG’s Office should have staff members who are properly trained in conducting investigations.

Endnotes

1. Rajasthan Cylinders and Containers v. Union of India, Civil Appeal No. 4280 of 2014 (1 October 2018).

2. Cadila Healthcare Limited and another v. CCI and others, LPA 160/2018 & CM APPL. Nos. 11741-44/2018 (12 September 2018).

3. Competition Commission of India v. Oriental Rubber Industries Private Limited, LPA No. 607 of 2016 (24 May 2018).




4. India Glycols Limited v. Indian Sugar Mills Association & Ors; Ester India Chemicals Limited v. Bajaj Hindusthan Limited & Ors.; Jubilant Life Sciences Limited v. Bharat Petroleum Corporation Limited & Ors.; A B Sugars Limited v. Indian Sugar Mills Association & Ors.; Wave Distilleries; and Breweries Limited v. Indian Sugar Mills Association & Ors. Lords Distillery Limited v. Indian Sugar Mills Association & Ors., Case No. 21, 29, 36, 47, 48 & 49/2013 (18 September 2018).

5. The CCI has announced such studies into the functioning of the online cab aggregator market, pharmaceuticals, onions, steel, air transport, energy and petroleum.

6. CCI, Report of the Special Project on ‘Cartel Enforcement and Competition’, International Competition Network Annual Conference, New Delhi, released on 21 March 2018, pages 33–37.

7. Google Inc. v. Competition Commission of India, LPA No.733/2014 (27 April 2015).

8. Excel Crop Care Limited v. Competition Commission of India & Anr. Civil Appeal 2480 of 2014, along with Civil Appeal 53–55 of 2014, and Civil Appeal 2922 of 2014 (8 May 2017).

9. Competition Commission of India Policy Note: Making Markets Work for Affordable Healthcare (October 2018). See, also, CCI Press Release No. 14/2018–19 (24 October 2018).

10. http://www.cci.gov.in/sites/default/files/presentation_document/p4.pdf?download=1.

11. In re: Cartelization in Tender Nos. 21 and 28 of 2013 of Pune Municipal Corporation for Solid Waste Processing v. Saara Traders Private Limited & Others, Suo Moto 3 of 2016 (31 May 2018); In re: Cartelization in Tender No. 59 of 2014 of Pune Municipal Corporation for Solid Waste Processing v. Lahs Green India Private Limited & Others Suo Moto 4 of 2016 (31 May 2018); Nagrik Chetna Manch v. Fortified Security Solutions & Others Case No. 50 of 2015 (1 May 2018); Surendra Prasad v. Maharashtra State Power Generation Co. Ltd. & Others Case N0. 61 of 2013 (10 January 2018).

12. Eveready Industries India Ltd., Panasonic Energy India Ltd., Indo National Ltd., Geep Industries (India) Pvt. Ltd. and Association of Indian Dry Cell Manufacturers Suo Motu Case No. 1 of 2017 (6 November 2018).

13. In re: Sugar Mills, Case No. 1 of 2010 (30 November 2011); In re: All India Tyre Dealers’ Federation v. Tyre Manufacturers, MRTP Case: RTPE No. 20 of 2008 (30 October 2012). Film and Television Producers Guild of India v. CCI (Case No. 37 of 2011 (3 January 2013).

14. The Competition Commission of India (Lesser Penalty) Regulations, 2009.

15. In Re: Cartelisation by broadcasting service providers by rigging the bids submitted in response to the tenders floated by Sports Broadcasters. v. Essel Shyam Communication Limited & others Suo Motu Case No. 2 of 2013 (11 July 2018). Shardul Amarchand Mangaldas and Co acted for Globecast.

16. Case No. 50 of 2015 Fortified Security Solutions (1 May 2018) and Suo Motu Case No. 2 of 2016 (31 May 2018).

17. In Re: Anticompetitive conduct in the Dry-Cell Batteries Market in India, Suo Moto Case No. 2 of 2017 (30 August 2018).

18. Nagrik Chetna Manch v. Fortified Security Solutions & Others, Case No. 50 of 2015 (1 May 2018).




19. In Re: Cartelisation by broadcasting service providers by rigging the bids submitted in response to the tenders floated by Sports Broadcasters v. Essel Shyam Communication Limited & others Suo Motu Case No. 2 of 2013 (11 July 2018).

20. Velankani Electronic Private Limited v. Intel Corporation, Case No. 16 of 2018 (19 November 2018).

21. Tata Power Delhi Distribution v. CCI and another, Competition Appeal (AT) No. 1 of 2018 (24 August 2018).

22. Hyundai Motor India v. Competition Commission of India, Competition Appeal (AT) No. 6 of 2017 (19 September 2018).






Naval Satarawala Chopra Tel: +91 98100 11191 / Email: [email protected] Naval Satarawala Chopra, Equity Partner, Competition Law Naval has been practising competition law since its inception in India. He focuses on complex enforcement and merger cases and was recently involved in successfully obtaining an infringement decision against Google; successfully defending Uber; and in obtaining approval for the Bayer/Monsanto transaction. Naval advises several auto-part manufacturers in relation to ongoing international cartel investigations as well as several bid rigging cases in different sectors involving government contracts. He also advises clients on challenges against the CCI's investigations for violations of due process and natural justice. Naval is the only Indian lawyer to feature in Global Competition Review’s “40 under 40” list and his clients include Microsoft, Facebook, Monsanto, National Stock Exchange, Uber, VeriFone, DLF and Abbott.

Manika Brar Tel: +91 98100 98321 / Email: [email protected] Manika Brar, Partner, Competition Law Manika has been an integral member of the practice since the enforcement of competition law in India in 2009 and has many firsts to her credit. She has considerable expertise in advising on cartel investigations, dominance cases and other competition issues. Manika has also worked extensively on the merger control side with several notable successes. She was involved in the first case in India on predatory pricing, the first follow-on compensation claim, and the first case where a “dawn raid” was successfully conducted. She regularly conducts competition law compliance trainings for several Indian and multinational clients. In addition to making valuable contributions to market intelligence chapters of publications, Manika has also been listed as a foremost practitioner under 45 in “Who’s Who Legal: Competition – Future Leaders”.

Nitika Dwivedi Tel: +91 96506 91799 / Email: [email protected] Nitika Dwivedi, Senior Associate, Competition Law Nitika has been part of the Firm’s Competition Law Practice since 2014 with over four years’ experience in competition law matters. She has been involved in defending companies in private as well as public sectors in cartel and abuse of dominance cases. She has successfully defended WhatsApp against allegations of abuse of dominance. She was also involved in obtaining an unconditional stay from the National Company Law Appellate Tribunal on the Commission’s order against ACC Limited in a bid rigging case.

Amarchand Towers, 216, Okhla Industrial Estate, New Delhi – 110 020, India Tel: +91 11 4159 0700; +91 11 4060 6060 / URL: www.amsshardul.com

Shardul Amarchand Mangaldas & Co.


Indonesia


Under Republic of Indonesia Law Number 5 of 1999 regarding Monopolistic Practices and Unfair Business Competition (the Indonesian Competition Law or “ICL”), cartels are regulated as follows.

Law No. 5 defines an “agreement” as “an action by one or more entrepreneurs to bind themselves to one or more other entrepreneurs under any name, whether entered into in writing or not”.

Under the ICL, cartel behaviour falls under several articles, as follows:

a. Article 5, which prohibits price-fixing agreements between competing business actors, and states that:

“Business actors are prohibited from entering into any agreement with competitors in order to fix prices for certain goods and/or services to be borne by the consumers or clients in the same relevant market.”

Article 5 of the ICL, however, provides two exemptions to this rule: (a) that business competitors may agree on a price within the framework of a joint venture; or (b) if mandated by law.

Given its wording, Article 5 follows the so-called per se illegal doctrine, i.e. investigators from the Business Competition Supervisory Commission (“KPPU”) will require no further investigation into the practice’s actual effect on the market or the intentions of individuals who are engaged in the practice in order to assess a violation.

Under KPPU Regulation Number 4 of 2011 regarding Guideline to Article 5, price-fixing is a violation of the ICL because it eliminates competition within the market. In a competitive market, the sales price of goods and services moves toward the marginal cost of production and the production amount of the goods and services will increase accordingly. A competitive market will be efficient and benefit consumers. Further, the effect of price-fixing is basically the same as in a monopoly. Suppliers controlling monopolies obtain monopolistic profits. Price competition is eliminated through price-fixing.

Under a price-fixing arrangement, however, a group of suppliers or suppliers and buyers together agree to maximise the selling price (to maximise income), to temporarily lower the prices (as a barrier to a new entrant) or to stabilise prices (to avoid price wars). In doing so, final consumers do not benefit from productivity gains, economies of scale, or competitive price movements.

In line with this description, price-fixing must be regarded as a form of collusion.

Benedicta Frizka, Jonathan Tjenggoro & Lia Alizia Makarim & Taira S.



Thus, price-fixing which is prohibited in accordance with Article 5 is price-fixing which arises from an agreement between two or more parties. Without such an agreement, any similarities in prices set between business actors in the same market cannot be regarded as a violation of Article 5.

Competitively speaking, collusion is any agreement to restrict competition between business actors, which would otherwise be competitors, to exert a common effect upon a relevant market.

Under ICL Article 5, price-fixing covers not only fixing of the final price, but also covers agreements on price structures or pricing schemes. Therefore, prohibited price-fixing does not always mean the imposition of the same final price to consumers, but may take the form of an agreement on profit margins (the difference between the selling price and production cost).

In general, forms of price-fixing covered under Article 5 are, among others: • agreements to increase or decrease prices; • agreements on using a certain standard formula as a basis for calculating prices; • agreements on keeping a fixed comparison between the competing prices of

certain products; • agreements on eliminating discounts or stipulating discount uniformity; • agreements on the requirements for the provision of credit to the consumers; • agreements on eliminating products offered with a low price in the market

(inexpensive substitutes), so as to limit supply and maintain high prices; • an agreement on compliance with announced prices; • an agreement to not sell products if the agreed price is not achieved; and • an agreement to use uniform prices as a preliminary step in negotiations.

In their preliminary investigation into an alleged cartel, the KPPU investigator tries to identify price-fixing based on preliminary evidence derived from reports or the KPPU takes the initiative to obtain evidence of the alleged violation of Article 5 of Law No. 5 of 1999. The evidence required is of mutually agreed price-fixing and of the business actors’ compliance with the agreement. This evidence may be direct evidence (hard evidence) or indirect evidence which indicates the relationship between and conformity of the evidence (circumstantial evidence).

To uphold circumstantial evidence, the investigator requires additional factors (“plus factor”) to differentiate parallel business conduct from illegal agreements. In other words, the KPPU cannot make a finding of violation on the basis of circumstantial evidence alone.

From the investigator’s perspective, the best verification method is to use both direct and indirect evidence. The best use of indirect evidence is by combining communication evidence and economic evidence.

Analysis of the market structure is conducted by the investigator to determine whether the relevant market would be supportive of collusive behaviour. If so, indirect evidence may be used as an initial indication of the existence of coordination in the relevant market which can be used as an indication of violation of Article 5 of Law No. 5 of 1999.

Given the above, after the KPPU investigator attempts to obtain sufficient evidence (at least two elements of proof) based on the facts found during the investigation, the question will be whether there is evidence of an agreement, either direct or indirect. If

Makarim & Taira S. Indonesia



the evidence obtained by the investigator is direct evidence, the KPPU investigator will have a good chance of convincing the Commission Panel that the price-fixing has occurred. On the other hand, if the evidence obtained by the KPPU investigator is indirect, it is then necessary to analyse communications and economic evidence. Analysis of communication evidence indirectly indicates the agreement. The use of economic analysis evidence becomes of key importance in indirect evidence, i.e. to prove the existence of an agreement. Economic analysis plays its role to deduce coordination or agreement among the business actors in the relevant market.

b. Article 9, which prohibits business actors from dividing marketing territory (market allocation) of goods and services, states:

“Business actors are prohibited from entering into an agreement with business competitors with the intention to divide the marketing areas or market allocation of the goods and/or services that may cause monopolistic practices and/or unfair business competition.”

Article 9 assumes the existence of an agreement between business actors. The application of Article 9 depends on 3 (three) criteria: the parties are business actors; compete with each other; and enter into a relevant arrangement. In the distribution area of the market, the business competitors allocate market share to each buyer according to local criteria, thereby limiting competition between them. Therefore, it will be easier for business actors to increase prices or reduce production to increase profits.

A market allocation agreement is made when business actors enter into a mutual agreement that ends up limiting the distribution of the same/similar/complementary goods and services in a particular area. The forms that this type of agreement can take are, among other things, an obligation to supply certain goods and services and not others, to supply in certain areas and not in others, not doing advertising campaigns, refraining from aggressive trading practices, maintaining certain sales distribution channels and maintaining particular traders in certain areas.

A market allocation agreement will only be effective if the consumers have no ability to move from one area to another area or find a substitute of the goods and/or services. Basically, market allocations between business actors will not only impose economic losses on the consumer but also on efficient business actors. The business actors will be restricted from expanding their businesses and markets and will lose their opportunity to increase market share.

Article 9 subscribes to the so-called rule of reason doctrine, i.e. to prove a violation, the KPPU investigator must examine the underlying reasons for the arrangement as well as the existence of monopolistic practices or unfair business competition caused by the arrangement, or whether the business actors have an acceptable reason which increases consumer benefit, such as the certainty of the existence of supply at competitive prices.

An example of a market allocation agreement handled by the KPPU in 2008 was for the market allocation for the person in charge of technical matters for the electrical installation construction business in South Sulawesi. According to the KPPU, the existence of the market allocation was proven by the agreement between Board of Management of electricity and mechanical associations in Indonesia, particularly, between associations in South Sulawesi.

As a result of the market allocation agreement, installation companies were not able to




use another person, other than the one allocated to its area. According to the business actors, the market allocation agreement was entered into primarily to increase the safety and security of electrical installations and improve resources.

However, in its decision, KPPU struck down the market allocation agreement and prohibited the business actors from entering into another market allocation agreement.

c. Article 11, which prohibits business actors from establishing a cartel to control the production and/or marketing of products, states:

“Business actors are prohibited from entering into any agreement with a competitor with the intention of influencing the price by determining the production and/or marketing of goods and/or services, which may cause monopolistic practices and/or unfair business competition.”

For an agreement to violate Article 11, the agreement must be among competitors. Therefore, an Article 11 violation depends on three criteria: the parties must be business actors; they must be competitors; and they must have concluded a relevant agreement. Given its wording, Article 11 subscribes to the so-called rule of reason doctrine, i.e. to prove the violation, the KPPU investigator must examine the underlying reasons for the arrangement as well as the existence of monopolistic practices or unfair business competition caused by the arrangement.

Under Article 1 (2), the term “monopolistic practices” means the centralisation of economic power by one or more entrepreneurs creating control over the production and/or marketing of certain goods and/or services, resulting in unfair business competition and which can injure the public interest. Under Article 1 (6), unfair business competition means competition among entrepreneurs in their production activities and/or in marketing goods and/or services, conducted in a manner which is unfair or contradictory to the law or which hampers business competition.

Forming a cartel is a strategy where business actors will enter into a horizontal agreement to regulate production and marketing to influence the price of product. Cartels will be created more easily if the participants are companies of comparable size. Production quota arrangements or price stipulations may only then be achieved because the production capacities and costs among the companies are similar.

Homogenous goods or services may not support diverse consumer preferences and therefore, pricing competition will be the primary effective competitive variable. Accordingly, the business actors in the relevant market will be more likely to be tempted to engage in cartels to avoid price wars which may jeopardise their profits. To find out the level of a customers’ preference and determine the degree of product homogeneity in a market, KPPU investigators will conduct surveys.

A relatively high entry barrier for newcomers will strengthen a cartel. There are few opportunities for a newcomer to fill the gaps in strongly cartelised markets. Cartels in industries with high entry barriers will therefore generally survive competition from newcomers.

In the investigation of a cartel’s production and marketing, the KPPU has in case law recognised the concept of concerted action, which is an action in which all the cartel participants, without necessarily entering into an explicit agreement between them, perform some action which implements a mutual policy on the production and marketing of their products. This concept was used by the KPPU in respect of the recent cattle importing cartel.




Under Article 30, the KPPU is responsible for the supervision of the application of the ICL, including its enforcement. Its duties include: • reviewing agreements, business practices and mergers that may lead to unfair

competition; • taking action, within the authority given to it by the ICL; • giving advice to the government on policy that has an impact on competition; • issuing guidelines or publications related to the ICL; and • providing the President and House of Representatives regular reports on the results

of the KPPU’s work and activities.

If the KPPU identifies a potential violation, the KPPU will establish an investigative team to conduct in-depth searches for evidence, the underlying reasons for the arrangement, and the existence of monopolistic practices or unfair business competition caused by the arrangement (i.e. an effects test). To obtain evidence, the KPPU investigator will, among other things, request documents (hard copy or soft copy) from the relevant parties, summons witnesses and carry out in-field investigations (if necessary).

However, in its investigations, since the KPPU has no authority to take any action, such as summons witnesses, or conduct searches to find evidence of an agreement, or wiretap the management of a company, the KPPU investigators often face obstacles. Under Article 36 (G) of the ICL, the KPPU needs to cooperate with other authorities (e.g. the Police Force) if they need assistance because, for example, a witness is not cooperative.

Upon receipt of sufficient evidence, the KPPU investigator will examine whether sanctionable cartel behaviour has taken place. If so, the KPPU may impose a sanction according to its authority under the ICL. These include administrative, principal and additional criminal sanctions (see below for the administrative and criminal sanctions).

Up until now, the cases and recommendations the KPPU has handled have been triggered by reports or undertaken at the initiative of the KPPU, based on research and studies of strategic sectors of industry, concentration and whether there is an economic aspect. The KPPU has examined, for example, an ocean freight cargo rates cartel, a cooking oil cartel, a cement cartel, a fuel surcharge cartel, a pharmaceutical drug cartel, a tire cartel, an imported cattle cartel, and a scooter cartel.

Overview of investigative powers in Indonesia

Under the ICL, in the investigation of a potential violation, the KPPU will act as follows (“Case Handling”):

a. carry out an internal study of the findings;

b. carry out research;

c. monitor the business actors;

d. carry out a preliminary investigation;

e. file the case dossier;

f. hold KPPU hearings; and

g. issue a decision.

During the Case Handling, the KPPU investigator may conduct a preliminary investigation to obtain more evidence. The KPPU investigator will, among other things, request




documents (hard copy or soft copy) from the relevant parties, summons witnesses, the reported party, experts and other related parties as well as conduct an on-site inspection (if necessary). The KPPU will also hold hearings and summons the relevant parties to provide the required documents and information. These hearings are part of the case handling.

The KPPU investigator will also cooperate with other authorities (e.g. the Police Force) if they need further assistance if, for example, a witness who has been summonsed is not cooperative. Under the ICL, if a party who has been summonsed is uncooperative, for example, he/she refuses to provide the requested documents or information and/or explanation, under Article 48 (3), the KPPU may impose a fine of IDR 1,000,000,000 (one billion Rupiah, approximately equivalent to US$ 70,000) up to IDR 5,000,000,000 (five billion Rupiah) or a prison sentence of up to 3 (three) months. It is worth noting that the fines in the draft new law are generally much higher than in the current law.

Following the preliminary investigation, the KPPU investigator will file the case dossier and decide whether the case should go to hearings. Based on the evidence provided in the hearings, the KPPU will decide whether the allegation has been proven and whether a sanction should be imposed.

Since the ICL does not yet acknowledge the concept of leniency, in its investigation of a cartel, few cartelists admit to their activities and so the KPPU must find evidence of a cartel in the documents which are provided to them. In addition, KPPU investigators must use circumstantial evidence, such as economic evidence, including the profit, turnover, production capacity and other data in financial statements.

In addition to the economic evidence in the financial statements, the KPPU investigator also uses statistical tests to prove a correlation between the cartel agreement and changes in turnover and production during a certain period related to the cartel agreement, as well as whether there has been any increase in profit since the cartel agreement came into effect, derived from changes in price, production, or marketing.


In November 2018, a KPPU hearing was held for a presumed cartel activity by 7 (seven) salt companies. It was alleged that the cartel operated between 2013 and 2016. Suspicion arose because in 2015 salt was in rather short supply and a proposal was submitted to importing salt, but the salt was not actually imported until two years later, causing suspicions to rise regarding the salt supplies during that two-year period. It was suspected that the salt was being stockpiled and not sold or marketed.

From 2013–2016, the 7 (seven) salt companies controlled 86.33% of the market for salt. The KPPU’s investigator, Noor Rofieq, explained that due to the suspected cartel between the salt companies, salt prices increased from 80% to 115%. The investigation was an initiative of the KPPU.

In addition to the salt cartel case, the KPPU and Indonesian Police Force have conducted some other cartel investigations in the last 12 months, most of which are food related. In June 2018, the Head of the Police Force of the Republic of Indonesia, Tito Karnavian, claimed that the Police Force investigated approximately 400 food cartel cases during the 2 (two) months before Idul Fitri 2018.


Since its establishment on 7 June 2000, the KPPU has already had 4 (four) management




teams, each with a tenure of 5 (five) years. The most recent management team consisting of 9 (nine) commissioners is assigned by the President of the Republic of Indonesia under Decree Number 81/P Tahun 2018 in April 2018. Even though the KPPU has the authority to handle legal enforcement broadly in anti-monopoly issues, in the third management period, the KPPU has focused its enforcement primarily on certain strategic sectors, i.e. food, health, education, infrastructure, energy, banking, logistics. The current chairman of KPPU Kurnia Toha explains in a published informal interview that his team aims to focus on main basic needs, i.e. food and housings, followed by automotive and other sectors, information and technology as well as communication or digital economy.

As of Muhammad Nawir Messi’s leadership (2012–2015), the KPPU has become more selective in selecting cases that originated from reports of bid rigging. The plan is to restrict the focus of the KPPU’s investigators to handle the cases in the strategic sectors noted above.

In addition, bid rigging also falls under criminal law, and can therefore also be investigated by other law enforcement agencies, such as the Corruption Eradication Commission, the Police, and the Attorney General. An example of this is the trans-Jakarta bid rigging case which is also being investigated by the Attorney General.


Under the ICL, the KPPU has the authority to:

1. accept reports from the public and/or business actors alleging monopolistic practices and/or unfair business competition;

2. search for evidence and initiate preliminary investigations into the business actors to prove the existence of monopolistic practices and/or unfair business competition; and

3. impose sanctions on convicted business actors.

The KPPU’s investigators are expected to have independence with regard to their power and duties. KPPU investigators must be free from the influence of any party, including Commissioners in the KPPU’s council. In order to ensure their independence, the KPPU investigators who conduct a preliminary investigation do not play a role in the prosecution of the case.

In addition, in the hearings, the parties have equal access to all the documents the KPPU investigators intend to produce as evidence.

For the avoidance of doubt, Indonesia’s Constitutional Court (Mahkamah Konstitusi) through its Decision No. 85/PUU-XIV/2016 of 20 September 2017 clarified that the KPPU’s authority to investigate under the ICL is only for administrative investigations to collect administrative evidence. Its authority does not cover other investigative procedures, including among others, those under criminal procedural law, which shall only be undertaken upon meeting certain circumstances.


In the past, many KPPU cartel-related decisions were overturned by the District and Supreme Court due to a lack of direct evidence. This issue is expected to be resolved by the proposed leniency programme in the draft amendments to the ICL. It is expected that the leniency programme may assist KPPU in collecting direct evidence of cartel violation.


As with leniency, the ICL does not cover any administrative settlement (such as plea




bargaining) for a cartel or other cases handled by the KPPU. Therefore, if the business actors admit participation in a cartel and submit evidence of a cartel to the KPPU investigator, the KPPU investigator will proceed to the filing and hearings steps. If the hearings are thereby made shorter, there might be a reduction in the sanction under the KPPU’s decision.


Under Article 38, anybody who knows or suspects that a business actor has violated the ICL or has suffered a loss as a result of a violation of the ICL, may report it in writing to the KPPU, along with the identity of the reporter, the details of the violation and the damages suffered (if any). To protect the reporter, the KPPU must keep the identity of the reporter confidential.

Upon receipt of a complete report alleging a cartel (with sufficient evidence) and evidence of the damages, the KPPU investigators will go straight to hearings without a preliminary investigation. In the hearings, the KPPU’s role is replaced by the reporting party.

The ICL is silent on objections to a report. Therefore, it is important for the KPPU investigator to re-confirm the existence of the cartel before it goes to a hearing.


Under Article 48, the KPPU has the authority to impose administrative sanctions on business actors who violate the cartel provisions. These include a fine of IDR 1,000,000,000 (one billion Rupiah) up to IDR 25,000,000,000 (twenty-five billion Rupiah) as well as the damages suffered by the affected parties. These fines will increase substantially when the law is amended.

Under Article 47 and KPPU Regulation No 4 of 2009 regarding Administrative Action Guidelines, the KPPU is required to complete 2 (two) steps in determining the amount of a fine:

1. Determine the basic value and make adjustments by increasing or reducing the basic value. The basic value is calculated according to the sales volume achieved by the business actor excluding the Value Added Tax (“VAT”) and other related taxes in the relevant market.

2. Consider the market situation which may result in addition to or in a reduction on the fine based on the basic value according to an overall assessment, taking into account all the related aspects, which include: a. whether the business actor continually or repeatedly engaged in the cartel

violation, in which case, the basic value will be increased by up to 100%; b. whether the business actor refused to cooperate in the preliminary investigation;

and c. regarding the leader or initiator of the cartel, the KPPU investigators will look at

the steps the leader or initiator of the cartel took to restrict or threaten other business actors.

The basic value may be reduced if the KPPU decides that:

a. the cartel participant has provided evidence of the discontinuance of the cartel after the KPPU’s investigator started the preliminary investigation into the cartel;

b. the cartel participant has provided evidence of its minimal involvement in the cartel;

c. the cartel participant has been cooperative in the case handling process; and




d. the cartel participant is willing to sign a statement regarding its intention to change its behaviour and not be involved in other activities which violate the ICL.

The final amount of the fine should not exceed IDR 25,000,000,000 (twenty-five billion Rupiah) or 10% of total turnover during the current business year, whichever is lower.


Under Article 48, the KPPU has the authority to impose administrative sanctions on business actors who violate the cartel provisions. These include a fine of IDR 1,000,000,000 (one billion Rupiah) up to IDR 25,000,000,000 (twenty-five billion Rupiah) as well as the damages suffered by the affected parties. These fines are expected to increase substantially when the law is amended.

Under Article 47 and KPPU Regulation No 4 of 2009 regarding Administrative Action Guidelines, the KPPU is required to complete 2 (two) steps in determining the amount of a fine:

1. Determine the basic value and make adjustments by increasing or reducing the basic value. The basic value is calculated according to the sales volume achieved by the business actor excluding the Value Added Tax (VAT) and other related taxes in the relevant market.

2. Consider the market situation which may result in an addition to or reduction in the fine based on the basic value according to an overall assessment, taking into account all the related aspects, which include: a. whether the business actor continually or repeatedly engaged in the cartel

violation, in which case, the basic value will be increased by up to 100%; b. whether the business actor refused to cooperate in the preliminary investigation;

and c. regarding the leader or initiator of the cartel, the KPPU investigators will look at

the steps the leader or initiator of the cartel took to restrict or threaten other business actors.

The basic value may be reduced if the KPPU decides that:

a. the cartel participant has provided evidence of the discontinuance of the cartel after the KPPU’s investigator started the preliminary investigation into the cartel;

b. the cartel participant has provided evidence of its minimal involvement in the cartel;

c. the cartel participant has been cooperative in the case handling process; and

d. the cartel participant is willing to sign a statement regarding its intention to change its behaviour and not be involved in other activities which violate the ICL.

The final amount of the fine should not exceed IDR 25,000,000,000 (twenty-five billion Rupiah) or 10% of total turnover during the current business year, whichever is lower.

Criminal sanctions

Under the ICL, the sanctions available upon conviction of participation in a cartel include:

1. a fine of IDR 1,000,000,000 (one billion Rupiah) up to IDR 25,000,000,000 (twenty-five billion Rupiah);

2. revocation of the cartel agreement; and

3. the determination of the compensation to paid due to the cartel agreement.

In addition to the above sanctions, under the ICL, for:

1. a price cartel violation (Article 5), a criminal fine of IDR 5,000,000,000 (five billion




Rupiah) up to IDR 25,000,000,000 (twenty-five billion Rupiah) may be imposed or imprisonment for up to 5 (five) months; while

2. for a production and marketing cartel violation (Article 11) a criminal fine of IDR 25,000,000,000 (twenty-five billion Rupiah) up to IDR 100,000,000,000 (one hundred billion Rupiah) may be imposed, or imprisonment for up to 6 (six) months.

Further, in addition to the above sanctions, under Article 10 of the Criminal Code, for a criminal cartel offence, the business licence may be revoked, and the directors or commissioners may be barred from these positions for 2 (two) to 5 (five) years.

Cross-border issues

The ICL does not cover cartels which have no connection to the Indonesian territory, even if they have an impact on the Indonesian economy. Article 1 defines a business actor as any individual or entity, whether a legal entity or non-legal entity, established and domiciled or engaging in activities within the jurisdiction of the Republic of Indonesia, either individually or jointly through agreements, engaged in various kinds of business activities in the economic sector.

Some caution should be taken interpreting the above, as the KPPU has recognised a single economic entity doctrine (“SEED”). Therefore, a cartel arrangement by parent companies outside of Indonesia, if it also applies to their subsidiaries in Indonesia, can fall under the jurisdiction of the ICL, as in the Temasek cartel case.

However, following the meeting with the Korean Fair Trade Commission (“KTFC”), the KPPU entered into a cooperation agreement on 8 November 2013 which focuses on the following four aspects: enforcement of the anti-monopoly law; regular dialogues; exchanges of information through direct communications; and technical assistance. This cooperation is important because Korea is one of Indonesia’s biggest business partners and one of the biggest investors in Indonesia through more than 2,100 (two thousand one hundred) companies in Indonesia.


The statistics in the KPPU’s website show that 70% of the cases handled by the KPPU are tender cases, most of which are related to the procurement of goods and services. Cartel cases are at the next level of importance and are an ongoing focus.

Reform proposals

A new draft law amending the ICL has been in preparation by the KPPU since 23 September 2014 and is currently in the process of synchronisation by the House of Representatives and other relevant governmental institutions. However, no deadline has been set for the introduction and adoption of the Bill. It will reform the cross-border authority of the KPPU by amending the definition of a business actor. It is also likely that a leniency clause will be included in the proposed competition law. The maximum fine is proposed to be from 5% to 30% of the sales value earned during the period of the breach. In addition, any business actor that repeats a cartel violation may have its business licence revoked and placed on the black list.






Benedicta Frizka (Associate) Tel: +62 21 5080 8300, 252 1272 / Email: [email protected] Benedicta Frizka is an Associate in the Firm’s Corporate and Commercial Group. Her experience includes advising on general corporate matters and foreign investment. She has also assisted clients with merger filings and provided them advice on Indonesian competition law.

Jonathan Tjenggoro (Senior Associate) Tel: +62 21 5080 8300, 252 1272 Email: [email protected] Jonathan Tjenggoro is a Senior Associate in the Firm’s Corporate and Commercial practice group. He has worked with M&T since 2012 and assists clients with a range of corporate transactions and general commercial advice, including foreign investment. He has recently been active on a number of real estate projects. He also advises on merger control filings and other competition law matters.

Lia Alizia (Partner) Tel: +62 21 5080 8300, 252 1272 / Email: [email protected] Lia Alizia is a Partner in the Corporate, Commercial and Litigation & Dispute Resolutions departments of M&T. She has dealt with a wide variety of corporate, commercial and litigation & dispute resolution matters. The major areas of expertise include anti bribery, anti-corruption, property, Indonesian employment, anti competition and IPR-related issues. She has handled employment-related matters, mass terminations of employment in various industries, the resolution of disputes and the enforcement of IPR. Lia has authored a number of significant publications and often speaks at local and overseas seminars and training programmes on employment, corporate and IPR matters.

Summitmas I, 16th–17th Fls. Jl. Jendral Sudirman Kav 61–62 Jakarta 12190, Indonesia Tel: +62 21 5080 8300, 252 1272 / URL: www.makarim.com

Makarim & Taira S.


Israel


The Restrictive Trade Practices Law 5748-1988 (the Antitrust Law) deals with restrictive arrangements and an infringement of this chapter is considered a criminal offence and is also subject to civil and administrative enforcement.

A ‘restrictive arrangement’ is defined as an arrangement made between two or more persons conducting business that restricts at least one party to the arrangement, in a manner that may prevent or reduce competition (section 2(a) of the Antitrust Law).

In addition, the Antitrust Law provides in section 2(b) for a number of specific restraints, the existence of which constitutes an irrefutable presumption that damage to competition exists (that is, per se, illegal practices), in horizontal arrangements. Accordingly, a horizontal arrangement involving a restraint relating to one of the following issues shall be deemed a restrictive arrangement:

• the price to be demanded, offered or paid;

• the profit to be obtained;

• the division of all or part of the market, in accordance with the location of the business or in accordance with the persons or type of persons with whom business is to be conducted (market allocation); and

• the quantity, quality or type of assets or services in the business.

For many years the accepted legal approach was that the definition of a restrictive arrangement in section 2 does not distinguish between horizontal and vertical agreements – both may be found to be restrictive arrangements under the irrefutable presumption of section 2(b). During the past decade, several rulings have eroded that rule, and in August 2015, the Supreme Court decisively overturned that rule. The Supreme Court held that the irrefutable presumptions of section 2(b) generally do not apply to vertical arrangements, and that vertical arrangements may only be regarded restrictive arrangements if their potential to harm competition to a non-negligible extent is proven.

In addition, section 5 of the Antitrust Law determines that a course of action determined by a trade association for its members or some of them, which is liable to eliminate or reduce competition among them, or such course of action which the trade association recommended to them, shall be deemed to be a restrictive arrangement as defined in section 2, and the trade association and any of its members acting in accordance with such course of action shall be deemed to be a party to a restrictive arrangement.

The level of knowledge required for criminal liability is awareness of the elements of the offence. Intention is not required for a finding of liability.

Eytan Epstein, Mazor Matzkevich & Shani Galant-Frankfurt M Firon & Co.



It should be noted that entry into a restrictive arrangement without the authorisation of the Antitrust Tribunal (or without a temporary authorisation) is forbidden, unless the arrangement was specifically exempted by the Director General of the Israeli Antitrust Authority (“IAA”) or is exempted according to one or more of the block exemptions.

Currently there are 15 block exemption rules, as follows:

• Block Exemption for Arrangements of Minor Importance;

• Block Exemption for Joint Ventures;

• Block Exemption for Agreements for the Execution of Research and Development;

• Block Exemption for Restraints Ancillary to Mergers;

• Block Exemption for Exclusive Distribution Agreements;

• Block Exemption for Exclusive Purchase Agreements;

• Block Exemption for Franchise Agreements;

• Block Exemption for Arrangements between Aircraft Carriers;

• Block Exemption for Arrangements between Aircraft Carriers, in Routes Subject to the Open Sky treaty;

• Block Exemption for Arrangements between Sea Carriers;

• Block Exemption for Agreements between Related Companies;

• Block Exemption for Non-Horizontal Agreements that Do Not Con cern Price;

• Block Exemption for Collaborations Among Competitors Regarding Export of Defence Equipment;

• Block Exemption for Agreements Regarding the Export of Security Equipment outside the State of Israel; and

• Block Exemption for Joint Loans Arrangements (Temporary Provision).

Two enforcement institutions were established under the Antitrust Law: the “IAA”; and the Antitrust Tribunal.

The IAA, headed by the Director General, is an independent government enforcement agency established in 1994. The IAA employs about 100 staff and is divided into three professional departments: legal; economic; and investigations. Thus, the IAA conducts both investigations and legal proceedings regarding restrictive arrangements and uses its vast enforcement measures for this end.

The Antitrust Tribunal, sitting with the District Court of Jerusalem, has an exclusive jurisdiction over non-criminal government antitrust proceedings. The District Court of Jerusalem has exclusive jurisdiction over criminal antitrust matters. Civil antitrust cases could be brought in any court in Israel which has a local jurisdiction, in accordance with the court’s jurisdiction based on the amount of sought damages.

Overview of investigative powers in Israel

Upon the order of the Director General or authorised IAA staff, every person and entity is obliged to provide all information, documents, ledgers or other certificates that, in the opinion of the Director General, would ensure or facilitate the implementation of the Antitrust Law. The IAA makes extensive use of this power.

The Director General (or authorised IAA staff) may, if they have reasonable grounds to believe it is necessary to ensure implementation of the Antitrust Law or to prevent its contravention:

• enter into any business premises and conduct a search without a search warrant.

M Firon & Co. Israel



Notably, entry into residential premises is only permissible in accordance with a search warrant handed down by the court; and

• seize any article or document (including computer material), if they have reasonable grounds to believe that it may serve as evidence.

Furthermore, in the event that suspicion arises that a breach of the Antitrust Law has been committed, the Director General, or authorised IAAs, may investigate any person related to such contravention, or any person who may have information regarding such contravention, and may order any such person to accompany him on an investigation and to provide any details, documents or information relevant to such contravention. An investigator is authorised to compel oral testimonies, and the person under investigation is obliged to answer any question, except for questions that might incriminate him or her. Such testimonies may be used against the provider thereof.

In addition, wiretapping is permissible in certain circumstances subject to the approval of the president of a district court. With respect to a cartel offence, the Director General, the chief of the IAA’s investigations department and his deputy, and any authorised investigators, shall have some powers of detention, arrest and release.


In the past year, the IAA filed indictments against several companies and their managers at the District Court:

(1) in June 2018, the IAA filed indictments, against a number of video games and game console stores in respect of allegedly coordinating the price of the “FIFA17” football video game, as well as the price of “PlayStation” and “Xbox” game consoles (“the Gaming Cartel”);1 and

(2) in July 2018, the IAA filed indictments against several travel companies and some functionaries in these companies for entering into a restrictive arrangement, fraudulent activity, bribery and money laundering activity, in respect to offering travel services to youth delegations to Poland. According to the IAA, the defendants agreed in advance that they would not compete against each other in offering travel services to youth delegations.2

The Antitrust Law does not determine minimum levels for sanctions. Until recently, in most cases, individuals were sentenced to community service, for periods of up to six months in lieu of imprisonment, while imprisonment was the exception. Court decisions in recent years, including the Supreme Court’s decisions, indicate that the customary punishment for cartel offences are between a few months of actual imprisonment and community service.

In June 2018, the District Court of Jerusalem sentenced five CEOs of tree pruning companies for imprisonment periods ranging from one-and-a-half months (in addition to community service) to eleven months – which is the most severe punishment ever imposed in Israel for cartel offences. These sentences were imposed on the main defendants for entering into restrictive arrangements in aggravating circumstances, in addition to fraud and money laundering convictions associated with bid rigging (“the Pruning Cartel”). In addition, fines totaling hundreds of thousands of NIS for each company were imposed.3

In September 2018, the District Court of Jerusalem convicted the Israeli Association of Contractors and its functionaries, 11 contracting companies and their directors for entering into a restrictive arrangement in the form of recommendation to boycott a tender of the Ministry of Construction and Housing.4

In May 2018, the IAA opened an investigation against 14 transportation companies on




suspicion of committing offences of coordinating tenders, fraudulent receiving and money laundering activity.5

In February 2018, the IAA published a draft for public comments of a consent decree between the IAA and Schnapp Batteries Company, according to which, among others, the company will pay NIS 1M to the State Treasury, for being a party to a restrictive arrangement that could have harmed the competition in the car batteries market.6

In March 2018, the IAA reached a consent decree with the supermarket chain Bitan Wines Company, according to which the company will sell two of its branches and provide to the buyer a credit for 18 months, in order to stop the harm to the competition in Migdal HaEmek and Kiryat Shmona areas. In addition, the company will pay the State Treasury NIS 2M.7

In July 2018, the IAA reached a consent decree with Shufersal Company, the largest supermarket chain in Israel, according to which Shufersal committed to cancel or abandon almost 200 real estate exclusivity arrangements it had with various property owners. Shufersal will be allowed to be a party to future exclusivity arrangements for only 25 new branches and for no more than three years. After this period, Shufersal will not be allowed to enter into exclusivity arrangements at all.

In addition, Shufersal agreed to pay an administrative fine of NIS 9M, for violations of the Promotion of Competition in the Food Sector Law, 2014 (“the Food Law”).8

In September 2018, the Antitrust Tribunal approved a consent decree between the IAA and Tnuva Company, which is Israel’s leading milk and dairy product supplier. In the framework of this consent decree, Tnuva admitted its liability for three restrictive arrangements, and undertook to pay its relevant customers the precedential sum of NIS 25M – the highest amount of monetary sanction of any sort imposed for breaching of the Antitrust Law – which will be automatically transferred to the customers as credit to their payment cards.9


Due to the IAA’s limited resources on the one hand, and the vest enforcement means and measures on the other hand, the IAA must prioritise its enforcement activities. Hence, the various enforcement activities are prioritised among themselves (e.g., administrative sanctions including monetary sanctions, versus criminal sanctions), and against other regulatory activities.

As far as it is published, the IAA does not target specific markets for its enforcement activities, but instead uses its authority to deal with activities which it considers are most harmful to competition.


As previously mentioned, due to the limited resources, the IAA must prioritise its investigation activities, and therefore investigations are usually held against alleged hardcore cartels activity.

Mostly, in recent years, investigations were launched against alleged bid rigging activities (mostly governmental procurements), and alleged price-fixing activities. The IAA investigation department often combines forces with other enforcement and investigation authorities such as the police’s fraud unit.


The IAA adopted an official leniency programme for companies and individuals in 2005.




The programme provides for amnesty from criminal prosecution to a cartel member – an individual or a corporation and its directors, officers and employees – that comes forward first and helps the IAA in the investigation of cartel activities prior to the opening of an open investigation, provided this party is not ‘the leader’ of the cartel.

The leniency programme is designed to grant immunity only in regard to cartel activities and obstruction of justice offences related to the cartel activity (as opposed to other forms of criminal antitrust activities such as illegal restrictive arrangements other than cartels, abuse of dominance and illegal mergers).

The leniency programme sets out the following conditions in order to grant an amnesty:

• Leniency will be granted to the first party – corporation or individual – to come forward and deliver full information with respect to an illegal activity in which the applicant was involved.

• Leniency will not be granted to an individual or a corporation that was clearly ‘the leader’ of the cartel (i.e., coerced others to join the illegal activity or initiated it or had a dominant role in the illegal conduct).

• Leniency will be granted to a party reporting illegal activity before an open investigation has commenced.

• If a corporation qualifies for leniency, all directors, officers and employees of that corporation will receive full amnesty from criminal prosecution.

If the corporation approaches the IAA to deliver information with respect to the illegal activity, the approach should follow a clear and binding decision of the corporation to deliver information to the IAA, as opposed to the unilateral approach of an individual.

• In case the corporation does not approach the IAA, executives and employees may approach the IAA on their own initiative, deliver information and be granted individual leniency if they meet the programme’s conditions (e.g., the individual was not “the leader” of the cartel).

• Leniency will be granted only to those who have terminated their part in the illegal activity (however, applicants are required to receive the IAA’s consent to advise other parties they have ceased their participation in the cartel).

• Leniency will be granted to those who fully cooperate with the IAA investigation on an ongoing basis. This cooperation includes providing the information held by the applicant for immunity, by way of full and true disclosure, including detailed cartel-related documents and the names of those involved. If a corporation is applying for immunity, information is expected to be provided by all the relevant employees and managers. In addition, the applicant for immunity must comply with the provisions of the IAA during and after the investigation, to assist in the investigation and to fully testify with respect to the cartel, as necessary.

• Leniency will not be granted to a person who was previously either convicted of a cartel offence or has been granted immunity pursuant to the leniency programme in regard to a different cartel.

According to the revised Public Statement regarding the criteria and considerations in setting the level of monetary sanctions (Director General’s Public Statement 1/16), the Director General shall refrain from imposing a monetary sanction on a person who was granted immunity under the immunity programme (“the Public Statement 1/16”).10

In 2018, the IAA filed an indictment based on the implementation of the leniency programme




in the Gaming Cartel case, the Tree Pruning Cartel case was also established based on the leniency programme.


If the IAA chooses civil enforcement rather than the criminal route, it may enter into a consent decree with the parties to the restrictive arrangement. The consent decree is subject to the approval of the Antitrust Tribunal. Violation of the consent decree can lead to monetary sanctions and other sanctions, including criminal sanctions for breaching the court’s order (e.g., sanctions for contempt of court).


Private enforcement is possible under the Antitrust Law. An act or omission contrary to the provisions of the Antitrust Law shall constitute a tort in accordance with the Torts Ordinance [New Version], 5728-1968, enabling any person to seek a remedy from the court through a civil action for the actual damages he or she suffered.

The submission of class actions is also possible in antitrust cases. Note that the purpose of damages under Israeli law is restitutive and the Antitrust Law does not allow punitive or exemplary damages. However, in October 2013, a bill was published proposing several amendments to the Antitrust Law. Inter alia, the bill suggests adopting the American triple damages model in private enforcement of antitrust, except for cases where the defendant was granted immunity from criminal prosecution under the leniency programme of the IAA.

The ‘indirect purchaser’ doctrine was expressly asserted in several matters before the courts, but ultimately the cases were settled without the court ruling on the issue. While no express ruling has yet been given on the application of the ‘indirect purchaser’ doctrine in antitrust cases, past decision demonstrated a tendency towards the rejection of that defence. For example, in November 2013, in its decision to reject a motion for dismissal of a class action application, the Central District Court determined that the existence of a conflict of interest between the members of two distinct subgroups of the class action group (direct and indirect injured members) does not deny the possibility of providing compensation to any of the group’s members. Note, however, that this issue was not in the core of the debate in that application and was not the subject of the decision. Nevertheless, we may witness a change in the future, due to an opinion submitted by the State Attorney General to the Central District Court in the Aviation cartel case,11 in which it is argued that indirect consumers should be allowed to claim their damages from the cartel members. These developments may be the path for rejecting the ‘pass-on’ defence in antitrust private actions.


The following administrative sanctions are available under the Antitrust Law for cartel activity:

• The Director General may impose monetary sanctions on corporations and individuals that are involved in violations of the Antitrust Law, in lieu of criminal indictment monetary sanction. As previously mentioned, in October 2016, the Director General published the Public Statement 1/16 which are revised guidelines regarding the criteria and considerations in setting the level of monetary sanctions.

• A consent decree, according to which the Director General and the parties to the restrictive arrangement may agree, inter alia, on an amount of money to be paid to the




State Treasury. The consent decree may include a provision according to which the parties do not confess the violation of the Law. As previously mentioned, in the last 12 months the IAA reached three consent decrees in alleged restrictive arrangements, that did not allow substantiation of hardcore cartels.

• An injunction order by the Antitrust Tribunal upon request of the Director General to cease the illegal activity.

• The Director General may issue an administrative determination, by which certain arrangements are declared to be restrictive arrangements. Such determination, unless reversed by the Antitrust Tribunal, is considered to be prima facie evidence in any judicial proceeding.

Under article 50D of the Antitrust Law, the Director General can impose monetary sanctions of up to NIS 1M on an individual. As for corporations, if in the year preceding the fiscal year in which the infringement took place, the corporation turnover exceeded NIS 10M, the Director General may impose a monetary sanction of up to 8 per cent of the turnover, up to approximately NIS 24M. It should be noted that the new Bill of the Antitrust Law, which was published on April 30, 2018, further discussed below, suggests to annul the limitation of NIS 24M for monetary sanction, therefore limiting the possible sanction solely to 8 per cent of the corporation’s turnover.


The Director General’s decision to grant an exemption to a restrictive arrangement, a declaration by the Director General that certain conduct is a restrictive arrangement and a decision to impose monetary sanctions are all appealable to the Antitrust Tribunal within 30 days (the Antitrust Tribunal’s decisions is appealable to the Supreme Court within 45 days).

Only the decision made by the Supreme Court is binding to the lower courts. It should be highlighted that, according to the Antitrust Law, the appellate can be both the parties, the IAA and third parties, depending on the decision. The Tribunal applies a de novo assessment in reviewing the case, and the standard of proof is preponderance of the evidence (balance of probabilities).

Criminal sanctions

The sanctions available under the Antitrust Law for criminal offences are up to three years’ imprisonment (or five years, in aggravating circumstances) or a maximum fine of NIS 2.2M. In addition, a daily fine of NIS 14,000 may be imposed for each day that the offence persists. If a corporation is involved, the said fines will be doubled.

Furthermore, if an offence under the Antitrust Law was committed by a corporation, then every person that was, at the time of the offence, an active director, a partner (except for a limited partner) or a senior officer responsible for the relevant field shall also be liable, unless that person has proven that the offence was committed without his or her knowledge and that he or she took all reasonable measures to ensure compliance with the Antitrust Law.

Cross-border issues

The Antitrust Law does not explicitly mention that it applies to conduct taking place outside Israel, nor does it negate its application to such foreign conduct. In 1999, the Director General of the IAA determined that an arrangement existed in the market for selective fragrances, and addressed the issue of the extraterritorial application of the Israeli antitrust




legislation. According to the declaration, James Richardson, an Australian registered company which held a licence from the Airports Authority to operate a duty-free shop at the Israeli airport, and held over 30 per cent of the Israeli market in selective fragrances, entered into a restrictive arrangement with foreign selective perfume manufacturers to distort competition for selective fragrances in Israel. James Richardson sought, through its restrictive arrangements with the foreign suppliers, to maintain its 30 per cent markdown on imported selective fragrances.

In addressing the extraterritorial application of the Israeli antitrust legislation, the Director General referred to foreign jurisprudence on the issue, in particular he adopted the “Effect Doctrine” developed and implemented in the US and the EU. The Director General held that a restrictive arrangement between foreign parties entered into outside the borders of Israel but the purpose or result of which, in whole or in part, is significant damage to competition in the Israeli market, will fall within the purview of the Antitrust Law.

The Antitrust Tribunal addressed this issue for the first time in 2011, and adopted the Director General’s approach.12

In September 2013, the Director General issued a Declaration under Section 43(a)(1) of the Antitrust Law in regard to an international cartel entered into between foreign companies to coordinate bids submitted in tenders for gas insulated switchgears (“GIS”) in many countries around the world, including Israel.13 In his decision, the Director General further discusses the Effect Doctrine, and emphasised that extraterritorial application of the antitrust law can be concluded when the conduct is taking place outside the state borders, only when there is a clear connection between that conduct and the local market. The Director General indicated that the very fact that bids submitted in Israel were based on the agreements between the cartel members was indeed a manifestation of the ‘striking influence’ of the cartel on the Israeli market, thus justifying the enforcement of Israeli law.14 The Director General concluded that:

“The restrictive arrangement which is the subject of this declaration was conducted abroad by non-Israeli companies. Nonetheless, its influence over competition in the local market obliges the conclusion according to which the performance of such arrangement breaches the Israeli Antitrust Law.”

The issue of extraterritoriality in antitrust cases has not yet been firmly decided by the courts in the context of a claim for damages or in a criminal proceeding.

Private civil proceedings against foreign entities are subject to the rules of service outside the state of Israel as provided in the Civil Procedure Regulations, 5744-1984 (CP Regulation). Particularly, in the case of a foreign defendant who is not personally present in Israel, a plaintiff needs the court’s approval to serve its claim outside the jurisdiction, as a precondition for the court’s jurisdiction over that defendant.15

The court may grant a motion for service outside the jurisdiction if the claim falls under one of the categories listed in Regulation 500 of the CP Regulation. Regulation 500 stipulates a list of 10 situations in which service outside the jurisdiction could be permitted.16 The common denominator of the factors detailed in the CP Regulation is the existence of a link between the dispute and Israel. For instance, when relief is sought against a party domiciled in Israel or that the claim concerns real estate located in Israel, and matters that concern a breach of a contract entered into in Israel or breach of a contract that occurred in Israel, irrespective of where the contract was entered.

In recent years, several decisions of the Israeli district courts in Israel have granted (ex parte)




permission for service outside of the jurisdiction to foreign corporations which allegedly engaged in illegal global cartels, based on Regulation 500(7) of the CP Regulation, which requires that the claim be founded on an act or omission that has taken place within the state of Israel. For example, the Registrar of the Central District Court approved, ex parte, a motion for service outside of Israel in the class action filed regarding the liquid crystal display flat panel Cartel (the LCD cartel).17 The basis for this decision was that the sale of flat panels to Israeli purchasers, or products that contain flat screens – of which prices were allegedly fixed by the respondents outside of Israel – falls within the meaning of an ‘act within the State’, as stated in Regulation 500(7).18

However, the ruling of the Registrar was later reversed on appeal. The Central District Court accepted the appeal of the foreign defendants, rejecting the argument that damages in antitrust cases should be deemed part of the ‘act within the State’ for Regulation 500(7) purposes. The District Court emphasised that under customary case law ‘an act’ is a separate element that must be distinguished from the ‘damage’ component. The Court stated that if the Israeli legislator wishes to force the Law’s jurisdiction on foreign parties to facilitate the commencement of lawsuits against foreign parties in Israel, amendment to the law or to the regulations is required.19 In August 2017, the Supreme Court upheld this decision in the LCD Cartel Case, and ruled that damage, in itself, would not suffice to grant permission for a service outside Israel, if the act or omission of the alleged cartel was not performed in Israel.20 Thus, the significance of the decision is that Israeli plaintiffs are not able to bring an action against foreign companies that participated in a global cartel which affected the Israeli market and consumers, unless the alleged illegal activity (in full or in part) occurred, de facto, in Israel or the defendants has some recognised presence in Israel.


The past few years have been characterised by an increasing number of motions to certify class actions based on alleged global cartels. The initiation for these claims is usually made by private practitioners, and the actual plaintiffs are private consumer organisations or Israeli individuals while the respondents are foreign companies that were allegedly parties to global cartels that according to the plaintiffs’ claim affected the Israeli market and harmed consumers.

Thus, since 2013, several applications to approve actions as class actions have been submitted against alleged members of international cartels (with or without the participation of a company based in Israel): the International Air Freight Forwarding cartel; the LCD Cartel Case; the GIS cartel; the Cathode ray tube cartel; and the Optical Disk Drivers cartel. To date, no decision has been made as to whether or not to certify any of these applications.

However, as stated above, the recent ruling of the Supreme Court in the LCD Cartel Case limits the possibility of filing class actions against foreign entities that have no presence in Israel.

Reform proposals

The main reform proposal and expected future development is in the framework of a proposed Bill published in April 30, 2018 (a Bill of the Antitrust Law (Amendment No. 20) – (Reinforcing Enforcement and Reducing the Regulatory Burden), 5767–2018.21 The Bill offers numerous amendments to the Antitrust Law. For example, it is proposed to broaden the self-assessment regime in respect of the application of the block exemptions, and also to expend the exemption decisions issued by the Director General.




In addition, the Bill offers to shorten the time in which the IAA must decide in applications for an exemption of a restrictive arrangement from 90 to 30 days, and grant the authority the power to extend the period to additional periods that do not exceed 120 additional days.

Moreover, the Bill suggests annulling the aggravated circumstances offence, while increasing the maximum punishment for the other offences, such as entering into a restrictive arrangement, to a maximum sentence of five years imprisonment.

As previously mentioned, the Bill also proposes to annul the maximum of NIS 24M for monetary sanction, therefore limiting the possible sanction solely to 8 per cent of the corporation’s turnover.

* * *

Endnotes

1. Publication 501525 (June 17th, 2018).

2. Publication 501537 (July 4th, 2018).

3. Publication 501520 (June 13th, 2018).

4. Publication 501582 (September 13th, 2018).

5. Publication 501512 (May 28th, 2018).

6. Publication 501473 (February 28th, 2018).

7. Publication 501480 (March 13th, 2018).

8. Publication 501552 (July 30th, 2018).

9. Publication 501573 (September 3rd, 2018).

10. Publication 501072 (October 26th, 2016).

11. Jerusalem District Court, Criminal Case 49529-12-11, The State of Israel v. Avi Victor Ben Dror, January 2nd, 2018, published in Nevo.

12. Restrictive Arrangement 513-04 ACUM Ltd – the Society of Israeli Music Composers, Authors and Publishers v. the Director General et al, 2011, paragraph 26.

13. The Director General’s declaration under Section 43(a)(1) regarding a restrictive arrangement between GIS manufacturers. Publication 500473 (September 16th, 2013).

14. The Director General decided not to include in the Determination the worldwide cartel members who had never submitted bids in GIS tenders in Israel. The Director General determined that considering: (1) the agreement applied to many countries (not just Israel); and (2) there is a satisfactory explanation and competitive reason for these specific companies to refrain from activities in Israel during the period of the cartel (the geopolitical situation during the relevant period), it is difficult to attribute the participation of these companies in the global cartel to an impact on the Israeli market. Therefore, and in light of the terms of the effects doctrine, it cannot be determined that they were a party to a cartel in Israel. Ibid., paragraph 140.

15. Additional methods for serving a foreign defendant under the CP Regulation are through personal service when a representative of the corporation is present in Israel, or via an ‘agent’ of the foreign defendant that is located in Israel. An individual or a corporation is deemed to be an ‘agent’ if it is proved to have strong ties with the foreign defendant.




16. Fulfilment of one of the grounds for the service out of the jurisdiction under Regulation 500 will allow the court to properly exercise jurisdiction over foreign entities, subject to compliance with the forum non conveniens doctrine.

17. Central District Court, Class Action 53990-11-13 Hatzlacha Consumer Movement for the Promotion of Equitable Economic Society (RA) v. AU Optronic Corporation and others, November 27th, 2013, published in Nevo.

18. Central District Court, Class Action 53990-11-13 Hatzlacha Consumer Movement for the Promotion of Equitable Economic Society (RA) v. AU Optronic Corporation and others, September 5th, 2014, published in Nevo.

19. Central District Court, Class Action 53990-11-13 Hatzlacha consumer movement for the promotion of equitable economic society (RA) v. AU Optronic Corporation and others, December 29th, 2016, published in Nevo.

20. Supreme Court, Permission for Civil Appeal 925/17 Hatzlacha consumer movement for the promotion of equitable economic society (RA) v. AU Optronic Corporation and others, July 31st, 2017, published in Nevo.

21. Publication 501510 (April 30th, 2018).






Eytan Epstein Tel: +972 3 754 0800 / Email: [email protected] Eytan Epstein is a senior partner at M Firon & Co. Mr. Epstein has repeatedly been listed in The International Who’s Who of Competition Lawyers and has also been elected by leading research organisations, such as Chambers and Partners and The Legal 500, as one of the leading competition law practitioners in Israel. Mr. Epstein is a graduate of the Tel Aviv University Faculty of Law (1984) and, after being admitted to the Israel Bar in 1985, worked in DG IV (competition) in Brussels. He established his firm in 1989 and merged with M Firon in 2016. Mr. Epstein is a member of the International Bar Association (IBA), serves as a member of the BIC and is the representative of the Israel Bar. Mr. Epstein has published numerous articles on antitrust and the legal environment of Israel’s foreign trade. He is also the author, together with Tamar Dolev-Green, of the book “Competition Law in Israel” (Wolters Kluwer 2015).

Mazor Matzkevich Tel: +972 3 754 0800 / Email: [email protected] Mazor Matzkevich is a partner at M Firon & Co, and she heads the competition, antitrust and regulatory affairs department. Ms. Matzkevich practice focuses on all aspects of antitrust including litigation in administrative and criminal cases, merger notifications and the new Concentration Law and the Food Law. Ms. Matzkevich joined the Israel Antitrust Authority in 1998, and between 1999 and 2002 headed the Authority’s Criminal Division. In addition, Ms. Matzkevich was responsible for the Authority’s regulatory activity in sectors such as professional organisations, water and environment. In 2003, after being admitted to the New York State Bar, Ms. Matzkevich joined the Federal Trade Commission (FTC) as a staff attorney, until 2009. In 2010 Ms. Matzkevich joined Epstein Chomsky, Osnat and Co, as a partner, until its merger with M Firon & Co in 2016.

Shani Galant-Frankfurt Tel: +972 3 754 0800 / Email: [email protected] Shani Galant-Frankfurt is an advocate at M Firon & Co and part of the antitrust and regulatory affairs department. Ms. Galant-Frankfurt advises on both civil and criminal antitrust cases. Her practice includes, among others, notifications of mergers, advising clients and providing legal opinions in respect of all aspects of competition and antitrust law. Ms. Galant-Frankfurt received her law degree (LL.B.), with Honours, from Interdisciplinary Center Hertzliya (IDC) in 2014, and her Master of Laws (LL.M.), with the highest Honours, from IDC in 2017.

Adgar 360 Tower, 2 Hashlosha St, Tel Aviv 6706054, Israel Tel: +972 3 754 0800 / Fax: +972 3 754 0011 / URL: www.firon.co.il

M Firon & Co.


Italy


Cartels constitute an administrative offence. The Italian Competition Authority (Autorità Garante della Concorrenza e del Mercato, “ICA”, an independent administrative authority) is entrusted with the relevant investigative, decision-making and fining powers. In particular, the ICA applies Article 101 TFUE to cartels having an EU dimension (i.e., suitable to prejudice trade between Member States) and Article 2 of the Law (a provision that is largely similar to 101 TFEU) to cartels having a domestic dimension. The ICA can also apply both provisions simultaneously. However, in its decisional practice, the ICA is generally inclined to apply Article 101 TFEU, whereas it applies Article 2 of the Law only to cartels having a very limited geographic scope. In any case, Italian rules shall “be interpreted in accordance with the principles of the European Community competition law” (Article 1(4) of the Law). As a result, enforcement of Italian antitrust law is based on the principles set forth by EU law.

Both provisions lay down a very wide notion of a cartel, which encompasses any kind of arrangement (express or tacit, formal or informal, written or oral), concerted practices and decisions of associations of undertakings.

When it ascertains the existence of a cartel, the ICA may impose administrative fines to undertakings taking part in cartels, with a legal maximum of 10% of the undertaking’s consolidated turnover for the previous financial year, and order the charged undertakings to cease the anti-competitive conduct. ICA’s decisions might be appealed before administrative courts, i.e., the Regional Administrative Court of Lazio (TAR Lazio) in first instance and the Council of State in second instance. Rules governing proceedings before the ICA are set forth by Presidential Decree No 217/1998.

Infringements of Article 101 TFEU and/or Article 2 of the Law may also be ascertained by the civil judges in the context of private actions for damages or for the declaration of nullity of an agreement.

In principle, infringements of the above-mentioned rules do not give rise to criminal liability, unless the infringing conduct constitutes itself a crime (e.g., in the case of cartels, such as bid rigging, in public tenders).

Overview of investigative powers in Italy

ICA usually exercises its power to investigate cartels following complaints submitted by third parties or leniency applications. However, it may also act on its own initiative. ICA’s investigative powers are the following.

Requests for information and/or documents. The Authority may request undertakings, public or private entities and individuals to supply information and exhibit any documents in their

Alessandro De Stefano & Luca Toffoletti Nctm Studio Legale



possession which are of relevance to the investigation. The requested party has a duty to cooperate with the ICA. Refusal or failure to comply with such a request, without objective justification, may be fined up to €25,822. Should information or documents submitted be inaccurate or misleading, fines of up to €51,645 may be imposed. Such fines have been applied in ICA’s decisional practice.

Inspections. The Authority may conduct inspections (dawn raids) at the premises of the investigated party or of third parties in possession of documents/information of relevance to the investigation. Inspections, which may be conducted at any stage of the investigation (but are typically conducted immediately after the opening of the proceedings), do not need judicial authorisation. In conducting inspections, ICA officials are assisted by Italian Tax Police officers (Guardia di Finanza). During the inspection, the party may be assisted by legal counsels, but the ICA officials are not obliged to wait for their arrival at the party’s premises (as a matter of practice, they wait for a maximum of 30 minutes). During inspections, ICA officials may scrutinise, and make copies of, undertaking’s records and books, digital documents and email correspondence (typically using forensic IT tools), and any other relevant document. Moreover, they may conduct oral interviews of the undertaking’s employees in order to obtain information and/or explanations on the investigated conduct. Following completion of the activities, ICA officials prepare a minute of the inspection, which shall be signed by them and party’s legal representatives. The same fines indicated above apply in case of refusal/failure to supply information/documents and of provision of inaccurate or misleading information/documents during inspections.

Hearings. The ICA may set up hearings with the investigated parties or third parties in possession of relevant information, in order to obtain elements of relevance to the investigation. At the end of the hearing a minute is undersigned by an ICA official and the representatives of the heard party.

Experts’ reports. The ICA may obtain independent experts’ reports (e.g., on economic, statistical, or technical matters) on any profile of the investigation. However, in practice such power is very rarely exercised by the ICA.

Limitations of ICA’s investigative powers. ICA’s investigative powers suffer two main limitations: (i) no self-incrimination: while a general duty to cooperate exists, in the context of both replies to request for information/documents and inspections, this duty shall not undermine the general principle according to which the undertakings cannot be obliged to provide self-incriminating information or documents; and (ii) legally privileged documents, i.e. communications between the undertaking and its external lawyers, cannot be seized during dawn raids. In-house legal counsel’s advice is not covered by legal privilege, unless it only reproduces the content of the advice provided by an outside counsel.


In 2018, the ICA has concluded seven cartel proceedings: (i) it has ascertained the existence of cartels in four cases, in two of which cases it has imposed fines (in one case for a total amount of approx. €678 million and in another case a final of approx. €3.3 million); (ii) two cases have been closed subject to commitments offered by the parties; and (iii) one further case has been closed without ascertaining infringements.

Decisions of infringement: • Case I812 – F.I.G.C. Regolamentazione dell’attività di direttore sportivo, collaboratore

della gestione sportiva, osservatore calcistico e match analyst (June 27, 2018): The ICA

Nctm Studio Legale Italy



imposed a fine equal to €3,330,659.69 on the Italian Football Association for having adopted regulations and subsequent calls for tender that restricted access to some football professions (e.g., team director, match analyst) in breach of Article 101 TFEU.

• Cases I801A – Servizio di prenotazione del trasporto mediante taxi – Roma and I801B – Servizio di prenotazione del trasporto mediante taxi – Milano (June 27, 2018): The ICA investigated the agreements of the top cab dispatching cooperatives operating in Rome and Milan, whose members are taxi drivers associated with the cooperative under a non-compete clause, according to which cab drivers cannot accept calls for service from competing dispatchers. The ICA ascertained that such non-compete clause violates Article 101 TFEU, since, in particular, it is capable of preventing the entry into the market of innovative operators, such as the platforms that matches taxi drivers and passengers through their mobile phone applications. However, the ICA has decided not to impose sanctions, having qualified the infringement as not serious (fines can only be imposed to “serious” or “very serious” infringements, see below).

• Case I811 – Finanziamenti Auto (20 December, 2018): Following a leniency application made by Daimler and Mercedes Benz, the ICA has launched an investigation against the leading captive banks and related automotive groups operating in Italy in the sale of vehicles by means of financial products (including BMW, Fiat-Chrysler, Ford, Renault, Volkswagen, Mercedes Benz, and Toyota), as well as their trade associations. The ICA has ascertained the implementation of a cartel between 2003 and 2017 involving the exchange of sensitive information on current and future quantities and prices. Such cartel would have restricted the competition on the market for car sales through loans in violation of Article 101 TFEU. Accordingly, the ICA has imposed a total fine of €678 million (the highest fine has imposed on Fiat-Chrysler: €178,979,400), while it has awarded the benefit of full immunity from fine to the leniency applicant.

Commitment decisions:

• Case I799 – Tim-Fastweb-Realizzazione rete in fibra (March 28, 2018): The proceedings concerned the compatibility with Article 101 TFEU of a coinvestment agreement between Telecom Italia (i.e., the Italian telecommunications incumbent) and Fastweb (i.e., a competitor of Telecom) regarding the construction of a fixed telecommunications network in optical fiber (FTTH) in 29 main Italian cities by a joint venture company named Flash Fiber. The ICA has investigated whether the agreement was able to restrict the competition on the market for fixed wholesale access and the market for broadband and ultrafast-broadband retail telecommunication services, considering that cooperation involved the two main Italian vertically integrated operators. The ICA has closed the proceedings stating that the co-investment agreement, as modified by the commitments offered by the parties, will promote the development of infrastructural competition in the fixed network telecommunications markets and will allow a rapid covering process of the national territory with new generation networks.

• Case I813 – Restrizioni alle vendite online di stufe (April 18, 2018): The proceedings concerned an alleged resale price maintenance arrangement imposed by a supplier to its online distributors of stoves in violation of Article 101 TFEU.

Decision of non-infringement. The ICA closed an investigation without ascertaining infringements on case I819 – Intercent-ER/Gara per farmaci emoderivati (Decision of December 12, 2018): The investigation concerned the compliance with Article 101 TFEU




of the joint participation, through a consortium, of two competitors in a large public tender for the supply of certain services to the national healthcare system. In particular, ICA has investigated whether the consortium would have been set up with a view to avoiding competition between the two firms.

In 2018, the ICA has opened three further proceedings:

(i) Case I820 – Fatturazione mensile con rimodulazione tariffaria (Decision of February 7, 2018): The investigation aims at verifying whether the main Italian telecommunications operators (Telecom, Vodafone, Fastweb, Wind3), also through their trade organisation, have coordinated their commercial strategy in violation of Article 101 TFEU with regard to the terms of payment imposed on their respective clients as a consequence of the new regulatory framework, which has required the operators to reintroduce a monthly basis billing (instead of a 28-day basis billing adopted by the operators in the previous months). It is worth noting that the ICA has adopted interim measures, prohibiting the parties to apply the price increases stemming from the above-mentioned changes in the terms of payment.

(ii) Case I821 – Affidamenti vari servizi di vigilanza privata (Decision of February 21, 2018): The investigation concerns an alleged bid rigging in the context of a number of public tenders regarding the provision of security services in violation of Article 101 TFUE.

(iii) Case I831 – Gare Ama servizio smaltimento rifiuti (Decision of December 12, 2018): The investigation concerns an alleged bid rigging in the context of a number of public tenders issued by Ama, i.e., the company in charge of the management of urban waste in Rome, in violation of Article 101 TFEU.

The ICA also opened a non-compliance proceeding (case I792C – Gare ossigenoterapia e ventiloterapia-Inottemperanza; Decision of October 17, 2018) against seven suppliers of home oxygen therapy for an alleged failure to comply with an ICA’s order to refrain from reiterating a concerted practice such as the one ascertained in its 2016 infringement decision.

The result is that in the context of the above-mentioned investigations, the ICA has generally conducted inspections at the premises of the involved undertakings (with the only exception of case I812).

ICA’s 2018 enforcement levels have been essentially equivalent in terms of investigations concluded to those of 2017 (five cartels sanctioned and commitments accepted in one case) and 2016 (six cartels sanctioned and commitments accepted in one case). However, it is worth noting a significant increase in the fines applied on the undertakings, which have been equal to approximately €350 million in 2016, €240 million in 2017 and €680 million in 2018 (mainly by virtue of the fine imposed in the above-mentioned case I811).

Finally, the following six proceedings initiated in 2017 are still pending:

(i) Case I803 – Condotte restrittive del Consiglio notarile di Milano (proceeding initiated by Decision of January 1, 2017): The investigation concerns the conduct of the Notary Council of Milan, aimed at inducing the notaries of its district to limit their activity, thus restricting competition between them and ultimately leading to market sharing and restriction of price competition, in breach of Article 2 of the Law.

(ii) Case I805 – Prezzi del cartone ondulato (proceeding initiated by Decision of March 22, 2017): The investigation concerns alleged market-sharing and price-fixing agreements in the market for corrugated board sheets and cardboard packaging in breach of Article 101 TFEU.




(iii) Case I806 – Affidamento appalti per attività antincendio boschivo (proceeding initiated by Decision of March 14, 2017): The investigation concerns an alleged bid rigging in the context of public tenders for fire-fighting and helicopter rescue services in breach of Article 101 TFEU.

(iv) Case I808 – Gara Consip FM4-Accordi tra i principali operatori del facility management (proceeding initiated by Decision of March 21, 2017): The investigation concerns an alleged bid rigging in the contest of public tenders for the provision of facility management services for public administration in breach of Article 101 TFEU.

(v) Case I814 – Diritti internazionali: The investigation concerns an alleged collusion between the participants in the tenders called since 2009 by the Italian Football League for the sale of the international TV rights of the competitions organised by the same League (i.e., Serie A Championship, Italian Cup, etc.) in breach of Article 101 TFEU.

(vi) Case I816 – Gara So.Re.Sa. rifiuti sanitari Regione Campania: The investigation concerns an alleged bid rigging in the context of the tender issued by Soresa for the supply of collection and disposal of medical waste services in the Campania Region in breach of Article 101 TFEU.


ICA’s recent enforcement activities focus (and will likely continue to focus in the near-future) on the following key sectors:

Telecommunications: As already mentioned, the ICA has closed a proceeding with commitments (see above case I799) and is currently investigating an alleged coordination between telecommunication operators in the field of retail offers (see above case I820).

Pharmaceutical: The ICA is continuing its enforcement activity in the pharmaceutical sector, to which it has also traditionally attached special attention in consideration of its impacts on the public budgets. In particular, it has concluded the investigation in the above-mentioned case I819 (without ascertaining any infringement). Moreover, it has concluded a non-compliance proceeding following its 2016 decision by which it has sanctioned an abuse of dominance for excessive pricing in the field of cancer medicines (case A480B-Incremento prezzo farmaci Aspen/Inottemperanza).

New economy services: The ICA has ascertained the anti-competitive nature of the non-compete clause imposed by cab dispatching cooperatives, since they are able to impede the entry into the market of innovative operators, such as operators which matches taxi drivers and passengers through mobile phone applications (cases I801A and I801B). It is worth noting that the ICA has initiated a further investigation – this time for violation of Article 102 TFEU – on the non-compete clause imposed by cab dispatching cooperative of Turin.

Professions: The ICA is continuing its advocacy and enforcement of competition rules in the field of professions, in order to grant freedom of access and more competition amongst professionals with the aim of increasing consumer choice and welfare. In particular, the ICA has sanctioned the regulations of the Italian Football Association that restricted access to some football professions (case I812) and is currently investigating certain restrictive conducts of the Notary Council of Milan (case I803).

The types of infringements that come to prominence in ICAs 2018 decisional practice are:

Bid rigging: The ICA is keeping fighting bid rigging with a view to safeguard public budgets. Five investigations for alleged bid rigging are currently pending (cases I806, I808, I816, I821 and I831), while the case I819 has been closed without ascertaining infringements of competition law.




Exchange of information: The ICA is traditionally very active in the investigation of exchanges of information between competitors. In the wake of such tradition, the Authority has recently applied one of its highest fines in the case I811 (€678 million) and is currently investigating further cases of exchange of information connected to price-increase agreements (cases I805 and I820).

Traditionally, ICA’s enforcement in the field of vertical infringements is not particularly vigorous. In 2018 the Authority has conducted only one investigation in this field, which has been closed by accepting commitments, although the investigated conduct concerned a case of resale price maintenance (case I813).

Finally, it is worth noting that, on September 25, 2018, the ICA has adopted its “Guidelines on antitrust compliance”, which provide undertakings with guidance on the content of the compliance programme, the capability of the compliance programme to be considered as a mitigating circumstance for the purposes of quantification of the fine, and the criteria that the ICA intends to use to quantify the reduction of the fine as a consequence of the adoption of a compliance programme.


The ICA has investigation, prosecution, decision-making and sanctioning powers. In a nutshell, the stages of the proceedings are the following.

Decision to open proceedings. The decision to open proceedings, adopted by the ICA’s Board, shall indicate: (i) the essential elements of the alleged infringement; (ii) the deadline by which the ICA shall adopt its final decision; (iii) the name of the case handler; (iv) the office where the case file is available; and (v) the deadline within which the investigated party may ask to be heard. The decision is served with the investigated parties (typically, at the beginning of the inspection) and possible third parties (e.g., the parties which submitted complaints), and then published on ICA’s weekly bulletin and website. As a matter of practice, the decision is followed by inspections at the premises of the investigated parties.

Investigation. The investigated parties and any other party admitted to the proceedings (having a direct interest in the investigation) may: (i) produce written submissions, documents, and opinions; (ii) have access to the case file (based on a reasoned confidentiality request of the interested party, the ICA may decide to refuse access to certain documents or parts of documents; ICA’s decision to refuse access may be appealed); and (iii) ask to be heard. The ICA may exercise the above-mentioned investigative powers (see Overview of investigative powers in Italy above). The investigation phase ends with the issuance of the Statement of Objections, which contains the preliminary results of the investigation conducted by the ICA and its assessment of the case. The Statement of Objections is immediately served with the investigated parties and the third parties admitted to the proceedings, together with the indication of the closing date of the investigation. Following receipt of the Statement of Objections, the parties may: (i) submit a written response to ICA’s conclusions until five days before the closing date of the investigation; and (ii) require to be heard by ICA’s Board in a final hearing, which is usually set up on the closing date of the investigation.

Decision. After the investigation has been completed, ICA’s Board shall issue the final decision. As a general rule, the standard of proof applied by ICA is largely consistent with the EU Commission’s decisional practice. Should it consider that the investigated conduct violates Article 101 TFEU and/or 2 of the Law, the ICA orders the parties to refrain from carrying out the conduct within a given deadline and, if it qualifies the infringement as




serious or very serious, the ICA may impose a fine. Cartels are typically qualified as very serious.

It is worth noting that: (i) the ICA is not required to undertake an investigation and reach a final decision on the infringement within a mandatory period of time; and (ii) the ICA has recently closed a number of proceedings without ascertaining infringements of Articles 101 TFEU and/or 2 of the Law, when it has found that the alleged collusive conduct was not adequately proved (see the above-mentioned case I819), or without imposing fines despite a finding of infringement, when it has found that the alleged collusive conduct was not serious (see the above-mentioned cases I801A and I801B). This shows an increased attention drawn by ICA to the defensive arguments of the investigated parties.

It is disputed in Italy whether the above-mentioned decision-making structure effectively safeguards the parties’ rights and the general principle of equality of arms, considering that investigation, prosecution, decision-making and sanctioning powers are all integrated into a single body, even if the ICA’s Board is formally separated from the investigative offices. In this respect, many authors also recall that traditionally the Italian administrative courts have been reluctant to annul ICA’s decisions. The matter has been examined by the European Court of Human Rights in the landmark judgment Menarini (2011): the Court held that, in order to ensure compliance of the Italian system with the right to a fair trial, the ICA’s decision shall be subject to judicial control by a court having full jurisdiction, namely the power to decide on all aspects of law and fact and, if necessary, to reformulate the decision on both facts and law. Following Menarini, the most recent judgments of the Italian administrative courts actually carry-out a deeper review of ICA’s decision and the number of ICA’s decision annulled by TAR or Council of State has increased.

In this context, it is likely that the implementation of the ECN+ Directive will impact the ICA’s investigative powers and procedures significantly, e.g., in terms of: (i) undertakings’ rights of defence; (ii) power to conduct inspections also at the private homes of directors, managers, and other members of staff of undertakings; and (iii) power to impose higher fines, also during inspections, in order to foster cooperation by the investigated undertakings during the proceedings.


On February 2007, the ICA adopted the so-called Leniency Notice, by which it regulates leniency regime in Italy. The leniency programme is exclusively governed by the ICA.

In a nutshell, according to the Leniency Notice, the first undertaking that submits information and evidence concerning the existence of a cartel may be granted full immunity from a fine, provided that: (i) the ICA is not already aware of, or does not already hold sufficient information or evidence on, the cartel; (ii) the applicant gives information and/or evidence decisive for ascertaining the cartel; (iii) the applicant ceases the infringing conduct, unless it is otherwise agreed with the ICA; (iv) after submission of the application and for the entire duration of the proceedings, the applicant cooperates with the ICA; and (v) the applicant shall not inform anyone but ICA of its intention to file a leniency application and shall not disclose the fact or any of the content of its application, especially to the other cartelists. Further companies that provide evidence of a “significant added value” (i.e., capable of reinforcing ICA’s ability to prove the infringement) may be granted a reduction of the fine up to 50%, where the same above-mentioned requirements are met. There is no deadline for submitting a leniency application.

Leniency applications may be submitted either by the undertaking or by its appointed outside




counsel, either in writing or orally; it shall include all the information and evidence of the cartel at the applicant’s disposal. The applicant may anonymously establish informal contacts with the ICA before submitting the formal application, in order to receive guidance on the programme. In order to secure its position as leniency applicant, the undertaking may request a marker from the ICA. Should more EU national competition authorities be well placed to investigate a cartel case, an undertaking may submit a full-form leniency application to the EU Commission and a short-form leniency application to the ICA.

Once the ICA has received the application and verified that the above-mentioned requirements are fulfilled, the ICA grants a conditional immunity or reduction of a fine within a certain period of time, the length of which depends on the amount of evidence provided and the complexity of the case. The percentage of reduction of the fine applied to the applicant is typically not defined at the beginning of the proceedings. Indeed, the ICA confirms the conditional immunity or reduction of the fine only in its final decision, provided that the applicant has fully cooperated during the proceedings. Should the requirements for immunity not be met, the ICA shall inform the applicant, which can withdraw its application (and related documents) or ask the ICA to assess the information/documents provided for the purposes of a fine reduction.

As of December 31, 2018, ICA has granted: (i) full immunity in eight cases, i.e., cases I649 (2007), I700 (2010), I701 (2010), I722 (2011), I733 (2012), I772 (2015), I789 (2016), I811 (2018); (ii) reduction of the fine by 50% to the second applicant in three cases (I701, I722 and I733); (iii) reduction of the fine of 49% in case I722 and of 40% in case I701 to the third applicant; and (iv) reduction of the fine of 10% in case I722 to the fourth applicant. In case I700, the submission of the leniency application followed the opening of the proceedings, but nevertheless the applicants were granted full immunity. Based on the above, the leniency programme has not played a significant role in Italy, since in the period February 2007–December 2018 the ICA has sanctioned 67 cartels, but only in the above-mentioned eight cases (i.e., approx. 12%) following submission of a leniency application.

The major benefit stemming from the submission of a leniency application is the immunity from, or the reduction of, the fine which could be imposed by the ICA. The main risks are:

(i) the exposure of the undertaking to damage actions. However, according to Legislative Decree No 3/2017, which has transposed in Italy the EU Directive 2014/104/EU on actions for damages under national law for infringements of competition law provisions of the Member States, national courts cannot order a party or a third party to disclose leniency statements and the amount of contribution of the co-infringer which has been granted immunity from fines under a leniency programme cannot exceed the amount of the harm it caused to its own direct or indirect purchasers or providers; and

(ii) the exposure of the individuals involved in the infringement to criminal proceedings, where the collusive conduct amounts to a crime (e.g., in the case of bid rigging in public tenders).


The Law does not provide for any settlement procedure. The only fast track procedure available to the parties in order to obtain a negotiated closure of the investigation is the commitments mechanism. Indeed, pursuant to Article 14-ter of the Law, the investigated party may obtain the closure of the proceedings by offering commitments within three months from the notification of the decision to open proceedings. ICA may accept




commitments and close the investigation without the imposition of sanctions, provided that the proposed measures – which are submitted to third parties’ comments through a market test – are capable of eliminating the anti-competitive nature of the conduct under investigation. Should the ICA accept the commitments, they become binding on the undertaking which proposed them. Should the undertaking breach the commitments, the ICA may impose a fine of up to 10% of its turnover.

Although, according to EU Regulation No 1/2003, the commitments mechanism should not be used in cases of cartels involving hard-core restrictions (e.g., price-fixing), in its decisional practice the ICA has sometimes accepted commitment even in those cases. For example, in the above-mentioned case I813, the investigated conduct concerned an alleged resale price maintenance imposed by a supplier to its online distributors of stoves.


Third parties may file a complaint with the ICA, asserting the existence of a cartel. Most of ICA’s proceedings are opened following third parties’ complaints. Should ICA believe that the elements provided by third parties were insufficient to open proceedings, the ICA shall inform the complainants about the grounds of its decision and the complainants may challenge the ICA’s decision before the administrative court. As already mentioned, should the ICA open the investigation, third parties showing to have an immediate and actual interest in the proceedings may submit a reasoned request to intervene in the proceedings. Once admitted, they have the right to produce written submissions, documents and opinions, to ask to be heard by the ICA, and to participate in the final oral hearing, as well as to access the documents held by the ICA in the case file (with the exception of confidential documents/information and leniency statements).


Should the investigation reveal infringements of Articles 101 TFEU or 2 of the Law, the ICA shall set a deadline within which the infringing undertaking shall cease the collusive conduct. As a matter practice, the ICA requires that the party refrains immediately from the infringing conduct, adopts the necessary steps to restore an effective competition on the affected market within a certain deadline, and files a compliance report on the implementation of the steps.

When the infringements are qualified as serious (this is typically the case with cartels), the ICA may impose a fine of up to 10% of the consolidated worldwide turnover realised by the undertaking concerned in the last financial year. The relevant turnover of the associations of undertakings is generally calculated on the basis of an association’s revenues or membership fees. The parties become aware of the exact amount of the fine only with the service of the ICA’s final decision; however, the Statement of Objections explains in broad terms the method that the ICA should use to calculate the fine.

For the purposes of quantifying the fine, in 2014 the ICA has adopted Guidelines on the method of setting pecuniary administrative fines. In a nutshell, the Guidelines provide the following.

Calculation of the basic amount of the fine. The ICA calculates the basic amount of the fine as up to 30% of the value of sales of goods and services related to the infringement, sold by the infringing undertaking in the last full year of its participation in the collusive conduct. Such value is then multiplied by the number of years of participation in the collusive conduct.




As a general rule, in case of secret cartels, the percentage should not be below 15%. Moreover, for the most serious infringements, the basic amount may be adjusted by adding an entry fee, ranging from 15% to 25% of the value of sales. In cases of bid rigging, the basic amount is equal to the value of the supplies or goods awarded to each undertaking through the tendering process or the negotiated procedure or, in case of unsuccessful tender, the sum that should have been awarded.

Aggravating and mitigating circumstances. The ICA may find aggravating (e.g., having played a decisive role in the promotion, organisation or monitoring of the infringement) or mitigating circumstances (e.g., having effectively cooperated with the ICA during the investigations, having adopted an effective compliance programme). Should such circumstances exist, the fine may be adjusted accordingly, by increase or decrease of up to 15% of the basic amount for each relevant circumstance, provided that the adjustment does not exceed in aggregate 50%.

Further elements. The amount set on the basis of the above-mentioned parameters may be increased by up to 50% if the undertaking concerned belongs to a large corporate group or has a particularly high global turnover. The fine may also be further increased in consideration of the amount of unlawful gains resulting from the infringement. Should the application of the above-mentioned steps cause the application of a fine exceeding the ceiling of 10% of the turnover of the undertaking concerned, the fine is reduced accordingly. The ICA may impose a symbolic fine, where the particular circumstances of the case recommend it. The sanctioned undertakings may invoke the inability to pay, where the payment of the fine would irremediably compromise its economic stability.

The ICA applies the settled EU-case law, according to which a parent company may be held jointly and severally liable for the cartel conduct of a subsidiary where, although having a separate legal personality, that subsidiary does not decide independently upon its own conduct on the market, but carries out, in all material respects, the instructions given to it by the parent company. Accordingly, the ICA may address a decision imposing fines to the parent company, without having to establish the personal involvement of the latter in the infringement, and the 10% legal maximum is calculated using the parent’s turnover. In assessing whether a decisive influence exists, the ICA applies the EU-law principles (i.e., rebuttable presumption of actual exercise of decisive influence where the parent owns approx. 100% of the subsidiary’s share capital; otherwise, the ICA shall prove the existence of the decisive influence invoking all the relevant factors relating to the economic, organisational, and legal links which tie the subsidiary to its parent company). It is worth noting that in the above-mentioned case I811, the ICA has calculated the 10% legal maximum using the parent’s turnover only with regard to parent companies owing approx. 100% of the charged undertakings.

The quantification of the fine made by the ICA is subject to a full review by the administrative Courts, which are entitled to substitute their own appraisal for that of the ICA and have effectively used such power in a number of cases in the past.

Where the undertaking does not cease the collusive conduct, the ICA may impose a fine of up to 10% of its turnover or, if the undertaking has been already sanctioned with the ICA’s original decision, of no less than double the fine already imposed (always provided that the ceiling of 10% of its turnover is not exceeded). In cases of repeated non-compliance, the ICA may order the undertaking to suspend activities for up to 30 days (this remedy has never been imposed).

Following the opening of proceedings, the ICA may also adopt interim measures, where a




cursory assessment of the case reveals the existence of an infringement of competition law (fumus boni iuris) and there is a risk of serious, irreparable damages to competition (periculum in mora). Such measures may be challenged before administrative courts. Where the undertaking concerned does not comply with the ICA’s decision, the ICA may impose a fine of up to 3% of its turnover. As of December 31, 2018, the ICA has adopted interim measures in only three cases concerning cartels, i.e. cases I675-ABI/Modifica unilaterale delle condizioni contrattuali (2006), I678-Distribuzione di farmaci senza obbligo di ricetta alle parafarmacie (2006), and I820-Fatturazione mensile con rimodulazione tariffaria (2018; see above).

Article 2(3) of the Law states that “Prohibited agreements are null and void”. Moreover, the participation in cartels may cause actions for damages by undertakings and individuals who suffered a damage as a consequence of the collusive conduct (see section “Developments in private enforcement of antitrust laws” below).


The ICA’s cartel infringement decisions are subject to judicial review before the TAR Lazio. The appeal shall be filed within 60 days from notification/publication of the ICA’s decision. The appealing parties may also ask for a stay of execution, where a risk of serious and irreparable damage deriving from the execution of ICA’s decision exists. As a matter of practice, the proceedings before TAR Lazio usually last between one and two years.

Within 30 days from notification or three months from publication, the judgments of the TAR Lazio may be appealed before the Council of State. Council of State’s decisions are definitive, even though they might be challenged before the Court of Cassation exclusively on jurisdictional grounds. Proceedings before Council of State usually last between 18 months and two years.

Appeals may be brought to challenge decisions imposing sanctions, interim measures and orders to bring the infringement to an end, non-compliance decisions, as well as decisions ascertaining omissions to provide information/documentation requested by ICA or transmission of false information or documentation. Administrative courts’ scrutiny is essentially a review of the legality of the ICA’s decision, meaning that it is an assessment on whether ICA’s conclusions are based upon accurately stated facts and are supported with adequate and consistent grounds. However, the judicial review does not replace the ICA’s assessment, so that the Courts may only confirm or annul (totally or in part) ICA’s decision. The Courts exercise a full review, having the power to substitute their own appraisal for that of the ICA, only with regard to the quantification of the fine.

As a general rule, the Courts do not acquire new means of evidence in the context of the appeal proceedings, since they rely on the evidence in the case file. However, it is worth noting that both the TAR Lazio and the Council of State have developed in-depth expertise in competition law matters in the course of the last approx. 30 years of exclusive jurisdiction on the ICA’s decisions.

The Courts have annulled the ICA’s decisions in a number of cases in the past and have modified the quantification of the fine in further cases. In 2018, the Courts have rendered the following judgments on the ICA’s decisions: in case I742-Tondini per cemento armato, the ICA’s decision has been annulled by TAR Lazio; in case I792-Gare ossigenoterapia e ventiloterapia, the TAR Lazio has annulled the ICA’s decision with regard to two out of the three collusive conducts and ordered the ICA to reduce the fine imposed on the parties with regard to the third collusive conduct; in case I796 – Servizi di supporto e assistenza tecnica




alla PA nei programme cofinanziati dall’UE, the TAR Lazio has partially annulled the ICA’s decision; in case I789-Agenzie di modelle, the TAR Lazio has ordered the ICA to reduce the fine imposed on the parties; in case I783B-Accordo tra operatori del settore vending-Rideterminazione sanzione, the TAR Lazio has annulled the decisions by which the ICA had reduced the sanction imposed on two undertaking as a consequence of TAR Lazio’s judgment on the merits; in case I771-Servizi di post-produzione di programme televisivi RAI, the Council of State has annulled the judgment by which the TAR Lazio had annulled the ICA’s decision; and in cases I797-Consiglio notarile di Roma, Velletri e Civitavecchia, I793-Aumento prezzi cemento, I776-Mercato della produzione di poliuretano espanso flessibile, and I759-Forniture Trenitalia, the Courts have confirmed the ICA’s decision.

Criminal sanctions

The Law qualifies antitrust infringements as administrative offences. Nevertheless, certain collusive behaviours may also amount to criminal offences and therefore be subject to criminal sanctions. For example, this is the case of bid rigging in public tenders, which amounts to a criminal offence according to Articles 353, 353-bis, 354 of the Italian Criminal Code.

In order to increase the effectiveness of the activities aimed at promoting the proper functioning of the market, on January 2018, the ICA signed separate memoranda of understandings with the Public Prosecutor’s Offices of Rome and Milan. The memoranda provide an operational framework for the exchange of information and documents between the ICA and the Public Prosecutor’s Offices acquired in the context of their respective functions. For example, ICA has opened the above-mentioned proceedings I814 on the basis of information and documents sent by Public Prosecutor’s Office of Milan.

Cross-border issues

The ICA is part of the European Competition Network (ECN), where the EU Commission and the national competition authorities of all EU Member State co-operate with each other. In this context, the Authority has established an internal division specifically devoted to the ECN network. Cooperation with the EU Commission and the EU national competition authorities within the ECN network will be strengthened following the adoption of the above-mentioned ECN+ Directive.

The Authority is also a member of the International Competition Network, an international body that brings together a number of national competition authorities worldwide and seeks to provide them with a specialised venue for maintaining regular contact and addressing practical competition issues.


On January 19, 2017, the Italian Government adopted the Legislative Decree No. 3/2017 (“Decree”), implementing in Italy the EU Directive on antitrust damages. The main features of private enforcement in Italy are the following.

Standing. Any individual (natural or legal person, entity devoid of legal personality) may claim damages for loss caused to him by an infringement of the European and/or Italian competition law provisions, also by means of class actions (based on an opt-in model).

Compensatory nature of the antitrust damages. The victims of antitrust violations may claim a compensation, which shall (only) cover actual loss (damnum emergens), loss of profit (lucrum cessans), plus the payment of interests. Over-compensation or multiple compensation (e.g., treble damages as in the United States) are not admitted.




Disclosure of evidence by counterparty or third parties. Upon reasoned request of a party, the civil judge may order the counterparty or third parties the disclosure of specified items of evidence or categories of evidence that are in their availability, where: (a) the requesting party has given sufficient evidence of the plausibility of its claim; (b) the disclosure is relevant to the action; (c) the disclosure is proportionate, balancing the interests of all parties concerned; and (d) the request does not concern attorney-to-client correspondence. Should such items of evidence contain confidential information, the courts may adopt any measure to protect such confidential information from being disclosed during the litigation.

Discovery of evidence included in the ICA’s file. In case of follow-on actions, the courts may order – upon reasoned and detailed request of a party – the ICA to disclose certain documents included in its file, provided that such order does not undermine the effectiveness of the public enforcement of competition law. However, leniency statements cannot at any time be disclosed (black list); moreover, information prepared specifically for ICA’s proceedings and information that the ICA has drawn up and sent to the parties in the course of its proceedings may be disclosed only after the ICA has closed its proceedings (grey list). Any other evidence not falling within the above-mentioned categories may be disclosed at any time (white list). Effect of ICA’s decisions. An infringement of competition law ascertained by a final decision of the ICA, which is no more appealable before a national court, is deemed to be irrefutably established for the purposes of an action for damages brought before Italian courts. The binding effect of the ICA’s final decision covers the nature of the infringement as well as its material, personal, temporal and territorial scope, not also the causal relationship between the alleged harm and the infringement of competition law nor the existence of a damage.

Burden of proof. The claimant must demonstrate the: (i) defendant’s breach of competition law; (ii) direct causation between the breach and the loss suffered; (iii) defendant’s fault for the breach; and (iv) amount of loss suffered.

Limitation periods. The limitation period for damages actions is five years; it begins to run when the infringement ceases and the claimant knows – or can reasonably be expected to know – the behaviour constituting the infringement, the fact that the infringement caused the claimant harm, and the identity of the infringer. In case of follow-on actions, the limitation period is suspended if the ICA initiates a proceeding in respect of an infringement of competition law to which the action for damages relates and the suspension ends one year after the infringement decision has become final or after the proceeding is terminated.

Joint and several liability. Where several undertakings infringe the competition rules jointly (e.g., in the case of a cartel), those co-infringers are jointly and severally liable for the entire harm caused by the infringement. Exceptions to this general rule are provided for infringers, which are small or medium-sized enterprise and the immunity recipient (see above).

Passing-on. The Italian courts recognise the so-called passing-on of the overcharge, i.e., the situation in which harm resulting from the price difference between what was actually paid and what would otherwise have been paid in the absence of the infringement has been, entirely or partially, “passed” from the injured party to its own purchasers.

Presumption of damages in case of cartels. The Decree has introduced a rebuttable presumption of damages in case of cartels (even if the presumption does not cover the concrete amount of harm).

Jurisdiction. The Decree has concentrated the jurisdiction for handling antitrust damages actions on the Tribunals of Rome, Milan and Naples.




Most damage actions concerning a cartel follows the ICA’s decision, since the secret nature of cartels increases the information asymmetry and makes it more difficult for claimants to obtain the evidence necessary to prove the harm without a prior decision of the ICA.

The party who has suffered a damage as a consequence of a collusive conduct may also benefit from interim relief, where it proves the existence of fumus boni iuris (i.e., sufficient factual and legal grounds for establishing a prima facie case) and periculum in mora (i.e., necessity of the relief to avoid serious and irreparable damage to the claimant).

Finally, as already mentioned, Article 2(3) of the Law states that “Prohibited agreements are null and void”. Voidness of cartels may be ascertained and declared by the civil judge.

Reform proposals

No reform relating to competition law in general, and to cartel enforcement in particular, is ongoing in Italy. However, in the near future the Italian government shall transpose in Italy the so-called ECN+ Directive, which has been signed into law on December 11, 2018, and published in the Official Journal of the European Union on January 14, 2019. Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with the Directive by February 4, 2021.






Alessandro De Stefano Tel: +39 02 725511 / Email: [email protected] Alessandro De Stefano is Salary Partner in the firm and deals mainly with Antitrust Law, principally in the regulated sectors: telecommunications and media; transport; pharmaceuticals and energy; and Intellectual Property Law. Alessandro has consolidated experience in civil litigation of private antitrust enforcement and proceedings before the European Commission, the Italian Competition Authority and the national regulatory authorities. He is also the author of various articles and speaker at several antitrust seminars.

Luca Toffoletti Tel: +39 02 725511 / Email: [email protected] Luca Toffoletti is Equity Partner in the firm and deals mainly with Antitrust & Competition Law and Litigation & Arbitration. He regularly assists large national and international companies on investigative procedures by the competition authorities, on appeals before the administrative Courts, and in civil litigation (antitrust actions, precautionary proceedings). He also offers assistance in competition law, including antitrust compliance programmes. Luca is a researcher in Commercial Law at the University of Milan, where he teaches Competition Law and Economics, and is a member of AAI the Italian Antitrust Association. He is also the author of numerous articles on antitrust matters.

Via Agnello 12 – 20121 Milan, Italy Tel: +39 02 725511 / URL: www.nctm.it

Nctm Studio Legale


Japan


The “Act on Prohibition of Private Monopolization and Maintenance of Fair Trade” (Law No. 54 of 1947), commonly known as the “Antimonopoly Act” (the “AMA”), governs cartel enforcement in Japan. The AMA prohibits businesses from engaging in “unreasonable restraint of trade”, which is defined as business activities by which a business, “in concert with other enterprises, mutually restrict[ing] or conduct[ing] their business activities in such a manner as to fix, maintain or increase prices, or to limit production, technology, products, facilities or counterparties, thereby causing . . . a substantial restraint of competition in any particular field of trade” (AMA art. 2, para. 6). This covers price-fixing cartels (kakaku karuteru), bid rigging in public projects (nyusatsu dango), and bid rigging in private industry (juchu chosei). The AMA also prohibits businesses from engaging in “unfair trade practices”, including concerted refusals to deal (AMA art. 2, para. 9(i)). Additionally, the AMA prohibits businesses from entering into an international agreement or contract that constitutes an unreasonable restraint of trade or unfair trade practice (AMA art. 6).

The Japan Fair Trade Commission (the “JFTC”) is the government agency responsible for enforcing the AMA and may impose cease-and-desist orders and administrative fines (called “surcharges”) on firms that it finds to have engaged in cartel conduct. Surcharges are calculated pursuant to a complex but rigid formula set forth in the AMA. Since 1 April 2015, appeals from JFTC orders are considered by the Tokyo District Court.

In addition to administrative sanctions, firms and individuals face criminal exposure for cartel violations. The filing by the JFTC of a criminal accusation to the Prosecutor General is the exclusive means by which a criminal prosecution may be brought against firms and individuals for cartel violation of the AMA (AMA art. 96.1). If the JFTC determines through its investigation that a case is particularly egregious and has a significant effect on people’s lives, or that the administrative remedies are not sufficient, it may file a criminal accusation with the Prosecutor General, which may result in a fine of up to JPY 500m (approximately US$ 4.37m) for firms or imprisonment of up to five years and a fine of up to JPY 5m (approximately US$ 43,700) for individuals. Such criminal penalties are in addition to the JFTC’s administrative sanctions.

Firms may face civil damages claims from customers, but Japan does not have enhanced damages or class actions for antitrust claims. Firms may also be debarred from government contracts. In addition, directors of firms that have been found to have engaged in cartel conduct may be sued by shareholders for breach of fiduciary duty.

The government sometimes exempts certain types of concerted behaviour. For example, in connection with the increase in the consumption tax in 2014, a law was passed to permit

Kei Amemiya, Daiske Yoshida & Kazuyasu Yoneyama Morrison & Foerster


specific types of businesses to apply to the JFTC to set up “pass-on cartels” and “price representation cartels”, which would allow for uniform behaviour and fairness among competitors in responding to the tax increase.

Overview of investigative powers in Japan

Administrative investigation

Under article 47 of the AMA, the JFTC may conduct an investigation using the following measures: (1) ordering persons to be interrogated and gathering their opinions or reports; (2) ordering expert witnesses to give opinions; (3) ordering persons to submit books and documents and to keep such documents at the JFTC; and (4) entering and inspecting the firm’s premises or any other necessary sites.

In practice, the JFTC typically starts a cartel investigation with simultaneous dawn raids or surprise inspections (called “on-site inspections”) on all suspected cartel members, including any leniency applicants. The JFTC sometimes sends out written questionnaires regarding industry practices, which may be followed by an on-site inspection. During the on-site inspection, the JFTC may seize any documents it considers to be relevant and will make copies of electronic files. Such inspections can take place at a firm’s headquarters, as well as any offices, facilities, or employee residences that may have relevant materials. The JFTC will seize and keep original documents through the duration of the investigation, including any appeals. Firms may request to make copies of materials that are needed for business, either during the inspection or at the JFTC’s premises. Also, the JFTC usually requires firms to submit detailed reports about the business operations and sales data. The JFTC may interview witnesses during the on-site inspection.

As discussed further below, the JFTC does not recognise the concept of attorney-client privilege or legal privilege as it exists in American or English law and potentially may seize documents that contain attorney-client communications as part of its on-site inspection.

In addition to seizing documents and materials, the JFTC may request individuals to submit to voluntary interviews after the on-site inspection. If an individual refuses, the JFTC can issue an order for a compulsory interview. In both voluntary and compulsory interviews, the interviewee does not have the right to have counsel present. At the end of an interview session, the JFTC may require the interviewee to sign a statement that it has prepared. In the past, the interviewee was given an opportunity to correct mistakes, such as typographical errors, but typically was not permitted to make substantive changes and was not given an opportunity to consult with counsel before signing. The JFTC issued new guidelines effective as of January 2016 clarifying that witnesses are permitted to consult with counsel during breaks and that the record should reflect any corrections suggested by witnesses. The interviewee and the firm may not receive a copy of the signed statement. An individual may be interviewed multiple times, though usually no more than eight hours per day excluding breaks. Employees of leniency applicants are subject to the same procedure.

Article 39 of the AMA requires the JFTC to keep confidential any information it has seized, been provided, or created, including witness statements. However, prosecutors may use such signed statements as evidence during a criminal trial, and a firm may obtain copies of its employees’ statements in order to challenge or appeal an administrative order. In addition, “interested parties”, such as injured parties, may seek to review and obtain copies of documents from the appeal, but the firm will be given an opportunity to request redactions of confidential business information.

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Criminal investigation

Criminal investigations in Japan are governed by the Code of Criminal Procedure (Law No. 131 of 1948). The Prosecutor General may refer cases to a regional public prosecutor’s office to commence a criminal prosecution based on the filing of an accusation by the JFTC. Prior to commencing the prosecution, prosecutors will try to obtain information from witnesses on a voluntary basis as much as possible, including obtaining signed statements. This process may occur in tandem with the JFTC’s investigation. Prosecutors may also use written statements obtained by the JFTC as evidence.

The prosecutors or police may arrest a suspect, typically with an arrest warrant. If it becomes necessary to detain a suspect, the prosecutor must obtain a pre-indictment detention order from a court within 48 hours following the arrest. The initial detention period is 10 days, subject to extension by another 10 days if necessary. The prosecutor must initiate the prosecution of the suspect within that period or release the suspect. The prosecutor therefore will try to extract a confession from the suspect within the first 20 days but may immediately re-arrest the suspect on a different charge to begin the interrogation process anew. Once a suspect has been arrested, he or she has the right to consult privately with counsel and may assert the right against self-incrimination. However, counsel is usually not permitted to be present during the interrogation. Prosecutors may use signed statements obtained through interrogation as evidence at trial. The Criminal Procedure Law was amended on 24 May 2016, including requiring audio and video recording of interrogations in certain cases, but not for violations of the AMA.


Launch of Plea Bargaining in newly amended Criminal Procedural Law

A new “plea bargaining” system introduced by the Criminal Procedure Law amended on 24 May 2016 was put into force on 1 June 2018. The system aims at improving and diversifying the evidence collection process during the criminal investigation. Under the system, a prosecutor and a suspect or defendant (individual or company) accused of certain types of crimes (including crimes arisen from AMA infringements) may enter into an agreement under which the suspect/defendant agrees to provide some “cooperation”, i.e., certain evidence or testimony that will aid in the charging or investigation of an offence of a certain type of crime by a “third party” (individual or company). In exchange, the prosecutor agrees to withdraw or reduce his/her criminal charges. Unlike the plea bargaining system in the United States, the system does not require self-incrimination. It is expected that the system further enhances cartel enforcement from criminal sanction perspectives. To date, no new case has been announced in which the new plea bargaining system was utilised in criminal cartel prosecution.

Criminal prosecutions

The JFTC referred cartel matters for criminal prosecution in 2012 and 2013 in connection with the bearings case, but there were no official announcements of such referrals in 2014 or 2015. In 2016, the Tokyo District Prosecutor’s Office brought criminal proceedings against 10 of 11 firms that had been fined by the JFTC for bid rigging in connection with Tohoku Earthquake reconstruction work. The 10 firms were found guilty and criminally fined a total of JPY 1.38bn (approximately US$ 12m) before deduction (each firm could deduct 50% of the criminal fine from the JFTC surcharge, which totalled approximately JPY 1.35bn (approximately US$ 11.8m)). In March 2018, the JFTC filed a criminal accusation with the Public Prosecutor-General against four major general contractors in Japan for




alleged bid rigging in relation to the construction of new terminal stations for the maglev railway. According to the JFTC, it considered the scale and the highly public nature of the case in deciding to file the criminal accusation. On 22 October 2018, the Tokyo District Court sentenced two of the accused companies to a criminal fine of JPY 200m (approximately US$ 1.8m) and JPY180m (approximately US$ 1.64m), respectively.

Enforcement data

According to the JFTC’s official statistics for fiscal year 2017 (April 2017 through March 2018), the JFTC imposed administrative orders against a total of 41 firms in 13 separate cases, including surcharges totalling approximately JPY 1.89bn (approximately US$ 17m). This was a significant drop compared to the previous year. In fiscal year 2016, there were administrative orders against a total of 51 firms in 11 separate cases, including surcharges totalling approximately JPY 9.14bn (approximately US$ 80m); and in fiscal year 2015, there were administrative orders against a total of 39 firms in nine separate cases, including surcharges totalling approximately JPY 8.51bn (approximately US$ 74m).

The number of leniency applications dropped to 103 in fiscal 2017 departing from the steadily increasing trend during the period of fiscal 2014 to fiscal 2016 (61 applications in fiscal 2014, 102 in fiscal 2015, and 124 in fiscal 2016).

The average surcharge per firm in fiscal 2017 also dropped significantly to approximately JPY 59.1m (approximately US$ 0.5m), from approximately JPY 286m (approximately US$ 2.5m) in fiscal 2016.

Regarding international investigations conducted by the JFTC, in March 2018, the JFTC decided to terminate its investigation in relation to a certain bond trading among several foreign-based companies. According to the JFTC, though it found that conduct by two international investment banks was in violation of the Article 3 and 6 of the AMA (cartel conspiracy), it decided to close the investigation due to the lapse of the prescription period (five years) set out in Article 7(2) and Article 7-2(27) of the AMA.

Regarding domestic cartel cases, apart from the aforementioned bid rigging case in relation to the construction of new terminal stations for maglev railway, there were the following cases:

1) In February 2018, the JFTC issued cease-and-desist and surcharge payment orders to the manufactures of suspensions used in hard disk drives, finding that price-fixing arrangements among the manufacturers continued for around 17 months. The total surcharge to be paid amounts to JPY 1.07bn (approximately US$ 9.73m).

2) Throughout 2018, the JFTC issued cease-and-desist orders and surcharge payment orders in relation to bid riggings among distributors of uniforms in various industries and applications. The total amount of the surcharge to be paid amounts to JPY 87.4m (approximately US$ 800,000).

3) In March 2018, the JFTC issued cease-and-desist orders and surcharge payment orders to construction firms for bid rigging in relation to the paving works. The total amount of the surcharges to be paid amounts to JPY 770m (approximately US$ 7m).

4) In October 2018, the JFTC issued cease-and-desist orders and surcharge payment orders to five department stores having retail stores in the Kinki region, finding price- fixing arrangements in relation to the delivery of seasonal gifts. The total amount of the surcharge to be paid amounts to JPY 194m (approximately US$ 1.76m).

The JFTC conducted several on-site inspections in 2018. These included on-site inspections of: eight manufacturers of road paving materials in May for alleged price-fixing on the sale




of “modified asphalt”; and four water treatment business companies in October for alleged bid riggings in relation to the operation of waste water treatment facilities.


JFTC investigations are fairly quick, typically resulting in the issuance of an administrative order within 12 to 18 months of the first on-site inspection. This speed imposes a great burden on firms and their lawyers, who are required to deal with a large volume of information in a compressed time period, often with limited access to documents because they have been seized. The situation is made even more difficult if the JFTC has interviewed employees during the on-site inspection, without any opportunity for such employees to consult with counsel before or during the interview. Although the JFTC permits counsel to be present at interviews conducted during on-site inspections, it will not wait for counsel to arrive. For voluntary interviews after the on-site inspections, the JFTC does not permit counsel to be present (although it now will permit interviewees to consult with counsel during breaks). If the interviews result in signed statements by employees acknowledging the cartel conduct, it obviously impacts the firm’s ability to defend itself.

The challenge is multiplied if the conduct is international in scope, requiring firms and their counsel to consider strategy in other jurisdictions. Under the Japanese leniency system, firms up to the fifth leniency applicant may obtain a reduction to the surcharge, even if they seek leniency after the on-site inspection. If the cartel was purely domestic, with no effect on other countries, then it may seem sensible for a firm that is subject to an on-site inspection to apply for leniency, provided that there are facts supporting such an application. However, if the client has operations in other countries and it is uncertain whether the cartel may have affected other countries, it is essential to consult with foreign counsel and carefully consider the effect such a leniency application could have in other jurisdictions. In some cases, even if the client has relatively small operations in other countries or it is possible but not certain that the cartel had an impact in those other countries, it may be advisable for the client to consider seeking leniency in some or all of these other countries, because the exposure could be greater to the client company and its employees. On the other hand, in some cases, it may be better to not submit a leniency application in Japan, in order to mitigate exposure elsewhere.

Another significant issue is the limit on how firms may interact with counsel. Because the JFTC is not prohibited from seizing attorney-client communications, there is some risk for attorneys in sending advice to clients in writing. Not permitting attorneys to participate in witness interviews also creates risk not only for the firms but also for the individuals who may not fully understand that they face criminal exposure in Japan or elsewhere based on their statements.

Such systemic disadvantages to firms that are subject to investigation may be somewhat alleviated by the recent amendments to the AMA, especially giving an opportunity for parties to be heard before orders are issued, giving parties an opportunity to review the evidence before the hearing, changing the forum for administrative appeals from the JFTC to the Tokyo District Court, and permitting the submission of new evidence in the appeal. Also, the new JFTC guidelines on administrative investigation procedures expressly permit witnesses to consult with counsel during breaks and to request corrections to witness statements, as well as to submit complaints to the JFTC on the conduct of inspectors. It remains to be seen how the amendments will work in practice, but these changes indicate that the JFTC is making an effort to address concerns regarding its procedures.





The JFTC instituted a leniency system in January 2006. There has been a total of 1,165 leniency applications filed between its inception and March 2018, with a sharp increase in applications since 2010, when the JFTC increased the maximum number of leniency applicants per case and permitted joint applications by firms in the same corporate group. The number of new cases resulting from leniency filings over the last several years has been growing again after a sudden drop in 2014: there were 19 in 2012; 12 in 2013; 4 in 2014; 7 in 2015; 9 in 2016; and 11 in 2017.

Under Japan’s system, a total of five firms may obtain leniency from administrative fines on a given product. The first firm to apply for leniency before the JFTC investigation begins is entitled to receive full immunity, and the second applicant receives a 50% reduction to the surcharge. The third, fourth, and fifth applicants will receive a 30% reduction. After a case has been initiated, a maximum of three firms may apply (up to a maximum of five including applicants before the start of the case), and the amount of the leniency would be 30% for all of them.

The JFTC is considering revising the surcharge system so that the amount of reduction or enhancement will be based on the degree of each firm’s cooperation, similar to the EU system. This arose from a concern that applicants are not incentivised to cooperate with the JFTC if the surcharges are solely based on a mechanical formula based on the order of filing leniency applications.

The JFTC is also considering amending the surcharge system to be able to seek surcharges against foreign firms with no sales in Japan. Although the JFTC has attempted to impose surcharges against foreign firms, to date it has been successful in pursuing Japanese firms, which may be a further disincentive for firms (both Japanese and foreign) to apply for leniency. Leniency only applies to administrative sanctions, not to criminal or civil claims. However, the Ministry of Justice has stated that it would give due deference to the JFTC and not prosecute the first leniency applicant.

If a JFTC investigation has not yet started, before applying for leniency, an applicant may anonymously ask the JFTC by telephone whether leniency is available for a particular product and how many other applicants have already applied, if any. To obtain a marker, the applicant must fax to the JFTC a copy of “Form 1”, a one-page form that requires the identification of the applicant, the relevant product, the type of conduct being reported, and the period that the conduct took place. Once a marker has been obtained, the applicant must submit “Form 2” within a period designated by the JFTC (usually two to three weeks), which requires more detailed information about the conduct and submission of supporting evidence. In certain cases, for example, if there is concern about the potential discoverability of the submission in other jurisdictions, the JFTC may permit the applicant to submit certain information orally.

If the JFTC investigation has started, an applicant may apply for leniency by submitting “Form 3” within 20 days after the start of the investigation. Form 3 requires the submission of information similar to Form 2.

Leniency may be denied if, for example, the applicant submitted false information, failed to provide requested information, prevented others from leaving the cartel, or continued to participate in the cartel after the investigation started.

During the investigation, the JFTC does not publicly disclose the identity of the leniency applicants, and leniency applicants will be subjected to on-site inspections. Since 1 June




2016, the JFTC has published the identities of the leniency applicants and the percentage reduction received by each for all leniency applications received after that date, with respect to issued decisions.

The JFTC is required to maintain the confidentiality of documents relating to its investigation, including leniency submissions, during the course of an investigation.


The new act introducing a new procedure for administrative settlement in antitrust cases (“Kakuyaku-Tetsuzuki”), which was enacted as part of the Trans-Pacific Partnership (“TPP”) Agreement (“the TPP Related Act”) will be put into force from 30 December 2018. The new settlement procedure will be applied to various unilateral infringements but not cartel infringements.


Article 45 of the AMA permits third parties to report suspected violations to the JFTC, which the JFTC is required to duly consider. If the third party’s report was sufficiently detailed and in writing, the JFTC must inform the third party whether it has taken steps in response to the report. The third party is not entitled to receive any reward for making a report.


The surcharge imposed by the JFTC is calculated by applying certain rates to the sales of the relevant product over the period of the violation, up to a maximum of three years. The applicable rates are set by Article 7-2 of the AMA and vary depending on the type and size of the firm. For unreasonable restraint of trade, the rates are: 10% for large manufacturers; 4% for small and medium manufacturers; 3% for large retailers; 1.2% for small and medium retailers; 2% for large wholesalers; and 1% for small and medium wholesalers. These rates may be adjusted upwards or downwards based on certain factors. If the firm ceased the conduct early and did not take a leading role, then the applicable rate is reduced by 20%. If the firm repeatedly engaged in the conduct, or took a leading role, the applicable rate is increased by 50%; and if the firm both repeatedly engaged in the conduct and took a leading role, the applicable rate is doubled. If the resulting amount is less than JPY 1m (approximately US$ 8,750), a surcharge will not be imposed.

In addition to the surcharge, firms may be subject to cease-and-desist orders or administrative guidance.

Since the 2013 amendment, before issuing an administrative order, the JFTC has given parties prior written notification and an adequate opportunity to review the case file (and make a copy of the party’s own documents), after which there has been a hearing presided by a JFTC officer. In the hearing, a party may make arguments (orally or in writing) and submit supplementary evidence. The JFTC issues its administrative order only after the hearing.


Once the JFTC has issued its order, a party may appeal it either based on the liability findings or the amount of the surcharge. Appeals are considered by the Tokyo District Court. The court is not bound by the JFTC’s factual findings, and parties are permitted to submit new evidence.




Criminal sanctions

Firms face a maximum criminal fine of JPY 500m (approximately US$ 4.37m), and individuals face up to five years’ imprisonment and a maximum fine of JPY 5m (approximately US$ 43,700). If the term of imprisonment is no more than three years, the court may impose a suspended sentence (i.e., probation). In most white-collar criminal cases in Japan, a first-time offender will receive a suspended sentence without any actual jail time. To date, no Japanese court has sentenced an individual to actual jail time for a cartel offence.

Firms that are subject to both an administrative surcharge and a criminal fine will receive a reduction in the amount of the administrative surcharge, equivalent to one-half of the amount of the criminal fine.

Cross-border issues

On rare occasions, the JFTC has issued administrative sanctions against foreign firms for cartel conduct affecting the Japanese market. The most recent examples are a cease-and-desist order against European firms in the Marine Hose case in 2008, a cease-and-desist order and surcharge orders against Asian firms in the CRT case in 2009, and a cease-and-desist order and surcharge order against a Norwegian shipping firm in the Automotive Shipping case in 2014. However, the JFTC has not been able to enforce such orders extraterritorially. In the Marine Hose case, four European firms and one Japanese firm were found to have violated the AMA, but the Japanese firm was the only party that the JFTC decided to fine. In the CRT case, a surcharge payment order was issued against Korean, Malaysian, and Indonesian firms, but the order itself acknowledged that the firms had no presence and no authorised representatives in Japan, so the JFTC could serve notice of the orders only by publication in Japan. The Asian firms appealed the orders but were denied by the JFTC in May 2015, which held that the parents of the foreign firms (which were present in Japan) should be regarded as purchasers of the relevant products. In 2016, the Tokyo District Court upheld the JFTC’s finding and did not reach the issue of extraterritoriality because it deemed the parents to be present in Japan. In the Auto Shipping case, the Norwegian firm did not make public whether it paid the surcharge. As discussed above, the JFTC is considering amending the AMA so that it can more easily seek surcharges from foreign firms.

The JFTC has cooperation agreements with foreign antitrust enforcers and coordinates investigations with them, for example, to conduct simultaneous dawn raids. In connection with the Marine Hose and CRT cases mentioned above, as well as in certain automotive parts cases, the JFTC has publicly stated that it coordinated the investigations with the U.S. DOJ and the European Commission. In multijurisdictional leniency applications, the JFTC will ask the applicant for a waiver to permit it to discuss the case with other competition authorities. In addition, Japan has mutual legal assistance treaties (“MLAT”) with various countries, pursuant to which Japanese prosecutors may cooperate with foreign authorities to obtain evidence in criminal investigations.

In 2018, the JFTC held bilateral meetings on competition law and policy with the competition authorities in other jurisdictions for the purpose of building the cooperative relationship as well as developing the mutual understanding with the Korea Fair Trade Commission (“KFTC”) in September and with the European Commission (“EC”) in December.

In August 2018, the JFTC, the Australian Competition and Consumer Commission (“ACCC”), and the Asian Development Bank Institute (“ADBI”) co-hosted the 14th East




Asia Top Level Officials’ Meeting on Competition Policy and the 11th East Asia Conference on Competition Law and Policy in Sydney, Australia.


Japanese law permits private antitrust actions, but there have been few cases in this area. Japan is not a litigious society in general, and the lack of a class action system, limited discovery, and limited damages all tend to dissuade private actions.

One basis for a private action is article 25 of the AMA, which provides that firms that have violated the AMA shall indemnify injured parties. Such cases can only be brought in the Tokyo High Court and only after the JFTC has instructed that its decision is final. In such cases, liability is usually not an issue, because there is a rebuttable presumption that the JFTC’s factual findings are correct. Instead, the litigation is over the scope of damages, for which the court may seek the JFTC’s opinion. Alternatively, an injured party may bring a general tort claim under article 709 of the Civil Code in any district court in Japan. To establish a claim under article 709, the plaintiff must prove the defendant’s intent or negligence, the amount of the damages, and causation.

Any party that was injured by a violation of the AMA, including both direct and indirect purchasers, can bring a claim under either statute. But any incentive to pursue a private action in Japan is probably even smaller for indirect purchasers, because there is no class action system for antitrust violations, and the possible recovery may be too small for a single plaintiff to pursue. There is no “pass on” defence as such, but it may be taken into account in assessing the damages amount. There are no punitive damages in Japan.

In addition, although not a “private enforcement” action as such, an increasing number of derivative claims are filed by shareholders of firms that have been found to be violating the AMA. Such claimants seek to collect damages from the firm’s directors on behalf of the firm and improvements to the firm’s antitrust compliance.

Discovery is limited in Japan, but a private plaintiff may seek the court’s permission to obtain evidence from litigants and third parties by making specific disclosure requests for relevant documents that are known to exist. Also, an “interested party”, including injured parties, may review and copy filings from appeal proceedings and criminal trials, subject to redaction of sensitive information.

Reform proposals

As discussed above, substantial efforts in reforming Japan’s cartel enforcement system have continued this year. With the launch of the new “plea bargain” system, it is expected that the cartel enforcement will be beefed up further. The JFTC currently plans to submit at the next Diet an amendment to the AMA, which would introduce a discretionary surcharge system to determine the fine amount based on the degree of a firm’s cooperation, rather than a mechanical approach based on the order of filing the leniency application. The proposed amendment would also make it easier for the JFTC to seek surcharges from foreign firms by not restricting the basis of the surcharges to revenues in Japan over the previous three years.






Kei Amemiya Tel: +81 3 3214 6522 / Email: [email protected] Kei Amemiya is a partner at Morrison & Foerster, leading its Japanese antitrust and competition practice in the Tokyo Office. Mr. Amemiya previously served as Investigator at the Japanese Fair Trade Commission, where he played a leading role in a number of cases involving cartel/bid rigging, private monopolisation and unfair trade practices, most of which resulted in JFTC’s model rulings on several key issues. In his private practice, Mr. Amemiya has advised numerous clients across multiple industries on every kind of antitrust issue, including precedent-making cartel and other investigations as well as internationally renowned merger reviews. He also advises JFTC and ICN committees on major issues from the private counsel perspective. Mr. Amemiya is admitted to practise law in Japan and the state of New York.

Daiske Yoshida Tel: +81 3 3214 6522 / Email: [email protected] Daiske Yoshida is a partner in the Tokyo office of Morrison & Foerster. He has extensive experience in cross-border litigation, arbitration and investigations in a wide range of industries, and specialises in advising clients on matters involving antitrust, anti-corruption, economic sanctions, and data privacy/security. He represents clients in U.S. federal and state courts at both the trial and appellate levels, as well as international arbitrations. Mr. Yoshida also advises clients in transactions involving intellectual property rights, antitrust and anti-corruption issues. He is admitted in New York and in Japan as a Gaikokuho-Jimu-Bengoshi.

Kazuyasu Yoneyama Tel: +81 3 3214 6522 / Email: [email protected] Kazuyasu Yoneyama is of counsel to Morrison & Foerster. Mr. Yoneyama’s principal areas of practice are antitrust and intellectual property matters. In addition to a range of domestic Japanese antitrust matters, he has represented clients in complex cross-border antitrust investigations. These include the defence of a Japan-based manufacturing group in an international cartel investigation brought by the European Commission, representation of individuals in relation to Antitrust Criminal Investigations driven by the US Department of Justice, and representation of a global technology company in a Japan Fair Trade Commission investigation of its competitor and as the plaintiff in Japanese civil antitrust litigation. Mr. Yoneyama also has a range of experience in intellectual property, product liability and other litigation matters. He is a member of the Tokyo Bar Association.

Shin-Marunouchi Building, 29th Floor, 5-1, Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-6529, Japan Tel: +81 3 3214 6522 / URL: www.mofo.com

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Malaysia


Section 4(1) of the Malaysian Competition Act 2010 (“Competition Act”) prohibits a horizontal agreement between enterprises insofar as it has the object or effect of significantly preventing, restricting or distorting competition in any market for goods or services. “Horizontal agreements” are agreements between enterprises which operate on the same level of the production or distribution chain. For the purposes of the Competition Act, a parent and a subsidiary company is regarded as a single enterprise if, notwithstanding their separate legal entity, they form a single economic unit whereby the subsidiaries do not enjoy real autonomy in determining their actions on the market. As such, agreements entered into between a parent company and its subsidiary may not be subject to Section 4(1) of the Competition Act unless it can be shown that the subsidiary company has autonomous powers over its business operations.

Horizontal agreements which have the following object are deemed anti-competitive, i.e. “hard-core restrictions” or “cartel infringements”, without having to show its anti-competitive effect:

(a) fixing, directly or indirectly, a purchase or selling price or any other trading conditions;

(b) sharing market or sources of supply;

(c) limiting or controlling – (i) production; (ii) market outlets or market access; (iii) technical or technological development; or (iv) investment; or

(d) bid rigging.

A horizontal agreement which does not fall within any of the abovementioned categories will have to be assessed on a case-by-case basis to determine whether such agreement has a “significant” anti-competitive effect. In general, if the combined market shares of parties who are competitors do not exceed 20%, any agreement entered into between both parties is unlikely to be considered to have a “significant” anti-competitive effect on the market and will likely be permissible. The market share threshold would not apply to horizontal agreements which are deemed anti-competitive, i.e. “hard-core restrictions”. Similarly, a vertical agreement entered into between parties who are not competitors whose individual market shares do not exceed 25% in the relevant market would also be unlikely to be considered to have a “significant” anti-competitive effect on the market.

Notwithstanding the above, an enterprise may still relieve itself from liability for a cartel infringement if it is able to satisfy all of the following requirements:

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(a) there are significant identifiable technological, efficiency or social benefits directly arising from the agreement;

(b) the benefits could not reasonably have been provided by the parties to the agreement without the agreement having the effect of preventing, restricting or distorting competition;

(c) the detrimental effect of the agreement on competition is proportionate to the benefits provided; and

(d) the agreement does not allow the enterprise concerned to eliminate competition completely in respect of a substantial part of the goods or services.

The onus lies on the enterprise to prove that all the requirements above have been satisfied and that the benefits have been passed on to the consumers.

The relevant authority overseeing issues falling within the ambit of the Competition Act is the Malaysia Competition Commission (“MyCC”). The MyCC derives its powers from the Competition Commission Act 2010 (“Competition Commission Act”) in order to carry out its functions such as to implement and to enforce the provisions of the Competition Act, amongst others.

However, MyCC is not the only authority overseeing competition issues in Malaysia. There are also separate competition law provisions under the following sector-specific legislations:

(a) the Communications and Multimedia Act 1998;

(b) the Energy Commission Act 2001;

(c) the Petroleum Development Act 1974 and the Petroleum Regulations 1974 insofar as the commercial activities are directly related to upstream operations comprising of activities of exploring, exploiting, winning and obtaining petroleum whether onshore or offshore of Malaysia; and

(d) the Malaysian Aviation Commission Act 2015.

Any commercial activity falling under the aforementioned legislations will be exempted from the Competition Act and instead, would be governed by the sector-specific regulators.

The following activities are also not subject to the provisions of the Competition Act:

(a) an agreement or conduct to the extent to which it is engaged in order to comply with a legislative requirement;

(b) collective bargaining activities or collective agreements in respect of employment terms and conditions and which are negotiated or concluded between parties; and

(c) an enterprise entrusted with the operation of services of general economic interest or having the character of a revenue-producing monopoly.

Overview of investigative powers in Malaysia

The MyCC has wide investigative powers under the Competition Act and the Competition Commission Act. The MyCC has the power to commence an investigation on an enterprise either:

(a) on its own initiative where it has reason to suspect that such enterprise has infringed any prohibition under the Competition Act; or

(b) upon receiving a complaint by a person to carry out an investigation on any enterprise, agreement or conduct.

In carrying out its investigation, a MyCC officer will have all or any of the powers of a

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police officer in relation to a police investigation in seizable cases as provided for under the Malaysian Criminal Procedure Code. The wide investigative powers of the MyCC, as set out in the Competition Act, include:

(a) Power to require provision of information: The MyCC may request in writing any information or document which is relevant to the performance of its powers and functions. The MyCC may also request an individual to provide a statement explaining any information or document required by the MyCC. It is an offence to intentionally fail to disclose or omit relevant information or provide false and misleading information to the MyCC;

(b) Power to retain documents: The MyCC may take and retain any document for a duration which it deems necessary;

(c) Power to access records, etc.: The MyCC may require access to a person’s records, books, accounts or other things necessary for the purposes of carrying out its functions under the Competition Act. Failure to allow such access to the MyCC and any attempt to destroy, conceal, mutilate or alter any such records is considered an offence under the Competition Act;

(d) Power to search and seize with warrant: The MyCC may obtain a warrant to enter the premises to search and seize any record, book, account, document, computerised data or any other thing which contains or is reasonably suspected to contain information of an infringement or offence, including entry by force at any reasonable time by day or night. Where it is not practicable to remove any record, book, account, document or computerised data, the MyCC is authorised to seal, by any means, such information at the premises or container in which it is found. It is an offence to break, tamper with or damage such seal or to remove any such sealed records from the premises;

(e) Power to search and seize without warrant: If the MyCC has reasonable cause to believe that, as a result of the delay in obtaining the warrant, the investigation would be adversely affected or that evidence is likely to be tampered with, removed, damaged or destroyed, the MyCC may enter the premises without a warrant. A refusal to provide the MyCC entry to the premises or any attempt to assault, obstruct, hinder or delay such entry also constitutes an offence under the Competition Act; and

(f) Power to access computerised data: The MyCC may require access to computerised data, whether stored in a computer or otherwise. The necessary password, encryption code, decryption code, software or hardware to access such data will need to be provided to the MyCC.

Notwithstanding the wide investigative powers of the MyCC as set out above, the Competition Act prohibits any usage or disclosure of confidential information obtained under the Competition Act unless, amongst others, the disclosure is necessary for the MyCC to carry out its functions or is made with the consent of the person who provided the information. “Confidential information” includes any trade, business or industrial information that belongs to any person which has economic value and is not generally made public. Any individual who is found to have made an unauthorised disclosure or usage of such confidential information would have committed an offence under the Competition Act.

Further, any communication between a professional legal adviser and his client is covered under legal professional privilege and will not be required to be disclosed to the MyCC. However, the legal professional privilege only extends to communication between the




enterprise and its external legal adviser and does not include communication with its in-house legal counsel.


The MyCC had issued five infringement decisions for a breach of a Section 4 prohibition under the Competition Act, four of which were in relation to a price-fixing cartel, since the Competition Act came into force on 1 January 2012.

On 13 December 2018, the MyCC announced that they are working closely with the Ministry of Domestic Trade and Consumer Affairs (“MDTCA”) to probe into any anti-competitive conduct, such as price-fixing cartels, which may have affected the domestic market for chicken eggs. The case is currently being investigated at the date of this article.

Separately, upon receiving instructions from the MDTCA, the MyCC also commenced investigations on tyres and beverages companies for potential anti-competitive behaviour. These parties were found to have issued price revision notices prior to the implementation of the Sales and Services Tax on 1 September 2018.

In October 2018, the MyCC had issued a proposed decision against seven tuition and day care centres for engaging in price-fixing activities. The MyCC found that the centres had collectively fixed and standardised the fees charged for the tuition and day care services rendered by their respective centres. As a result, a financial penalty of RM 33,068.85 was imposed. All seven enterprises are also required to immediately cease and desist from the act of price-fixing and to repudiate the price-fixing agreement with immediate effect. The seven enterprises are also required to enrol and complete the MyCC’s e-learning course on Competition Compliance for Small and Medium Enterprises (“SMEs”) within one (1) month from the issuance of the decision.

To date, there have not been any reports or press statements on dawn raids being carried out by the MyCC.


Since the Competition Act came into force on 1 January 2012, a number of trade associations have been investigated and fined by the MyCC for exchanging sensitive information during its meetings, including fixing the prices of its products or services, the most recent being the proposed decision issued against the General Insurance Association of Malaysia and 22 of its members. Such investigations are often initiated on MyCC’s own accord after the trade associations issue a public statement or a press release announcing a decision amongst the members to increase prices.


In Malaysia, the investigation and decision-making process are both executed by the MyCC. The investigation will be carried out by the Enforcement Division, whereas the decision on whether or not there is an infringement will be made by commission members of the MyCC comprising of individuals with experience and knowledge in matters relating to business, industry or economics.

There is no specific limitation period for the MyCC to commence an investigation against an enterprise or for the MyCC to arrive at its decision. Upon completion of the investigation, the MyCC will first issue a proposed decision to the enterprise setting out the grounds for the MyCC’s findings. Upon receiving the proposed decision, the enterprise is given an




opportunity to submit a written and, if it chooses to do so, an oral representation to the MyCC. The proposed decision will not be publicly available and will only be made known to the enterprise being investigated. Upon receiving the enterprise’s representations, the MyCC will then decide whether to make a finding of infringement or a finding of non-infringement.

As set out earlier, the MyCC has wide investigative powers under the Competition Act, akin to that of a police officer under the Criminal Procedure Code. As such, any attempt to obstruct the MyCC’s investigation would be a criminal offence.


The Competition Act has a leniency regime whereby a reduction of up to 100% of any penalties imposed can be granted to an enterprise which has:

(a) admitted its involvement in a cartel infringement; and

(b) provided information or another form of co-operation to the MyCC which significantly assisted or is likely to significantly assist in the identification or investigation of any finding of an infringement by an enterprise.

The percentage of reduction that can be granted to the enterprise would differ depending on:

(a) whether the enterprise was the first to bring the suspected infringement to the attention of the MyCC;

(b) the stage of the investigation at which: (i) an involvement in the infringement was admitted; or (ii) any information or other co-operation was provided.

However, the granting of leniency does not absolve the enterprise from any other legal consequences, such as a civil proceeding being brought against the enterprise by any person who has suffered loss or damages directly as a result of the infringement. To date, there have not been any public reports announcing that an enterprise has been granted leniency by the MyCC.

In the event leniency is available in a particular situation, the Leniency Officer appointed by the MyCC will provide a “marker” to the first applicant in order to preserve its priority while the application is being prepared. The function of the marker is essentially to indicate the priority, date and time as well as the subject matter of the application. The marker will remain valid for a period of 30 days, during which period the applicant is required to complete its application by providing information such as, amongst others, a detailed description of the suspected infringement and any documentary evidence of the cartel conduct, e.g., minutes or notes of meetings, price lists and agreements.

Upon receiving a leniency application, the MyCC will first grant a “conditional leniency” whereby the applicant is required to fulfil certain conditions. The grant of leniency will only be made unconditional after the applicant has fulfilled all the conditions imposed by the MyCC and the MyCC has made an infringement finding on the cartel conduct.

All leniency applicants are required to enter into a written conditional leniency agreement with the MyCC which sets out the following conditions:

(a) admission of the applicant’s involvement in the cartel conduct and providing significant assistance to the MyCC’s investigation;

(b) the applicant to cease and desist immediately from engaging in any further infringing activities unless otherwise required by the MyCC;




(c) full and honest disclosure by the applicant;

(d) the applicant provides continuous co-operation to the MyCC in the course of its investigation;

(e) the applicant agrees not to destroy any relevant document which may assist the MyCC in its investigation;

(f) the applicant should not harass or intimidate others to participate in the cartel; and

(g) the applicant undertakes not to disclose any aspect of its leniency application.

The MyCC has the right to withdraw the grant of leniency should the applicant fail to fulfil any of the abovementioned conditions. Failure to comply with the conditions set out above would result in the conditional grant of leniency being revoked by the MyCC. Even if the grant of leniency has been made unconditional, the MyCC reserves the right to revoke such leniency if it subsequently discovers that the applicant has failed to comply with any of the conditions required.


There is currently no administrative settlement of cases in Malaysia. However, the Competition Act allows for the MyCC to accept an undertaking from an enterprise where the enterprise agrees to do or to refrain from a particular conduct. Upon accepting such undertaking from the enterprise, the MyCC will close the investigation without making an infringement finding and no financial penalties will be imposed on the enterprise.


The MyCC can commence an investigation upon receiving a complaint on any enterprise, agreement or conduct that has infringed the Competition Act. However, under the MyCC’s Guidelines on Complaints Procedure, only complaints in relation to alleged infringing activities after the Competition Act came into force on 1 January 2012 will be considered.

A complaint can be lodged either via a hard copy Complaint Form which can be downloaded from the MyCC’s website or via an e-Complaint. The Complaint Form should include information about the complainant, the infringing party and the alleged infringing activity being complained of and should be supported with any relevant information and documents.

Upon receiving a complaint, the MyCC will first ascertain whether such complaint falls within its powers under the Competition Act. If it does, the MyCC will then take into account its strategic priorities before launching a formal investigation. A formal investigation will only be conducted if the MyCC has reasonable grounds for suspecting that there is an infringement of the Competition Act.


In the event of an infringement finding, the MyCC may require the enterprise to carry out any or both of the following:

(a) pay a financial penalty up to a maximum of 10% of the worldwide turnover of the enterprise over the period during which the infringement occurred; or

(b) comply with any directions or steps as deemed appropriate by the MyCC.

In determining the amount of financial penalty to be imposed on the infringing enterprise, the MyCC will take into consideration the following factors:




(a) the seriousness (gravity) of the infringement;

(b) turnover of the market involved;

(c) duration of the infringement;

(d) impact of the infringement;

(e) degree of fault (negligent or intentional);

(f) role of the enterprise in the infringement;

(g) recidivism;

(h) existence of a compliance programme; and

(i) level of financial penalties imposed in similar cases.

Further, the MyCC will also consider whether there are any aggravating or mitigating factors which would increase or reduce the amount of financial penalties imposed. For example, the financial penalties imposed will be increased if the enterprise is the leader or instigator of the infringing activity and if the enterprise has not provided any co-operation to the MyCC during its investigation. On the contrary, if the enterprise only played a minor role in the infringing activity (especially where its participation is due to threats or coercion) and the enterprise has an existing corporate compliance programme, these factors will be taken into consideration to potentially reduce the amount of fines imposed.

Parties will first be informed of the financial penalties or remedial actions imposed on it when the MyCC issues its proposed decision. Parties will then be given an opportunity to appeal against any penalties or remedial actions before members of the MyCC.


An enterprise which is dissatisfied with the decision of the MyCC can submit an appeal to the Malaysian Competition Appeal Tribunal (“CAT”). In submitting its notice of appeal, the enterprise is to state, in summary, the substance of the decision appealed against. The CAT has the power to:

(a) remit the matter back to the MyCC;

(b) impose, revoke or vary the amount of the financial penalty imposed by the MyCC;

(c) give such direction as the MyCC could have given; or

(d) make any other decision which the MyCC could have made.

In the event the MyCC has imposed a financial penalty on the enterprise, the enterprise is allowed to apply for a stay of the MyCC’s decision pending appeal, subject to the CAT’s approval.

The powers of the CAT to hear an appeal is similar to the powers of a subordinate court with regards to the enforcement of attendance of witnesses, hearing evidence on oath or affirmation as well as punishment for contempt.

To date, the CAT has issued two decisions, which is the appeal by Malaysian Airline System Berhad (“MAS”), AirAsia Berhad and AirAsia X Sdn. Bhd. (collectively, “AirAsia”) as well as the appeal by My E.G. Services Bhd and My E.G. Commerce Sdn. Bhd. (collectively, “MyEG”) against the MyCC’s infringement finding.

In the appeal by MAS and AirAsia, the CAT unanimously overturned the MyCC’s decision and found that MAS and AirAsia had not infringed Section 4(2) of the Competition Act. As a result, MAS and AirAsia were not required to pay the financial penalty of RM 10 million which was imposed on each of them by the MyCC. The MyCC has subsequently submitted




an application for judicial review at the High Court of Malaya to appeal the decision of the CAT and the case is currently pending before the High Court.

In the appeal by MyEG to overturn the MyCC’s decision for finding that MyEG had abused its dominant position, the CAT upheld the MyCC’s decision, including the imposition of a financial penalty of RM 2.272 million for the infringement period of 5 January 2015 to 22 January 2015 and 2 May 2015 to 6 October 2015. In addition to affirming the MyCC’s decision, the CAT also imposed an additional daily penalty of RM 7,500 on MyEG, which was computed from 25 June 2016 to 28 December 2017. MyEG subsequently submitted an application for judicial review against the CAT’s decision and the case is currently pending before the High Court.

Criminal sanctions

There are currently no criminal sanctions for a cartel infringement. However, there are criminal liabilities if the enterprise or an individual commits an offence under the Competition Act, such as obstructing the MyCC’s investigation.

If a body corporate is found to have committed an offence, it may be liable to a fine not exceeding RM 5 million and for a second or subsequent offence, a fine not exceeding RM 10 million. If an individual is found to have committed an offence, such individual may be liable to a fine not exceeding RM 1 million or imprisonment for a term not exceeding five years or both and for a second or subsequent offence, a fine not exceeding RM 2 million or imprisonment for a term not exceeding five years or both.

Cross-border issues

The Competition Act only applies to commercial activities outside of Malaysia if it has an effect on competition in any market in Malaysia. The MyCC does not have jurisdiction to investigate an enterprise which committed a cartel outside of Malaysia if it does not impact the Malaysian market.


Under the Competition Act, a person who has suffered any loss or damages directly as a result of the infringement by the enterprise is entitled to bring a right of action for relief in a civil proceeding in a court. Such action can be brought by any person regardless of whether such person dealt directly or indirectly with the infringing enterprise.

As of 20 December 2018, there has not been any publicly available information that any private action has been commenced by any person in the courts of Malaysia.

Reform proposals

The MyCC has indicated that the merger control regime may be introduced in Malaysia in the near future, although there has not been any official statements issued by the MyCC to date.






Raymond Yong Tel: +603 2299 3810 / Email: [email protected] Raymond has been actively involved in the area of competition law since the introduction of the Competition Act 2010 and is recognised as a recommended competition lawyer in Malaysia by the Global Competition Review. He is also recognised as a leading individual in the antitrust and competition practice area by The Legal 500. Raymond regularly deals with the Malaysia Competition Commission (“MyCC”) including representing clients in investigations, lodgement of complaints and leniency applications. He has also appeared before the Competition Appeal Tribunal and advised a trade association on an exemption application to the MyCC. Raymond has assisted clients extensively in various commercial arrangements, alliances, joint ventures and mergers and acquisitions. His clients include multinational corporations, government-linked companies and trade associations from a range of sectors such as financial services, fast-moving consumer goods, building materials, construction, hospitality, property, plantation, automotive, pharmaceutical and healthcare.

Penny Wong Tel: +603 2299 3915 / Email: [email protected] Penny mainly advises on competition law and data protection matters. Her experience includes advising on compliance with the Competition Act 2010, providing competition law training, review of business practices and agreements and drafting competition compliance and dawn raid manuals. She has also been actively involved in investigations by the Malaysia Competition Commission and has appeared before the Competition Appeal Tribunal. Her clients include government-linked companies and multinational companies in various sectors such as pharmaceutical, property, insurance, hospitality, plantation, construction and fast-moving consumer goods. Apart from practising competition law, she has also been actively involved in various personal data protection compliance programmes for clients, including reviewing business practices, providing advice on personal data protection related matters, drafting relevant documentations as well as compliance manuals.

Suite 33.01, The Gardens North Tower, Mid Valley City, Lingkaran Syed Putra, 59200 Kuala Lumpur, Malaysia Tel: +603 2299 3888 / URL: www.rahmatlim.com

Rahmat Lim & Partners



Netherlands

When cross-border cartels within the EU are exposed and the European Commission imposes a fine, this often results in follow-on proceedings by injured parties wishing to recover their damages. In EU-wide cartel cases, one of the first questions that needs answering is which court has jurisdiction to hear the case. This question is answered on the basis of the local private international law of the EU Member State of the court addressed. EU law is a part of such private international law. The question of jurisdiction can be answered on the basis of either i) the country of establishment of the defendant, or ii) the place where the harmful event took place. This often leads to multiple courts having jurisdiction. Follow-on proceedings in European cartel cases have – over previous years – mostly been brought before the British, Dutch and German courts. The decision of the United Kingdom to leave the EU has created legal uncertainty and hence made the choice for the British courts less obvious. And there are more reasons to choose the courts of the Netherlands. We address several of those reasons in this article.

Dutch courts and handling international cases

Dutch courts can compete with the best courts in the world and provide for efficient litigation in international disputes.

Dutch courts are considered to be among the best in their field. Since the 17th century, Dutch courts have been known to be professional, truly independent and experienced. The Netherlands has been ranked in the top-five of the Rule of Law Index of the World Justice Project for several years, and ranks first with regard to Civil Justice.1 The main reasons for this top-tier ranking are that civil justice is accessible and affordable, free of discrimination and corruption, free of improper government influence and that judgments are effectively enforced. Furthermore, unlike in some other European countries, civil justice in the Netherlands is not subject to unreasonable delay.

Dutch law furthermore allows for proceedings that lead to the declaration of (universal) applicability of settlements on a class of injured parties. Normally, defendants may run the real risk of multiple procedures in multiple EU Member States (the courts of which may all have jurisdiction). Therefore, the possibility of arranging pan-European applicability of a settlement for all injured parties contributes to the likelihood of reaching an attractive settlement.

Dutch law requires that proceedings before Dutch courts are conducted in Dutch. Given that the Dutch have always been internationally orientated, and that the Dutch-speaking community is relatively small, the Dutch focus on learning foreign languages early on. All Dutch courts allow exhibits to be filed in, among others, the English language. In practice,

Louis Berger, Hans Bousie & Rieneke Reijnen bureau Brandeis



a Dutch translation is not required if it is to be expected that the court understands the language of the exhibit. Furthermore, skilled interpreters are widely available in the Netherlands and can be made use of during hearings.

Recently, the District Court of Amsterdam opened its specialised chamber for international commercial disputes, the Netherlands Commercial Court. On 11 December 2018, the Dutch Senate approved the bill to create the Netherlands Commercial Court, which was subsequently established on 1st January 2019. This court will enable parties to litigate in English before highly specialised judges, provided that i) the District Court of Amsterdam has jurisdiction to hear the case, and ii) all parties agree, in writing, to bring the case before the Netherlands Commercial Court and that the procedure will be conducted in English.2 The jurisdiction of the District Court of Amsterdam may be based on a choice of court clause or on the law, for instance designating the court of the defendant’s domicile. It is expected that the Netherlands Commercial Court will live up to the quality standards required by parties to international disputes.

Cost of litigation – effectively no “loser pays rule”

The Dutch legal system distinguishes itself from several other legal systems because of its substantially lower litigation costs. This cost-limitation follows from both efficiency as well as from the fact that the courts work with low fixed-rate cost orders.

When proceedings are initiated, both claimants and defendants must pay court fees, which are fixed and very modest.3 Cost order awards do not reflect the real costs of litigation. For example, nominal cost orders are commonly less than EUR 20,000 even in high stakes cases, and hardly ever in excess of EUR 50,000.

Dutch courts in cartel damages cases

No arrest/suspension when a decision to impose a fine is revocable

Cartelists fined by the European Commission usually appeal to the decision in order to mitigate the fine. As a consequence of this, the decision of the European Commission is often still revocable when damages proceedings are initiated. This leads the defendants to the (so-called Masterfood) defence that no decision on damages can be taken, as long as the decision of the European Commission is not definitive. Dutch courts, however, show little willingness to be slowed down by the parties when it comes to the advancement of proceedings. In the Equilib/KLM case4 for instance, the Amsterdam Court of Appeal denied this defence. It ruled that national proceedings must only be stayed in cases in which questions of fact or law need to be answered, which are dependent on the lawfulness of the decision of the European Commission. The Dutch court is also quite willing to assume that the proceedings should not completely rely on the validity of the cartel ruling, and will therefore not have any problems ascertaining its jurisdiction.5

No stay of proceedings awaiting Supreme Court ruling in similar cases

In compliance with EU judiciary directives, Dutch courts6 have denied the line of defence that argues that a case needs to be suspended or adjourned until higher courts have reached a decision in a similar (cartel damage) case.7

Dutch courts assume jurisdiction relatively easy, the anchor defendant creates jurisdiction

In line with EU legislation, Dutch courts have jurisdiction if:

(a) at least one of the (alleged) offenders is established in the Netherlands at the time the

bureau Brandeis Netherlands



proceedings are initiated, and jurisdiction sticks even if the case against that offender is settled during the following proceedings;

(b) the cartel/restrictive trade practice originated (partly) in the Netherlands; or

(c) the restrictive trade policy was (partly) enforced in the Netherlands or damages as a result of the cartel were (partly) suffered in the Netherlands.8

A Netherlands-based defendant can serve as an anchor defendant when multiple individual claims are essentially connected.9 This means that all damage claims against the recipients of a decision to impose a fine by the European Commission can be handled by a single court. By allowing this, Dutch courts help to avoid the risk of possible fragmentation and divergent rulings, which would exist if the cases had to be heard by different courts in different countries. This would be contrary to the objectives of the Brussels i-bis Regulation.10

In Dutch proceedings, the parties have the freedom to use the procedural toolbox that is available to them. Adding another party to pending proceedings or joining cases against multiple (foreign) defendants, does not in itself constitute abuse of procedural law. The defendant may state that the claimant only uses these procedural tools to pull it away from the court of its domicile. In these types of situations, Dutch courts emphasise the importance of the principle of efficiency, to which it will usually give priority.11 This principle does not only aim for speedy proceedings, but also for similar judgments in similar cases. As a consequence thereof, courts do not often find that summoning defendants of several Member States to Dutch proceedings hinders defendants in their defence in a relevant way.12 Therefore, if jurisdiction is based on the presence of an anchor defendant, Dutch courts will not easily deny jurisdiction. The argument that the claim against the Dutch anchor defendant will possibly be dismissed does not suffice in this regard.

Cases in which judicial and factual circumstances are similar can and should be handled by one individual court, even if they are not initiated simultaneously.13 Dutch courts often show willingness to be convinced that this is the case.14 The objective is that the risk of conflicting judgments in similar proceedings (can and) must be mitigated. In cases that should normally be initiated before other (EU) courts, but are initiated before a Dutch court because of another case pending before such court, Dutch courts are not likely to shy away from ascertaining jurisdiction.

In a case in which a German cartelist disputed the jurisdiction of the Dutch courts, the District Court of Limburg ruled that participants of the cartel, which cartel had been active in the Netherlands, in which Dutch companies participated and that held collusive meetings in the Netherlands, could and should have anticipated that damages proceedings would be held before a Dutch court.15 The fact that the cartel damages case is also connected to other jurisdictions does not affect this conclusion.16 Furthermore, Dutch courts acknowledge, also with respect to questions of jurisdiction, that cartel-related rulings do not only have consequences for the individual, acting members of the cartel. If the parent companies are pointed out as policy makers in the decision of the European Commission, also with respect to the subsidiaries that have formed the cartel, cases against the parent companies can also be brought before a Dutch court.17

Choice of court agreement does not affect jurisdiction

Another example of the manner in which Dutch courts assess jurisdiction regards choice of forum clauses in the agreement affected by the cartel. As cartel damages cases have a tortuous nature and create market distortion, the damage does not directly relate to the concluded contract, but to the effects of the distortion of the market as a whole. Therefore,




choice of forum clauses in the underlying agreements, have no effect with regard to jurisdiction of the court in cartel damages proceedings.18 The Court of Justice of the European Union has taken a similar approach, based on the argument that the claimant could not reasonably foresee litigation regarding the tortuous acts of the cartelists and that he was unaware of the unlawful cartel and that therefore the contractual choice of jurisdiction did not cover such proceedings.19 The only possible exception to this would be when a plausible argument could be made that the agreement(s) to which the choice of court agreement applies, is relevant to the judgment in the cartel damages case.20 This will only occur in exceptional cases. However, in a judgment of 13 September 2017, the regional court of Dortmund (Germany) ruled to the contrary in a judgment regarding an arbitration clause.21 It ruled that, although jurisdiction clauses must be interpreted in the light of EU law, arbitration clauses are interpreted according to national law. The regional court of Dortmund saw no obstacles for the validity of the arbitration clause, under German law. Some European Courts are stricter than others, but – if approached by the highest national court – the Court of Justice of the European Union finally decides how European law is to be dealt with.

Claim vehicles are accepted claimants under Dutch law

Dutch civil procedural law allows for special claim vehicles to act as a plaintiff in proceedings. According to Dutch law, a foundation or association may engage in proceedings as a special purpose vehicle (“SPV”) in the following ways:

A. The SPV can pursue the claims on behalf of the injured parties. In order to do so, the injured parties can assign their claims to the SPV and the SPV can bring these claims in its own name. The injured parties can also enter into a mandate agreement with the SPV, which will entitle the SPV to bring the concerned claims either in its own name, or in the name of the injured parties.

B. The SPV can bring a so-called “collective action” on the basis of article 3:305(a) of the Dutch Civil Code (“DCC”). This enables the SPV to demand declaratory relief with regard to the question of whether the committed act was tortuous. Article 3:305a sub 5 DCC states that such declaratory relief does not bind the injured parties, if they opt out. Although we acknowledge that such relief should not bind injured parties if they do not want to be bound by it, as individual injured parties are not a party to the proceedings, the judgment does not bind them anyway. Collective actions can provide the momentum necessary to force the injuring party to accept a collective settlement.22 A SPV can commence a collective action without the cooperation of the injured parties, but is subject to other limitations.

Options A and B can be combined. Option B-type collective actions can only be brought by a Dutch foundation or association. Statutory law restricts the foundation or association in distributing profits (articles 2:26 (3), 2:285 (2) and 3:305a (1) DCC). Furthermore, in order to have locus standi the foundation or association is required to adopt sufficient safeguards for injured parties’ interests (article 3:305a (2) DCC). This requirement was recently introduced in order to counteract the usage of collective actions by entrepreneurs that put their own commercial objectives before the interest of the injured parties they claim to represent. The minimum standards with regard to these safeguards have not yet been determined by legislation or case law. By means of self-regulation, a corporate governance code for collective action foundations and associations was introduced. This code entails – inter alia – that the board of the foundation or association should be independent from the




law firm it employs and that the foundation or association should be run on a non-profit basis. This, however, does not preclude a funder to fund the class action.

The abovementioned corporate governance code does not apply to a foundation or association bringing claims on the basis of a power of attorney or an assignment of claims.

It does not seem very useful to represent injured parties in typical 305a proceedings who opt out of the effects of the judgment obtained by another foundation or association. For reasons of uniformity of the law, it is highly likely that the Dutch courts would provide the same judgment as provided by a court of the same rank, either granting or denying the declaratory relief. However, theoretically it is possible that another foundation or association could obtain a better result.

Some other benefits of Dutch civil procedural law

The Netherlands is an attractive venue for settling international mass claims

The Netherlands is also an attractive venue for settling international mass claims, irrespective of whether it concerns cartel damages claims or other damages claims and irrespective of whether any litigation has actually taken place in the Netherlands. The basis for settling mass claims in the Netherlands is the Dutch Act on the Collective Settlement of Mass Claims. In short, it requires a collective settlement agreement between one or more potentially liable parties and one or more foundations or associations that, pursuant to their articles of association, promote the interests of the class members. Subsequently, the parties to the collective settlement agreement can jointly request the Amsterdam Court of Appeal to declare this settlement agreement binding on all class members on an opt-out basis. The court of appeal assesses whether the settlement agreement meets certain criteria – most importantly, the reasonableness of the agreed compensation. The court also assesses whether the organisation is sufficiently representative.

The international scope of this mechanism was first confirmed in the Shell Reserves case.23 The vast majority of the class members were not residing in the Netherlands, but across the globe. Also, not all potentially liable parties had their domicile in the Netherlands. The Converium case24 was of an even more international nature. None of the potentially liable parties resided in the Netherlands. Moreover, there were only a very limited number of Dutch class members.

In the Converium case, the argument that the amount of settlement relief was unreasonable, because the fees for U.S. plaintiffs’ lead counsel which were to be deducted from the settlement amount were too high, was dismissed. This was an atypical case, as it regarded fees for the work of three American law firms regarding the settlement that was reached in the United States. Recent case-law shows how the Amsterdam Appeal Court treats the remuneration of advisors in a case that involved the Dutch legal sphere. In the Fortis settlement case, the Amsterdam Appeal Court denied the settlement twice, as the remuneration fee for the claim vehicles gravely exceeded the costs they had made for the settlement and the proceedings, while at the same time some (the “active”) claimants were rewarded a higher compensation fee than others (“non-active”) claimants. This, according to the Appeal Court, gave the impression that the claim vehicle was in it for its own benefit, more than for the benefit of the (non-active) injured parties, which is why the court denied the requested declaration.25 This ruling provides future claimants with some guidance as to how the Amsterdam Appeal Court weighs the interests of the injured parties in mass settlement cases. Ultimately, the Fortis settlement was indeed declared binding.26 In a further oral hearing the claim vehicles have addressed and explained the stipulated fee. The




Amsterdam Appeal Court ruled that under the given circumstances, the remuneration was high, though not unreasonable. While the settlement amounts to €1,308,000,000, the claim vehicles will obtain approximately €45,000,000 in fixed fees and €80,000,000 in success fees. In light of the costs for the proceedings and for the settlement, which amount to approximately €30,000,000, the return on investment could be seen as worthwhile.

Proof of damage

When it comes to proving the scope of the damage, Dutch courts can be very forthcoming towards damaged parties in cartel cases. For example, in a case regarding the globally operating Gas Insulated Switchgear Cartel, the District Court of Gelderland ruled that, when trying to ascertain proof of damage, claimants cannot reasonably be expected to know what should have been a reasonable price for the products in question.27

The EU principle of effectiveness implies – according to Dutch courts – that defendants are under the obligation to provide an insight into their price calculations, since insufficient information is available which makes it extremely complicated for claimants in cartel damages cases to calculate the price increases or surcharges about which complaint is made. This implies that defendants in cartel damages cases may be obliged to provide an insight into their price calculations and to substantiate their production costs and surcharges. When defendants fail to provide this information, the Dutch court considers itself free to make an estimate of the surcharge arising as a result of the cartel. This significantly reduces the burden of proof for claimants in Dutch cartel damages cases.

The gathering of evidence

Although the Dutch legal system does not know the concept of US-style discovery or (UK- style) disclosure, there are some procedural tools which can be effective. Although they are less invasive when compared to Anglo-Saxon jurisdictions, they are more cost-efficient.

Dutch law contains a special arrangement pertaining to the inspection and provision of records. Based on article 843a of the Dutch Code of Civil Procedure (“DCCP”), a party may, under certain conditions, seek the provision of items of evidence from its opponent. This party must have a legitimate interest in the provision of a certain record. In order to preclude the possibility that the item of evidence might disappear during the proceedings, it is also possible to impose a prejudgment attachment on information in the possession of the opponent, by means of a so-called seizure of evidence. In this way it is possible to ensure that the items of proof will be available when the right to inspection has eventually been granted. This arrangement offers another all too welcome compensation for the informational disadvantage of claimants in cartel damages cases.

Passing-on defences

An important aspect of cartel damages litigation is the question of damage. Sometimes, direct purchasers of goods, unaware of the cartel, will for instance raise their own prices due to an increase of prices by their suppliers. The question arises of whether these direct purchasers may claim for damages if they have indeed shifted the implications of the cartel to their customers. This question is referred to as the passing-on defence. The European legal system regarding damages does not allow for overcompensation, which could occur if the effects of the cartel were indeed also passed on to consumers, covering the claimants’ damage. The European cartel damages directive prescribes that the passing-on defence is acceptable in all European legal systems. This implies that courts will have to find a way to address this problem. Until now, the passing-on defence has not led to a reduction of the damages in Dutch case law.




The Gas Insulated Switchgear Cartel case involves ABB and Alstom as cartel members and Tennet, an electricity transmission system operator, as an injured party. In the case between Alstom and Tennet, the District Court of Gelderland gave quite a groundbreaking judgment on 10 June 2015,28 denying the passing-on defence of the cartelists. On the basis of a judgment of the Court of Appeal of Leeuwarden in parallel proceedings regarding the same cartel, the district court noted that it had to accept the validity of the passing-on defence. It ruled that according to Dutch law,29 the legal ground for accepting a passing-on defence is article 6:100 DCC, which states that when the injured person has not only suffered damage from an event, but also benefitted from it, the benefit has to be subtracted, as far as this is reasonable, from the damage that has to be compensated to him. The court subsequently ruled that in light of all the circumstances of the case, it was unreasonable and unfeasible that cartel member Alstom would be allowed to keep its tortious profits due to the fact that the damage had been passed-on further down the chain by the purchasers of Alstom. In addition, the court also found that if damages would be awarded to the direct purchaser, these damages would probably come to the benefit of the ultimate injured parties as well. Therefore, the court denied the passing-on defence.

In a ruling of 8 July 2016 in the parallel case, the Dutch Supreme Court found that, according to Dutch law and in line with the EU Antitrust Damages Directive, advantages related to the damage caused must be included in the damages award, as far as reasonable.30 This is an important ruling, as it shows that the District Court of Gelderland correctly found that the principle of reasonableness may prohibit a passing-on defence is being accepted.

This year, the Court of Appeal of Arnhem-Leeuwarden announced in an interim decision in the ABB/Tennet case that it will rule on the passing-on defence of ABB at a later stage. The court stated that it will look at Tennet’s argument that, insofar as Tennet passed-on any damage to the end users, this passing-on was done conditional to a possible compensation to be received from ABB.31

Endnotes

1. See data.worldjusticeproject.org/#table.

2. See www.netherlands-commercial-court.com.

3. As per 1 January 2017, with a maximum of EUR 3,894 at the first instance and EUR 5,200 at appeal.

4. Court of Appeal Amsterdam, 24 September 2013, ECLI:NL:GHAMS:2013:3013 (Equilib/KLM).

5. District Court of The Hague, 1 May 2013, ECLI:NL:RBDHA:2013:CA1870 (CDC/Shell c.s.), par. 4.26.

6. District Court of Gelderland, 15 April 2015, ECLI:RBGEL:2015:2621, par. 3.6.

7. European Court of Justice (ECJ), 14 December 2000, C-344/98 (Masterfood); ECJ 1 December 2011, C-145/10 (Painer).

8. ECJ, 21 May 2015, C-352/13 (CDC/Perioxide).

9. Art. 8 (1) Brussels I Recast for European defendants or article 8 DCCP for non-European defendants.

10. Court of Appeal Amsterdam, 24 September 2013, ECLI:NL:GHAMS:2013:3013 (Equilib/KLM); District Court of The Hague, 17 December 2014,




ECLI:NL:RBDHA:2014:15722; District Court of Amsterdam, 7 January 2015, ECLI:NL:RBAMS:2015:94 (Equilib/KLM); District Court of Limburg, 25 February 2015, ECLI:NL:RBLIM:2015:1791 (Deutsche Bahn/Nedri Spanstaal e.a.).


12. District Court of Amsterdam, 7 January 2015, ECLI:NL:RBAMS:2015:94 (Equilib/KLM), pars 3.6–3.8; District Court of Limburg, 25 February 2015, ECLI:NL:RBLIM:2015:1791 (Deutsche Bahn/Nedri Spanstaal e.a.), par. 3.5; District Court of The Hague 1 May 2013, ECLI:NL:RBDHA:2013:CA1870 (CDC/Shell c.s.), par. 4.27.

13. District Court of Amsterdam, 7 January 2015, ECLI:NL:RBAMS: 2015:94 (Equilib/KLM); District Court of Amsterdam, 4 June 2014, ECLI:NL:RBAMS:2014:3190 (CDC/Akzo c.s.), par. 2.12.

14. District Court of Amsterdam 4 June 2014, ECLI:NL:RBAMS:2014:3190 (CDC/Akzo c.s.), pars 2.12–2.13.

15. District Court of Limburg, 25 February 2015, ECLI:NL:RBLIM:2015:1791 (Deutsche Bahn/Nedri Spanstaal e.a.), par. 3.5.

16. District Court of Limburg, 25 February 2015, ECLI:NL:RBLIM:2015:1791 (Deutsche Bahn/Nedri Spanstaal e.a.), par. 3.5; District Court of Amsterdam, 4 June 2014, ECLI:NL:RBAMS:2014:3190 (CDC/Akzo c.s.), par. 2.16.


18. District Court of The Hague, 1 May 2013, ECLI:NL:RBDHA:2013:CA1870 (CDC/Shell c.s.).

19. ECJ judgment of 21 May 2015, CDC Hydrogen Peroxide, C‑352/13, EU:C:2015:335, par. 70.

20. District Court of Amsterdam 4 June 2014, ECLI:NL:RBAMS:2014:3190 (CDC/Akzo c.s.), par. 2.23.

21. Landgericht Dortmund, judgment of September 13, 2017 – 8 O 30/16 Kart, par. 26.

22. The settling of international mass claims in The Netherlands will be discussed below.

23. Court of Appeal Amsterdam, 29 May 2009, ECLI:NL:GHAMS:2009:BI5744 (Shell Reserves).

24. Court of Appeal Amsterdam, 17 January 2012, ECLI:NL:GHAMS:2012:BV1026 (Converium).

25. Court of Appeal Amsterdam, 16 June 2017, ECLI:NL:GHAMS:2017:2257 (Fortis) par. 8.41.

26. Court of Appeal Amsterdam, 13 July 2018, ECLI:NL:GHAMS:2018:2422 (Fortis).

27. District Court of Gelderland, 24 September 2014, ECLI:NL:RBGEL:2014:6118 (Tennet/ABB).

28. District Court of Gelderland, 10 June 2015, ECLI:NL:RBGEL:2015:3713 (Tennet/Alstom).

29. The events took place far before the implementation of the cartel damages directive.

30. Dutch Supreme Court 8 July 2016, ECLI:NL:HR:2016:1483.

31. Court of Appeal Arnhem-Leeuwarden 29 May 2018, ECLI:NL:GHARL:2018:4876.






Louis Berger Tel: +31 20 7606 505 / Email: [email protected] Louis Berger is a partner and founder of bureau Brandeis, with well over 20 years of experience in the field of commercial litigation. Louis has strong expertise with regard to tort law cases, class actions and antitrust follow-on proceedings. Louis Berger is founder and editor of Q, the Cartel Damages Quarterly, a bureau Brandeis’ journal on cartel damage competition case law. An important part of Louis Berger’s practice regards cross-border litigation. In these complex cases, Louis works with law firms, experts and funders worldwide. Louis is currently involved or has been involved in class actions, the Aircargo cartel case, the Trucks cartel case, (Chevron/Ecuador, trustee/KPMG). Louis Berger is admitted to the Dutch Bar Association and is a member of the International Bar Association (“IBA”) and the American Bar Association (“ABA”).

Hans Bousie Tel: +31 20 7606 505 / Email: [email protected] Hans Bousie has been an antitrust lawyer for well over 20 years. He is a partner and founder of bureau Brandeis. Hans has been involved in numerous antitrust cases before the European Commission, the ECJ and several Dutch courts. He successfully attacked the Belgian State de facto monopoly on commercial radio and the Dutch cartel on fixed book prices. Together with Louis Berger he heads bB’s cartel damages section. He has been involved in cases like the Aircargo cartel case, the Trucks cartel case and is now working on a second opinion in another case and preparing to start three new cartel damages cases in the Netherlands. Hans is the founder and editor of Q, the Cartel Damages Quarterly, a bureau Brandeis’ journal on cartel damage competition case law in the main jurisdictions of the EU.

Rieneke Reijnen Tel: +31 20 7606 505 / Email: [email protected] Rieneke Reijnen is a senior associate at bureau Brandeis. She specialises in commercial litigation, with a clear focus on complex commercial torts and contract litigation. Rieneke has extensive experience in class actions and disputes relating to investments in real estate, offsetting of payment obligations and with respect to security rights, both in and outside of bankruptcy proceedings. Because of her experience as an attorney in Supreme Court litigation, Rieneke has a keen eye for the tactics of litigating in appeal proceedings. Rieneke was sworn in as an attorney in 2006, at the time working for Houthoff Buruma. In 2013, she successfully completed post-graduate studies in corporate liability law at Grotius Academy. Rieneke is a regular blogger on directors’ liability on her blog corporatelitigator.wordpress.com.

Sophialaan 8, 1075 BR Amsterdam, The Netherlands Tel: +31 20 7606 505 / Fax: +31 20 7606 555 / URL: www.bureaubrandeis.com

bureau Brandeis


New Zealand


New Zealand’s Commerce Act 1986 (the Act) prohibits a person from entering into a contract or arrangement, or arriving at an understanding, that contains a cartel provision and prohibits giving effect to a cartel provision.

A cartel provision is a provision that has the purpose, effect, or likely effect of one or more of the following in relation to the supply or acquisition of goods or services in New Zealand:

• price-fixing;

• restricting output; and/or

• market allocating.

The New Zealand Commerce Commission (NZCC) is the independent statutory authority that administers the Act. The NZCC has the power to investigate potential breaches of the cartel prohibition and can initiate civil proceedings in the High Court for civil pecuniary penalties and other orders, such as banning orders, where it believes parties have engaged in cartel conduct. The NZCC has no general power to determine a breach of the Act or impose penalties. Such is the role of the courts. Damages claims can also be brought for loss suffered by affected persons.

New Zealand’s law in relation to cartel conduct was, after a drawn-out legislative process, amended with effect from August 2017. The cartel prohibition described above replaced the previous prohibition in relation to price-fixing as previously defined. Other key changes include:

• the introduction of new exceptions to the cartel prohibition for collaborative activities (replacing the old ‘joint venture’ exemption), vertical supply contracts, and joint buying and promotion agreements; and

• a new clearance regime for collaborative activities.

The Labour Party-led coalition government has, in 2018, re-introduced a legislative proposal to make intentional cartel conduct a criminal offence, which would result in parallel civil and criminal regimes similar to New Zealand’s close neighbour, Australia. We cover this development briefly below.

Overview of investigative powers in New Zealand

The NZCC can initiate an investigation based on its own information, as a result of a complaint, or an application for immunity pursuant to its Cartel Leniency and/or Cooperation Policies. Investigations of cartel conduct in New Zealand may also follow the announcement

April Payne & Oliver Meech MinterEllisonRuddWatts


of cartel investigations or enforcement actions in other jurisdictions. Most recently, the NZCC’s cartel enforcement activity appears to have been focused on domestic cartels.

Power to obtain documents and evidence

Under section 98 of the Act, the NZCC has broad powers to:

• require the production of specific documents or information; and/or

• require individuals to attend an interview with the NZCC to give evidence (either orally or in writing) and produce documents,

if it considers it necessary or desirable to do so for the purposes of carrying out its functions and exercising its powers.

While the NZCC’s powers are very broad, the courts have recognised that they are not unlimited. The Supreme Court in AstraZeneca Ltd v Commerce Commission [2009] NZSC 92 confirmed that a section 98 notice must relate to a subject matter that the NZCC has jurisdiction to investigate. In particular, the Court held that the NZCC does not have the power to use a section 98 notice to “check whether it has the necessary power by reference to something it may discover on a ‘fishing expedition’ pursuant to the notice”. In that case, the Supreme Court found that the section 98 notice was invalid because an exemption from the restrictive trade practices sections of the Act applied to the conduct that it was investigating.

A person cannot refuse to comply with a section 98 notice on the ground that to do so might tend to incriminate them. Statements made to the NZCC by an individual in a compulsory interview cannot be used against them in criminal proceedings or proceedings for pecuniary penalties under the Act, except in the case of perjury and offences relating to the obstruction of the NZCC’s exercise of its investigatory powers. The statements can, however, be used against the individual’s employer.

A recipient of a section 98 notice is not required to produce documents that are legally privileged.

Power to obtain a search warrant

Under section 98A of the Act, the NZCC can apply to a Judge of the District Court or High Court, or another issuing officer, for a search warrant to, amongst other things:

• carry out unannounced searches of business and residential premises;

• search computer hard-drives using forensic IT tools; and

• seize documents and other evidence.

The issuing officer must be satisfied that there are reasonable grounds to believe that the search warrant is necessary for the purpose of ascertaining whether a person has engaged in or is engaging in conduct that constitutes or may constitute a contravention of the Act. The NZCC’s power to obtain a search warrant was successfully challenged in Tranz Rail Ltd v District Court at Wellington [2002] 3 NZLR 780 (CA). In that case, the Court of Appeal held that a section 98A warrant allowing the NZCC to enter the premises of Tranz Rail and seize material as part of an investigation into alleged predatory pricing was invalid because the NZCC could have issued a section 98 notice requiring Tranz Rail to provide the relevant information. The NZCC’s argument that it would have allowed the company time to destroy potentially relevant material was found to be unwarranted because informal discussions had already taken place.

The NZCC does not have any general surveillance powers and cannot obtain a warrant for the use of surveillance and interception devices. In New Zealand, these powers are only available for serious criminal offences.

MinterEllisonRuddWatts New Zealand



Sanctions for non-compliance

In New Zealand, it is a criminal offence:

• without reasonable excuse, to refuse or fail to comply with a notice requiring the provision of documents or information or to appear before the NZCC; and

• to knowingly provide the NZCC with false or misleading documents, information or evidence: • in the context of a compulsory interview, to refuse to take an oath or affirmation,

answer any question or produce any document; or • to resist, obstruct or delay a NZCC employee acting pursuant to a search warrant.

A person who commits any of these offences is liable on conviction, in the case of an individual, to a fine of up to NZ$100,000 and in the case of a body corporate, to a fine of up to NZ$300,000. These fines maxima were increased tenfold from the previous maxima, with effect from August 2017 in the last round of legislative changes to the Act.

These sanctions have been used, though relatively rarely:

• in 2005, Koppers Arch Wood Protection and its former general manager were fined NZ$25,000 and NZ$8,000, respectively for failing to produce documents when required to do so;

• in 2006, Osmose, a participant in the same wood preservatives cartel as Koppers Arch, was fined NZ$13,000 after it pleaded guilty to a charge of failing to provide documents; and

• in 2008, Aerolineas Argentinas pleaded guilty to a charge of failing to comply with a statutory notice by providing the required documents five months after the due date and was fined NZ$11,000.

The fines in each of these cases were under the old, and significantly lower, maximum penalties.

Breach of the cartel prohibition has not, to date, been a criminal offence in New Zealand, although as we noted below that now appears likely to change. Hefty civil pecuniary penalties can be imposed on both companies and individuals.


Cartel investigation and prosecution activity for the NZCC was, in 2018, at a lower level than in previous years, with the NZCC focused for much of the year on concluding its long-standing cases in the real estate and livestock industries. The NZCC publishes information about selected open investigations.

Notably, in November 2017 the High Court dismissed the NZCC’s civil penalty proceedings against Lodge Real Estate Limited and Monarch Real Estate Limited (two real estate agencies) and two individuals (directors of the companies) for alleged price-fixing relating to Trade Me advertising listing fees. Trade Me operates an online platform, and its suite includes Trade Me Property for property listings. The NZCC alleged that a group of agencies had agreed to all withdraw their standard listings from Trade Me and that any Trade Me listings in the future would be “vendor funded”, meaning that they would be paid for by the vendor and/or the particular real estate agent.

While the High Court was persuaded that the real estate agencies had entered into an arrangement or understanding to withdraw their standard listings from Trade Me and move to “vendor funding” of Trade Me’s “per listing” fees, the Court held that the arrangement




did not have the purpose or effect of fixing, controlling or maintaining the price of real estate sales/commissions or advertising services. In effect, the proven arrangement or understanding was that the agencies would not absorb Trade Me’s increased listing fees – but there was no proven arrangement or understanding as to what the agencies would themselves charge to vendors for Trade Me listings.

The case is significant because, while the NZCC originally filed proceedings against 13 national and regional real estate agencies, only two, Lodge and Monarch, defended the proceedings. The remaining agencies admitted that they had contravened the Act, entered into settlement agreements with the NZCC and were subsequently ordered to pay pecuniary penalties totalling collectively more than NZ$18.97 million.

The NZCC appealed the High Court decision. The Court of Appeal released its decision on 23 November 2018, allowing the appeal, confirming the High Court’s findings that the agencies had entered into, and given effect to, an arrangement or understanding, but overturning the High Court in finding that this did have the purpose or effect of fixing, controlling or maintaining the price.

The Court of Appeal considered that an “arrangement or understanding” naturally has an element of discretion and is often poorly defined. Overall, there was an understanding that either the vendor or individual agent would fund the listing, not the agency itself. That entailed pass-through of the listing fee, even recognising that that may not happen in all instances. The Court of Appeal rejected the submission that the listing fee was not a sufficiently significant proportion of the price of services provided by the agencies to have the effect of fixing or controlling the overall price. The Court of Appeal held that there is no de minimis qualification in that there is no mathematically insignificant amount of the price. On these appellate findings, the concept of “price-fixing” clearly extends any agreements reached on the component parts of an overall price, however large or small.

The NZCC also filed proceedings in the High Court in December 2017 against GEA Milfos International Limited, a herd management and milk testing company, for alleged cartel conduct between mid-2012 and September 2014. The NZCC alleges that Milfos and its competitor agreed to use a common quote calculator to generate quotes for retail customers. The trial is expected to be held in early 2019.


The NZCC announces its competition and consumer law enforcement priorities annually. The NZCC has stated, however, that cartels will always be a priority because of the significance of their potential impact on markets and the economy as a whole.

The NZCC has regard to the following criteria when determining whether to commence or continue enforcement action and the type of enforcement action it will take:

• the extent of the detriment caused by the conduct;

• the seriousness of the conduct; and

• whether taking enforcement action is in the wider public interest.

Each of these criteria are considered together, in the context of the available information and the relevance of the conduct to the NZCC’s responsibilities and priority areas for new enforcement activity. In general, however, the greater the likely level of detriment arising from the conduct in question or the more serious the conduct is, the more likely it is that the NZCC will take enforcement action.





The NZCC’s Competition and Consumer Investigation Guidelines set out the NZCC’s investigation process. The process has three stages:

(1) Screening and prioritising incoming issues. The NZCC undertakes a screening process to identify whether there is a reasonable basis for suspecting a breach has occurred or may occur and whether it is a matter that is appropriate for the NZCC to investigate. Complainants are notified at this stage of the process whether their matter resulted in no further action or will be investigated.

(2) Investigating and gathering information.

(3) Outcome. At the end of an investigation, investigated parties are notified of that fact and any outcome such as the type and level of enforcement response selected. The complainant and any other affected parties will also be notified where reasonable. The NZCC may also publish the outcome on its enforcement register; for example, where an investigation results in a warning letter being issued.

The NZCC applies its enforcement criteria discussed in the section above when deciding whether to investigate or to take enforcement action. The NZCC has also published Enforcement Response Guidelines which set out the factors it takes into account when deciding the type of enforcement action it will take in a given case. In general, the NZCC has stated that the enforcement response selected will have one of the following aims:

• stopping the unlawful conduct;

• deterring future unlawful conduct by that person or others;

• remedying any harm caused by the unlawful conduct;

• punishing the wrongdoer (where appropriate);

• encouraging businesses to comply; or

• providing informative public precedent.

The NZCC expressly recognises and observes the principles of natural justice when making decisions that affect a person’s rights, obligations, or interests. If a person considers that the NZCC has exercised its decision-making powers improperly, that person can apply to the High Court for a review of that decision.


The NZCC operates a Cartel Leniency Policy (Policy) which encourages ‘whistle-blowing’ by cartel participants. The Policy is an important aspect of the NZCC’s enforcement toolkit, with the NZCC recognising that a leniency policy is the single most effective tool available to detect cartels.

The Policy is not part of the Act and has no formal legal status, but is a policy statement that outlines the NZCC’s approach to granting immunity in return for cooperation by companies and individuals.

In light of recent changes made to the Act, the NZCC published an updated version of the policy in June 2018.

The Policy applies only to cartel behaviour. The NZCC has a general Cooperation Policy that applies to breaches of other provisions of the Act.

Under the Policy, the NZCC may grant conditional immunity to the first cartel member to approach the NZCC. The immunity is from prosecution by the NZCC only, and does not extend to private enforcement actions by third parties.




Conditions for immunity

The applicant must meet (and continue to meet) the following conditions for immunity to be available:

• the applicant is the first applicant to meet the criteria for conditional immunity;

• the applicant is or was a participant in the cartel;

• the party admits that its participation in the cartel may breach the relevant sections of the Act;

• the applicant is no longer involved in the cartel, or has informed the NZCC that it will cease its involvement (except in particular circumstances);

• the applicant has not coerced others to participate in the cartel;

• the applicant makes admissions in relation to actions that are genuinely corporate acts as opposed to those undertaken by individuals (in the case of companies); and

• the applicant agrees to provide full and continuing cooperation to the NZCC in its investigation, and in any subsequent proceedings.

Company directors, officers and employees may obtain conditional derivative immunity via the company’s successful application on the same conditions.

Immunity applicants are prioritised according to the time of their application. Only the first cartel participant to approach the NZCC and meet the required criteria is eligible for conditional immunity. However, a subsequent applicant may be able to obtain conditional immunity if the first applicant fails to meet the conditions for immunity. Subsequent applicants who are not eligible for conditional immunity but are willing to cooperate with the NZCC’s investigation can benefit from cooperation concessions (i.e., reduced penalties).

The application process

The first step in the application process is to obtain a ‘marker’. This allows an applicant to reserve their place as the first to ‘blow the whistle’ on cartel conduct. A hypothetical inquiry, on a ‘no names’ basis, may be made to establish whether conditional leniency is available before a marker is placed.

To obtain a marker, the applicant must provide the NZCC with sufficient details of the nature of the cartel, such as the product(s) and/or service(s) involved, the main participants, and the impact of the cartel on a market in New Zealand. This information allows the NZCC to determine whether immunity is available.

Once a marker has been obtained, the applicant must then provide the NZCC with a written or oral statement called a ‘proffer’ to perfect the marker. The standard time allowed to perfect the marker is 40 calendar days, but a longer or shorter time may be agreed with the NZCC.

Once a marker has been ‘perfected’, the NZCC will confirm that conditional immunity has been granted. The NZCC requires that parties enter into a Conditional Immunity Agreement (CI Agreement).

Subsequent applicants will be informed of their place in the queue for conditional immunity. If the first applicant fails to perfect the marker, or if conditional immunity is not granted, the NZCC may offer a marker or conditional immunity to the next applicant in the queue, subject to their meeting the conditions of immunity.

Confidentiality

The NZCC requires that immunity applicants keep confidential the fact of or the content of the immunity application, its investigation and/or any civil proceedings brought by the NZCC, except as required by law or if the applicant has the NZCC’s prior written consent.




The NZCC has stated that it endeavours to protect to the fullest extent confidential information provided by holders of a marker or conditional immunity. However, the CI Agreement allows the NZCC to disclose any information provided by the leniency applicant for the purposes of conducting the NZCC’s investigation.

In relation to international cartels, the NZCC will not share confidential information provided by an applicant, including the applicant’s identity, with other competition authorities without their consent. However, the NZCC does expect an applicant to provide a waiver to allow the NZCC to discuss information with overseas regulators unless there is good reason not to, such as asymmetry in leniency positions in other jurisdictions.

The NZCC may receive requests to disclose information relating to a conditional leniency holder pursuant to the Official Information Act 1982 (OIA). If this occurs, the NZCC will give the conditional leniency holder an opportunity to comment on any proposed release of the information and to take such action as the applicant considers necessary to resist the OIA request.

There are a number of grounds to withhold information requested under the OIA including that the disclosure of information provided under an obligation of confidence would prejudice the supply of similar information or would unreasonably prejudice the commercial position of the person who supplied the information. If the NZCC declines a request to disclose information under the OIA, the requesting party may request a review of the decision by the Ombudsman.

The NZCC may also be required to discover primary documents provided to it by the leniency applicant in any proceedings initiated by the NZCC. If so, the NZCC can seek confidentiality orders where applicable to restrict the inspection of documents to counsel and experts or similar. Any documents referred to in open court during any proceedings would, however, become part of the public record.

We are not aware of any challenges through the New Zealand courts to date to obtain information or documents provided by a conditional immunity holder to the NZCC.


The NZCC is open to early resolution, including settlement, of actual or potential court proceedings in appropriate cases. The NZCC may not consider it appropriate to settle where the conduct is particularly serious or a legal precedent is required.

Settlements with the NZCC can be:

• Out-of-court, where proceedings have not been issued and the terms of the settlement do not require the Court’s approval. Generally, an admission of breach will be required.

• In-court, where settlements have been commenced or the Court’s involvement is required to implement the settlement terms. For example, the Court will need to be involved if a penalty is to be set, or it needs to make other orders.

While the NZCC may agree to recommend to the Court that a particular penalty should be imposed, ultimately it is for the Court to set the appropriate penalty and not the parties. In exercising its discretion, the Court will have regard to the following matters:

• the duration of the contravening conduct;

• the seniority of the employees or officers involved in the contravention;

• the extent of any benefit derived from the contravening conduct;




• the degree of market power held by the defendant;

• the role of the defendant in the impugned conduct;

• the size and resources of the defendant;

• the degree of cooperation by the defendant with the NZCC;

• the fact that liability is admitted; and

• the extent to which a defendant has developed and implemented a compliance programme.


A third party can complain to the NZCC about suspected cartel conduct. The NZCC will then choose whether to investigate and, if it considers there has been a breach, to take enforcement action. The criteria applied by the NZCC when determining what action, if any, to take is outlined earlier in this chapter. There is no obligation on the NZCC to commence an investigation or to take enforcement action for suspected breaches of the Act.

The NZCC will, where practicable, keep a complainant informed of its decision to investigate or not, and of any enforcement action taken. There is no ability for a third party to appeal a decision not to investigate or take enforcement action, although a third party could seek judicial review of the decision.

Third party complainants can bring a private action for damages or injunctive relief for breach of the cartel prohibition. Exemplary damages can also be awarded under section 82A, although we are not aware of any exemplary damages having been awarded to date.


The maximum pecuniary penalties for cartel conduct are:

• For companies – the greater of NZ$10 million or three times the commercial gain derived from the anti-competitive activity (or 10% of group turnover in New Zealand if the amount of the gain cannot be determined) per breach.

• For individuals – NZ$500,000 per breach.

The courts must impose penalties on individuals unless there are good reasons not to. Companies cannot indemnify individuals for these penalties or reimburse their legal costs if they are found to have breached the cartel prohibition and a penalty has been ordered. Courts can order persons who have engaged in cartel conduct to be excluded from company management for up to five years.

The highest penalty against a company for cartel conduct to date has been the NZ$7.5 million agreed by Air New Zealand and approved by the High Court for Air New Zealand’s part in the air cargo cartel. The NZ$7.5 million penalty included a 20% discount for Air New Zealand’s admissions. The highest penalty against an individual so far was NZ$100,000 for price-fixing and exclusionary conduct imposed on the General Manager of a supplier who participated in the wood preservative chemicals cartel.

In terms of the recent enforcement activity, in 2016 and 2017:

• The highest penalty ordered against a company for cartel conduct was in the real estate price-fixing case, with the High Court imposing penalties on 11 agencies in a number of separate judgments ranging from NZ$900,000 to NZ$2.575 million.

• The highest penalty imposed on an individual for cartel conduct was also in the real




estate price-fixing case, with the High Court imposing a penalty of NZ$50,000 on the director of one of the participating agencies, Property Brokers.


In New Zealand, it is the High Court that determines whether there has been a breach of the Act and orders pecuniary penalties.

Decisions of the High Court can be appealed to the Court of Appeal within 20 working days of the decision. A decision of the Court of Appeal can only be appealed to the Supreme Court with leave. An application for leave must be filed and served within 20 working days of the decision.

An appeal to the Court of Appeal proceeds by way of re-hearing. In general, the parties to an appeal cannot adduce further evidence. However, a party can apply for leave to do so on questions of fact by oral examination in Court. If leave is granted, cross-examination will be allowed.

Criminal sanctions

New Zealand has not, to date, had criminal sanctions for cartel conduct.

As we note below, the Commerce (Criminalisation of Cartels) Amendment Bill, currently before Parliament, proposes to introduce criminal sanctions for intentional cartel conduct.

Cross-border issues

The Act applies to conduct engaged:

• inside New Zealand; or

• outside of New Zealand by any person resident or carrying on business in New Zealand to the extent that such conduct affects a market in New Zealand.

The Act was amended in August 2017 to confirm that a person (person A) engages in conduct in New Zealand if:

• any act or omission forming part of the conduct occurs in New Zealand; or

• another person (person B) engages in conduct in New Zealand, and the conduct of person B is deemed to be the conduct of person A.

The application of the Act to conduct outside of New Zealand was considered in Commerce Commission v Visy Board Pty Ltd [2012] NZCA 383. In that case, Visy Board Pty Ltd (Visy), an Australian company, admitted to having participated in cartel conduct with Amcor Australia and was fined AU$36 million in Australia.

The New Zealand High Court found that whether or not a person is ‘carrying on business in New Zealand’ is not confined to whether or not the company maintained a systematic and continuous physical presence in New Zealand, and the analysis requires recognition of the practical modes of transacting business, including the fact that modern day commerce necessitates dealing with consumers through a variety of methods of communication including the internet. The Court of Appeal supported this approach, focusing the analysis on whether a company’s conduct ‘relates to’ New Zealand markets and less so on where a company is physically based.

Some of the reasons that Visy was found to carry on business in New Zealand included:

• Visy operated Visy Board NZ as an integrated division of Visy and presented itself to trans-Tasman customers as one business including the New Zealand division;




• Visy was directly involved in Visy Board NZ’s New Zealand operations; and

• Visy dealt directly with New Zealand customers on various occasions, particularly with major customers.

International cooperation

Under the Act, the NZCC may provide compulsorily acquired information or investigative assistance to an overseas regulator where the NZCC has a cooperation arrangement with the relevant regulator or the Minister of Commerce has entered into an applicable government-to-government cooperation arrangement.

The NZCC has cooperation agreements with a number of overseas agencies including the Australian Competition and Consumer Commission, Canada’s Commissioner of Competition and Taiwan’s Fair Trade Commission.

These agreements generally provide for cooperation between the agencies on matters of common interest, including:

• notification relating to activities that have an impact on the other jurisdiction;

• co-ordination of enforcement activities;

• exchange of information in certain circumstances; and

• joint educational programmes and publications.

The NZCC can only provide compulsorily acquired information and/or investigative assistance to an overseas regulator if it is satisfied (among other considerations) that the provision of the information or assistance will not be inconsistent with the cooperation arrangement and that to do so will not undermine New Zealand’s international trade interests.

The NZCC can impose conditions on the provision of information or assistance to overseas regulators, including conditions relating to the maintenance of confidentiality. Where the NZCC provides information to an overseas regulator, it is required to notify the person who supplied the information or any other person to whom the information relates of the provision of that information.


Any person that contravenes the cartel prohibition is liable for any loss or damage caused by the conduct. In addition, the High Court can order exemplary damages, notwithstanding that the person may have paid, or at a later date be required to pay, pecuniary penalties in relation to the same conduct. A private litigant can also apply for an injunction.

An action for damages under the Act must be brought within three years after the matter giving rise to the contravention was discovered or ought reasonably to have been discovered, with a ‘long-stop’ limitation of 10 years.

In New Zealand, a private litigant cannot simply rely on a judgment in a pecuniary penalty case as prima facie evidence of a breach or that loss or damage occurred. As a result, plaintiffs in a follow-on case must establish both a breach of the Act and the loss or damage caused to them. Admission of a breach during a settlement with the NZCC is also not necessarily probative evidence of liability. The courts recognise the reality that parties can decide to settle litigation for various reasons, and not all settlements are made with admissions of liability.

We are not aware of any successful follow-on or stand-alone civil damages claims for cartel conduct in New Zealand to date. For example, in Schenker AG v Commerce Commission,




a third party (Schenker) attempted to obtain access to documents that had been filed by the defendant airlines in the air cargo litigation. Schenker was a potential follow-on claimant and wanted access to the documents to investigate whether it may have suffered loss as a result of the alleged conduct. The Court declined access.

It is possible that some claims have been settled out of court, but the fact and terms of settlements are confidential as between the parties.

Unlike jurisdictions such as Australia and the United States, there is no codified ‘class actions’ regime in New Zealand. The High Court Rules do allow for representative actions brought by a named representative plaintiff or plaintiffs on behalf of, and for the benefit of, others with the “same interest” in the subject matter of the proceeding. However, to date, no representative actions alleging breaches of the Act have progressed to trial.

Reform proposals

Market studies – new powers added

The Commerce Amendment Act 2018 was passed in October 2018. The Act, amongst other things:

• provides the NZCC with the power to undertake market studies; and

• allows the NZCC to accept court enforceable undertakings as part of its settlement process.

The new market studies (or “competition studies” power as it is referred to in the Act) enables the NZCC to conduct detailed reviews into the competitive conditions of markets, either on its own initiative or at the request of the Minister of Commerce & Consumer Affairs where it is in the public interest to do so. The NZCC will have the power to make non-binding recommendations to improve the performance of markets such as changes to policy; changes to the conduct of market participants; or regulation. Enforcement activity can, of course, flow on as among the outcomes of a detailed examination of the operation of an industry.

Criminal sanctions – proposed

When what ultimately became the 2017 amendments were initially mooted as a policy development, it was proposed to introduce criminal sanctions. In a policy turn-around, that proposal was abandoned (by the then National Party-led coalition government) prior to the passing of the 2017 amendments and changes to the cartel prohibition.

In February 2018, the Labour Party-led coalition government re-introduced to Parliament a proposal to criminalise intentional cartel conduct, with the Commerce (Criminalisation of Cartels) Amendment Bill. It now appears likely that the Criminalisation Bill will be passed in 2019, with a proposed two-year transitional period before the criminal sanctions come into force.

The Bill proposes, in terms of penalty, criminal fines with equivalent maxima to the current civil penalties, but the real sting would be in the potential for terms of imprisonment, for individuals, on conviction of the criminal offence, of up to seven years.






April Payne Tel: +64 9 353 9946 / Email: [email protected] April is a Senior Solicitor in the Dispute Resolution team. She joined the firm in 2012 before moving to London where she worked for the Competition and Markets Authority on a number of competition law regulatory investigations and market studies. April returned to the firm in 2016. April has wide-ranging experience in dealing with regulatory enquiries from New Zealand regulators. This includes assisting with NZCC and Financial Market’s Authority matters, as well as Worksafe investigations and prosecutions. Recent regulatory investigations she has worked on include Fair Trading Act and Commerce Act matters.

Oliver Meech Tel: +64 4 498 5095 / Email: [email protected] Oliver Meech is an experienced litigator and dispute resolution specialist handling complex commercial litigation, and competition, regulatory and consumer law matters. Oliver advises on contentious and non-contentious aspects of competition, regulatory and consumer law. He advises on mergers and acquisitions, restrictive trade practices, unilateral conduct and regulation. He advises clients in Commerce and Fair Trading Act investigations and with their interactions with the commercial regulators. He advises on front-end compliance and, in the consumer law area, has represented clients before the courts and before the Advertising Standards Complaints Board. Chambers Asia-Pacific 2018 describes Oliver as “a well-reputed competition and consumer law specialist”.

Lumley Centre, 88 Shortland Street, Auckland, New Zealand Level 18, 125 The Terrace, Wellington, New Zealand

Tel: +64 9 353 9700 / +64 4 498 5000 / URL: www.minterellison.co.nz

MinterEllisonRuddWatts


Pakistan


The substantive law governing competition in Pakistan is primarily contained in the Competition Act 2010 (the “Act”).

Section 4 of the Act prescribes agreements or decisions “which have the object or effect of preventing, restricting or reducing competition within the relevant market”. Such “prohibited agreements” include various forms of cartelisation and Section 4 (2) provides a non-exhaustive list of such agreements, including agreements relating to: price-fixing; market sharing; limiting production, distribution or sale of goods or services; limiting technical development or production; and collusive tendering or bidding. The types of agreements listed under Section 4 (2) of the Act are deemed to have an anticompetitive object.

It should be noted that an agreement may breach the provisions of the Act if it is found to have an anti-competitive object or an anti-competitive effect. Where an anti-competitive object is found, it is irrelevant whether the agreement also in fact has an anti-competitive effect and vice versa.

A “prohibited agreement” may take the form of an informal agreement, arrangement, understanding, concerted practice or decision and it is irrelevant for the purposes of the Act whether or not such agreements are legally enforceable.

The provisions of the Act are enforced by the Competition Commission of Pakistan (“CCP”), which is an independent, quasi-judicial body, with the power to conduct enquiries into the affairs of undertakings, initiate proceedings under the Act and, where a contravention of the Act is found, to make appropriate orders. The CCP is deemed to be a civil court under the Code of Civil Procedure 1908 for the purposes of proceedings under the Act and the primary remedies under the Act are remedial orders and civil penalties. However, failure to comply with an order of the CCP constitutes a criminal offence punishable with imprisonment or a fine.

Appeals against orders of the CCP lie with the Appellate Bench of the CCP, the Competition Appellate Tribunal and the Supreme Court of Pakistan, in that order.

Overview of investigative powers in Pakistan

Section 33 (1) of the Act grants the CCP the powers of a civil court in relation to: summoning and enforcing the attendance of witnesses and examining such witnesses on oath; discovery and production of documents or other material objects as evidence; accepting evidence by way of affidavits; requisitioning public records; and issuing commissions for the examination of any witness and/or document. Furthermore, Section 33 (3) of the Act empowers the CCP to require any undertaking to produce documents and/or furnish information to the CCP of the purposes of the Act.

Hira Ahmad & Ali Qaisar Siraj LMA Ebrahim Hosain



The CCP may, for reasons to be recorded in writing, authorise an officer to enter and search any premises for the purposes of enforcing the Act. An officer making such a search may impound documents and make copies of records and information stored on computers.

Where an undertaking refuses, without reasonable cause, to allow the CCP’s authorised officer to enter and search its premises, an investigating officer may enter such premises by force, if necessary. An order authorising an investigating officer to enter premises by force must be signed by at least two members of the CCP. The Act makes it a criminal offence for an investigating officer to use the power of forcible entry excessively, vexatiously or with mala fide intent, punishable with a fine and/or imprisonment. The CCP has not – to the best of our knowledge – resorted to the use of its power to forcibly enter premises in recent years.

Under Section 37 of the Act, the CCP may conduct enquiries into any matter relevant to the purposes of the Act on its own motion and must conduct enquiries into matters referred to it by the Federal Government. The CCP is also required to conduct enquiries where it receives a written complaint from an undertaking or a registered association of consumers unless it is of the opinion that the complaint is frivolous, vexatious, based on insufficient facts or unsupported by prima facie evidence. The CCP may not initiate an enquiry against an undertaking based on complaints received from individual consumers, but may undertake a less intrusive ‘study’ on such basis, and if prima facie evidence of a violation of the Act is found, proceed to initiate a formal enquiry into the matter (2016 CLD 1688; 2018 CLD 919).

The CCP also has the power to outsource ‘studies’, but not enquiries, by hiring consultants on a contractual basis.

The CCP also operates a scheme for rewarding whistleblowers/informants under the Competition (Reward Payment to Informant) Regulations, 2014, which empowers the CCP to pay informants rewards ranging from PKR 200,000 to PKR 5,000,000, depending on the usefulness of the information provided and the seriousness of the violations reported. As per the CCP’s Revised Guidelines on “Reward Payments to Informants Scheme”, the primary objective of the scheme is “uncovering and taking action against cartel activity in particular”.


The year 2018 saw a marked increase in cartel enforcement activity by the CCP over the previous year. An overview of significant enforcement activities undertaken during 2018 is set out below:

• In January 2018, the CCP issued an enquiry report regarding alleged violations of section 4 of the Act by Diamond Paints Industries (Pvt.) Limited (“Diamond Paints”) and its dealers. The enquiry was initiated after the CCP received a copy of an agreement purporting to fix minimum retail rates between Diamond Paints and its dealers in the city of Multan and subsequently conducted a search of Diamond Paints’ premises in Lahore and Multan. The enquiry committee found that Diamond Paints had effectively entered into a minimum resale price maintenance arrangement with its dealers and thus introduced restrictive trading conditions which prima facie appeared to facilitate a downstream cartel in violation of Section 4 of the Act and accordingly recommended that proceedings be initiated against Diamond Paints and its dealers under the Act.

• In March 2018, the CCP concluded proceedings initiated against Reliance Paints Pakistan (“Reliance”) in relation to conditions imposed upon its authorised dealers, including conditions relating to onward sales to unauthorised dealers and minimum resale prices. In the absence of any evidence that Reliance did not allow its dealers to

LMA Ebrahim Hosain Pakistan



sell the products of competing brands, the CCP found that Reliance had not violated the Act by requesting its authorised dealers not to sell its products to dealers not authorised by it since this did not amount to an effective exclusive supply obligation. However, the CCP found that Reliance had imposed minimum resale price maintenance obligations on its dealers and thus violated the Act. The CCP accepted a commitment by Reliance to withdraw an earlier notice fixing the minimum retail price of its products and issue a remedial notice. Keeping in view the nature of the violation and the fact that it had subsisted for a period of three years, the CCP imposed a fine of PKR 5,000,000 on Reliance, notwithstanding its commitment.

• In March 2018, the CCP issued a ‘show cause’ notice to the Pakistan Flour Mills Association for prima facie violations of the Act involving price-fixing and the sharing of commercially sensitive information. The notice resulted from an enquiry initiated at the CCP’s own motion on the basis of new reports that the association and its member undertakings had raised the prices of various categories of wheat and flour products between 2015 and 2016. The CCP had earlier conducted an inspection of the association’s premises and impounded relevant documents and material.

• In December 2018, the CCP disposed of proceedings initiated against the All Pakistan Newspapers Society (“APNS”) for allegedly violating the Act by taking decisions which amounted to price-fixing and the imposition of restrictive trading conditions in the market for advertising space and periodicals in Pakistan. The CCP found that APNS had violated the Act by operating a clearing house for its members and restricting them from undertaking direct advertising business. Citing APNS’s cooperative approach as a mitigating factor, the CCP imposed a fine of PKR 10,000,000 on the association.


An inherent hurdle to enforcement in cases of cartelisation is the lack of resources available to the CCP. The CCP had 160 staff members working on competition enforcement matters in the year 2016, with 12% of these staff members working on cartel enforcement. Despite the lack of resources, the CCP has managed to keep up a reasonable output and has levied billions of rupees in fines since its inception.

However, a significant impediment to effective enforcement of the Act is the ease with which undertakings have been able to obtain injunctions in traditional courts due to the fact that the appeal system provided under the Act has only recently become fully operational.

The CCP, with its limited resources, had been unable to collect a significant portion of fines levied by it as a result of such court actions.

Following the passage of the Competition Appellate Tribunal Rules 2015, the Competition Appellate Tribunal (“CAT”) has become operational and the Supreme Court of Pakistan has referred all pending appeals against the CCP’s orders to the CAT (press release 21st August 2017) and it is therefore envisaged that the tendency of undertakings to obtain injunctive relief from provincial high courts will be curbed. However, to the best of our knowledge, no appeals have been disposed of by the CAT since the passage of the 2015 rules.


In proceedings before the CCP, emphasis is laid on efficiency rather than on compliance with strict procedural requirements. The CCP has stated in its “Guidelines on Conduct of




Proceedings Before the Commission” that the CCP shall “administer and enforce the [Act], rules and regulations effectively, with the minimum of procedural requirements”. The Guidelines further state that “no proceedings of the Commission shall be invalid by reason of any defect or irregularity unless the presiding authority, on an objection taken by any party, is of the opinion that substantial injustice has been caused by such defect or irregularity or there are otherwise sufficient reasons for doing so…”. Furthermore, the lack of strict procedural requirements is further compounded by the fact that parties to proceedings under the Act need not be represented by lawyers and may instead be represented by members of the Institute of Chartered Accountants of Pakistan or the Institute of Cost and Management Accountants of Pakistan in accordance with regulation 8 of the Competition Commission of Pakistan (Conduct of Business) Regulations, 2007.

Notwithstanding the above, the appeals process described further below provides safeguards for parties’ procedural rights. It may also be noted that while the Act does not prescribe any strict procedural requirements to be observed in proceedings before the CCP, the Competition Commission (Appeal) Rules 2007 and the Competition Appellate Tribunal Rules 2015 do set out stricter procedural requirements to be observed by the Competition Appellate Bench and the Competition Appellate Tribunal, respectively.


Where the CCP is satisfied that an undertaking is a party to a “prohibited agreement”, the Act empowers it to grant leniency to an undertaking that first makes true and full disclosure in respect of the alleged violation.

Under the Competition (Leniency) Regulations 2013 (“Leniency Regulations”), the Competition Commission may either grant an undertaking complete immunity from financial penalties under the Act or grant a reduction in the amount of penalties that would otherwise be payable.

In order to be eligible for complete immunity from financial penalties, an undertaking must be the first to provide the CCP with evidence of a prohibited activity of which the CCP does not already have sufficient information to establish its existence, in addition to fulfilling other conditions.

Alternatively, the CCP may grant reductions in penalties of up to 100% to undertakings which provide independent, additional and corroborating or contemporaneous evidence of a prohibited activity either prior to the CCP issuing a “show cause” notice in respect of such activity or after initiation of proceedings under the Act, but prior to a final order being passed.

The Leniency Regulations further provide that, during appellate proceedings, the CCP may grant an undertaking a reduction of up to 85% in penalties if such undertaking provides the CCP with additional evidence previously unknown to the CCP of a nature which would add significant value to the evidence already in the possession of the CCP.

The order for leniency passed by the CCP in favour of Siemens (Pakistan) Engineering Company Limited (“Siemens”) in April 2012 remains the only such order to have been passed by the CCP since the passage of the Leniency Regulations. The application for leniency was made by Siemens subsequent to the initiation of an enquiry by the CCP into collusive bidding in the supply of electrical equipment, including air-insulated switchgear and transformers, by the Pakistan Electric Power Equipment Manufacturers Association and its member undertakings. In its final order, the CCP stated that “given the fact that this application is the first ever Leniency Application… we are of the view that this decision is most likely to be pivotal in shaping the landscape as to how cartel players may react. In our




considered view, immunity in terms of para. 73 above or up to 100% reduction in penalty in terms of para. 76 above would serve as an incentive to all participants of a cartel to come forward”. However, it appears that the leniency regime has not yet proven to be as strong an incentive as the CCP had hoped.


Part V of the Competition (General Enforcement) Regulations, 2007 empowers the CCP to accept ‘commitments’ made by the relevant undertakings at any time after initiating proceedings under the Act, but prior to the conclusion of such proceedings. Commitments must be sufficient to clearly address the anti-competitive effects identified by the CCP and acceptance of any commitments does not mean that a violation of the Act has not taken place. The CCP is not bound to accept any commitments and retains its discretion as to whether or not it will issue a favourable decision where a commitment has been accepted. Where the CCP makes a favourable decision, it is required to limit itself to imposing a penalty of no more than PKR 7,500,000 or 1% of the undertaking’s annual turnover in respect of each violation.


As mentioned above, the Act provides that the CCP may initiate enquiries into potential violations of the Act upon receipt of a written complaint from an undertaking or a registered association of consumers (but not individual consumers) unless it is of the opinion that the complaint is frivolous, vexatious, based on insufficient facts or unsupported by prima facie evidence. In addition, as noted above, the CCP operates a scheme for rewarding informants who come forward with information relating to cartel behaviour.

Excluding cases in which the CCP takes suo moto action, the majority of cartel enforcement actions appear to be triggered by complaints from undertakings operating in the same industry.

Civil penalties and sanction

Sanctions for “prohibited agreements” under the Act are in the form of imposition of fines by the CCP, which may extend to PKR 75,000,000 or an amount not exceeding 10% of the annual turnover of the concerned undertaking. In addition, in the case of “prohibited agreements”, the CCP may annul the relevant agreement or require the concerned undertaking to amend the agreement or related practice and not to repeat the prohibitions specified under the Act or to enter into any other agreement or engage in any other practice with a similar object or effect.


An appeal against an order of the CCP may be made to the Competition Appellate Bench (“CAB”), in the case of an order passed by a single member of the CCP. In the event that the impugned order was passed by two or more members of the CCP, the appeal lies with the CAT.

The CAB is composed of at least two members of the CCP, and cannot include any member associated with the original order. Appeals to the CAB are governed by the Competition Commission (Appeal) Rules, 2007. An applicant seeking to appeal an order of the CCP must file an appeal with the CAB within 30 days of receiving a copy of the order which the




applicant seeks to challenge. This limitation period is extendable at the bench’s discretion if it is satisfied that there was sufficient cause for not filing the appeal within the 30-day period.

Appeals to the CAT are governed by the Competition Appellate Tribunal Rules 2015 and must be filed within 60 days of the applicant receiving a copy of the impugned order. As with appeals to the CAB, the CAT has the discretion to extend the period for filing an appeal provided that there was sufficient cause for the applicant’s failure to file an appeal within the prescribed period.

An appeal against an order of the Competition Appellate Tribunal may be made to the Supreme Court within 60 days of the relevant order.

Criminal sanctions

As mentioned above, the primary remedies available to the CCP under the Act are civil penalties and remedial orders. No criminal sanctions are attracted by an initial violation of the Act. However, under Section 38 (5) of the Act, failure to comply with an order of the CCP constitutes a criminal offence punishable with imprisonment for up to one year or a fine of up to PKR 25,000,000. To the best of our knowledge, no criminal proceedings have been brought under the Act to date.

Cross-border issues

Section 1 (3) of the Act states that it “shall apply to all undertakings and all actions or matters that take place in Pakistan and distort competition in Pakistan” and, as such, the Act does not have any extraterritorial effect nor has the CCP ever attempted to assert its jurisdiction over persons outside Pakistan. However, in any given matter, it may be sufficient for one or more undertakings from amongst several to be doing business in Pakistan for the matter to fall within the CCP’s jurisdiction.

In at least one case, the CCP has also acted upon a complaint by a foreign undertaking in relation to international tenders in Pakistan by requiring the relevant government department to remove restrictive clauses from bidding documents relating to a tender for the procurement of bulldozers which placed restrictions on the country of origin of the equipment. (Press release 12th January 2016.) However, this remains a rare exception and most enforcement actions are of a purely domestic nature.

The CCP also frequently participates in various conferences, seminars and training programmes held at various international forums to facilitate cooperation among international competition authorities.


Beyond the filing of complaints by third parties, as highlighted above, there is no scope for private enforcement of competition laws in Pakistan since the law does not provide for standalone or follow-on civil actions by private persons for violations of the Act.

Reform proposals

There are no reform proposals in relation to the CCP or the Act that are expected to be implemented in the near future.






Hira Ahmad Tel: +92 21 35835 101 to 04 Ext. 313 / Email: [email protected] Hira Ahmad is a Partner at LMA Ebrahim Hosain’s Karachi (DHA) office. She was called to the Bar at Lincoln’s Inn in 2008 after graduating with an LL.B. (Hons) degree from the University of London. Ms. Ahmad has been with the firm since 2011. Prior to joining the firm, she worked as a Law Officer in the Legal Department of the State Bank of Pakistan (the country’s central bank). Ms. Ahmad is presently involved in numerous cases relating to the Competition Commission of Pakistan. Her areas of expertise include banking & finance, oil and gas projects, corporate & commercial law, competition law and IT. She is fluent in English and Urdu.

Ali Qaisar Siraj Tel: +92 21 35835 101 to 04 Ext. 324 / Email: [email protected] Ali Qaisar is an Associate Partner at LMA Ebrahim Hosain’s Karachi (DHA) office. Mr. Siraj graduated from the University of Manchester with an LL.B. (Hons) in 2013 and received a Master’s in Corporate & Commercial Law from Queen Mary, University of London in 2014. Mr. Siraj is enrolled as an Advocate in the courts of Sindh and a Solicitor of the Senior Courts of England and Wales and is a member of the Karachi Bar Association, the Sindh Bar Council and the Law Society of England and Wales. Ali routinely advises clients on a wide range of matters relating to the law on banking & finance, payment systems corporate, commercial, competition, information technology and insurance law.

4C, 9th Zamzama Commercial Lane, Phase V, DHA, Karachi, Pakistan Tel: +92 213 5835 101 to 04 / URL: www.lma-eh.com

LMA Ebrahim Hosain



Romania


The legal regime of cartels in Romania is primarily set out in article 5 of the Competition Act no. 21/1996 (the “Competition Act”),1 which mirrors the text of article 101 of the Treaty on the Functioning of the European Union. The cartel regime is further detailed for implementation purposes in wide secondary legislation (the “Secondary Legislation”).

In a nutshell, under the Competition Act, all agreements, concerted practices and decisions of associations of undertakings that have as object or effect prevention, restriction or distortion of competition are prohibited. Among anticompetitive practices, as set out in article 7 of the Competition Act, price-fixing, production or sale limitations or client allocation are the most harmful ones. Such practices are included within the hardcore restrictions category, de minimis exclusion not being applicable.

The Romanian Competition Council (the “RCC”) is entrusted with enforcement of competition rules. Within the RCC, the Cartel Office mainly sets the general strategy of the RCC’s Plenum (the “Plenum”), examines complaints, proposes the initiation of investigations ex officio, etc. Besides the direction for cartels, a specific direction, the Direction on Bids and Petitions, focuses on bid rigging practices. In addition, for proper functioning of public procurement under the umbrella of the “Module on Bid Rigging”, the RCC closely cooperates with various public institutions (e.g., National Council for Solving Complaints (“CNSC”), National Authority for Regulating and Monitoring Public Procurement, etc.).

Competition law infringements can trigger administrative, criminal or civil liability. The RCC is entitled to impose fines on the undertaking involved in an anticompetitive practice which varies from 0.5% to 10% of the total turnover achieved in Romania in the financial year before sanctioning. In practice, cartels are usually sanctioned with fines ranging from 4% to 8%. For undertakings with no registered turnover, the RCC will consider the previous year and so on, until an annual turnover is determined. The RCC may also request the parties to end the practice and impose comminatory fines if a party fails to observe obligations imposed by the RCC.

In addition, criminal liability of individuals breaching competition regulations may be exceptionally triggered by:

(a) individuals with management attributions which fraudulently initiate an anticompetitive practice may be subject to criminal liability facing potential imprisonment of up to five years; and

(b) removing a bidder from a public tender, by coercion or corruption, or engaging or

Mihaela Ion & Silviu Stoica Popovici Nițu Stoica & Asociații



colluding with the other bidders in order to distort the award price is punished with imprisonment from one to five years (article 246 of the Romanian Criminal Code).

Nonetheless, the criminal sanctions are not applied by the RCC but only by the criminal court. In other words, the RCC may only inform the criminal investigation bodies about a potential criminal offence.

As regards private enforcement of competition rules, the Emergency Ordinance no 39/2017,2 which transposes the European Directive on private enforcement, has entered into force.3 The Ordinance basically mirrors the text of the Directive and completes the general private enforcement legal framework set up by article 66 of the Competition Act.

Overview of investigative powers in Romania

The RCC may launch an investigation ex officio, following a third party complaint or based on a leniency application.

The Competition Act grants the RCC extensive investigative powers, amongst which the right to carry-out dawn raids or the possibility to send information requests to undertakings that might have relevant data. Most of the information which falls within the scope of the investigation is collected during dawn raids. The RCC actively uses this investigative tool. In 2017 alone, the RCC has conducted 22 dawn raids at 135 headquarters and places of business.

In order to conduct a dawn raid, a dawn raid order issued by the RCC’s President (detailing its object, purpose and date) and a judiciary authorisation are required. The judiciary authorisation may be challenged before the High Court of Cassation and Justice within 72 hours from its communication, but the appeal does not suspend its enforcement.

The wideness of RCC’s investigative powers is reflected in (a) the type of premises that may be subject to a dawn raid, and in (b) the type of documents that may be seized.

Competition inspectors may inspect any premises used by the undertaking, not only the ones legally owned but also those used de facto including the domicile, the lands or the means of transportation of administrators, directors, managers and other employees. In order to prevent concealment or destruction of evidence, competition inspectors may seal any premises.

Competition inspectors may collect copies and use any financial and commercial documents, including preparatory documents drafted by the undertaking investigated for the exclusive purpose of exercising its right to defence. The only documents which remain under protection are communications between the undertaking under investigation and its external lawyer made exclusively for the purpose of exercising the right of defence if they are drawn up after the launching of the investigation. In case the documents were drafted before the investigation, they benefit from legal privilege only if there is a link between such documents and the current investigation.

In addition, electronic data may also be searched. Competition inspectors may access the electronic equipment and preview the documents at the company’s headquarters, or simply copy the data.

On this point, the legal framework with respect to the dawn raid procedure was amended in 2017. The Competition Act now expressly provides the possibility given to the RCC to copy all the data stored on electronic devices.4 According to the RCC Procedure Regulation,5

copying all the data is possible in certain circumstances (e.g. when there is a big volume of data). Further on, the copied data will be sealed and the extraction of the information which

Popovici Nițu Stoica & Asociații Romania



falls within the scope of the investigation will be performed in the presence of the company’s representatives. Nonetheless, according to the amended article 26 (9) of the RCC Procedure Regulation following seizing the hard copy of the electronic information belonging to the investigated party, the RCC can search data in the absence of the representatives of the companies investigated. According to the RCC, the new procedure is not likely to infringe the right of defence of the investigated parties, as the extraction of the information needed for the investigation is realised in the presence of the company’s representatives.

Hindering the conduct of the dawn raid or the refusal to cooperate with the investigative team designated by the RCC for conducting the dawn raids may be sanctioned with fines ranging from 0.1% to 1% of the turnover realised in the year before the sanctioning decision.

Aside from dawn raids, another investigative power of the RCC is to send information requests to investigated undertakings, to other parties or to public authorities. Failure to comply with the RCC’s request may lead to fines ranging between 0.1% and 1% of the turnover achieved in the previous financial year for undertakings, and between Lei 1,000 and Lei 20,000 for public entities.

The RCC may also obtain statements from individuals who might have information on the investigation. Thus, the RCC may interview any individual or company’s representative(s) with their consent.


2017 was a full year from RCC’s enforcement activity perspective. Cartels are definitely in the spotlight as RCC launched 19 new investigations, out of which 11 concern potential cartels in different economic sectors (e.g., leasing, gas distribution). As an example, the RCC launched two separate investigations on the market of operational leasing and financial leasing regarding a potential coordination of commercial policies through price-fixing and/or market sharing and on the consumer credit market regarding a potential exchange of sensitive information. Recently, in October 2018, the RCC launched an investigation on the market of production and commercialisation of concrete with respect to potential market allocation and price-fixing.6

With respect to finalised investigations, most of them concerned anticompetitive agreements in key sectors such as energy, public tenders and liberal professions. The RCC applied fines amounting to €27 million.

In one of 2017’s landmark decisions, the RCC sanctioned a bid rigging anticompetitive practice in the form of allocation of the market for the production and sale of meters and related equipment for the measurement of electricity within the public procurement procedures organised by the operators of the electricity distribution networks in Romania. The investigation was launched based on a leniency application which led to granting total fine immunity for the applicant company. The sanctioned parties have exchanged sensitive information in order to facilitate coordination of their behaviour. Companies either refrained from bidding or submitted courtesy bids to ensure that the prior designated company won the tender. The implemented practice also included compensation mechanisms. As per the decision issued, discussions on the distribution of lots/bids were also held through Electrica. Employees have made non-transparent consultations with the parties involved, drafted the tender documentation in such a way as to benefit the infringing parties and even offered advice to the parties to give an appearance of legality to their behaviour. Thus, for the first time, a contracting authority was sanctioned because it acted as a channel of communication and facilitated the exchange of information between companies in order to share the market.7




The RCC also stated that since these anticompetitive practices have led to higher prices for the consumers, it will collaborate with the Regulation Authority in Energy Field for repairing the prejudice. This case also conducted to the application of the biggest fine of 2017, amounting to approximately €15.8 million.

The RCC also focused on sanctioning cartels in which professional associations and their members engaged. For instance, the RCC sanctioned the Chamber of Notaries of Suceava county and its members for establishing and implementing minimum fees for notary services.8 Only one notary public acknowledged the anticompetitive deed and therefore benefitted from a 15% reduction of the fine.

The professional association of security companies, as well as its members were also sanctioned for a price-fixing cartel implemented through exchange of price-related information. The minimum price was also published on the website of the association.9

Similarly, the National Chamber of Taxi Drivers of Romania has also been sanctioned for price-fixing.10

Nonetheless, in 2017 the RCC also closed a cartel investigation without sanctions.11 As a rule, the RCC decides to close an investigation or reject a complaint based on lack of proofs, mentioning that the standard of proof is not met. With respect to the standard of proof, within some decisions RCC applies the beyond any reasonable doubt standard, while in others it applies the standard of sufficient proof of an infringement’s existence.


The RCC is the only administrative domestic authority empowered to apply article 5 of the Competition Act and article 101 of the TFEU when the anticompetitive practice may affect trade between Member States. The prioritisation principle allows the RCC to decide what cases come first, based on the potential impact on effective competition, consumers’ general interest, or strategic importance of the economic sector concerned. However, there are no precise, public criteria based on which the RCC may decide to prioritise the cases. The RCC itself in its Strategy Plan for 2017–2020 mentioned its intention to review the criteria of the prioritisation principle.12

Fighting against cartels entails sustained prevention efforts and intense monitoring activity in order to identify risks of anticompetitive collusion, RCC’s sanctioning activity being complementary.

Cartel prevention

The RCC focuses on prevention of cartel behaviour, actively advocating for implementation of competition compliance programmes. The RCC seeks the growth of awareness and outlook of companies with respect to the necessity of compliance with competition regulations. In this respect, the RCC has issued a set of Guidelines regarding competition law compliance programmes (the Guidelines).13 Such competition law compliance programmes may be qualified as mitigating circumstances leading to fine reductions. Before the Guidelines, there were no formal criteria that a competition law compliance programme should have fulfilled in order to qualify as a mitigating circumstance. The Guidelines now set out the criteria that a competition compliance programme must fulfil in order to be qualified as a mitigating circumstance. In a nutshell, the main focus is on the effective implementation of the competition compliance programme, the RCC passing from a formal assessment to a more in-depth substance assessment. An effective competition compliance programme must include at least the following: senior management involvement; compliance




policies and procedures, information and training sessions; monitoring; audit and reporting mechanisms; and consistent disciplinary proceedings in case of competition rules infringement.

Cartel identification

In view of cartel identification, the RCC actively uses various monitoring tools. The RCC is entitled to launch sectorial inquires in different economic sectors when there is indication of potential restrictions of competition. As a result, RCC’s report identifies competition concerns and sometimes recommendations aiming at addressing such concerns. Over time, the RCC has issued reports and/or recommendations regarding food retail, the fuel sector, the pharmaceutical market, the grains market, the wood processing market and others. Recently, in 2018 the RCC issued its report regarding electronic commerce14 as well as the study with respect to the lock-in effect in public tenders for IT and medical equipment.15

Also, in 2018 the RCC has announced the launching of a new sectorial inquiry with respect to the effects of the sharing economy (businesses like Uber, Airbnb) on competition.16

In addition, the RCC uses new IT tools in view of an easier detection of anticompetitive practices. Besides an IT project whose main purpose is to ensure effective cooperation between public authorities (e.g., the National Direction of Anticorruption), the RCC is currently implementing the Big Data project. Through the integration analysis of big volumes of data, the Big Data Project is expected support RCC’s investigative activities, According to the RCC “the Big Data project will facilitate the identification of cartels in the field of public procurement and will facilitate the finalization of the internal computerization of the Competition Council”.17

Moreover, after launching in 2016 a price comparison platform for basic food products (the Price Monitor), the RCC has announced its extension to fuel prices.18 The immediate consequence is the increase of the market’s transparency, which will help the RCC detect potential price collusions. According to the RCC, such transparency with respect to prices could also enhance the degree of competition on the market.


A balance between the public and private interests of parties involved in an alleged cartel is the main objective of national competition legislation.

The right of defence in its various forms, such as the right to access the investigation file, the right to submit written observations to the statement of objections, the right to defence during the hearings before the Plenum, and the right to a separate hearing, act to support private interests. As means of protection for undertakings under investigation, the competition legislation provides strict rules for carrying out investigations and, in some cases, for example, dawn raids, the RCC must have the court’s prior formal approval. Parties also enjoy the right to appeal in court certain acts of the RCC such as: inspection orders; interim decisions; qualification of some information as non-confidential; or sanctioning decisions, etc.

As additional protection, the competition legislation usually sets time limits for various phases of the RCC’s decision-making process, but they are not mandatory. For example, deliberations must take place the same day with the hearings or on another day if the Plenum decides deliberations will be postponed for certain reasons. After deliberation, the RCC has 120 days to draft and communicate the decision. However, the competition legislation does not stipulate a maximum term for finalising the investigation. In practice, the average




duration of investigations in cartel matters is of approximately two to four years depending on the complexity of the case at hand.

In practice, most statements of objections that reach the Plenum finalise with a sanctioning decision. Limited cases exist where the Plenum has issued a rejection decision or returned the statement of objections for further analysis.


Domestic leniency policy regulated by the Competition Act and detailed in the RCC’s Guidelines on the conditions and criteria for the leniency policy applicability (“Leniency Guidelines”)19 is intensively promoted by the RCC, including through its Leniency Module.

However, leniency is not very often used, probably because of the possibility that the acknowledgment of anti-competitive practices might backfire as criminal liability of the applicant’s legal representatives. However, the Romanian Criminal Code provides that persons who reveal their participation in the prohibited practice before the initiation of criminal proceedings will not be liable for the deed. A disclosure after the initiation of criminal proceedings leads to a reduction by half in the punishment limits.

Leniency also applies to cartels and conducts to fine immunity or only reduction. Fine immunity is available before and after the RCC launches an investigation. A basic rule in leniency proceedings says that one cartel may only have one successful immunity applicant, so the following applicants may get fine reductions: 30% to 50% for the first applicant; 20% to 30% for the second applicant; and up to 20% for subsequent applicants.

Since the entry into force of Government Emergency Ordinance no 39/2017 transposing the European Directive on private enforcement, the undertaking benefitting from immunity will be jointly liable for damages from anti-competitive practices.

The RCC will not disclose the immunity applicant’s identity to third parties (including other parties to the alleged infringement) that have access to statements made in the context of leniency (including the applicant’s identity), only until the statement of objections is issued during file access.

Our jurisdiction reports only three cases of “successful” leniencies: (a) in an investigation into taxi companies for fixing transportation tariffs; (b) in an investigation for bid rigging in oil and gas drilling works; and (c) the investigation concerning bid rigging in the energy field.20


Our domestic antitrust legal framework does not regulate a settlement procedure as in EU legislation. However, while companies involved in cartels cannot submit commitments, they can apply for the recognition procedure which may lead to important fine reductions (between 10–30%).

According to RCC’s activity report, in 2017, 156 undertakings/associations of undertakings were sanctioned, 33 of which recognised the infringement of the Competition Act. Despite RCC’s active advocacy of the recognition procedure’s benefits, the number decreased from 2016 when out of 119 sanctioned parties, 94 recognised the alleged infringement.

The procedure of recognition has been detailed in the secondary instructions of the RCC entered into force in November 2016. In exchange of acknowledgment of the anti-competitive behaviour, the undertaking can benefit from a substantial reduction of the fine




ranging between 10% and 30%. However, the fine cannot be below 0.2% of the turnover realised in the financial year preceding the sanction. Also, the recognition can take place even before the RCC issues the statement of objections. An undertaking that benefitted from the leniency policy may also use the acknowledgment procedure to gain an additional reduction of the fine.

In order to benefit from a reduction of the fine, the undertakings must submit a formal request that will include (a) the clear recognition of the anti-competitive practice and accept the maximum sum foreseen for the fine, (b) the confirmation they were informed accordingly and they had the possibility to express their opinions with respect to the infringement, and (c) the confirmation that they will request access to the file and/or the organisation of hearings in case the investigation report communicated does not reflect the propositions of the practice’s recognition. In case the RCC does not accept the terms of the request and therefore the reduction of the fine is not awarded, the recognition cannot be used as evidence.

Also, in case the practice was recognised, and a reduction of fine is awarded, if the undertaking decides to challenge the RCC’s decision, it will lose the benefit of recognition.


Generally, any natural or legal person proving an interest can file a complaint for anti-competitive practices, but this does not automatically mean the RCC opens an investigation. Following preliminary assessment of the complaint, the RCC may decide to: (1) open an investigation; (2) dismiss the complaint; or (3) inform the applicant that the facts described in the complaint fall outside the Competition Act, or are already analysed by the European Commission or other national competition authority. The complainant may challenge the rejection decision in court within 30 days from communication.

Third parties have access to documents from investigation files in limited situations. For example, the author of a complaint which was informed by the RCC that it would reject its complaint may request access to the non-confidential version of the documents taken into consideration by the RCC in its preliminary assessment. In investigations initiated following complaints, the President of the RCC may approve the hearing of the complainant and/or provide a non-confidential version of the investigation report, if the latter demands so.

In addition, any individual may inform on its own intention and anonymously the RCC of the existence of potential anti-competitive behaviours, using the online whistleblowers platform.21 Their identity cannot be spotted and thus will not be disclosed, and their action will not be considered an infringement of confidentiality obligations provided by the Labour Code or in their employment agreements. The RCC has already launched an investigation on the tourism market following such report.

The RCC can also be notified using another IT tool available on its site – the notification can be made anonymously, but there is no guarantee that the person will not be identified/their identity will not be disclosed.22


The RCC’s procedure on imposing sanctions is rather transparent. The infringer is personally and individually liable for paying the fine.

As mentioned above, fines applied range from 0.5% to 10% of the total turnover achieved in Romania. In practice, for cartel infringements, the RCC sets the basic amount of 3% or 4%.




The base level of the fine is set based on the gravity and the duration of the investigated deed. Such base level may be increased or reduced depending on the existence of aggravating or the mitigating circumstances. For example, mitigating circumstances include the effective implementation of a competition law compliance programme and active cooperation with the RCC’s case handlers. Aggravating circumstances include recidivism or the reinitiating of the cartel.

In case of associations of undertakings, the fine applied to associations of undertakings may not exceed 10% of the total turnover of each member active on the market affected by the association’s infringement.


Sanctioned parties may appeal the RCC’s decision in order to seek its annulment before the Bucharest Court of Appeal. The decisions may be challenged within 30 days upon their communication. The court has the prerogative to review the decision under all aspects of fact and law. Almost all decisions issued by the RCC are subject to annulment.

Some procedural omissions or errors made during the investigation or in the RCC’s decision-making process may be challenged only within a specific term (e.g., 72 hours from communication for judicial authorisation of dawn raids). Since 2016, decisions regarding access to confidential information are no longer qualified anymore as unilateral administrative acts; they may be challenged only along with the RCC’s final decision with respect to the investigation.

There are cases where courts ruled differently when the RCC’s decision was challenged separately by the sanctioned undertakings, even if the facts and evidence were identical for all sanctioned undertakings, mainly because precedents do not have the force of law in our legal system.

Courts may also consider new evidence, not only those from the RCC’s file, such as: documents; witnesses; and expert evidence. Also, the courts have started to admit a wider range of evidence (e.g., expert appraisements). There are no officially acknowledged and certified competition experts that may be used to establish the existence of cartels in court, but the judge may ask non-binding opinions from “specialists” in competition.

Up to now, we have limited cases where the court has overturned RCC’s decisions. Nonetheless (a) the courts have started to pay more attention to assessing the evidence provided by the parties, and (b) have started to reduce fines imposed by the RCC by conducting an analysis of the proportionality of the said fines. For instance, in 2017, Bucharest Court of Appeal maintained 71% of the challenged fines.

Criminal sanctions

As mentioned above under “Overview of the law and enforcement regime relating to cartels”, criminal liability for competition law infringements is exceptionally triggered. To the best of our knowledge, there has been only one case in which an individual was criminally prosecuted for participation in a cartel. However, we expect anti-competitive criminal case-law on bid rigging to be banned by article 246 of the New Criminal Code.

The RCC and criminal investigation bodies have the legal possibility to simultaneously investigate the same deed based on different grounds, which raises some questions in terms of cooperation between these authorities.

Article 34 (6) of the Competition Act allows for information collected during investigations




to be used also for the more extensive purpose of applying the law in the area of competition and states the RCC’s right to inform other public authorities if aspects under their jurisdiction are found. The generality of these provisions raises questions as to what type of information the RCC will provide to other authorities: all confidential information obtained by competition law-specific procedural instruments, including information received in the context of leniency or acknowledgment.

The absence of express limitations in this respect would, in fact, render leniency or recognition policies less appealing, especially in bid rigging cases, as it brings exposure to individual sanctions if the information provided to the RCC is disclosed to the criminal authorities.

As the number of investigations launched based on information received within the Module of Bid-Rigging and from authorities investigating criminal cases has increased, new and clear rules should be enacted to: (a) introduce specific boundaries to information exchanges with prosecutors; (b) increase cooperation transparency; and (c) ensure the protection of the parties’ rights under the RCC’s investigation.

Cross-border issues

According to article 2 (5) of the Competition Act, domestic competition rules apply to all practices with anti-competitive effects on the Romanian market, even if the infringement was committed outside Romania. The RCC, as a member of the European Competition Network (“ECN”), applies article 101 of the TFEU according to the Council Regulation (EC) no. 1/2003, when trade between Member States may be affected.

Settled practice between ECN members shows that the European Commission and national competition authorities inform each other of new cases, coordinate investigations and other information relevant to their activity. In addition, the RCC can exchange evidence with the European Commission and any other European competition authority.

Also showing close cooperation between the RCC and other national competition authorities is the Cartels Office’s legal possibility to proceed to dawn raids at the European Commission’s or other national competition authorities’ request. Appointed representatives of competition authorities from EU Member States can participate in the dawn raids requested by them and effectively carried out by the RCC.

For instance, in June 2016, the European Commission carried out dawn raids at companies in the gas market from Romania, in a European case concerning a potential anti-competitive behaviour aimed at hindering natural gas exports from Romania to other Member States.23


The domestic competition framework acknowledges third parties’ right to file claims both before (so-called stand-alone actions) and after the issuance of a sanctioning decision by the RCC (so-called follow-on actions). Representative actions for damages on behalf of consumers brought by certain bodies or “class actions” are also included.

In this field, the Directive on private enforcement, transposed through the Emergency Government Ordinance no. 39/2017, further amended our national legal framework. The following are the most important modifications:

(a) The Court may impose disclosure of evidence to the defendant/a third party. The Court can also request the RCC disclosure of evidence available in its file when these evidences cannot be obtained from the parties/other third party. However, some types




of evidence can never be disclosed, such as: leniency declarations/transaction proposals. Moreover, there is no disclosure procedure independent of a trial already brought before a court. It would be useful to regulate this specific issue as victims of competition law infringement could find themselves unable to provide evidence for bringing a private enforcement claim.

(b) The RCC’s final decisions establish an absolute legal presumption of the existence of the illegal anti-competitive deed.

(c) The statute of limitation is five years for stand-alone actions, as well as for follow-on actions, and it starts running from the tme the plaintiff knew or should have known of the infringement, the damage caused by this infringement and the identity of the infringer.

(d) It is presumed, until contrary proof is provided, that cartels cause damages.

Up to this moment, the national courts have dealt with only two private litigations on antitrust matters (i.e., stand-alone actions). In both cases, the first jurisdiction court held that the claimants have not proved the alleged infringements of the Competition Act. In one of these cases, Bucharest Court of Appeal awarded the appeal and obliged the defendant to pay the plaintiff an indemnification of approximately €930,000. The decision was upheld by the High Court of Cassation and Justice.24 Private enforcement remains for now a developing area in Romania.

Reform proposals

Regarding legislative developments which impact cartel enforcement policy, there are several projects currently being debated in Parliament:

(a) One of the projects provides that in case the turnover of the companies that have infringed competition law is below €1 million, the fine will be applied by considering only the turnover achieved on the relevant market concerned by the infringement.25 This will therefore lead in some cases to a reduction of the fine quantum. A second project includes a similar proposal but without referring to any threshold.26

(b) In addition, this second project provides that in case the RCC’s decision is challenged in court, it becomes enforceable when the court’s decision becomes final. Such amendment is unlikely to be adopted, given that the fines applied by the RCC (if confirmed) would be transferred to the State’s budget years after the issuing of the RCC’s decision.

(c) A third project proposes the generalisation of the obligation to provide RCC with information regarding prices for all companies, regardless of the economic sector in which they are active.27 According to the project, such information could be requested for realising price comparisons on online platforms. Therefore, it looks like price comparison platforms will be used in economic sectors other than food and fuels.

* * *

Endnotes

1. Competition Act no. 21/1996 republished in the Official Journal of Romania no. 153 on 29 February 2016.

2. Emergency Ordinance no. 39/2017 published in the Official Gazette, Part 1, no. 422, 8 June 2017.




3. Directive 2014/104/EU of the European Parliament and of the Council of 26 November 2014 on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union Text with EEA relevance, OJ L349.

4. Before this modification, only the secondary legislation provided this possibility.

5. Regulation Procedure, published in the Official Gazette, Part I, no. 601, 26 July 2017.

6. http://www.consiliulconcurentei.ro/uploads/docs/items/bucket13/id13630/ inspectii_ciment_oct_2018.pdf.

7. ht tp: / /www.consi l iu lconcurentei . ro/uploads/docs/ i tems/bucket13/ id13 228/decizie_77_20122017_publicare_site.pdf.

8. http://www.consiliulconcurentei.ro/uploads/docs/items/bucket13/id13099/amenzi _notari_ian_2018_english.pdf.

9. http://www.consiliulconcurentei.ro/uploads/docs/items/bucket13/id13092/comunicat _amenzi_paza_ian_2018_eng.pdf.

10. http://www.consiliulconcurentei.ro/uploads/docs/items/bucket13/id13103/amenzi_ taxi_iasi.pdf.

11. http://www.consiliulconcurentei.ro/uploads/docs/items/bucket12/id12986/ordin_ apia.pdf.

12. http://www.consiliulconcurentei.ro/uploads/docs/items/bucket12/id12175/plan_ strategic_2017-2020_1505.pdf.

13. http://www.consiliulconcurentei.ro/uploads/docs/items/bucket13/id13010/ghid_ privind_conformarea_cu_regulile_de_concurenta_decembrie.pdf.

14. http://www.consiliulconcurentei.ro/uploads/docs/items/bucket13/id13201/raport_ al_investigatiei_privind_sectorul_comertului_electronic.pdf.

15. https://www.juridice.ro/wp-content/uploads/2018/05/Studiul.pdf.

16. http://www.consiliulconcurentei.ro/uploads/docs/items/bucket13/id13628/studiu_ sharing_economy_oct_2018.pdf.

17. http://www.consiliulconcurentei.ro/uploads/docs/items/bucket13/id13153/com_big _data_mar_2018_eng.pdf.

18. https://www.profit.ro/povesti-cu-profit/consiliul-concurentei-consumatorii-vor-gasi-in-monitorul-preturilor-informatii-despre-un-milion-de-produse-alimentare-si-carburanti-auto-18376685.

19. Guidelines on the conditions and criteria for the application of the leniency policy implemented by Order no. 300/2009 and published in the Official Journal of Romania no. 610 of 7 September 2009.

20. Decision no. 7 as of 17 February 2015, Decision no. 77 of 20 December 2017.

21. https://secure.secway.info/ro/start.php.

22. https://portal.consiliulconcurentei.ro/solicitari/login.

23. http://europa.eu/rapid/press-release_STATEMENT-16-2133_en.htm.

24. Court of Appeal of Bucharest, Decision no. 1701/2015 of 30 October 2015 and High Court of Cassation and Justice, Decision no. 1979/2016 of 23 November 2016.

25. http://www.cdep.ro/proiecte/2017/500/80/2/pl735.pdf.

26. https://www.senat.ro/legis/PDF/2018/18b475FG.pdf.

27. http://www.cdep.ro/proiecte/2017/300/20/6/se416.pdf.






Mihaela Ion Tel: +40 21 317 7919 / Email: [email protected] Mihaela Ion is a partner at Popovici Nițu Stoica & Asociații and the head of the competition practice group. Her areas of expertise cover in particular antitrust litigation, unfair trade practices, consumer law, merger control proceedings and state aid. She also assists clients in structuring and implementing compliance programmes and providing regular training as external legal counsel on all relevant aspects of competition law. Chambers Europe reported Ms. Ion as having “great expertise in antitrust investigations and wider competition law”. Ms. Ion holds a degree from ‘Lucian Blaga’ University of Sibiu and is a member of the Romanian Bar Association. She also holds a Master’s degree in European and International Business, Competition and Regulatory Law from Freie Universität Berlin, a Master’s degree in competition from the Bucharest Academy for Economic Studies and a Master’s degree in international relations and European integration from the Romanian Diplomatic Institute.

Silviu Stoica Tel: +40 21 317 7919 / Email: [email protected] Silviu Stoica is a partner with Popovici Niţu Stoica & Asociaţii. His practice focuses on a broad range of contentious and non-contentious competition matters, with an emphasis on cartel investigations and industry inquiries, abuses of dominant position and antitrust disputes. Mr Stoica also advises clients on restrictive agreements and works closely with in-house corporate counsels in sensitive internal compliance reviews. Mr Stoica has been commended in Chambers Europe as a ‘strategic and realistic’ competition lawyer who is ‘business-friendly and very easy to communicate with’. Mr. Stoica also has wide experience in advising private equity funds and strategic investors, in relation to mergers & acquisitions. Silviu Stoica holds a degree in law from the University of Bucharest Faculty of Law and is a member of the Bucharest Bar Association. Mr Stoica attended the course on US legal methods – introduction to US law at the Institute for US Law in Washington, DC, and the International Development Law Organization development lawyers course (DLC-20E) in Rome.

239 Calea Dorobanti, 6th floor, Bucharest, 1st District, Postal Code 010567, Romania Tel: +40 21 317 7919 / URL: www.pnsa.ro

Popovici Nițu Stoica & Asociații


Singapore


Singapore’s Competition Law Regime

Enacted in 2004, the Competition Act (Cap. 50B) (the “Act”) is the principal statute governing the competition law regime in Singapore. The Act is administered and enforced by the Competition and Consumer Commission of Singapore (the “CCCS”), which is a quasi-judicial, statutory body established under Part II of the Act. Previously known as the Competition Commission of Singapore (the “CCS”), the CCS was renamed the CCCS when it took on the additional function of administering the Consumer Protection (Fair Trading) Act (Cap. 52A) with effect from 1 April 2018. Cartel matters are decided upon by the CCCS, but the CCCS’s decisions can be appealed to the Competition Appeal Board (the “CAB”). A decision of the CAB can subsequently be appealed to the High Court on a point of law arising from the decision, or from any decision as to the amount of a financial penalty. Parties may also appeal High Court decisions to the Court of Appeal under section 74 of the Act.

The Section 34 Prohibition

Cartel activities are prohibited by section 34 of the Act (the “Section 34 Prohibition”), which provides that:

“…agreements between undertakings, decisions by associations of undertakings or concerted practices which have as their object or effect the prevention, restriction or distortion of competition within Singapore are prohibited…”

Section 34(2) of the Act provides examples of the types of arrangements that may fall within the ambit of this prohibition. Specifically, section 34(2) of the Act states that agreements, decisions or concerted practices may have the object or effect of preventing, restricting or distorting competition within Singapore if they:

• directly or indirectly fix purchase or selling prices or any other trading conditions;

• limit or control production, markets, technical development or investment;

• share markets or sources of supply;

• apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; or

• make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of the contracts.

Third Schedule to the Act

Section 35 of the Act provides for excluded agreements that are specified in the Third

Lim Chong Kin & Corinne Chew Drew & Napier LLC



Schedule to the Act. For example, the Minister may exclude a particular agreement or any agreement of a particular description if he is satisfied that there are exceptional and compelling reasons of public policy as to why the Section 34 Prohibition ought not to apply (paragraph 4 of the Third Schedule to the Act).

Other specific activities and industries excluded from the application of the Section 34 Prohibition are specified in paragraphs 5, 6 and 7 of the Third Schedule to the Act, and include the supply of piped potable water, the supply of bus services, and cargo terminal operations, amongst others.

The Section 34 Prohibition does not apply to vertical agreements unless the Minister otherwise specifies by order (paragraph 8 of the Third Schedule to the Act). To date, the Minister has not specified any vertical agreement to which the Section 34 Prohibition will apply.

Additionally, the Section 34 Prohibition does not apply to arrangements that give rise to net economic benefit (an exclusion that is provided for in paragraph 9 of the Third Schedule to the Act). In order to qualify for the exclusion, it must be shown that the arrangement:

• contributes to improving production or distribution, or promoting technical or economic progress;

• does not impose on the undertakings concerned restrictions that are not indispensable to the attainment of those objectives; and

• does not afford the undertakings concerned with the possibility of eliminating competition in respect of a substantial part of the goods or services in question.

Block Exemption Orders

Section 36 of the Act empowers the Minister to make an order, following the recommendation of the CCCS, to exempt certain categories of agreements from the Section 34 Prohibition.

The Competition (Block Exemption for Liner Shipping Agreement) Order is the only Block Exemption Order (“BEO”) that has been granted in Singapore since the introduction of competition law. It initially took effect on 1 July 2006 for a period of five years, and its extension until 2015 was granted by the Minister for Trade and Industry on 16 December 2010. It was then subsequently extended by the CCCS, and will now apply until 31 December 2020.

CCCS’s Guidelines

Pursuant to section 61 of the Act, the CCCS has published guidelines which outline how the CCCS administers and enforces the provisions under the Act. Of relevance to cartel enforcement are the CCCS Guidelines on the Section 34 Prohibition 2016 (the “Section 34 Guidelines 2016”), the CCCS Guidelines on Lenient Treatment for Undertakings Coming Forward with Information on Cartel Activity 2016 (the “Leniency Guidelines 2016”), and the CCCS Practice Statement on the Fast Track Procedure for Section 34 and Section 47 Cases (the “Fast Track Practice Statement”). The Section 34 Guidelines 2016, Leniency Guidelines 2016 and the Fast Track Practice Statement apply to all cases for which the CCCS has not issued a provisional infringement decision (“PID”) before 1 December 2016.

Overview of investigative powers in Singapore

The investigative powers of the CCCS are set out in the Act, specifically:

• Section 62 of the Act provides that the CCCS may conduct an investigation if “there are reasonable grounds for suspecting that…the section 34 prohibition has been

Drew & Napier LLC Singapore



infringed by any agreement”. Any investigation will be carried out by either the CCCS or a duly appointed inspector (section 62(2) of the Act).

• Section 63 of the Act provides that the CCCS has the power to require the production of specified documents or specified information.

• Section 64 of the Act provides that the CCCS has the power to enter premises without a warrant.

• Section 65 of the Act provides that the CCCS has the power to enter and search premises with a warrant.

The CCCS’s powers of investigation are described in detail in the CCCS Guidelines on the Powers of Investigation in Competition Cases 2016.


The CCCS has issued three infringement decisions (“ID”) during the last 12 months, as of October 2018.

Bid Rigging in Electrical Services and Asset Tagging Tenders

On 28 November 2017, the CCCS issued an ID against three companies, namely the Cyclect Group,1 HPH Engineering Pte. Ltd. (“HPH”) and Peak Top Engineering Pte. Ltd. for their involvement in rigging bids in the tender for the provision of electrical services for the Formula 1 Singapore Grand Prix for 2015 to 2017. The CCCS found that the Cyclect Group had prepared all price schedules and final bid prices for the other two companies, with the intention that the Cyclect Group would win the three-year term tender.

The CCCS’s ID was also issued against the Cyclect Group and HPH for engaging in bid rigging GEMS World Academy Singapore’s tender for the provision of asset tagging services. The CCCS found that Chemicrete Enterprise Pte. Ltd. (a part of the Cyclect Group) had sought HPH’s assistance to support its bid. GEMS World Academy Singapore received three quotes, and awarded the tender to Chemicrete Enterprise Pte. Ltd.

The financial penalties imposed on the three companies are as follows:

In levying the financial penalties, the CCCS took into account the nature of the infringements, the turnover of the three companies, aggravating and mitigating factors, as well as the representations made by the Cyclect Group. The Cyclect Group was also awarded with a discount further to its leniency application under the CCCS’s leniency programme.

Capacitor Cartel

On 5 January 2018, the CCCS issued an ID against five capacitor manufacturers for price-fixing and exchanging confidential business information. The five capacitor manufacturers are:

• Panasonic Industrial Devices Singapore, and Panasonic Industrial Devices Malaysia Sdn. Bhd.;

• Rubycon Singapore Pte. Ltd.;

Financial Penalty for

F1 Tender

Financial Penalty for

GEMS Tender

Total

The Cyclect Group S$559,297.00 S$12,000.00 S$571,297.00

HPH S$28,128.00 S$5,000.00 S$33,128.00

Peak Top S$21,693.00 N.A. S$21,693.00




• Singapore Chemi-con (Pte.) Ltd.;

• Nichicon (Singapore) Pte. Ltd.; and

• ELNA Electronics (S) Pte. Ltd.

The five capacitor manufacturers were found to have engaged in anti-competitive agreements, including price-fixing and the unlawful exchange of confidential business information in respect of the sale, distribution and pricing of Aluminium Electrolytic Capacitors (“AECs”) to customers in Singapore.

The CCCS commenced its investigation after receiving an application for immunity under its leniency programme from one of the five capacitor manufacturers. Its investigation revealed that the five capacitor manufacturers held regular meetings in Singapore where they exchanged commercially sensitive business information such as customer quotations, sales volumes, production capacities, business plans and pricing strategies. They also discussed and agreed on sales prices and agreed to collectively reject customers’ requests for price reduction for AECs which are sold in the ASEAN region, including Singapore.

The financial penalties imposed on the five companies are as follows:

.

In levying the financial penalties, the CCCS took into account the relevant turnovers of the parties in relation to the sale of AECs in Singapore for the year preceding the end of their respective infringements which totalled an estimated S$60 to S$70 million, the nature and duration of the infringement, aggravating and mitigating factors, as well as representations made by the parties. Besides Panasonic Industrial Devices Singapore, and Panasonic Industrial Devices Malaysia Sdn. Bhd. which received total immunity from financial penalties, ELNA Electronics (S) Pte. Ltd., Rubycon Singapore Pte Ltd and Singapore Chemi-con (Pte) Ltd. were also awarded a discount further to their leniency application for leniency under the CCCS’s leniency programme.

Chicken Distributors Cartel

On 12 September 2018, the CCCS issued an ID against the following 13 fresh chicken distributors for engaging in price-fixing and non-compete agreements:

• Gold Chic Poultry Supply Pte. Ltd.;

• Hua Kun Food Industry Pte. Ltd.;

• Hy-fresh Industries (S) Pte. Ltd.;

• Kee Song Food Corporation (S) Pte. Ltd.;

• Lee Say Poultry Industrial and its sole-proprietor, Lee Say Group Pte. Ltd.;

• Hup Heng Poultry Industries Pte. Ltd.;

• Leong Hup Food Pte. Ltd and its holding company, ES Food International Pte. Ltd.;

Party Financial Penalty

ELNA Electronics (S) Pte. Ltd. S$853,227.00

Nichicon (Singapore) Pte. Ltd. S$6,987,262.00

Panasonic Industrial Devices Singapore, and Panasonic Industrial Devices Malaysia Sdn. Bhd.

NIL

Rubycon Singapore Pte. Ltd. S$4,718,170.00

Singapore Chemi-con (Pte.) Ltd. S$6,993,805.00




• Prestige Fortune (S) Pte. Ltd.;

• Ng Ai Food Industries Pte. Ltd.;

• Sinmah Poultry Processing (S) Pte. Ltd.;

• Toh Thye San Farm;

• Tong Huat Poultry Processing Factory Pte. Ltd.; and

• Ban Hong Poultry Pte. Ltd.

The CCCS commenced its investigation into the fresh chicken distribution industry after it received information from an informant with inside information on the cartel activity. The CCCS’s investigations revealed that the parties had engaged in discussions on prices, had expressly coordinated the amount and timing of price increases of certain fresh chicken products sold in Singapore, and had agreed to not compete for each other’s customers, from at least September 2007 to August 2014.

The financial penalties imposed on the companies are as follows:

In levying the financial penalties, the CCCS took into account the relevant turnovers of the parties, representations made by the parties, the nature, duration and seriousness of the infringement, and aggravating and mitigating factors. The CCCS also imposed the highest total financial penalty in a single case to date, due to the large size of the industry, the high market shares of the parties, the severity and long duration of the cartel conduct.

Aside from financial penalties, the CCCS has also directed the parties to provide a written undertaking that they will refrain from using The Poultry Merchants’ Association, Singapore, of which all the Parties are members, or any other industry association as a platform or front, for anti-competitive activities.

Party Financial Penalty

Gold Chic Poultry Supply Pte. Ltd. and its related company, Hua Kun Food Industry Pte. Ltd.

S$1,771,111

Hy-fresh Industries (S) Pte. Ltd. S$705,939

Kee Song Food Corporation (S) Pte. Ltd. S$2,689,065

Ng Ai Food Industries Pte. Ltd. S$1,910,897

Sinmah Poultry Processing (S) Pte. Ltd. S$2,624,706

Toh Thye San Farm S$2,267,465

Lee Say Group, which consists of:

• Lee Say Poultry Industrial and its sole-proprietor, Lee Say Group Pte. Ltd.;

• Hup Heng Poultry Industries Pte. Ltd.;

• Leong Hup Food Pte. Ltd and its holding company, ES Food International Pte. Ltd.; and

• Prestige Fortune (S) Pte. Ltd.

S$11,399,041

Tong Huat Group, which consists of:

• Tong Huat Poultry Processing Factory Pte. Ltd.; and

• Ban Hong Poultry Pte. Ltd.

S$3,580,415





The CCCS released the Fast Track Practice Statement and the revised versions of its Guidelines on the Section 34 Prohibition, i.e. the Section 34 Guidelines 2016, and leniency regime, i.e. The Leniency Guidelines 2016, on 1 November 2016.

The Section 34 Guidelines 2016 clarifies the CCCS’s analytical framework and considerations in relation to the Section 34 Prohibition, as well as its stance towards vertical agreements. It noted that the fact that undertakings are in a vertical relationship and/or have a vertical agreement does not, however, preclude the finding of a horizontal concerted practice which has as its object or effect the prevention, restriction or distortion of competition within Singapore. In particular, while dual distribution agreements may generally be considered as vertical agreements, a horizontal concerted practice is likely to be found in agreements of a hub-and-spoke nature.

The Leniency Guidelines 2016 provide greater clarity on the CCCS’s leniency programme, including the requirements for leniency, how a leniency marker or conditional immunity/leniency is secured, perfected and/or withdrawn, and the disclosure and use of information obtained from the leniency applicant by the CCCS. It also introduces new express requirements for leniency applications.

The Fast Track Practice Statement introduces a fast-track procedure for infringements of the Section 34 Prohibition to incentivise parties under investigation to cooperate with the CCCS. The purpose of introducing the fast-track procedure is to assist the CCCS to more effectively and efficiently enforce the Act.


In deciding whether to launch a formal investigation, the CCCS takes into account its strategic priorities and the merits of the case. The CCCS prioritises its enforcement efforts based on the following:

• potential impact of the conduct on the economy and society (e.g. the significance of the industry in the Singapore economy, whether the infringement has a great impact on business costs in Singapore, how large a consumer base the industry has, how much the infringement will add to costs of living);

• severity of the conduct (e.g., hard-core price-fixing, serious abuse of dominance, mergers which substantially lessen competition);

• importance of deterring similar conduct (e.g., whether other companies will follow suit and engage in the same conduct if it is left unchecked);

• resource considerations (e.g., how many cases the CCCS is handling, how resource-intensive the case is relative to the expected benefits); and

• risk of over-intervention (e.g., when action by the CCCS may inadvertently deter innovation and entrepreneurship).

There is no prescribed timeframe for the conclusion of the CCCS’s cartel investigations. The timeframe for an investigation depends largely on the nature and complexity of each case.


The CCCS’s leniency programme is described in detail in the Leniency Guidelines 2016. Leniency applications may be made orally or in writing to the CCCS.

If a party provides sufficient information to the CCCS to establish the existence of cartel activity before the CCCS has opened an investigation, that party may benefit from full




immunity from financial penalties (“full immunity”). To earn full immunity, the leniency applicant must also ensure that it:

• provides the CCCS with all the information, documents and evidence available to it regarding the cartel activity;

• grants an appropriate waiver of confidentiality to the CCCS in respect of other jurisdictions and regulatory authorities which have been notified of the conduct and/or from whom leniency has been sought;

• unconditionally admits liability to the conduct for which leniency is sought;

• maintains continuous and complete cooperation throughout the investigation and until the conclusion of any action by the CCCS arising as a result of the investigation;

• refrains from further participation in the cartel activity from the time of disclosure of the cartel activity to the CCCS (except as may be directed by the CCCS);

• must not have been the one to initiate the cartel; and

• must not have taken any steps to coerce another undertaking to take part in the cartel activity.

After the CCCS has commenced an investigation, the first party that provides information to the CCCS about the cartel that is sufficient for it to issue an infringement decision can benefit from lenient treatment by way of a reduction of up to 100 per cent in the level of the financial penalties. Subsequent leniency applicants may benefit from a reduction in financial penalties of up to 50 per cent.

The CCCS provides a marker system for leniency applications. If the leniency applicant is unable to immediately submit sufficient evidence to allow the CCCS to establish the existence of the cartel activity, the leniency applicant will be given a limited time to gather sufficient information and evidence in order to perfect the marker. If the leniency applicant fails to perfect the marker within the given time, the next leniency applicant in the marker queue will be allowed to perfect its marker to obtain full immunity or a 100 per cent reduction in financial penalties. Once the marker has been perfected, the other leniency applicants in the marker queue will be informed that they no longer qualify for full immunity or a 100 per cent reduction in financial penalties.

The CCCS also operates a “Leniency Plus system”. A party cooperating with the CCCS in relation to a cartel in one market (Cartel A), may also be involved in a completely separate cartel activity in another market (Cartel B). Under the Leniency Plus system, if the party was to provide information in respect of Cartel B, it may not only stand to benefit from lenient treatment in respect of Cartel B, but may benefit from further reduction in penalties in respect of Cartel A.


The fast-track procedure provides an avenue for parties to admit liability for infringements of the Act (and comply with various other conditions) in return for a reduction in the amount of financial penalty to be imposed. It exists in parallel to the CCCS’s leniency programme and is distinct from voluntary commitments offered to the CCCS, in that the latter does not involve any admission of liabilities by the parties under investigation and finding of infringement under the Act.

The fast-track procedure can be initiated by the CCCS prior to or after a PID but not after an infringement decision has been issued. The CCCS envisages that, in general, the fast-track procedure will be initiated prior to a PID being issued. Parties under investigation can




proactively indicate to the CCCS their willingness to engage in a fast-track procedure discussion. However, the CCCS has discretion in determining whether a case is suitable for the fast-track procedure.

The Fast Track Practice Statement sets out the fast-track procedure. The fast-track procedure consists of the following stages, namely, initiation, discussion, agreement, and acceptance.


Third parties may lodge complaints with the CCCS if they believe that there has been a breach of the Section 34 Prohibition.

The CCCS will check at the onset that the complaint falls within its scope of powers under the Act. If the subject matter of the complaint is under the CCCS’s purview, the CCCS may ask the complainant to provide further information. If the complaint cannot be substantiated, the matter will be closed. The CCCS will inform the complainant of its decision to not take any action in relation to a complaint.

If the complaint can be substantiated with relevant information, the CCCS will evaluate and assess whether the subject matter of the complaint is likely to have an appreciable adverse effect on competition. The CCCS may launch an investigation if there are reasonable grounds for suspecting that competition law has been breached.


The CCCS, under section 69 of the Act, can make such directions as it considers appropriate to bring an infringement to an end or to remedy, mitigate or eliminate any adverse effect of the infringement. While section 69 of the Act provides general discretion to the CCCS in making directions to bring an infringement to an end or to remedy, mitigate or eliminate any adverse effect of the infringement, it provides specific examples of the directions that the CCCS may make, including:

• requiring parties to the agreement to modify or terminate the agreement;

• the payment to the CCCS of such financial penalty in respect of the infringement as the CCCS may determine (where it determines that the infringement has been committed intentionally or negligently), such financial penalty not exceeding 10 per cent of such turnover of the business of the undertaking in Singapore for each year of infringement for such period, up to a maximum of three years;

• to enter such legally enforceable agreements designed to prevent or lessen the anti-competitive effects that have arisen as may be specified by the CCCS;

• to dispose of such operations, assets or shares of such undertaking in such manner as may be specified by the CCCS; and

• to provide a performance bond, guarantee or other form of security on such terms and conditions as the CCCS may determine.

The CCCS’s Guidelines on the Appropriate Amount of Penalty in Competition Cases 2016 was revised in 2016 (“Revised Penalty Guidelines 2016”). The CCCS has stated in the Revised Penalty Guidelines 2016 that it will adopt the following six-step approach when determining the amount of financial penalty to impose:

• the calculation of the base penalty having regard to the seriousness of the infringement (expressed as a percentage rate) and the turnover of the business of the undertaking in Singapore for the relevant product and relevant geographic markets affected by the infringement in the undertaking’s last business year;




• the adjustment for the duration of the infringement;

• the adjustment for other relevant factors, e.g., deterrent value;

• the adjustment for aggravating or mitigating factors;

• the adjustment if the statutory maximum penalty is exceeded; and

• the adjustment for immunity, leniency reductions and/or fast-track procedure discounts.

The CCCS has imposed financial penalties on the parties involved in cartel activities in every infringement decision published to date, save for the parties who have enjoyed immunity under the leniency programme.

Section 69(4) of the Act provides that the maximum amount of financial penalty imposed may not exceed 10 per cent of the turnover of the business of the undertaking in Singapore for each year of infringement, up to a maximum of three years. There are no minimum penalties (in absolute terms) stipulated in the Act.


Parties to an agreement or persons whose conduct in respect of which the CCCS has made a decision as to the infringement of the Section 34 Prohibition may appeal against (or with respect to) that decision, the imposition or amount of any financial penalty, or any directions issued by the CCCS, to the CAB. An appellant would be required to prove its case on a balance of probabilities to succeed in its appeal. Appeals are made by lodging a notice of appeal, in accordance with the Competition (Appeals) Regulations, within two months from the date of issue of the CCCS’s infringement decision.

The CAB is an independent body established under section 72 of the Act. It comprises 30 members including lawyers, economists, accountants, academics and other business people. In the usual course, a panel of five members will be appointed to hear an appeal. It has broad powers to make directions it thinks fit to determine the just, expeditious and economic conduct of the appeal proceedings.

As of October 2018, the CAB has received 13 appeals relating to the cartel infringement decisions and issued its appeal decisions in 10 of these appeals. Three appeals were withdrawn by the appellants.

A decision of the CAB can subsequently be appealed to the High Court on a point of law arising from the decision, or on the amount of a financial penalty (section 74 of the Act). Appeals are brought by way of originating summons, and the procedure governing the appeal is set out in order 55 of the Rules of Court (Cap 322, R 5, 2006 Rev ed). Parties may also appeal High Court decisions to the Court of Appeal under section 74 of the Act. Such appeals are governed by the same procedure as all other civil appeals in Singapore. There is no further appeal right from the Court of Appeal. There have been no appeals against the decisions of the CAB to date.

Criminal sanctions

No criminal sanctions may be imposed on individuals in respect of cartel conduct or competition law violations in Singapore.

However, criminal liability can arise where a person:

• refuses to provide information pursuant to a requirement on him or her to do so;

• destroys or falsifies documents;




• provides false or misleading information; or

• obstructs an officer of the CCCS in the discharge of his or her duties.

Offences are punishable by a prison sentence not exceeding 12 months, a fine not exceeding $10,000, or both. There have been no such criminal sanctions imposed in Singapore to date.

Cross-border issues

Section 88 of the Act provides for cooperation between the CCCS and foreign competition bodies. The CCCS inked its first memorandum of cooperation with the Japan Fair Trade Commission (“JFTC”) on 22 June 2017.

The agreement provides for extensive cooperation between the two competition authorities as it allows for the authorities to notify each other of potential infringements of the other party’s competition laws. It also allows for the exchange of information and coordination on enforcement of cases, such as cartel investigations, that are of mutual interest. Both competition authorities can request that the other competition authority initiate enforcement activities. For example, if the CCCS uncovers cartel activities undertaken in Japan that affect Singapore, the CCCS can request that the JFTC initiate investigations.

In addition to the above, the CCCS announced, on 30 August 2018, that it had entered into a memorandum of understanding with Indonesia’s Commission for the Supervision of Business Competition to facilitate cooperation on competition enforcement.

Besides these two memoranda, it should be noted that many of Singapore’s Free Trade Agreements include chapters on competition and provide for cooperation on competition matters.

Further, the CCCS already cooperates with foreign competition authorities on cartel investigations through its leniency programme. Leniency applicants are required to grant a waiver of confidentiality to the CCCS in respect of any jurisdiction where the leniency applicant has also applied for leniency, as a condition to benefit from total immunity from financial penalties.


Section 86 of the Act provides that any person who suffers loss or damage directly as a result of an infringement (including, inter alia, of the Section 34 Prohibition) shall have a right of action for relief in civil proceedings. The Act does not allow claimants to claim for double or treble damages.

This right is predicated on an infringement finding by the CCCS, and may only be brought within two years following the expiry of any applicable appeal periods. Third parties do not have standing to bring such claims in other circumstances, or to lodge an appeal with the CAB.

To date, there have not been any follow-on claims brought to court in respect of a violation of the Section 34 Prohibition.

Reform proposals

The CCCS has previously in December 2016 indicated that it is undertaking a comprehensive review of the Act.2

Besides the ongoing review, the past year has also seen the following amendments made to the Act.

First, pursuant to the Competition (Amendment) Act 2018, the CCCS is empowered to accept binding and enforceable commitments for cases involving the Section 34 Prohibition.




Entities under investigation may offer legally binding commitments to the CCCS to address the concerns raised by the CCCS in connection with the conduct being investigated. Should these commitments be accepted by the CCCS, the CCCS shall make a decision that the Section 34 Prohibition has not been infringed by the conduct. Under this new framework, should the relevant entity breach these commitments, the CCCS will be able to apply to the Singapore courts for the enforcement of the same.

Second, also pursuant to the Competition (Amendment) Act 2018, the CCCS is empowered to conduct general interviews during inspections and searches. These powers are not an expansion, but a clarification, of the CCCS’s powers of investigation in this regard.

* * *

Endnotes

1. Chemicrete Enterprises Pte. Ltd., Cyclect Electrical Engineering Pte. Ltd. and Cyclect Holdings Pte. Ltd. (together the “Cyclect Group”).

2. A Decade in Control, 13 December 2016, (International Financial Law Review) (see http://www.iflr.com/Article/3646766/A-decade-in-control.html).






Lim Chong Kin Tel: +65 6531 4110 / Email: [email protected] Chong Kin is a Director with Drew & Napier LLC. He heads both the Competition and Regulatory (Contentious and Non-Contentious), and the Telecommunications, Media and Technology practices. Chong Kin has experience in advising the sectoral competition regulators on liberalisation matters since 1999, including drafting, implementing and enforcing the competition law framework for the telecom, media and postal sectors, before moving onto the general Competition Act. He continues to advise both regulators and industry on competition matters under various sectoral competition codes and is widely acknowledged by peers, clients and rivals as a leading competition lawyer in Singapore. Asialaw notes, “[Chong Kin] is a very technically proficient and commercially savvy lawyer. He is also very entrenched in the competition space, giving him unique insights into policy direction and interpretation”.

Corinne Chew Tel: +65 6531 2326 / Email: [email protected] Corinne is a Director at Drew & Napier LLC. Corinne’s all-encompassing competition law experience includes assisting clients in the filing of merger notifications to the CCCS, leniency applications and assisting clients with CCCS investigations. Corinne has also assisted multinational and local companies in setting up competition law compliance and audit structures, dawn raid and whistleblowing programmes and conducting audit checks for companies in a wide range of industries in Singapore and other jurisdictions. Corinne’s corporate experience includes providing contractual and regulatory advice for listed and unlisted companies in a broad spectrum of industries. She has assisted in the reviewing and drafting of joint venture, shareholder, distribution, as well as sale and purchase agreements. Asia Pacific Legal 500 2018 lists Corinne as a leading individual in Competition and Antitrust in Singapore.

10 Collyer Quay, #10-01 Ocean Financial Centre, Singapore 049315 Tel: +65 6531 4110 / URL: www.drewnapier.com

Drew & Napier LLC


Spain


1. In Spain cartel activity is covered and sanctioned by legislation on competition, enacted both at the European Union level – basically Article 101 of the Treaty on the Functioning of the European Union (“TFEU”) and Article 1, (1) and (2), of the Council Regulation (EC) No. 1/2003, on the implementation of the rules on competition laid down in Articles 101 and 102 of the TFEU (“EU Regulation”), and, at national level – basically, in Article 1 of Law 15/2007, on competition (“Spanish Competition Act” or “SCA”), which follows the said EU provisions very closely, and in Regulation on Competition, approved by Royal Decree 261/2008, which developed and implemented the SCA (“Competition Regulation”).1

Article 1 (1) SCA prohibits agreements or concerted practices between two or more undertakings which have the object or effect of preventing, restricting or distorting competition and which may affect trade within Spain. Cartels are one of those types of collusive conducts, which the Fourth Additional Provision of the SCA, in its current version, defines as “an agreement or concerted practice between two or more competitors aimed at coordinating their competitive behaviour on the market or influencing the relevant parameters of competition through practices such as, but not limited to, the fixing or coordination of purchase or selling prices or other trading conditions, including in relation to intellectual property rights, the allocation of production or sales quotas, the sharing of markets and customers, including bid-rigging, restrictions of imports or exports or anti-competitive actions against other competitors”.2 Agreements qualified as cartels are void, except if covered by a provision of the same Act that provides in different terms (Article 1 (2) SCA).

As a matter of fact, the general cartel prohibition (“Prohibition”) foreseen in the said Article 1 SCA, is subject to several limitations. One of them is foreseen by Article 1 (3), which provides that the Prohibition “will not apply to agreements, decisions, recommendations and practices that contribute to improving the production or the commercialisation and distribution of goods and services or to promoting technical or economic progress, without the need for any prior decision for this purpose, providing that: a) They allow consumers a fair share of its benefits; b) They do not impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives, and c) They do not afford participating undertakings the possibility of eliminating competition in respect of a substantial part of the products or services in question”. Article 1 (4) sets forth also that the Prohibition “is not applicable to agreements, collective decisions or recommendations, or concerted or consciously

Pedro Moreira SCA Legal, S.L.P.



parallel practices that comply with the provisions set out in the Community Regulations on the application of Article 81 (3) of the EC Treaty3 for certain categories of agreements, decisions by associations of undertakings and concerted practices, including when the corresponding conduct may not affect trade between EU Member States”. Finally, Article 1 (5), following the regime already foreseen in the EU Regulation and in the mentioned Article 1 (4), provides that “the Government may also declare through Royal Decree the application of Section 3 of this Article to certain categories of conduct, prior report by the Competition Council and the National Competition Commission”.4

In addition, Article 5 of the Spanish Competition Act establishes that the “Prohibition set forth in the aforesaid Article 1 will not apply to conducts which, due to their scant importance, are not capable of significantly affecting competition. The criteria for demarcating conduct of minor importance shall be determined according to regulations, considering, among others, the market share”. For now, the demarcation has been carried by Articles 1 and 2 of the Competition Regulation, the first determining the conducts qualifiable of “scant importance” on the ground of their market share” and the second excluding certain conducts from that concept even if they meet the requirements foreseen in the first of them to be qualified as “of scant importance”.

2. The Prohibition is enforced by the Comisión Nacional de los Mercados y de la Competencia, the Spanish Commission on Markets and Competition (“CNMC”), which was created in 2013, by Law 3/2013, and that assumed, since its inception, among others, the powers to enforce competition regulations that once were entrusted to the Comisión Nacional de la Competencia, the Competition Commission,5 now extinguished (Article 5). These powers extend to the enforcement in Spain of EU competition law, where the conduct taking place in the country may affect trade between Member States, under Article 5 of the EU Regulation.6

Public enforcement of the Prohibition at first is vested in the CNMC,7 which, on this field, has the authority to: • investigate any agreements or conducts that may be infringing the Prohibition and,

as such, to request the undertakings concerned to supply the information necessary and to carry out any inspections for that purpose;

• declare that a certain conduct infringes the Prohibition;8 • impose fines of up to 10% of the turnover of the offender in the preceding business

year (Article 63 (1) (c) SCA), or in case the turnover cannot be determined and on the ground of the infringement being qualified as very serious, of more than €10 million (Article 63 (3) SCA);

• impose periodic penalty payments, to an amount of up to €12,000 per day, aimed at compelling the infringer to put an end to the conduct that has been declared as infringing the Prohibition (Article 67 SCA);9 and

• the enforcement of its sanction resolutions as well as of those given in review by the courts (Article 5 Law 3/2013).

On the grounds that the infringements of the Prohibition are qualified as very serious by the SCA (Article 62 (4) (a)), this piece of law sets also forth that they lapse after four years, as against shorter lapses for less serious infringements. The term of the lapse period shall be counted as of the day when the infringement was committed or, in the case of continued infringements, as of when they have ceased (Article 68 (1) SCA).

SCA Legal, S.L.P. Spain



Law 3/2013 provides for a formal distinction between the organ of the CNMC in charge of investigating agreements and conducts and the one in charge of applying fines and other sanctions for the infringement of the Prohibition (Article 29.2). Where investigation activities and the drafting of the resolutions are carried out by the Competition Division, fines and other sanctions are applied by the Competition Committee of the CNMC’s Council,10 the corresponding decisions being challengeable before the Courts, which are entitled to repeal or modify them, though on legal grounds only (Article 48 SCA).

3. In addition to the public enforcement of competition law – where what is at stake is the application of fines and other sanctions for the infringement, by a certain conduct, of competition rules – in Spain private enforcement of these rules is also foreseen by the law. Third parties (such as customers of cartel participants) may bring private actions, before the Courts of Commerce, for damages arising from an infringement of the Prohibition.

Since the enactment of the SCA, the initiation of the said private actions does not depend on a previous decision by the CNMC sanctioning the (allegedly) damaging conduct, or even on the opening of investigation proceedings against the defendant, something that clearly leaves room for stand-alone claims. Nonetheless, with a view to avoiding decisions on competition matters based on an interpretation of the competition laws that is not line with that of the CNMC, the 2000 Civil Procedure Act allows for the CNMC to intervene in any proceedings, as an amicus curiae, on its initiative or at the request of the court, for the purpose of informing or making comments regarding the enforcement of competition laws (Article 15 bis).11

Whereas public enforcement is vested both in the Authorities and the Courts, private enforcement is in the hands of Courts only, though law also states that competition disputes between offenders and victims can be solved by arbitration or ADR (Article 77 SCA). Regarding arbitration, the CNMC is entitled to act as a court of arbitration for, among others, the hearing of damage claims filed by victims against offenders (Articles 5 (1) b) SCA and 46 of the CNMC’s bylaws).

4. In addition to its cartel enforcement activity, the CNMC acts also as a consulting body of the Government, the parliaments, the regional governments and other public entities, in all matters related to competition, something that empowers it to participate in the drafting of any piece of legislation on competition (Article 5 (2) SCA).

Overview of investigative powers in Spain

Investigative powers are vested in the Competition Division of the CNMC, as foreseen in Article 27 of Law 3/2013, which gives tenured civil servants of the CNMC, duly authorised by the relevant director, the status of an agent of the authority enabled to conduct as many inspections as required at companies and undertakings for the proper enforcement of such piece of legislation and, notably, of the commitments in competition matters entrusted to it by Article 5.

The powers of inspection granted to the CNMC include, among others, those of making dawn raids, checking books and other documents, obtaining copies of any documentation and enquiring the staff of the companies or undertakings under investigation (Article 5 (2)). The performance of some of these powers (e.g. that of making a dawn raid) depend on the express prior consent of the affected party or, failing that, on a court authorisation.12




In addition to such powers, in the performance of its function of defending competition, the CNMC benefits from a duty of collaboration with it, imposed by Articles 39 SCA, 10 of the Regulation and 28 of Law 3/2013, on all persons, bodies or entities of all public authorities. This duty extends to the provision, on time, of all types of data and information in their possession which may be necessary for the discharge of the CNMC’s functions.

On the ground that the infringement of competition laws is not of a criminal nature, one could see the investigation powers of the CNMC as smaller if compared to those of the police when investigating the commission of crimes. Nonetheless, the court authorisation is also the rule in criminal investigation whenever the police intends to carry out certain investigation measures that may vulnerate certain constitutionally protected rights. The difference, if any, therefore, have not so much to do with the powers themselves, but with how they are exercised by the police, on one hand, and the CNMC, on the other, whose staff, most of which has civil servant status, does not see itself as a police department.

Sanction procedures are subject to a time limitation foreseen by Article 36 (1) SCA, which sets forth that those procedures shall not extend for more than 18 months following the date of their commencement. In case no resolution is adopted in the first 18 months following this date, the procedure will be deemed as expired (Article 38 (1) SCA).

Overview of cartel enforcement activity during the last years

1. At the time of writing this Chapter (December 2018), the last figures on CNMC’s enforcement activity are those disclosed by it in the 2017 Annual Report13 (“Report”), published in early 2018.

In 2017 the CNMC initiated nine sanction proceedings for infringements of Article 1 of SCA, of which three were for cartel agreements aimed at setting or increasing prices and fixing market quotes. Sectors involved were television, car batteries, electricity for rail networks, tobacco, pharmaceuticals, stowage and education ancillary activities.

In that year the Competition Division terminated 26 sanction proceedings, of which 16 were rejected, seven ended with a sanction proposal, one with an acquittal proposal and two with an agreement proposal.

In 2017 the CNMC adopted three resolutions on cartels that aimed at setting prices, markets sharing and exchange of relevant market information. Fines amounted to €72 million, of which €12,691,908 were pardoned under the leniency regime. The said three resolutions referred to the following cases: (i) Medium and low tension electrical cables (case S/DC/0562/15) (“Cables”): In this

case, the CNMC found that several companies operating in this area of business had entered into three different cartel agreements, one (with the support of the sectorial Association), to set prices, another to set market shares for big clients and a third one to set the market shares of two distributor companies. Fines amounted in total to more than €45 million.

(ii) Cement in Asturias (case S/0545/15): In this case, the CNMC found that 13 companies had established a cartel, under which they were setting prices of cement in Asturias and market shares, all for no less than 15 years. Fines amounted in total to €6.12 million.

(iii) Transport of passengers in the Balearic Islands (case S/DC/0512/14) (“Transport of Passengers”): In this case, the CNMC found that several companies operating in this area of business had agreed to (i) set minimum prices, (ii) engage in bid rigging activities in relation to public tenders launched by the regional government




for the rendering of school transportation, (iii) suggestion and diffuse prices of several transport services in the island of Mallorca, and (iv) share the market of certain transport services demanded by certain types of clients also in the said island. Fines amounted in total to €9.17 million.

Of the said three cartel procedures, two (Cables and Transport of Passengers) were initiated following a leniency request submitted by companies taking part in the cartels. In the Cables case, a leniency exemption, to the amount of €12 million, was applied to the participating company that brought information on the cartel to the CNMC.

In 2018, the CNMC initiated several investigation procedures and adopted several sanction resolutions on cartels, the most important of which are the following: a) Investigations on possible:

(i) anti-competitive practices (agreements for the distribution of customers, price-fixing and exchange of information) in the market for the purpose of marketing metallurgical coke, petroleum coke, coal, anthracite, foaming agents and recarburisers;

(ii) several anti-competitive practices (distribution and manipulation, among others, in tenders called by the Department of Traffic) by a cartel of companies operating in the business of roadworthiness testing services for commercial vehicles;

(iii) several anti-competitive practices (price-fixing, market share, etc.) by a cartel of companies operating in the radiopharmaceutical market;

(iv) fixing of prices by a group of cartelised suppliers of scrap metal used in steelmaking; and

(v) manipulation of tenders for the exploitation and maintenance of roads, by a cartel of several companies operating in the construction and public works business.

b) Sanction resolutions: (i) Financial Derivatives (case S/DC/0579/16): In this case, the CNMC found that

four commercial banks (BBVA, Caixabank, Banco Sabadell and Banco Santander), operating in this area of business had entered into a cartel to sell overpriced financial derivatives aimed at hedging the interest rate risk born by companies to whom they gave credit. Fines amounted in total to €91 million, ranging from €31.8 million, the highest, and €15.5 million, the minimum.

(ii) Business parcel services (case S/DC/0578/16) (“business parcel case”): In this case, the CNMC found that several companies operating in this area of business (General Logistics Systems Spain, S.A., Correos Express Paquetería Urgente, S.A., Redyser Transporte, S.L., Fedex Spain, S.L., among others) had engaged for several years, some of them for more than 10 years, in nine cartel agreements, which included “non-aggression” and market share clauses. Fines amounted in total to €68 million, the highest one being of €19.635 million and the minimum of €690,400, but, out of a leniency measure, the cartel members companies that denounced the cartel (General Logistics Systems Spain, S.A., and parent companies) were exempted from paying their fine (€3.8 million).

(iii) Batteries (case S/DC/0569/15): In this case, the CNMC found that several companies (Azor Ambiental, S.A., Exide Technologies, S.L., Recuperación Ecológica de Baterías, S.L.) dedicated to the sale of used car batteries had established a cartel, under which they had been setting prices and market shares in this market between 2008 and 2012. Fines amounted in total to €5.37 million, the highest single fine being €3.37 million.14




(iv) Public tenders launched by several departments of the Spanish General Administration (Tax, Social Security and Employment) for the acquisition of computing services (case S/DC/0565/15) (“public tenders case”): In this case, the CNMC found that 11 companies operating in this area of business (Software AG Atos Spain, S.A., Connectis ICT Services, S.A., España, S.A., Indra Sistemas, S.A., and seven others) had engaged for more than 15 years in bid rigging activities in relation to public tenders launched for the rendering of computing services, aimed at increasing the prices of those services. Fines amounted in total to almost €30 million, the highest amounting to €13.5 million and the minimum to €46,760.

2. In 2018, at judicial level, the Tribunal Supremo (“Supreme Court”) and the Audiencia Nacional (“National High Court”) ruled on several occasions on cartels, among which it is worth mentioning the following: a) From the Supreme Court:

(i) Ruling n. 1634/2018 (procedure 2781/2016), which confirmed a ruling given by the National High Court, that dismissed an appeal filed by Special Prices Autoreisen, S.L., a rent a car company, against a resolution of the CNMC that had dismissed a request for administrative settlement of a cartel investigation on the ground that the same did not meet the requirements foreseen thereto in Article 47 SCA.

(ii) Ruling n. 1571/2018 (procedure 3078/2016), which confirmed a ruling given by the National High Court, that partially dismissed an appeal filed by Siecsa Construcción y Servicios, S.A., a construction corporation, against a 2013 resolution of the former Competition authority that had applied a fine of €3.8 million for participation in a cartel that shared the market in public and private tenders in the region of Cantabria (case S/0329/11).

(iii) Ruling n. 1375/2018 (procedure 2452/2017), which confirmed a ruling given by the National High Court, that had dismissed an appeal filed by the Basque Country Civil Engineers Association against a resolution of the extinguished National Competition Commission, that had imposed on the appellant a fine of €200,000, as a sanction applied to it for having engaged in price recommendations regarding the professional services rendered by its members (case S/0356/11).

(iv) Ruling n. 1052/2018 (procedure 3055/2017), which repealed a ruling given by the court of instance, and confirmed a sanction resolution of the Basque Country Regional Commission that had been set aside by the a quo ruling, which had applied a fine of €508,344 to Centro de Contratación de Transportes de Vizcaya, Sociedad Cooperativa, and several other companies and an association of dockers, on the ground of having participated in a collusive boycott, in the port of Bilbao, against Maersk, a container shipping company and purchaser of docking services (case 2/2014).

b) From the National High Court: (i) Ruling given on 5 June 2018 (appeal 82/2014 – case Repsol Comercial de

Productos Petrolíferos, S.A.), which declared void and of null effect, on formal grounds, a resolution of the former competition authority (case V/652/07) that had declared a previous sanction resolution (that had imposed fines of more than €5 million to that company and several others operating in the area of petrol distribution for participating in a cartel) partially undischarged by the said infringer.




(ii) Ruling given on 28 March 2018 (appeal 374/2016 – case Laboratorios Hartmann, S.A. and Paul Hartmann, S.L.U.), which confirms in full a 2016 sanction resolution of the CNMC (case S/DC/0504/14) that applied a €4 million fine for participation in a cartel of sellers of pharmaceutical products, between 1997 and 2014, that set the price of a product for incontinence in adults.

(iii) Ruling given on 26 February 2018 (appeal 150/2015 – case SAICA and three other companies in the same group), which declared void and of null effect, in relation to the fines applied to the appellants (€5.37 million in total), a 2015 sanction resolution of the CNMC (case S/0429/12) that applied fines to the amount, in total, of €98.2 million to 30 companies and three trade associations operating in the industrial waste and urban sanitation businesses (Saica, FCC, Urbaser, Valoriza and others) for participation in a cartel aimed at, among others, the increase of prices and market sharing, in public and private tenders launched in the regions of Andalusia, the Basque Country and Madrid.


The CNMC has the authority to decide not to initiate proceedings following a complaint, but only when the Competition Directorate considers that, in the case brought to its attention, there seem to be no infringement of competition rules (Article 49 (3) SCA). Notwithstanding the fact that this provision does not leave much room for an enforcement policy that sets priorities in the use of the scarce resources available to enforce competition rules, the fact is that room exists, although only in relation to the investigation activities carried out at the CNMC’s own discretion.

In relation to those investigation activities, there are key issues in enforcement policy that tend to change from time to time, as the circumstances of the economy and the authorities’ views on what to do in order to better enforce competition rules, also change. In the case of the CNMC, on the ground of its recent creation, which has not even given ground for the renewal of its managing board, the Council, it is still too soon to see significant changes in its enforcement policy.

Nonetheless, since 2015, the CNMC has been approving annual programmes where it defines the general strategic measures to be taken in the year and the measures specifically foreseen for each of the sectors over which it has regulatory powers and in terms of enforcement of competition rules.

For 2018, in addition to announcing the creation of a Department of Economic Analysis, in charge of analysing public procurement data and surveying sectors where sensible competition issues have already been identified, the CNMC’s annual programme has set as one of 18 general strategic measures that of adopting a global vision aimed at promoting competition and an efficient economic regulation. With this view in mind, the CNMC announced that, in the area of competition in 2018, it would, among others (i) disclose guidelines on the drafting of economic reports to be submitted within certain complex procedures, (ii) consider the possibility of allowing oral pleadings in certain complex procedures, (iii) reinforce the economic background of its resolutions, (iv) develop a technical framework for the analysis of public procurement tenders and auctions, with a view to improve its standards and efficiency, and (v) improve the defence of its resolutions before the courts.

In addition, following the importance given to the digital economy by its chairman, Mr. José




María Marín Quemada (2013–), an economist, the CNMC has identified as priority areas of its competition enforcement activity in 2018 certain areas of business where the use of the internet, as a platform from which business is conducted, has been expanding (financial sector, transportation and public procurement). Other areas also identified as priorities for the CNMC in this year are television advertisement, pharmaceutics, hospitals, ports’ services and agriculture.


As commented before, investigation of cartel activity is carried out by the Competition Division through its Cartels and Leniency Subdivision, which has powers neither to initiate sanction procedures nor to apply sanctions, these powers being vested in the Council. This has been understood as enough to observe the usual rule in sanction procedures that requests that the power to investigate and the power to punish are vested in different persons or organs. Nonetheless, since the creation of the CNMC, there has always been a discussion of whether this would be sufficient to make the CNMC strong enough to impose fines for competition law infringements to companies with which it has close and frequent relations, not on the ground of being a competition authority, but on that of being also the authority in charge of most of the regulated sectors (energy, telecommunications, etc.). That is to say, the weakness of the CNMC as a competition authority would lie not so much on the fact that the distinction between who investigates and who punishes is not much more than formal,15 but on the fact that who is in charge of regulating a sector may not seem very well positioned to punish competition infringements by companies operating in the same sector.

Though the said argument ignores the fact that competition laws apply not only to companies operating in regulated sectors but also to companies in the other sectors of the economy, the truth is that companies operating in regulated sectors – on the ground of being only a few and having, as such, high turnover and big market shares – are prone to being applied high fines in case of infringement of competition rules, precisely those for which strength and independence on the part of the competition authority are mostly required.

Anyway, notwithstanding the above arguments used against the CNMC, after more than five years of activity, there is no doubt that this agency has been independent and strong enough as to impose heavy fines for competition infringements to a high number of companies from different sectors of the economy, including many operating in sectors regulated by it. Therefore, it seems that, at least in this point, the concerns raised by the creation of the CNMC have proved to be somewhat ungrounded.

Nonetheless, if independence and strength have proved not to be an issue, some argue, not always with reason, that the same cannot be said of the CNMC’s skills to deal with complex cases, for lack of, either of economic vision, which leads cases not be handled in an efficient manner, at least from an economic point of view, or of legal assertiveness, which has leaded many sanction resolutions, most of them adopted before 2016, to be declared void and of no effect when reviewed by courts. Regarding these CNMC’s resolutions, many of them were repealed on mere formal grounds (e.g., lack of notification of certain interim decisions to the investigated parties or of hearing of these, etc.), something that generated criticism and frustration, notably from members of its own Council.


Articles 65 and 66 SCA, as developed and implemented by Articles 46 to 53 of the Competition Regulation, allow the CNMC to grant exemptions from payment of fines, or




reductions in the amount of them, to undertakings or individuals that inform the CNMC of the existence of a cartel and of their participation or responsibility in the same, accompanied by the substantive evidence at their disposal or which may be obtained through an internal investigation, provided the requirements and conditions thereto laid down in the LDC and in the Competition Regulation are duly met.

The SCA establishes an exemption of sanction for the members of a cartel that bring evidence to the CNMC of the existence of (i) sufficient evidence to ground an investigation of the cartel, or (ii) of the infringement of the Prohibition – when, in this second scenario, no exemption has been given to any person on behalf of the former (Article 65.1) – provided that she cooperates with the CNMC and, among others, ceases to participate in the cartel (Article 65.2).

In addition, Article 66 SCA provides for a reduction in the sanctions to those individuals or companies participating in a cartel, that, without meeting all the requirements foreseen for the exemption granted by Article 65, at least meet some of them, and notably that of cooperating with the CNMC in the investigation, by providing evidence deemed relevant in comparison to that already gathered by such Commission.

In June 2013 the extinguished competition authority, the Comisión Nacional de la Competencia, approved a clemency programme under the SCA, which follows the leniency programme of the European Commission and which the CNMC has been applying since its creation. The notice of the programme, published in the Official Gazette in August 2013, includes detailed rules on the requests for exemption and reduction of the fines, the collaboration to be provided by the offenders and confidentiality, as well as an exhibit with the model form to be used by companies and undertakings that request leniency measures.

In 2018, the CNMC used this programme to exempt several offenders from fines, or to reduce the amount thereof, several offenders. An example of this is the mentioned business parcel services case, where, as mentioned, the CNMC exempted the members of the cartel that informed of the conduct of paying a fine to the amount of €3.8 million out of a leniency measure applied to such offender.


Following the solution devised by the EU Regulation, Articles 52 of SCA and 39 (5) of the Competition Regulation set a route for the termination of sanction proceedings without the application of a sanction to the offender. Under this provision, the Council of the CNMC, following a proposal by the Competition Division, has the authority to terminate sanction proceedings on cartel activities, when the alleged offenders have offered to bind themselves to eliminate the damages arising out of the investigated conducts, in terms deemed to sufficiently protect the general interest.

The offer is converted in a commitment once the Council adopts the decision to terminate the proceedings. Such decision cannot be taken after the termination of the investigation phase and the notification to the alleged offenders of the draft of the Resolution of the proceedings.

Though the administrative settlement of cases is different from a leniency programme – notably on the ground that, in such case, the sanction proceedings are not opened on the basis of information provided to the CNMC by a company or undertaking participating in a cartel – it can lead to the non-application of sanctions to the offender, which is, by all means, a form of leniency.

Though the CNMC has administratively settled several cases (e.g. abuse of dominant position), so far there is no notice of a cartel case having been settled in these terms.





Third parties (e.g., customers of cartel participants) can denounce cartels as well as other anti-competitive conducts that they see as infringing the SCA and actually a substantial part of the CNMC’s sanctioning procedures are opened following a complaint filed by a third party. For example, the 2015 investigation of the mentioned public tenders’ case, which, as mentioned, led to fines of almost €30 million, was opened on the ground of a complaint filed by one of the acquirers of those services.

The complaint needs to be submitted through the CNMC’s webpage and include the data foreseen in Article 25 of the Competition Regulation. Data foreseen in Exhibit I of this Regulation can also be included in the complaint, although this is not mandatory.

Participants have the right to be notified of the CNMC’s decision to open sanctioning proceedings or to set the case aside following the submission of a complaint. This decision, which is taken by the Council of the CNMC, following a proposal by the Competition Division, can be challenged before the courts.

In case the CNMC decides to initiate sanction proceedings, informers, as interested parties, have the right to (i) access those proceedings, with the exception of documents therein with commercial secrets belonging to other parties, (ii) request evidence, (iii) file pleadings; and (iv) receive notifications of certain developments produced in the same and, notably, receive the list of conducts that the Competition Division deems as foreseeably breaching the competition rules, and the draft of the resolution that ends the sanction proceedings (Articles 31–33 of the Competition Regulation).

Nonetheless, with a view to increase the number of infringements brought to the attention of the CNMC, this has announced, in early 2018, that it will authorise complaints to be filed without the need to disclose the name of the person/company that fills them.

Penalties and sanctions

As mentioned before, the CNMC has the authority to apply sanctions to offenders of competition rules, either in the form of fines or in that of periodic penalty payments.

Pursuant to Article 63 SCA, fines can be up to 10% of the turnover of the offender in the preceding business year. Apart from establishing an upper limit, as this provision does not include any guidelines on exactly how the fine should be set, in 2009 the predecessor of CNMC, the National Competition Commission, approved some guidelines on the subject.

Nonetheless, in 2015 in its ruling 112/2015 (appellation 2872/2013), the Administrative Chamber of the Supreme Court ruled that those guidelines did not comply with the provision of Article 63 SC and set some criteria that the CNMC has been following since then (“Criteria”).

In accordance with the Criteria, the said 10% upper limit is not a cap to be applied to a previously determined sanction, as it had been understood before, but the true upper limit of the fine range, whose amount needs to be set in accordance with the seriousness of the infringement to be sanctioned, the 10% amount being restricted to the most serious infringements only. In addition, the relevant turnover for the purpose of determining the said upper limit is the global turnover of the offender, which comprises not only the one corresponding to the market where the infringement was committed but also those corresponding to the remaining business activities of the offender.

In order to set the amount of the fine, the Criteria distinguish between the general amount – which is based on the nature of the infringement in itself, corresponding to around 60% of the upper limit – and the specific one – which takes into consideration the circumstances of




the infringement (duration and positive/negative aspects of the conduct of each of the companies to be sanctioned and the dimension of the market affected by the infringement),16 corresponding to the remaining 40% of the upper limit.

Nonetheless, in accordance with the Criteria, the sum of the said general and specific amounts corresponds to the final amount of the fine if such sum is deemed to be proportionate to the “relevance of the conduct of the infringer”, bearing in mind the importance of the business activities for which the infringer is to be sanctioned in her global turnover and the profits generated by the conduct to be sanctioned. Based on this, the fine should neither be smaller than the amount of those profits nor substantially higher than the same. Therefore, in case the sum of the general and the specific amount lies out of those limits, the amount of the fine needs to be adjusted accordingly.


1. Rulings on civil liability given by the Courts of Commerce, which are provincial and based on the capital of each province, can be appealed before the corresponding Provincial High Court (Audiencia Provincial), also based on the province capital. The Provincial High Courts hear the cases in second instance, which means that their rulings can be based on facts different from those accepted by the rulings given by the a quo courts. Nonetheless, the appellate powers of these courts are limited by the grounds foreseen by the appellant in her pleadings.

The appellate rulings are appealable in cassation before the Civil Chamber of the Supreme Court, also based in Madrid. The grounds for cassation of the rulings given by the Civil Chamber of the National High Court are those foreseen in general terms in the 2000 Civil Procedure Act, according to which a ruling given by a Provincial High Court is appealable in cassation on any of the following types of grounds: (i) where the a quo ruling deals with fundamental rights, except the right to the due process of law foreseen in Article 24 of the Spanish Constitution; (ii) when the amount of the proceedings exceeds €600,000; or (iii) if that amount is lower or the proceedings have been conducted due to their subject matter, when the hearing of the appellation has “cassation interest” (Article 477 (2)).17

2. With regards to public enforcement, the trying of the decisions by the CNMC is vested in the Administrative Chamber of the National High Court, based in Madrid, which hears the cases in unique instances. The rulings given by this Court are appealable in cassation before the Administrative Chamber of the Supreme Court, also based in Madrid.18

The grounds for cassation of the rulings given by the said Chamber of the National High Court are those foreseen in general terms in the 1998 Contentious Administrative Proceedings Act, according to which a ruling given by the Administrative Chamber of the National High Court is appealable in cassation on one or both of the following types of grounds: (i) infringement of procedural rules in the proceedings followed in the said a quo court; and (ii) infringement of any rules and or case law applicable to the case being heard (Article 88).

Criminal sanctions

The Spanish legislation does not qualify as a crime any of the conducts forbidden by the competition legislation. The criminalisation of certain anticompetitive conducts has been discussed on several occasions, but the legislator has always opted to keep things as they




have been since anticompetitive conducts began to be punishable under the 1963 Competition Act. In the case of cartel behaviour, when forbidden, it is also deemed as an administrative infringement, sanctioned with penalties, applied by the CNMC, and which, in no case, are deemed to have criminal sanction nature.

Notwithstanding the above certain anticompetitive conducts may be deemed a crime, if they are qualified as such under a broader rule not specifically devised to punish those types of conducts. That is notably the case of several fraudulent schemes seen in public procurement tenders (bid rigging) – where several bidders collude to increase prices, if acting as sellers, or to lower them, if acting as buyers, thus generating a direct loss to the launcher of the tender or auction and an indirect one to taxpayers and the whole economy – which are punishable, under Article 262 of the Criminal Code, with imprisonment from one to three years and several ancillary and several ancillary sanctions, which are more severe when the tender or auction has been called by a public body.

Cross-border issues

In accordance with the EU Regulation and the SCA, the CNMC has the authority to enforce not only the national competition rules, but also such regulation, when an infringement of Article 101 TFEU, i.e. one that affects competition in the EU market, occurs at least partially in Spain (Article 5 Law 3/2013).

In addition, the CNMC cooperates with several competition authorities, both at EU level and with national authorities from other Member States, and is a member of the European Competition Network (“ECN”), a network integrated by those authorities and the European Commission, that, in the words of the CNMC, “facilitates compliance with the obligations on cooperation imposed by legislation in the European Community, and which ensures consistent and effective application of the regulations on defence of competition, while also allowing sharing of experiences and identification of best practices”.

The CNMC also participates in the European Competitions Authorities Forum (“ECA”), a forum which the CNMC describes as focused on discussion of experiences and exchange of information on good practices among competition national authorities from member states of the European Economic Area; and takes part in the Committee on Competition from the OECD, on behalf of Spain, which concentrates on the distribution and exchange of knowledge and experiences in the defence of competition.

It also sponsors, together with the competition authorities from Portugal, an Ibero-American Forum on Competition, which meets once a year with competition authorities from Ibero-American countries, with the purpose of establishing ties with them.

Developments in private enforcement of competition laws

1. In Spain private enforcement of competition law and, as such, that of the Prohibition, has been in place for some time, and notably before the enactment of the SCA in 2007. As a matter of fact, however, in the first few decades of the Spanish competition legislation private enforcement was not specifically foreseen, and the mainstream understanding was that competition rules were aimed at protecting general interests – not private rights – and, as such, that the infringement of those rules could not be a ground for claiming damages – courts began to accept the existence a right to claim those damages long before the legislation opted to specifically rule this matter. Whilst before 2007 no provision expressly foresaw such enforcement,19 courts began to accept




that the right to claim damages caused by infringement of competition rules was covered by general rules and principles that allow for the claim, by an individual or a juridical person, of any damages suffered as a consequence of the infringement of any laws, as was upheld by a ruling given by the Civil Chamber of the Supreme Court in 2000.20

Nonetheless, the enactment of the SCA significantly upheld such enforcement by (i) entrusting the Courts of Commerce with the power to decide any controversies arising out of the infringement of Articles 1 and 2 of the same, and (ii) by repealing the need, foreseen in the 1989 Competition Act , to have a decision of the competition authority that sanctions a conduct, as a condition for any claim for damages to be admitted by the courts.

In 2017, with the transposition of the Directive 2014/104/EU, by Royal Decree Law 9/2017, which added several provisions to the SCA – and, notably, a title (VI) on compensation of damages – private enforcement of competition law in Spain received a new impulse.

The provisions of Title VI of the SCA (Articles 71–81) cover relevant issues on the damages claims caused by the infringement of competition laws, and, notably, the principle of full indemnity of damages, the determination of the amount to be indemnified and the burden of proof, some of them already covered, though in very general terms only, by the civil torts’ legislation (Article 1902 of the Civil Code).

Following Article 3 of the Directive 2014/104/EU, Article 72 SCA provides for the existence of a right to full compensation of damages, adding that such compensation shall place a person who has suffered harm in the position in which that person would have been had the infringement of competition law not been committed, which means the right to compensation for actual loss and for loss of profit, plus the payment of interest. Nonetheless, pursuant to this provision, full compensation shall not lead to overcompensation, whether by means of punitive, multiple or other types of damages.

In order to avoid overcompensation, Article 78 SCA provides that compensation amounts to the damages effectively suffered by the claimant, which excludes any amounts passed on, i.e., “compensation for actual loss at any level of the supply chain cannot exceed the overcharge harm suffered at that level”. The courts have the power to estimate the share of any overcharge that was passed on.

As to the burden of proof, we need to distinguish between the burden of proof of the infringement and the burden of proof of the damages. Regarding the burden of proof of the infringement, Article 75 SCA sets forth that “an infringement of competition law found by a final decision of the CNMC or by a Spanish court is irrefutably established for the purposes of an action for damages for the infringement of competition rules”. As to the burden of proof of damages, Article 76 SCA establishes that it shall be presumed that cartel infringements cause harm, although the infringer shall have the right to rebut that presumption. In any case, the burden of determining the amount of damages suffered is upon the plaintiff. If this fails, it will be up to the court to estimate such amount (Article 76 (2) SCA).

In case of more than one offender, liability for the damages is joint and several (Article 73 (1) SCA). Therefore, if an offender pays the victims more than its share of the damages, she will have the right to recover from the other offenders the amounts paid in excess (Article 73 (5) SCA).

The limitation period for claiming an indemnity for damages caused by an




infringement of the Prohibition is now five years (Article 74 SCA), which is substantially higher than the one foreseen in the general torts’ legislation (one year)21

and applicable to those damages before the 2017 reform. The said limitation period is suspended, among others, for the duration of any consensual dispute resolution process between the parties.

2. The reform carried out by Royal Decree Law 9/2017 did not affect substantive law matters only, as it extended to procedural ones, by amending the 2000 Civil Procedure Act. The said piece of legislation added a section (1st Section bis of Fifths Chapter of the Second Title of the Second Book) to the said Civil Procedure Act, with Articles 283 bis a) to 283 bis k), on evidence in damages proceedings for the infringement of competition rules. The most significant innovation in this matter has to do with the disclosure of evidence by the defendant, or would-be defendant, at the request of the plaintiff, which may now be ordered by the court, if certain requirements thereto are duly met. The failure of the requested party to comply with a court order on this may generate several negative consequences for such party, including the application by the court of daily fines of up €60,000, let alone be a ground for the initiation of a criminal procedure on charges of a commission of a crime of disobedience (Article 283 bis h)).

In 2018, there have been very few court rulings on damage claims filed by victims of cartels, and some of them were not in relation to cartel infringements forbidden by the SCA but by the EU Regulation. Among them it is worth mentioning the following: (i) Ruling n. 288/2018 of the First Court of Commerce of Murcia on 15 October 2018

(case 143/2018), whereby it declared that Volvo Group España, S.A.), a truck seller, had engaged in collusive conducts at the time of selling a truck to the plaintiff and condemned such company to pay damages to the amount of €128,756.78.

(ii) Ruling n. 274/2018 of the First Court of Commerce of Murcia on 27 September 2018 (case 144/2018), whereby it declared that Volvo Group España, S.A.), a truck seller, had engaged in collusive conducts at the time of selling a truck to the plaintiff, but refused to condemn it pay any damages thereto, as the plaintiff failed to meet the burden of proof of the damages amount that it had assumed, thus leaving no room for the court itself to set such an amount in accordance with Article 76 (2) SCA.

(iii) Ruling of the Third Court of Commerce of Barcelona on 5 September 2018 (case 30/2015-D4), whereby it condemned several companies operating in the sector of paper envelopes (Antalis International, Envel Europa, Tompla, Printeos, Hispapel, among others) to indemnify the plaintiff, a buyer of this type of product, in the amount of €2,043 million, for damages (overpricing) caused by a cartel agreement that operated between 1987 and at least 2009, as had been declared by the former competition authority in 2013 (case NUM000 Sobres de Papel).

Reform proposals

For the time being there are no substantial outstanding proposals for reform of the Spanish national competition regime, although the debate about the institutional framework of the Spanish competition laws enforcement has been on the table since the creation of the CNMC in 2013.

The ideas behind the merger of the competition authority and some of the regulatory ones in the CNMC in 2013, which had to do with reducing costs, generating synergies and




avoiding contradictions between regulatory and competition policies, have not been confirmed by the CNMC’s practice in its first five years of existence. This and the mentioned weaknesses seen by many in the CNMC’s institutional framework, had led the former Government, supported by the People’s Party, in 2017, to consider revising the solution that itself had devised in 2013, with a view to get back to a regime similar to the one in place before the creation of the CNMC, i.e., a regime that entailed a competition authority, with powers to investigate and sanction the infringements of the competition legislation, and several independent regulatory agencies, with powers to rule and sanction conducts except those foreseen by the said legislation.

For now, the new government, supported by the Socialist and several small non-mainstream parties which has taken office in June 2018, has not announced any steps on this, but it would not be surprising if, in the end, it decided to dismantle the CNMC and move back to the independent agencies’ regime with a stand-alone competition authority, by all means the most common regime in the EU.

Anyway, what is being discussed for the time being is not the reform of the competition rules or that of the competition authorities but the reform of sectors where compliance with competition rules has long been a highly discussed issue. An example of this is that of the regulated professions sector (architects, economists, engineers, legal professions, etc.), where not only the CNMC but also the competition authorities that preceded it, have found room for much improvement. Regarding this sector, the CNMC has recently published a report with its comments on the draft of an act to reform the conditions to access the professions of abogado (Spanish lawyer) and procurador de los tribunales (Spanish legal professional entrusted with powers to represent a party in court proceedings), where it basically supports the view that it is in the general interest that the acts reserved by the current legislation to the second of the said professions be also opened to lawyers.22

* * *

Endnotes

1. In addition, Spain has enacted Law 3/1991, on unfair competition. This piece of legislation does not aim to protect competition in the markets, but each of the players in the markets (companies and consumers) from unfair acts and conducts, i.e., committed in bad faith, of companies against other companies or consumers. Amongst others, this piece of legislation rules on the effects of unfair acts and conducts, by establishing a right of the companies or persons damaged by the same to be indemnified by the agents. Although Law 3/1991 does not specifically cover cartel activities, the pursuance of these might lead to the commission of unfair acts and conducts covered by the same.

2. This definition was given by Royal Decree Law 9/2017, which transposed several EU directives and notably Directive 2014/104/EU, of the European Parliament and the Council, on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union, whose Article 2 (14) reads in the very same terms. Before that the Fourth Additional Provision of the SCA read the following: “cartel is taken to be any secret agreement between two or more competitors which has as its object prices fixing, production or sales quotas, market sharing, including bid rigging, or import or export restrictions”. The most significant differences between the two versions have




to do with the fact that, in the current version, neither secrecy of the agreement nor even the existence of an agreement are requirements for the existence of a cartel. Instead of an agreement, a mere “concertation of practices” is now sufficient.

3. Now, Article 101 (3) of the TFEU.

4. Now, the below mentioned Commission on Markets and Competition.

5. Pursuant to Articles 13 and 15 SCA and 1 of Law 1/2002, the enforcement of SCA is shared by the CNMC with the regional competition commissions in each of the Spanish regional communities (“Regional Commissions”), which have established a department of such type, for the time only 12 of those communities having done so.

Basically, in accordance with such piece of legislation, the regional commissions engage in the enforcement of the Prohibition in case of agreements or conducts taking place within each of their territories, the CNMC keeping to itself the enforcement of the Prohibition in all other cases. Nonetheless, some Regional Commissions have not been given full powers in this matter but only some of them. Where there is no Regional Commission in place or where its powers do not cover the enforcement of the Prohibition in full but only a part thereof, the CNMC performs the corresponding powers (Transitory Provision of Law 1/2002).

6. In addition to such powers, Law 3/2013 has also vested the CNMC with powers to regulate several sectors (telecommunications, electricity, mail, railways, ports, etc.) that, before its creation, were entrusted to different regulatory boards and commissions.

7. In this chapter any reference to the Prohibition enforcement powers entrusted to the CNMC comprises those entrusted to the Regional Commissions by their corresponding bylaws, in accordance with the rules on assignment of enforcement powers to national and regional competition authorities foreseen by Law 1/2002. On this issue, see endnote 5.

8. Article 62 (4) SCA deems a cartel infringement as a very serious infringement. 9. In the case of juridical persons, in addition to the fines applied to such persons themselves,

the SCA also foresees the applications of fines of up to €60,000 to the individuals that manage or are members of the board of the same or integrate the managing departments that played a role in the prohibited agreement or conduct (Article 63.2).

10. The composition and powers of the organs of CNMC are ruled by its bylaws, which were approved by Royal Decree 657/2013.

11. This provision entrusts the same powers to the European Commission in any procedures where what is a stake is the enforcement of Article 101 TFEU.

12. The use by the CNMC of the power to engage in dawn raids without the consent of the affected party or a court authorisation, on several occasions, has generated legal disputes, where the affected party, as plaintiff, requested the setting aside of the proceedings, out of illegality generated by undue access to her premises. A recent example of this is the case heard by the Supreme Court, where this ruled, in cassation, in favour of the plaintiff (Repsol, S.A.) and against the CNMC, by annulling the information gathered in a dawn raid carried out on the premises of the said plaintiff (ruling given by the Administrative Chamber on 17 September 2018 – proceedings 2922/2016).

13. The figures for 2018 will be disclosed in the Annual Report for this year, due in early 2019.




14. In the end, Azor Ambiental, S.A. was not sanctioned, as the CNMC understood that the conducts of this offender had been investigated after the four years lapse period foreseen in Article 68 (1) SCA, something that, ipso facto, makes their punishment void.

15. Anyway, this situation exists since the enactment of the SCA, which merged the Servicio de la Competencia, integrated in the Ministry of the Economy and with powers to investigate infringements, and the Tribunal de Defensa de la Competencia, in charge of applying sanctions, and replaced them by the mentioned Comisión Nacional de la Competencia. At that time, the mainstream view was that this change strengthened independence at the time of investigating conducts, and this on the ground that the said Servicio integrated the Government and the new Comisión was independent from this.

16. These circumstances are those set in Article 64 SCA. Among the positive circumstances established therein, it is worth mentioning the one, added in 2017, consisting in the intent, by the infringer, to eliminate the effects of the infringement. This circumstance has a reinforced positive effect when the offender succeeds in fully eliminating those effects before the CNMC passes the corresponding sanction resolution.

17. Pursuant to Article 477 (3) of the 2000 Civil Procedure Act, there exists “cassation interest” when the a quo ruling is not in line with case law from the Supreme Court or there exist rulings from two or more Provincial Courts that rule on similar matters in contradictory terms, or where it applies rules that have been in force for less than five years, as long as, in the latter case, no case law from the Supreme Court exists concerning previous rules of identical or similar content.

18. The 2000 Civil Procedure Act also foresees an appeal of appellate rulings, called “extraordinary” for the infringement of procedure by an a quo ruling. This appeal, which, since its creation, has been subject to a transitory regime set forth in the Sixteenth Final Provision of the said 2000 Act, is based on any of the following grounds: (i) a breach of the rules on objective or functional jurisdiction and competence; (ii) an infringement of the procedural rules governing the judgment; (iii) a violation of the rules governing the procedures and safeguards of the proceedings, where such breach gives rise to the nullity of the ruling in accordance with the law or could have brought about a lack of proper defence; and (iv) a breach of the right to a due process, foreseen in Article 24 of the Spanish Constitution.

19. Apart from the mentioned Law 3/1991, on unfair competition, in its original version, which, though not foreseeing the indemnification of damages, was seen by some court rulings, as a ground thereto. A reform of this Act passed in 2009 amended Article 18 (now Article 32) of Law 3/1991 to expressly foresee the indemnification of damages caused by the unfair competition acts or conducts.

20. We refer to ruling 540/2000, whereby a sort of distribution agreement was deemed void, on the ground of infringing Article 81 (now 101) of the TFEU, and which included, as obiter dicta, statements on indemnification of damages caused by the infringement of competition rules.

21. Article 1968 of the Civil Code.

22. Report with reference “IPN/CNMC/004/18”, published in March 2018.






Pedro Moreira Tel: +34 91 781 50 40 / Email: [email protected] A founding partner of SCA Legal, S.L.P., Pedro Moreira has almost 20 years of experience as a litigation lawyer, specialising in commercial, competition and corporate law disputes. Thanks to his expertise in those areas of law and his background in economics and business administration, he regularly advises clients, from different jurisdictions and sectors, in competition matters proceedings and complex litigation cases (in relation to the breach of commercial contracts, damage claims, shareholders conflicts and other corporate law issues, bankruptcy and insolvency matters, etc.), some of them multijurisdictional and/or heard by a court of arbitration. Pedro also advises on a regular basis on non-contentious matters, mostly in commercial, corporate and competition law. Pedro graduated in Law from the Complutense University of Madrid and has also a BA in Law from the Catholic University of Lisbon, an MA in Economics (Diploma de Estudios Avanzados en Economía) from the Complutense University of Madrid and an MBA from the EAE (Madrid)/Camilo José Cela University (Madrid). He is a member of the Madrid Bar Association, speaks fluent Spanish, Portuguese and English and has also a working knowledge of French and German.

Calle Castelló nº 82, 4º izquierda 28006 Madrid, Spain Tel: +34 91 781 50 40 / URL: www.sca-legal.com

SCA Legal, S.L.P.


Sweden


The Swedish law applicable to anticompetitive agreements is in large part equivalent to EU competition law and Article 101 of the Treaty on the Functioning of the European Union (“TFEU”).

The current Swedish Competition Act (“Competition Act”) came into force on 1 November 2008 and governs all types of actions that may distort competition. The Competition Act aims to, as far as possible, incorporate EU competition law. It is thus interpreted in accordance with the practice of the European Commission (“Commission”) and the Court of Justice of the European Union (“ECJ”). Chapter 2 of the Competition Act governs the substantive provisions relevant for anticompetitive agreements and cartel enforcement. The Competition Act does not provide a legal definition of a cartel, but that is generally understood to signify an agreement entered between competitors aiming to distort competition on a specific market.

Chapter 2, Sections 1 and 2 of the Competition Act, are modelled on Article 101(1) and 101(3) of the TFEU. Section 1 prohibits the cooperation between undertakings that has as its object or effect the prevention, restriction or distortion of competition in the market to an appreciable extent, whereas Section 2 sets out the possible exemptions to the prohibition found in Section 1.

The geographic scope of the Competition Act stretches to behaviours affecting the territory of Sweden. The ultimate reach of the Competition Act is determined by whether the anticompetitive behaviour has the potential to affect a given market in Sweden. Hence, although an agreement may concern foreign undertakings or be organised outside of Sweden, if it has an appreciable effect on competition in Sweden, the Competition Act is applicable and the undertakings may be held liable. Where trade between EU Member States may also be affected, EU competition law will concurrently be applicable.

The Swedish Competition Authority (“SCA”) is the central administrative authority for the administration and enforcement of competition law in Sweden. The SCA plays a key role in the competition field. It is entrusted with investigative powers and, to some extent, decision-making powers. The SCA’s powers stem from the provisions in Chapter 5 of the Competition Act.

The SCA investigates possible infringements of the Competition Act and may require an undertaking to terminate practices found to violate competition law. If the undertaking fails to comply with an order from the SCA, an administrative fine may be imposed on the undertaking for non-compliance. In situations where the SCA has established the existence of a competition infringement, the Patent and Market Court (“PMC”) may impose fines of

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up to 10% of the infringing companies’ aggregate worldwide group turnover. Thus, the SCA does not have decision-making powers equivalent to the Commission.

The PMC is the competition court of first instance. Decisions and judgments by the PMC can be appealed to the Patent and Market Court of Appeal (“PMCA”). A leave of appeal is required if the PMCA is to hear a case. This court hierarchy reflects a reorganisation of the court system that was made effective as of 1 September 2016, where the PMC was established as a separate division within the Stockholm District Court (“SDC”) and where the Market Court (“MC”) was replaced by the PMCA. The reorganisation of the court system was deemed necessary due to the complex and comprehensive nature of competition cases. The new court system is intended to create a more unified and concentrated judicial system, which is a welcome change according to many stakeholders.

The consequence of an agreement found to fall within the provisions of Chapter 2, Section 1 of the Competition Act is that such agreements are unenforceable.

In cases where the undertakings’ market shares and turnover are below certain specific thresholds, the agreement will fall outside of the scope of the competition rules, in line with the SCA’s guidance on Agreements of Minor Importance. However, these de minimis rules do not apply to hardcore restrictions, such as cartel-like behaviour.

Overview of investigative powers in Sweden

The SCA has investigative powers broadly similar to those of the Commission. The investigative powers are set out in Chapter 5 of the Competition Act and include:

Requests for information. The Competition Act provides the SCA with extensive powers to require information, documents and other materials from undertakings that are suspected of an infringement, as well as third parties. The SCA may require such information when necessary for the performance of its duties under the Competition Act by issuing a request for information under Chapter 5, Section 1(1) of the Competition Act.

The SCA may also perform trade or sector-specific investigations by requesting information from customers, competitors and other undertakings to assess and highlight potential competition concerns in both the private and public sector. Such a request may be imposed under penalty of an administrative fine for failure to comply with the SCA’s request for information.

The SCA may also request information on behalf of another National Competition Authority (“NCA”) in the EU.

Call in for questioning. Individuals who are believed to be able to provide relevant information may be called in for questioning by the SCA. Orders to provide information and appear for questioning may be imposed under penalty of an administrative fine for non-compliance. However, privilege against self-incrimination applies and the individual does not have to disclose information that may implicate the individual.

Unannounced on-site inspection of the business premises – “dawn raids”. In order for the SCA to carry out a dawn raid, the PMC must first grant authorisation by a court order. Where the SCA has reasonable grounds to assume that the Competition Act has been infringed, or when it is necessary in order to fulfil Sweden’s obligations to the Commission or another NCA, the SCA can apply to the PMC for authorisation to conduct an unannounced on-site inspection at locations relevant to the suspected infringement; for example, company premises.

In order to be afforded the right to perform a dawn raid, the SCA has to show reasonable grounds to assume that the prohibition in the Competition Act has been infringed. The

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standard of proof – set out in Chapter 5, Section 3 of the Competition Act – is rather low, examples of which can be seen in previous cases such as PEAB Sverige et al. and Brunswick Marine in Sweden AB et al. There, the SCA was granted permission to enter and seize materials on the business premises due to indications of parallel behaviour of competitors, which was based on statistical analysis of tenders in public procurements.

Upon successful application to the PMC, the SCA is granted inspection powers during dawn raids. Such powers include the right to enter any premises, land and means of transport used for the business. The powers also include carrying out unannounced on-site inspections at the residential premises or other premises of members of the board and employees of the undertaking under investigation (in cases where the behaviour which is subject to scrutiny is considered to be sufficiently serious). The undertaking will, as a routine, not be heard before the PMC has taken its decision and not be informed until the investigation has been initiated.

During an unannounced on-site inspection, the SCA has wide powers to conduct necessary inspections in order to enforce the prohibition contained in the Competition Act. Those powers include:

• examining business books and other company records;

• taking or obtaining copies of, or extracts from, books and company records (including electronic records); and

• ordering oral explanations “on the spot”.

The SCA is often accompanied by the Swedish Enforcement Authority, which assists in gaining access to premises and applying official seals.

If the PMC denies the SCA’s application for a dawn raid, the SCA may appeal the decision to the PMCA.

Seizure of evidence. In the course of conducting a dawn raid, the SCA will do a physical search of the premises in question. The SCA has the power to examine any kind of company records, including taking copies or extracts from such records (electronic records included) as well as “mirroring” digitally stored material for an in-depth search. The SCA is not authorised to review mirrored information off business premises (i.e. at the SCA’s premises) without prior consent from the company. When the SCA reviews mirrored material at the SCA’s premises, the company will be invited to have a representative present throughout the process to supervise.

For more information on mirroring of digitally stored material, see below.

Inspection of non-business premises. The SCA may be authorised by the PMC to inspect other premises, land or other means of transport, including residential premises of directors, managers and other members of staff, where the criteria in Chapter 5, Section 3 of the Competition Act is fulfilled and the SCA has reasonable suspicion of a serious violation of the Competition Act.

Interviews with company employees. The SCA may, as part of an unannounced on-site inspection, order oral explanations from representatives or employees of the undertaking involved about documents found at the business premises, or about what role a particular individual of interest has in the organisation. However, the interviewee is not required to provide any incriminating information.

Furthermore, individuals who are believed to be able to provide relevant information in an investigation can be required to attend hearings at the SCA’s premises. The hearings will




be recorded in writing and the interviewee will be given the opportunity to examine that record for accuracy.

Legal privilege. During an unannounced on-site inspection, the SCA does not have the legal right to confiscate documents or storage devices containing information covered by legal privilege. In the event of a dispute of whether a particular document is legally privileged, the document is immediately to be sealed and sent by the SCA to the PMC for the issue to be determined without delay. Legal privilege only applies to legal advice obtained from external legal counsels who are members of the Swedish Bar Association or their associates (Chapter 5, Section 11 of the Competition Act).

In practice, the bar to show that a particular document is protected by legal privilege is set quite low in Sweden. In Posten AB et al., the company (“Posten”) claimed that a memorandum found by the SCA during a dawn raid, written by the in-house legal counsel for the purpose of obtaining external legal counsel, should be covered by legal privilege. The PMC agreed with Posten and consequently considered that every written document, which has been entrusted to a lawyer within its profession, is protected under legal privilege. Similarly, in Geberit, the PMC accepted a company’s argument that a handwritten memorandum had been prepared by a company manager to be used at a meeting with the company’s external legal counsel, even though that was not evident from the document itself. Consequently, the court held that the document should not be disclosed.

Privilege against self-incrimination. The protection against self-incrimination under Swedish law reflects the Convention for the Protection of Human Rights and Fundamental Freedoms, as interpreted by the European Court of Human Rights. It is up to the SCA to prove that an infringement of the Competition Act has been conducted. Although the SCA may require an individual or an undertaking to provide certain documents or information under the Competition Act, the SCA may not compel answers that might involve an admission of the existence of a competition law infringement which the SCA has to prove in court.


For the past few years, the SCA has prioritised cartel enforcement by devoting greater resources to develop its cartel detection methods. Additionally, the SCA has become more proactive in using media to convey its enforcement activities against anticompetitive behaviour. In particular, the SCA has emphasised the potential risks an undertaking may be exposed to by participating in a cartel, such as heavy fines, incurring a bad reputation and exclusion from participation in public procurement. Through intensified activity in the media, the SCA aims to increase awareness of the competition rules and the leniency programme.

Looking at which sectors the SCA has analysed in recent years, the SCA tends to prioritise those markets exposed to competitive imbalance. Sectors that have been under the SCA’s scrutiny in the past are building and construction, the health care sector and the petrol and timber markets. Moreover, the SCA receives around a handful of leniency applications per year, whereof around half are summary applications.

Although it varies, the SCA performs on average two dawn raids per year. In October 2016, the SCA performed unannounced on-site inspections after suspicions of unlawful cooperation between several large DIY building material chains. The SCA suspected that the chains had agreed on minimum prices on bathroom ceramics, resulting in higher prices for end consumers. In connection with this inspection, the SCA found indications of further




cooperation between the chains as to promotional activities. Consequently, the SCA performed an additional unannounced on-site inspection. The original investigation was concluded in June 2018 and found that while there were discussions between the companies regarding pricing, there was not an agreement or concerted practice in place that breached competition law. The second investigation was concluded in March 2017 and showed that the companies had cooperated in several promotional activities in the form of local sales displays. However, the SCA did not find conclusive evidence in support of the suspicion and concluded that the contacts between the undertakings did not have anticompetitive effect and therefore closed both investigations without taking any further actions.

In 2015, the online travel agencies (“OTA”) Booking.com and Expedia were subject to investigations in a number of EU Member States. The SCA investigated whether the OTAs applied anticompetitive parity clauses in relation to Swedish hotels. The investigations were closed after the OTAs made changes to the clauses. In 2016, 10 NCAs and the Commission decided to follow up which effect the changed agreements had on the OTA market. The final report was published in April 2017 and the SCA concluded that the new agreements had improved the conditions for competition between the OTAs.

Aleris Diagnostik, Capio S:t Görans Sjukhus et al. In December 2015, three companies within the health care and nursing sector were fined a total of approximately SEK 28 million for collusion during a public tender of clinical physiology. The SCA sued the companies before the SDC and requested fines amounting to a total of SEK 41 million. Aleris had, prior to the companies submitting their respective tender offers, agreed to share the contract with the other two, regardless of which company eventually would be awarded the contract. The SDC found that the practice was anticompetitive by object and imposed fines on the health care companies. The case was appealed to the PMCA, which in April 2017 set aside the SDC’s judgment and ruled in the health care companies’ favour. According to the PMCA, the agreements between the companies imposed an obligation on the winning party to, on request, appoint a losing party as subcontractor. The PMCA established that the agreements did not stipulate which volume a subcontractor would be awarded which meant that the parties had not agreed to share a certain volume of the market. The PMCA also pointed out that the decisive criteria to award the winner in the public tender had been the lowest price. Under those circumstances, the PMCA concluded that the agreements could not be considered anticompetitive by object and that the SCA had not presented sufficient evidence to establish that the agreements had anticompetitive effects.

The SCA sued TeliaSonera, Sweden’s largest telecommunications operator, and Göteborg Energi GothNet, a local network operator in Gothenburg, before the SDC requested a total fine of SEK 35 million for having formed a bid rigging cartel prior to a public tender procedure by the City of Gothenburg in 2009. The SCA claimed that when the City of Gothenburg procured data communication services, TeliaSonera and GothNet agreed that TeliaSonera would refrain from submitting a tender offer in the procurement, despite the fact that GothNet and TeliaSonera are major competitors on the market. Subsequently winning the bid, GothNet contracted TeliaSonera as a subcontractor. The court ruled in favour of the SCA’s claim and ordered each of the parties to pay SEK 8 million in fines. Telia appealed the judgment, which was later reversed by the PMCA. In its judgment from February 2018, the PMCA started out by declaring that the nature of the information provided by Telia to Gothnet entailing that Telia would not be submitting a bid in the procurement was a concerted practice within the meaning of the competition rules. However, considering the economic and legal context of the procurement in which the coordination took place,




the court held that the information exchange should not be treated as anticompetitive by object. Since there was not sufficient evidence of anticompetitive effects, the SCA’s claim was rejected.

Alfa Quality Moving, NFB Transport Systems and ICM Kungsholms were sued in 2014 for approximately SEK 42 million. The companies had in two subsequent transactions included ancillary restraints (non-compete clauses of five years) which, according to the SCA, were too far-reaching. The SCA claimed that the competition clauses amounted to unlawful non-competes and market-sharing. This was the first case where ancillary restraints have been interpreted as being able to create potential anticompetitive agreements, giving rise to fines. Although the court agreed with the SCA that the non-compete clauses were too far-reaching, the court found that the purpose of the clauses had been reasonable and that the SCA had not been able to show any negative effects on competition. The SCA appealed the case to the PMCA, which in November 2017 held that for the successful implementation of a transaction, non-compete clauses may be necessary as long as they are directly related to the merger. The PMCA ruled that such clauses are a form of “loyalty guarantee” between the seller and the purchaser, providing the buyer with a certain degree of security. The SCA argued that the moving companies had knowingly planned on non-compete clauses exceeding the three-year period outlined in the Commission’s guiding notice on ancillary restraints. However, the PMCA found that the three-year timeframe only reflects the duration under which companies normally can assume to be protected under the Commission notice instead of the maximum duration for a non-compete clause. The court did not find any evidence in support of that the non-compete clauses were automatically anticompetitive by object. The PMCA further concluded that the SCA did not provide any evidence proving that the clauses had anticompetitive effects. Consequently, the PMCA rejected the SCA’s appeal and fully upheld the SDC ruling.

Following a third party complaint, Electrolux and seven of its exclusive distributors were subject to an investigation by the SCA concerning potential bid rigging in connection with a public tender of institutional kitchen equipment. The investigation showed that Electrolux and the distributors had entered into exclusive distribution agreements which prohibited each distributor from making active sales and marketing campaigns into a geographic area which was exclusively allocated for another distributor within Electrolux’s exclusive distribution network. The exclusive geographic areas coincided with the counties-based division in the public tender. The distributors had submitted tender offers only in the counties that were allocated for each individual distributor according to the exclusive distribution agreements with Electrolux. The SCA found that it was not established whether the practice restricted competition and harmed consumers. As a result of the SCA’s investigation, Electrolux developed new guidance for its exclusive distributor’s future practices in public tenders. The SCA therefore decided not to take any further actions and closed the investigation.

In April and June 2017, the SCA conducted dawn raids at the premises of the insurance companies Söderberg & Partners, AIG, If, Trygg-Hansa and Folksam for suspected collusion in public tenders of insurance services. The SCA is currently examining whether Söderberg & Partners informed the insurance companies about their progress in public tenders, which Söderberg & Partners was handling in the capacity of insurance broker and advised them on when to adjust their tender offers. During the unannounced on-site inspection at Söderberg & Partners and following the company’s consent, the SCA decided to index and mirror digital material at the authority’s premises. Söderberg & Partners appealed the SCA’s decision to




the PMC, claiming that the SCA acted outside of its investigatory powers when the authority copied and confiscated the digital material. The PMC ruled that the SCA’s conduct during dawn raids cannot be judicially reviewed under Swedish law, therefore rejecting the company’s appeal. Söderberg & Partners appealed the ruling to the PMCA, arguing that the PMC’s decision meant there was insufficient judicial review under Swedish competition law and that it was not compatible with EU case law. The PMCA rejected the appeal and upheld the PMC’s ruling. Söderberg & Partners appealed the judgment to the Swedish Supreme Court. The Court stated that the SCA, when there is a dispute about whether a certain document copied during a dawn raid can be added to its file or not (i.e. if it is covered by legal privilege or falls outside the scope of the dawn raid decision), must ask for assistance from the Swedish Enforcement Authority (“SEA”), who then makes a formal decision which the company subject to the dawn raid can appeal. Thus, the Court found that there is sufficient judicial review under national law. However, in the current case, the SCA had added the documents to the file without asking for assistance from the SEA, which, according to the Supreme Court, was a violation of the company’s right to a fair trial under the European Convention for Human Rights. Nevertheless, the Supreme Court held that even if the SCA had neglected to comply with the procedure set out in law, thus depriving the company of its possibility to judicial review, it may not expand the company’s possibilities to appeal the decision before the PMC, but rather, it must be compensated through other remedies such as economic compensation.

In April 2018, the SCA conducted unannounced on-site inspections at the premises of several companies in the musical instrument sector. The SCA suspects that the musical instrument retailers have, between themselves and together with producers and distributors of musical instruments and add-on equipment, fixed prices for end customers. The investigation is ongoing and it remains to be seen whether the SCA will take any further actions. The SCA is also investigating possible price-fixing among retailers of furniture.


Enhanced decision-making powers for the SCA. The SCA does not currently have any powers to impose fines on companies infringing the Competition Act but must go to the PMC to request fines against undertakings that have infringed the competition rules. In 2015, the Swedish government launched a legislative initiative on whether the SCA should be granted enhanced decision-making powers in the enforcement of antitrust and merger control rules. In June 2016, the initiative proposed that the SCA should be granted enhanced decision-making powers in both antitrust and merger control cases in order to reduce processing times at the SCA and to further harmonise Sweden’s decision-making order with other EU Member States. However, the passed bill (published in September 2017) only extended the SCA’s decision-making powers in relation to merger control cases and not as to cases concerning violations of the prohibitions against anticompetitive agreements and abuse of dominant position. The statutory reform entered into force on 1 January 2018.

Mirroring. The issue of mirroring has been a much-debated topic in Sweden for the past few years due to the legal uncertainties surrounding the practice. Prior to the amendments to the Competition Act in 1 January 2016, there was no express legal basis allowing the SCA to carry out indexing and searching of digital material at its own premises in connection with a dawn raid. After the legislative reform, Chapter 5, Section 6 of the Competition Act now grants the SCA express authority to mirror materials found at unannounced on-site inspections, although that requires the consent of the company concerned.




Fishing expeditions. The debate has further been focused on the excess information that becomes available to the SCA through mirroring. The concern is that the SCA may go beyond its original authority and use the excess information for future investigations. In 2014, the MC held that the SCA did not have the authority to use previously mirrored material to investigate a potentially new competition infringement, hence clarifying that “fishing expeditions” are not lawful.


As mentioned above, the Swedish government’s bill to grant the SCA enhanced decision-making powers in the enforcement of antitrust and merger control rules, was published in 2017. One of the key issues investigated was whether the SCA should have the power to decide on financial penalties and act as first instance in competition infringement cases, with the possibility for the undertaking concerned to appeal the SCA’s decision to the PMC and further to the PMCA. The proposed reform was said to lead to a more efficient system, but could potentially also give rise to legal certainty concerns, since the SCA would be granted double-edged roles as both prosecutor and judge, which would be a novelty in the Swedish legal system. Therefore, the bill only extended the SCA’s decision-making powers in relation to merger control cases.

The reform entered into force on 1 January 2018.


The Swedish leniency programme was amended in 2014 to better reflect the EU leniency system. The new leniency regime introduced a marker system whereby a company may apply for a marker and submit limited information about an ongoing cartel. The minimum requirement in order to obtain a marker is to submit information on the market affected by the infringement, the other companies involved and the nature of the infringement. In order to secure the marker, the company must submit a complete notification within a specified time period. Unless the company with the marker fails to submit the outstanding information, another company cannot jump the queue for immunity.

To obtain immunity or reductions of fines, a company must satisfy certain conditions set out in Chapter 3, Sections 12 to 15 of the Competition Act. The first company to provide the SCA with sufficient information of the existence of a cartel may be granted immunity.

Alternatively, in situations where the SCA already has sufficient information to act without the applicant’s contribution, the company may still receive immunity if it is first to provide information which allows an infringement to be established or contributes in some other way to a very significant extent to facilitate the investigation.

Additionally, a company seeking immunity must also provide all relevant information available, actively cooperate with the SCA throughout the investigation, ensure that no evidence is destroyed, refrain from hindering the SCA’s investigation in any other way, and cease participating in the infringement as soon as possible.

In situations where a company has compelled other undertakings to participate in the infringement, immunity will not be available.

Where another company has already secured immunity, an undertaking applying for leniency can still benefit from a reduction of fines. Chapter 3, Section 13 of the Competition Act provides that a company may benefit from a reduction of fines if the undertaking provides the SCA with information that facilitates the investigation to a significant extent as well as satisfying the requirements for immunity set out above.




According to the SCA’s guidelines, the first company to satisfy the relevant conditions will be eligible for a reduction of the fine, which will be dependent on the timing of the information, the added value that the information may contribute, and the company’s cooperation throughout the investigation.


In cases where the facts are uncontested and can be considered clear-cut infringements, the SCA may, in accordance with Chapter 3, Section 16 of the Competition Act, issue a fine order, which is a form of binding settlement. The system of fine orders is built on voluntariness, where the company under investigation may choose to accept the SCA’s settlement terms or not. A fine order is binding and a simplified decision on liability is issued. However, the settlement can be appealed to the PMC within a year of written confirmation.

It is worth noting that there is no possibility for fine orders to receive any reductions or discounts – the advantages of fine orders are the simplified and expedited processes. Generally, fine orders have most often been used in bid rigging cases.


Many cases are brought to the SCA by third parties. The SCA may sua sponte open an investigation based on information from the public. Whether a tip-off leads to any further investigation often depends on whether the SCA believes there is consumer harm, the importance of a precedent and the measures required for the investigation. The SCA has wide investigative discretion and restraints on the capacity for investigations, and resources available, may influence whether an investigation is opened or not. Normally a decision on whether a matter should be further investigated or written off will be made within one to four months.

Undertakings concerned have the possibility, in the event that the SCA decides not to proceed with an alleged infringement, to initiate a private action in the matter.


Chapter 3, Sections 5 to 11 of the Competition Act contain the provisions applicable to civil penalties. The SCA has the burden to prove that the conditions under the Competition Act for imposing a fine on an infringing undertaking are fulfilled. According to case law, the standard of proof which the SCA will have to satisfy is high, but can to some extent be altered to take into consideration the seriousness of the infringement involved, and fines sought in a particular case.

Like the Commission, the SCA has provided guidance on the setting of fines, but may not fine an undertaking more than 10% of its group turnover during the previous financial year. The SCA tends to look at the turnover generated in a specific market where the infringement took place. When deciding the level of the fine, the SCA evaluates the gravity and the duration of the infringement.



Undertaking Maximum reduction of fines

1 50%

2 30%

3 and subsequent 20%


The base level of the fine is set by considering various factors such as the type and the scope of the infringement and the harmful effect on the market, both actual and potential harm. The base level is then adjusted for aggravating or mitigating circumstances. Factors such as having a ring-leading role or relapsing in anticompetitive behaviour are seen as aggravating circumstances, whereas full cooperation with the SCA and partial participation in the infringement may provide mitigating circumstances. For each circumstance, the level is adjusted by 5% to 15%.


Unlike at the EU level, it is the PMC that delivers the infringement judgment and not the SCA. The SCA rather acts as a prosecutor and will have to make its case against the investigated undertaking before the court. If the decision of the PMC is appealed and a leave of appeal is granted, the PMCA performs a review of facts and law, affecting both the legal assessment and possible sanctions.

The PMC is also the first instance in cartel damages actions. The PMC’s judgment or decision can be appealed to the PMCA which will hear the case if it grants leave to appeal.

As part of the European process to harmonise actions for competition damages across all Member States, a legislative reform entered into force in late December 2016 to implement the EU Directive on Antitrust Damages. The new Antitrust Damages Act includes several new reforms; for instance, a rebuttable presumption that cartels cause harm, clearer limitation periods and that a final infringement decision constitutes full proof of the existence of a competition law infringement in a follow-on damages case.

Criminal sanctions

Breach of the competition rules is not a criminal offence in Sweden. However, a trading prohibition may be imposed on an individual in cases of particularly serious infringements. Chapter 3, Section 24 of the Competition Act and the Swedish Trading Prohibition Act govern such prohibition. The SCA will seek a trading prohibition only in situations where it is considered to be in the public interest and the individual has seriously failed to fulfil his or her obligations.

The consequence following a trading prohibition is a ban for the individual concerned for a period of three to 10 years to run business operations or hold a senior position in a company. Furthermore, an individual failing to abide by a trading prohibition risks imprisonment of up to two years. The SCA does not take into consideration that an individual may have left or been removed from a post when seeking a trading prohibition.

In circumstances where either the company benefits from leniency, or the individual has contributed and personally cooperated to a significant extent, the SCA may grant immunity from a trading prohibition.

Cross-border issues

In situations where anticompetitive conduct may be subject to enforcement in multiple European jurisdictions, Regulation 1/2003 provides that the SCA and other European NCAs must cooperate closely for the investigation of a potential infringement. Within the framework of the European Competition Network (“ECN”), NCAs may assist each other in investigations by sharing information or performing dawn raids on behalf of another NCA. It is not uncommon, for example, for the SCA to assist in an unannounced on-site inspection in Sweden on behalf of another NCA.




Furthermore, a Nordic Cooperation Agreement exists between the NCAs in Denmark, Finland, Iceland, Norway and Sweden. The agreement facilitates information exchange, including non-confidential information, and case assistance between the Nordic NCAs. Besides the Nordic Cooperation Agreement and the ECN, Sweden is part of the International Competition Network and the Organisation for Economic Cooperation and Development.


In December 2016, Sweden implemented the EU Directive on Antitrust Damages Actions by enacting an entirely new Act on Antitrust Damages (the “Antitrust Damages Act”). The purpose of the reform is to facilitate for parties that have suffered from a violation of competition law to claim damages. The new Antitrust Damages Act includes provisions that clarify and simplify court proceedings in antitrust damages claims and introduces several new reforms; for instance: a rebuttable presumption that cartels cause harm; a final infringement decision that will constitute full proof of the occurrence of a competition law violation in a follow-on damages case; as well as clearer limitation periods.

It follows from Chapter 2, Section 1 of the Antitrust Damages Act that if an undertaking intentionally or negligently infringes the prohibition against anticompetitive agreements, the undertaking shall compensate any damage that is caused thereby.

The scope of those entitled to claim damages is not defined in the Antitrust Damages Act but can in general be described as “victims of competition law violations”. In principle, the victim is entitled to full compensation for damages suffered. The victim is therefore not only to be compensated for actual loss suffered, but also for any loss of profit resulting from the infringement, including interest from the time the harm occurred until compensation is paid.

Case law on private enforcement is very limited. To date, there have been few actions brought before Swedish courts. One example of private enforcement follows the Swedish Asphalt Cartel, where damage claims were brought by several municipalities which had been customers of the cartel members. However, all the claims were finally settled out of court.

Yarps Network Services AB v. Telia Company AB. In 2013, the MC had found Telia, owner of the national telephone network, accountable for abusing a dominant position in 2003 by applying negative margins that constituted an unlawful “margin squeeze” which potentially affected certain companies, among them Yarps (then “Spray”) and Tele2. In 2006, Yarps initiated damages actions against Telia and claimed compensation based on Telia’s allegedly abusive conduct. In March 2016, the SDC held Telia liable for harm suffered by Yarps and ordered Telia to pay damages. However, in June 2017, Svea Court of Appeal came to the opposite conclusion and found that Yarps had not proved that Telia’s conduct had sufficient anticompetitive effects to constitute an abuse of a dominant position and therefore reversed the SDC’s judgment and rejected Yarps’ damage claim.

Tele2 Sverige AB v. Telia Company AB. In 2005, Tele2 initiated damages actions against Telia based on Telia’s allegedly abusive conduct during 2003. In May 2016, the SDC held Telia liable for harm suffered by Tele2 and ordered Telia to pay damages. However, in December 2017, Svea Court of Appeal came to the opposite conclusion and found that although Telia’s conduct constituted an abuse, Tele2 had not proved that the conduct had caused Tele2 the alleged harm. Therefore, Svea Court of Appeal reversed the SDC’s judgment and rejected Tele2’s damage claim.




Booking.com B.V. and Bookingdotcom Sverige AB v. Visita. In 2016, the Swedish tourism sector association Visita had taken Booking.com B.V. and its Swedish subsidiary Bookingdotcom Sverige AB (“Booking.com”) to court over the “narrow price parity” clause in its agreements with hoteliers, arguing it was anticompetitive as it put restrictions on the hotels’ price advertising. Narrow price parity clauses prohibit hotels from offering lower prices or better conditions on their own websites than on the booking platform. The PMC analysed the clause’s possible anticompetitive effects and found that it potentially restricted both new online booking platforms’ access to the market and competition for hotel accommodation in Sweden. Booking.com claimed that the clause in their contracts with hoteliers was an ancillary restraint, necessary to operate their booking platform service. However, the PMC held that the restrictions were not necessary for Booking.com to be able to provide its service and that the conditions for exemption from the prohibition of anticompetitive agreements were not met. The court therefore ordered the company to remove the parity clauses in its agreements with hotels within three months from the court’s judgment or pay an administrative fine of SEK 35 million. Booking.com has appealed the judgment.

The Swedish law on collective redress is not restricted to a certain type of claim or area of law, and can thus be applicable when two or more victims of the same competition law violation want to bring action against any undertaking participating in a cartel. Collective redress has not yet been used in the field of competition law.

Reform proposals

As mentioned above, the Antitrust Damages Act entered into force in December 2016 and thus implemented the EU Directive on Antitrust Damages. The Antitrust Damages Act introduces several new reforms; for instance, a rebuttable presumption that cartels cause harm, clearer limitation periods and that a final infringement decision constitutes full proof of the occurrence of a competition law infringement.






Peter Forsberg Tel: +46 76 000 00 80 / Email: [email protected] Peter Forsberg is partner and head of the Competition & Procurement practice group at Hannes Snellman in Stockholm. He advises Swedish and international companies on competition law and public procurement issues. In particular, he has solid experience of domestic and international merger control, competition law disputes and compliance work. He regularly represents clients in proceedings before national competition authorities as well as before the European Commission. He has recently been involved in matters in the following sectors: financial services; food and consumer products; forest products; pharmaceuticals; and telecommunications.

Haris Catovic Tel: +46 76 000 00 50 / Email: [email protected] Haris Catovic is an associate at Hannes Snellman in Stockholm. He is specialised in EU and Swedish competition law and advises on all aspects of competition law.

Johan Holmquist Tel: +46 76 000 00 47 / Email: [email protected] Johan Holmquist is an associate at Hannes Snellman in Stockholm. He advises clients on competition law and public procurement matters.

Kungsträdgårdsgatan 20, 111 47 Stockholm, Box 7801, Sweden Tel: +46 760 000 000 / URL: www.hannessnellman.com

Hannes Snellman Attorneys Ltd


Switzerland


The Authorities

The Swiss Competition Authorities, comprised of the Competition Commission (“ComCo”) and its Secretariat (“Secretariat”) are responsible for the public enforcement of the Swiss Cartel Act of 1995 (“CartA”). The 12 members of the ComCo meet on a regular basis to decide cases, while the Secretariat conducts the investigations and submits proposals to the ComCo for determination. The ComCo consists of a majority of independent experts, such as professors of law and economics, and a minority of stakeholders, including industry and trade union representatives. There are approximately 58 lawyers and economists within the Secretariat, which is divided into four, equally sized divisions: infrastructure; services; product markets; and construction.

Typically, the Competition Authorities investigate complaints reported by businesses or consumers and leniency applicants. Cases that would be likely to have a substantial impact on the Swiss economy, such as market foreclosure by restrictions on parallel trade, are more likely to be prioritised for investigation. Cartels that do not substantially restrict competition are not subject to financial sanctions in Switzerland and complaints by concerned parties regarding such cartels are increasingly referred to civil redress by the Competition Authorities.

Enforcement Priorities

The enforcement priorities of the Competition Authorities consist of fighting hard core horizontal cartels and vertical agreements involving foreclosure of the Swiss market. Such vertical agreements are of particular interest to the ComCo, in cases where parallel imports from the EU into the Swiss market are potentially restricted. For example, agreements between parties within the European Economic Area (EEA) restricting passive sales outside of the EEA have been considered illegal from a Swiss perspective, since imports into Switzerland – not being part of the EEA – were affected by such agreements (see section below on “Overview of cartel enforcement activity during the last 12 months”). However, companies outside of the EEA may also be investigated. For example, recently an agreement between an Australian producer and a Swiss main importer of flash lights has been investigated. A Swiss competitor had tried to source this product through a Polish main importer, and was unsuccessful, because the Australian producer would not supply the Polish importer, after an intervention by the Swiss main importer.

Fines and Criminal Sanctions

The CartA distinguishes administrative sanctions from criminal sanctions. Criminal

Michael Tschudin, Frank Scherrer & Urs Weber-Stecher Wenger & Vieli Ltd.


sanctions for individuals are very rare and only apply to those who wilfully violate an amicable settlement or a final and non-appealable decision (including rulings regarding the obligation to provide information). Administrative fines against firms may amount up to 10 per cent of the turnover that the firm achieved in Switzerland in the preceding three financial years. According to the Federal Supreme Court, such administrative sanctions have the characteristics of criminal sanctions. Therefore, the guarantees of the European Convention for the Protection of Human Rights and Fundamental Freedoms (ECHR) apply in principle, however not in full.

Not all kinds of cartels are subject to fines. On the horizontal level, only hard core cartels regarding price-fixing, volumes, allocation of customers and territories may directly result in a fine. Regarding vertical restrictions, resell price maintenance and absolute allocation of a geographical market, to the extent that passive sales by other distributors into such territories are not permitted, may be fined. Other restrictions, such as vertical online sales restrictions, may be found illegal, but only fined where the undertaking involved violates the corresponding decision of the authority.

Overview of investigative powers in Switzerland

Proceedings under the CartA are generally in two stages. The Secretariat can initiate preliminary investigations on its own initiative, at the request of certain affected undertakings (e.g. competitors), or based on third party complaints. It is at the discretion of the Secretariat whether to open a preliminary investigation. If the Secretariat finds indications of a significant restriction of competition, it requests the opening of an investigation by a presidium member of the ComCo. Also, dawn raids and seizures of documents and electronic data first require an investigation to have been opened, as these coercive measures are not possible in preliminary proceedings.

In principle, the Secretariat may not decide on any procedural orders without the consent of a presidium member of the ComCo. Generally, once official investigations are opened, they are seldom closed without any consequences for the undertakings involved.

The scope of the investigative powers depends on whether or not the party involved is subject to an administrative sanction. If so, the right against self-incrimination (nemo tenetur principle) limits the investigative powers to a certain extent. If such sanctions do not apply, the investigative procedure is merely administrative. Such procedures are characterised by a certain duty of cooperation according to Swiss administrative law.

For example, upon specific request for information, the undertakings under investigation are obliged to provide the Secretariat with all information required for the investigation and to produce necessary documents (article 40 CartA). In case the Competition Authorities investigate a hard core cartel – which is subject to a fine – an undertaking may refuse to cooperate in relation to a request for information, to the extent that by cooperating the undertaking could incriminate itself. The same principle applies in relation to interviews with individuals (within the executive bodies) which speak for the undertaking.

Upon request of the Secretariat, a presidium member of the ComCo may order dawn raids and seizures (see article 42 para. 2 CartA). The Secretariat published a note on selected instruments of investigation in January 2016. Therein, it laid out its best practice particularly with regard to inspections and the seizure of documents and electronic data. The representatives of the Secretariat in charge of the inspection will, inter alia, not wait for the arrival of external lawyers before starting to search the premises. Any evidence discovered while the external lawyers were not present will, however, be set aside and only be screened

Wenger & Vieli Ltd. Switzerland



once the lawyers are present. If deemed necessary, the undertaking being raided may request the sealing of specific or even all documents and electronic data.

The Swiss Competition Authorities may communicate with the EU Authorities based on the agreement between Switzerland and the EU on cooperation and exchange of information between their respective competition authorities. This agreement allows them to mutually exchange specific case-related confidential information. The scope of this information exchange agreement is broader than in previous EU cooperation agreements with non EU-Member States and is therefore called a “Second Generation Agreement” in the EU. The crucial point in this new generation of agreements is that confidential information can be transmitted without the parties’ consent. Nevertheless, the agreement provides for limitations on the exchange of information and the use of it. For instance, only information already in the possession of the authority may be requested by the other authority, and information received under a leniency or settlement procedure must not be transmitted.


While the ComCo conducted around 30 investigations in the last 12 months, three decisions have been taken during this period which concerned cartels. Generally, the enforcement level slightly increased compared to previous years. As in other jurisdictions, the enforcement activity highly depends on the number of staff within the Competition Authorities, whereas this number has not increased in the year under review. Whereas in the past the detailed effects analysis had bound significant resources, the effects of cartels play a subordinate role now based on new case law of the Federal Supreme Court. These cases resulted in two main effects: firstly, the investigations are shorter since less economics is involved when considering hard core cartels. Secondly, the Competition Authorities seem more courageous or rather more aggressive in their investigative work. Therefore, we believe that the trend in Switzerland is clear: the level of enforcement has been raised and there is less room for pragmatic solutions.

Whereas the Secretariat especially focuses on bid rigging cases in the building sector, no business sector is excluded from competition law scrutiny. The three dawn raids in 2018 demonstrate this point: one dawn raid was carried out in February 2018 on several general contractors in the energy business in the region of Geneva. The Secretariat conducted another dawn raid in relation to an association of driving instructors. The most recent dawn raid in 2018 was carried out against several companies in the financial industry on the suspicion of a coordinated boycott of Apple Pay.

The ComCo has taken the following three decisions in the last 12 months concerning cartels. In January 2018, the ComCo decided on a partnership agreement between two wholesalers of engine fuel for certain machines, such as lawnmowers or chainsaws. The cartel concerned the resale price and customer allocation. The investigation was opened after a self-denunciation by one of the parties. The other party, which had subsequently filed a self-denunciation as well, was fined approximately USD 600,000.

In April 2018, the ComCo fined the German RIMOWA GmbH, with its registered office in Cologne, with approximately USD 130,000, for export restrictions outside the EU and the EEA, in its agreements with German distributors. Since Switzerland is not part of either the EU nor the EEA, the export restrictions concerned Switzerland as well. This case was started by complaints from various Swiss customers. The calculation of the fine is noteworthy, because the ComCo granted a discount for the willingness of RIMOWA GmbH to settle and additionally for its cooperation in the case, which resulted in a total discount of 40 per cent




on the original proposed fine (see also the section below on “Administrative settlement of cases”).

Also, in April 2018 the ComCo fined serval undertakings in a big rigging case of approximately USD 7.5 million. This case is part of a series of cases concerning the Swiss mountainous canton of Grisons. The cartels concerned public and private procurement in building construction and civil engineering. The decision has not been published yet and may be appealed to the Federal Administrative Court. Another case related to bid rigging in Grisons will most probably be decided in 2019.


The enforcement policy of the Swiss Authorities is strongly based on EU competition law. In particular, in relation to vertical restrictions, the Swiss Authorities heavily rely on the corresponding block exception rules and the guidelines of the EU. Accordingly, the ComCo has stated in its guidelines on vertical restrictions that vertical agreements, which are legal according to EU competition law generally, are legal according to Swiss law. The ComCo wishes to avoid a Swiss finish – i.e. an additional review according to Swiss law of international distribution systems which are in line with EU competition law.

That being said, the EU rules and guidelines do not, of course directly apply in Switzerland, and the ComCo reserves the right to deviate from EU standards to the extent that the specifics of the Swiss market require a specific analysis. Therefore, while undertakings may profit from some degree of guidance from the EU competition law, reliable safe harbours only exist to a very limited extent in Switzerland. Consequently, the degree of legal certainty is smaller than in the EU.


There is some controversy in Switzerland around the ComCo’s decision-making process as the two bodies, the ComCo and the Secretariat, are not separate. As already noted, the ComCo must approve the opening of an investigation, and, to conduct a dawn raid and seize documents and electronic data, the consent of a presidium member of the ComCo is required.

The ComCo announces the opening of an investigation by means of an official publication. This announcement must state the purpose of the investigation and the names of the parties involved. All parties subject to the investigation are vested with the usual administrative procedural rights, unless the CartA stipulates otherwise (article 39 CartA). They particularly have the right to consult and comment on the case files and to suggest witness hearings, and they have the right to be heard and to participate in oral party and witness hearings. On the basis of the investigation, the Secretariat issues a draft decision, which is comparable to the statement of objections in the EU. The parties may comment on such draft decision.

The ComCo and the appellate courts are not obliged to reach a final decision within a specified period of time. The question of whether statutory time bars apply is controversial and currently subject to an appeal before the Federal Administrative Court. In ComCo’s view, no statutory time bars exist except that no direct fines can be imposed if an investigation was opened later than five years after the restriction of competition had ceased (article 49a para. 3 letter b CartA).

In certain specific circumstances, procedural decisions (interim decisions) may be appealed even before a final decision on the merits has been taken. This may generally be the case regarding an order to produce specific documents or compulsory interviews with individuals.




Procedural rights against dawn raids are very limited. Consequently, dawn raids by the Competition Authorities have not been successfully challenged in court.

As a result of the Menarini decision of the European Court of Justice on 27 September 2011, the Swiss courts have held that the guarantees of the ECHR may be met by the appeal proceeding of the Federal Administrative Court. It should be noted that the Federal Administrative Court covers a broad field of administrative law and the administrative judges generally tend to support the administration. While the Federal Administrative Court following the guarantees of the ECHR has to examine the facts of a case point by point, it often gives leeway to the ComCo in relation to legal and economic issues.


In Switzerland many cartel investigations are started by a leniency application. In the first 10 years after the leniency regime came into force, the Competition Authorities had received about 50 leniency applications. In general, the ComCo and the Secretariat are considered to be fair and proportionate with regard to the obligations imposed on a leniency applicant, such as the obligation to fully cooperate with the authorities during the investigation.

Pursuant to article 8 para. 1 of the Ordinance on Sanctions imposed for Unlawful Restraints of Competition (“CASO”), the ComCo grants immunity from a fine if an undertaking is the first to either: (i) provide sufficient information enabling the ComCo to open an investigation that the ComCo itself did not have at the time of the leniency filing; or (ii) submit evidence enabling the ComCo to prove a hard core cartel, provided that no other undertaking has already been considered the first leniency applicant.

Immunity from a fine will not be granted if the undertaking: (i) coerced any other undertaking to participate in the infringement and was the ring leader; (ii) does not voluntarily submit to the ComCo all information or evidence in its possession concerning the illegal anti-competitive practice in question; (iii) does not continuously cooperate with the ComCo throughout the investigation without restrictions or delay; or (iv) does not cease its participation in the infringement voluntarily or upon being ordered to do so by the competition authorities.

Pursuant to the CartA, full immunity is limited to the “first in”. As outlined above, full immunity from a fine is also possible for cooperation that enables the ComCo to prove an infringement and therefore also when an investigation has already been opened and a dawn raid conducted. As soon as an undertaking becomes aware of an investigation having been opened and/or a dawn raid has been conducted, it needs to decide immediately whether or not to cooperate with the Competition Authorities. If the intention is to cooperate, it should submit a leniency marker or application to the ComCo without delay (in writing such as by e-mail or orally by protocol declaration).

Going in second or later in the same investigation will only allow for partial immunity. A reduction of up to 50 per cent is available at any time in the proceeding to undertakings that do not qualify for full immunity.

A leniency application may include information, which allows the ComCo to investigate further infringements (leniency-plus). The maximum discount in fines for such a leniency-plus application is 80 per cent. A party in a case regarding building hardware for windows, decided in 2010, benefitted from a reduction of 60 per cent in the original proceedings and of 100 per cent in the subsequent investigation, which concerned building hardware for doors. The latter case concerned five wholesalers who agreed on minimum margins for products from a specific producer.




Another cartel case following a leniency application concerned a vertical restriction on parallel trade. General Electric Company, USA, and GE Healthcare GmbH, Germany, applied for leniency in relation to restrictions in distribution agreements in Germany with third parties regarding active and passive sales into Switzerland, where GE distributed its products directly to end consumers through an affiliate. After a relatively short investigation, the parties agreed to an amicable settlement in 2016, which was accepted by the ComCo in the same year. No fine was paid because the applicants were granted a reduction of 100 per cent. This is remarkable, because a complete reduction requires the applicant to have not coerced any other undertaking into participating in the infringement of competition, nor played the leading role in such behaviour. Unfortunately, the published decision does not provide any reasoning for this aspect of the decision. It seems surprising that the producer in a common vertical relationship restricting exports of distributors had apparently no leading role; after all, this restriction of sales was beneficial to GE’s subsidiary in Switzerland. However, this case demonstrates that – apart from horizontal cartels – undertakings involved in vertical restrictions may, in principle, be rewarded with partial or even full leniency.


Under Article 29 of the CartA, the Secretariat may propose an amicable settlement on ways to eliminate the restraint to competition by the undertakings involved. The Secretariat regularly proposes such settlements, which must be approved by the ComCo. By using settlements, which include commitments of the undertakings involved regarding their future conduct, a direct and often immediate effect on the relevant market can be accomplished. Settlements can also lower the risk of an appeal and consequently avoid costly and time-consuming procedures before the Federal Administrative Court and subsequently the Federal Supreme Court. In addition, companies which accept an amicable settlement may benefit from a discount of generally up to 20 per cent of a potential fine. Thus, settlements are generally appealing to all parties. However, fewer appeals mean that for practitioners there is less judicial guidance from case law.

In its annual press conference of 17 April 2018, the ComCo emphasised the importance of administrative settlements. It highlighted in particular the cost saving aspects and the positive effects on the reputation of undertakings which agree to such settlements.

On 28 February 2018, the Secretariat published a new guidance paper on amicable settlements. The guidance clarifies that the discount for such settlements depends, amongst other things, on the timing. Whereas a settlement in the early state of proceedings may result in a discount of up to 20 per cent, the discount is generally reduced if the settlement is agreed at a later state in the proceedings. Where a settlement is agreed to by an undertaking after the Secretariat has issued a draft decision, the discount may amount to as little as 5 per cent. The discount for an amicable settlement is not exclusive and may be combined with other discounts, such as leniency discounts and discounts for good cooperation with the authorities. In the latter case the combined discount for an early state settlement of 20 per cent may be combined with a discount of another 20 per cent for good cooperation, a total discount of 40 per cent, which is not much less than the potential discount to a second leniency applicant, which may be up to 50 per cent.


Anyone may file a complaint with the Secretariat (article 26 CartA). According to the official annual report of the ComCo, the Secretariat conducted 63 (informal) so-called market




observations and 635 enquiries. Only very few of such matters were followed up by the Secretariat. Certain enquiries from companies, which are targeted against another company, are referred to civil enforcement by the Secretariat. However, this cannot hide the fact that a carefully drafted third party complaint is generally taken seriously by the Secretariat. So, a third party complaint may be the starting point of a detailed investigation particularly if convincing evidence is provided by the third party.

No party is entitled to have an investigation opened by the Competition Authorities and therefore may not appeal a refusal to do so. A third party may bring a civil court action based on competition law, although such case law has not yet been developed much in Switzerland (see section below on “Developments in private enforcement of antitrust laws”).

There is the possibility for affected third parties to join the investigation procedure. Where they qualify as a party, they have full legal standing and are vested with all procedural rights. However, under the Federal Supreme Court’s practice, third parties do not easily qualify as a party. Particularly with regard to competitors, in addition to a close proximity to the subject matter, they are required to suffer a clear economic disadvantage. Such disadvantage requires a specific and individual affectedness and is considered as given if an illegal anti-competitive agreement has disadvantageous effects on the competitor, in particular diminished turnover. The requirements for full legal standing have to be clearly established by the competitor claiming to be a party.


The amount of the fine depends on the duration and severity of the unlawful conduct. The turnover of the undertakings is calculated by application of the rules on the calculation of turnover in merger control cases (article 4 and 5 of the Merger Control Ordinance; “MCO”) and includes the consolidated net turnover (excl. intra-group turnover). The base amount is up to 10 per cent of the consolidated net turnover generated on the relevant markets in Switzerland cumulatively in the preceding three business years before the illegal conduct has ended, depending on the type and severity of the violation (article 3 CASO). Turnover of the undertaking abroad is not taken into account. The turnover relevant for the base amount of the fine is calculated by application of the rules of the MCO. In recent price-fixing cases, absent specific circumstances, the ComCo applied a percentage of between 5 and 10 per cent for the base amount. The base amount will then be increased by up to 50 per cent if the violation was implemented for up to five years. Each additional year thereafter will lead to an increase of another 10 per cent.

This interim base amount may increase by a certain percentage to reflect aggravating factors, such as repetition of an infringement, high cartel gains, ring-leading and measures to enforce cartel discipline (article 5 CASO). This is not exhaustive and other factors may be taken into account too: Swiss law provides the ComCo with wide discretion.

For calculating the fine, mitigating factors also have to be taken into account and the amount of the fine may be reduced accordingly. Examples of mitigating factors are: termination of the illegal conduct before or immediately after the ComCo has taken first steps; passive role in the cartel; or desisting from taking cartel enforcement measures. In recent cases, the reduction percentages have varied from 10 to 60 per cent depending on whether the companies fully collaborated, immediately ceased their unlawful practices, or concluded an amicable settlement.

In exceptional cases, the ComCo may also impose a lump sum or symbolic fines – this has been the case in the presence of rather small turnovers.





The decisions of the ComCo may be appealed at the Federal Administrative Court. Such appeals constitute full merits appeals on both the findings of facts and law. While administrative judges generally tend to support the administration, the Federal Administrative Court does not hesitate to annul ComCo’s decisions in full, if required. In our experience, the Federal Administrative Court’s judicial review of a case is more detailed in relation to hard facts as opposed to economic evidence, where the Court tends often to show reluctance to fully review ComCo’s arguments. It is noteworthy that the appeals committee, which was competent for competition law appeals before 2007, had economists who were closely involved in the judicial review. Unfortunately, the Federal Administrative Court currently lacks economists sitting on the bench.

Since many legal questions have not been answered in Swiss competition law by the competent courts, most decisions (excluding settlement cases) are appealed. In particular, the calculation of the fine – similar to the EU – is reviewed in detail by the courts, which often results in smaller fines for the undertakings involved in cartel cases.

The judgments of the Federal Administrative Court may be challenged in the Federal Supreme Court. In proceedings before the Federal Supreme Court, judicial review is limited to legal claims, i.e. the flawed application of the CartA or a violation of fundamental rights set forth in the Swiss Federal Constitution or in international law. In the last few years, the Federal Supreme Court has greatly tightened the CartA with its interpretation of the law. In certain cases, the legal reasoning was even more enforcement-driven than the ComCo’s position.

Numerous competition law cases are currently pending before the two appellate courts. Some of these cases raise fundamental questions, such as the questions of whether, and if so, what statutory time bars apply for public enforcement proceedings and what requirements must be proven to find an illegal single overall infringement.

Criminal sanctions

The CartA distinguishes administrative sanctions from criminal sanctions. Criminal sanctions for individuals are very rare and only apply to those who wilfully violate an amicable settlement or a final and non-appealable decision (including rulings regarding the obligation to provide information).

Administrative sanctions are not viewed as criminal sanctions in the strict sense. However, the guarantees of the European Convention for the Protection of Human Rights and Fundamental Freedoms (ECHR) regarding criminal charges apply in principle.

Cross-border issues

Application of Swiss competition law on foreign behaviour

As in other jurisdictions, Swiss competition law is applicable irrespective of whether or not the infringement has taken place in Switzerland. Decisive for the application of the CartA is whether a certain behaviour may have an effect in Switzerland. According to recent case law of the Federal Supreme Court, it is not necessary for there to be an actual effect, or a particular intensity of the effect. It is sufficient that the behaviour may potentially have an effect on the Swiss market. This broad interpretation deviates from international standards and may lead to surprising results. For example, clauses in contracts between foreign parties which have potential effects on the Swiss markets (for example, restrictions to export) are




sufficient for a sanction in Switzerland. This holds true even if such exports to Switzerland do not occur anyway – i.e. also without a restriction – and therefore have not even been contemplated by the parties when drafting the agreement. In other words, actual effects no longer play a role when analysing the applicability of the CartA. This is particularly problematic in relation to hard core cartels, since the negative effects of such cartels are presumed by the CartA and, therefore, the ComCo does not need to prove such actual effects when deciding a fine.

Cooperation agreements

Following the agreement between Switzerland and the EU on cooperation and exchange of information between their respective competition authorities, which entered into force on 1 December 2014 (see also the section above on “Overview of investigative powers in Switzerland”), Switzerland has started bilateral talks with Germany in relation to cooperation between their respective competition authorities. Germany is the most important trading partner for Switzerland. In addition, according to the ComCo, Germany constitutes an important market for reference for Switzerland, in particular, regarding price comparisons.


Competition law in Switzerland is (to date) to a large extent driven by public enforcement. Private enforcement has not reached its full potential and in particular has not reached the level which the legislator originally hoped for. There are several procedural and substantive reasons for this. Compared to other jurisdictions it has not been attractive for plaintiffs to enforce competition law claims in a civil court.

We believe that the modest development in private enforcement in Switzerland is based mainly on two elements: firstly, companies in Switzerland consider competition law predominantly as a compliance issue. The potential of competition law to protect a company’s interest, in particular against dominant firms, is generally underestimated. Secondly, the amount of recent case law regarding private enforcement is relatively low.

In the year under review there has been certain private litigation in the car distribution industry, for which the ComCo issued specific guidelines. In addition, the trend towards follow-on claims will most probably gain in importance in Switzerland in the near future. Specifically, the recent bid rigging cases could result in such follow-on claims brought forward by public procurement authorities.

Reform proposals

After the failed attempt to reform the CartA in 2014, several proposals have been put forward to reform certain specific elements in the CartA. The main current reform proposal in Swiss competition law relates to the controversial topic on how to fight Switzerland’s status as the so-called “Island of High Prices” in Europe. In 2016, the people’s initiative regarding “fair prices” was launched. By January 2018, the initiative committee had collected enough signatures to bring the initiative to a public vote. The initiative aims at introducing new regulation with regard to abuses by undertakings with “relative market power”. A similar concept as already exists in German competition law. Under the people’s initiative, and subject to legitimate business reasons, undertakings would abuse their relative market power if they either refuse to contract with Swiss domestic customers willing to purchase products abroad to the corresponding foreign conditions, or charge a “Swiss surcharge” on the foreign market prices. However, as the initiative is drafted, all obligations which apply to dominant




undertakings would apply also to undertakings with “relative market power”. Therefore, loyalty rebates of a supplier would be found illegal even if an undertaking is not dominant generally, but has market power in relation to a single customer, which for whatever reason relies on the products of the supplier. The Swiss Government has communicated a counterproposal in August 2018 limiting the scope of the concept of “relative market power” to the obligation to supply at foreign market prices. The Government will bring the initiative and its counterproposal to parliament in summer 2019.

Another more sector-specific reform proposal concerns online travel agencies. In October 2015, the ComCo prohibited several booking platforms the use of “wide” hotel rate parity clauses in their agreement with hotels. These clauses provided that hotels were not allowed to offer lower prices or larger quantities of rooms on, inter alia, other booking platforms. However, due to a lack of significant empirical value, the ComCo decided not to prohibit “narrow” hotel rate parity clauses, which solely prevented hotels from offering lower rates on their own websites as compared to the booking platforms. Instead, the ComCo wanted to monitor the effects of such clauses on the markets. However, a Motion by MP Bischof of 30 September 2016 to “Prohibit Adhesion Contracts from Online Booking Platforms against Hotels” aimed at prohibiting any kind of parity clauses in agreements between online booking platforms and hotels, i.e. including “narrow” hotel rate parity clauses. The Swiss parliament adopted the motion with a large majority. It is now up to the Swiss government to prepare a legislative proposal.

Finally, the Government is currently developing a proposal to reform Swiss merger control. Essentially, the Government intends to replace the current dominance test in merger control with the internationally standard SIEC test. This proposal had been included in the failed reform 2014, and the merger control element has not been disputed in parliament. Consequently, it is highly likely that a specific reform regarding merger control will be introduced in the next few years.






Michael Tschudin Tel: +41 58 958 53 36 / Email: [email protected] Michael Tschudin is specialised in Swiss and European competition law, regulated markets, related compliance programmes and litigation. Having worked at the Competition Commission (2005–2006) and the court of appeal for competition law cases, the Swiss Federal Administrative Court (2013–2014), he is able to draw on this practical experience when advising clients. Michael Tschudin had previously worked as an attorney at Wenger & Vieli AG from 2010 until 2012 before re-joining the firm in 2015. Since completing his PhD in competition law, he has regularly published articles on related issues. He focuses particularly on economic principles and in 2014 he obtained a postgraduate diploma in ‘Economics for Competition Law’ from King’s College, London. Michael Tschudin is ranked by Chambers as an associate to watch and by Who’s Who Legal Competition as a future leader in 2018.

Frank Scherrer Tel: +41 58 958 58 58 / Email: [email protected] Frank Scherrer is specialised in pharmaceutical and healthcare law and competition law. He has many years of experience in advising clients on competition matters and representing them in proceedings before ComCo and the courts. He has written several publications, including his thesis, in competition law.

Urs Weber-Stecher Tel: +41 58 958 58 58 / Email: [email protected] Urs Weber-Stecher is specialised in international dispute resolution (mainly arbitration) and competition law. He has long-standing experience in advising companies on competition law matters, representing them in proceedings before ComCo and state courts, and handling competition law disputes in arbitral proceedings (as counsel or arbitrator).

Dufourstrasse 56, PO Box, 8034 Zurich, Switzerland / Metallstrasse 9, 6300 Zug, Switzerland Tel: +41 58 958 58 58 / URL: www.wengervieli.ch

Wenger & Vieli Ltd.



Taiwan


The governing law for competition enforcement in Taiwan is the Taiwan Fair Trade Act (“TFTA”). The TFTA was enacted in February 1991, and took effect in 1992. The most recent comprehensive amendments to the TFTA, as it concerns cartel enforcement, took place in February 2015. The stated purpose of the law is “maintaining trading order, protecting consumers’ interests, ensuring free and fair competition, and promoting economic stability and prosperity”.

Article 14 of the TFTA defines “concerted action” as when “competing enterprises at the same production and/or marketing stage, by means of contract, agreement or any other form of mutual understanding, jointly determine the price, quantity, technology, products, facilities, trading counterparts, or trading territory with respect to goods or services, or any other behavior that restricts each other’s business activities, resulting in an impact on the market function with respect to production, trade in goods or supply and demand of services”. Article 14 expressly defines the phrase “any other form of mutual understanding” to mean “other than contract or agreement, a meeting of minds whether legally binding or not which would in effect lead to joint actions”.

Article 15 is the key provision of the TFTA regarding cartel activity. Article 15 prohibits any enterprise from engaging in “concerted action” unless that action is beneficial to the economy as a whole, is in the public interest, and has been approved by the Taiwan Fair Trade Commission (“TFTC”) as falling under one of eight permissible categories: (1) standard-setting; (2) research and development; (3) specialisation; (4) exporting; (5) importing; (6) certain actions related to an economic downturn; (7) certain actions related to small and medium-sized business; and (8) a catch-all category that allows for approval of certain actions aimed at development, innovation, and efficiency.

Parties engaged in permissible concerted action may file an application for approval with TFTC. Such applications are relatively rare, however. In 2017, the TFTC received seven applications for approval, up by two from the year before, but down from 15 in 2015. See 2017 Statistical Yearbook of Fair Trade Commission, at 41–42. The TFTC approved three applications for concerted action in 2017. Id. at 50. In 2017, all three approved applications for approval for concerted action were pursuant to category 5 (“joint acts in regards to the importation of foreign goods, or services for the purpose of strengthening trade”). Id. at 50; TFTA Art. 15, Subparagraph 5.

Overview of investigative powers in Taiwan

Investigatory Powers and Procedures

The TFTC is the central authority in charge of competition policy and enforcement in

Belinda S. Lee, Christopher B. Campbell & Meaghan Thomas-Kennedy Latham & Watkins LLP



Taiwan. The TFTA grants the TFTC the power to “investigate and handle...any involvement in the violation of the provisions of [the TFTA] that harms the public interest”. To accomplish this purpose, the TFTA provides that the TFTC may:

• require the parties and any related third party to appear to make statements;

• require the parties and any related third party to submit books, records, documents, and any other necessary materials or exhibits;

• dispatch personnel for any necessary onsite inspection of the office, place of business, or other locations of the parties and any related third party; and

• seize articles obtained from the investigation that may serve as evidence, only as necessary for the investigation, inspection, verification or preservation of evidence.

The TFTC’s interviews of parties and witnesses typically take place in Taipei and can last anywhere from one hour to multiple days. Multiple entities under investigation may be interviewed on consecutive days. Interviews are not necessarily transcribed verbatim, but the TFTC does generate a summary of the questions and answers during the interview, which is then included in the case file.

TFTC investigations can proceed quickly relative to investigations in other jurisdictions – a decision can be issued as soon as six months after the initial notice of investigation, particularly in cases where the TFTC has the assistance of a leniency applicant. Obviously, the pace will vary from case to case, but both counsel and clients should be prepared for the process to move quickly once an investigation is under way.

No Search Warrants or Dawn Raids

The current TFTA does not grant the TFTC the power to conduct dawn raids or otherwise apply for search warrants of target enterprises. Although the proposed 2015 amendments included a provision that would have granted the TFTC this power, the proposal did not pass. Various commentators expect that the dawn raid power will be proposed during the next round of amendments to the TFTA, and Dr. Huang Mei-Ying, who assumed the role of Chairperson of the TFTC in February 2017, has stated that she hopes to add the search and seizure power to the TFTA. Granting the TFTC the power to conduct unscheduled search and seizures would bring its powers more in line with that of competition authorities in other jurisdictions, such as China, Japan and the United States. In November 2017, the TFTC held bilateral discussions with the Japan Fair Trade Commission to exchange views on search and seizure power but, for the moment, the TFTA remains unchanged.


The TFTC’s most recent statistics cover enforcement activity in 2017. The TFTC reports that in 2017, it opened 2,288 new investigations. Of those, 328 cases were self-initiated and 1,960 were reported. Roughly 73% of reported cases (1,671 cases) were initiated in the form of a complaint – down from approximately 80% in the year before – and the large majority of new complaints targeted a business enterprise. The number of total reported cases in 2017 represents a small decline from 2016. In 2017, the TFTC closed 2,022 cases by decision or otherwise – up 5.9% from the year before. Of the 141 complaints closed by decision, 36 complaints or 25.7% were decided in favour of the enterprise. None of those cases involved concerted action investigations.

In 2017, the TFTC imposed a total of NT$23.422 billion in fines against parties investigated for anticompetitive conduct, which was an enormous increase over 2016. The vast majority of this amount was attributable to the TFTC’s October 2017 fine of NT$23.4 billion against

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Qualcomm for violations of the TFTA. In August 2018, that dispute was resolved by settlement and the original fine was replaced by settlement terms, which included Qualcomm’s agreement not to contest NT$2.73 billion of the original fine amount and its agreement to various behavioural commitments to domestic Taiwanese handset manufacturers and chip suppliers.


The 2015 amendments to the TFTA made several significant changes related to cartel enforcement. First, the amendments added a provision that allows the TFTC to presume a mutual understanding of concerted action based on “market condition[s], characteristics of the good or service, cost of profit considerations, and economic rationalisation of the business conducts”. TFTA Art. 14. This addition, which effectively allows the TFTC to prove concerted action through circumstantial evidence, has been viewed by commentators as largely shifting the burden of proof of concerted action from the TFTC to the target enterprises.

Second, the amendments increased the statute of limitations for the TFTC to impose sanctions for violations of the TFTA from three years to five years. TFTA Art. 41. This change provides the TFTC with more time to investigate and build a case against a target enterprise before imposing sanctions, and provides leniency applicants with more time to come forward, which could lead to a higher volume of filed cases in the coming years.

Finally, the 2015 amendments made a significant change to the appeals process. Previously, the TFTA required penalised parties to first appeal a decision of the TFTC to the Administrative Appeal Committee of the Executive Yuan (“AAC”). Under the current law, parties may skip the appeal to the AAC and appeal findings of liability directly to the administrative courts. TFTA Art. 48.


The TFTC publishes flow charts that detail the procedures and steps taken during investigations and applications for immunity in concerted action cases. See generally TFTC Regulations and Case Handling. Compared to other jurisdictions, however, such as the United States or the European Union, neither the TFTC nor the TFTA makes clear whether a party under investigation is entitled to details of the TFTC’s case theory or evidence. Because the 2015 amendments to the TFTA appear intended to globalise and modernise the law, however, increased transparency could be the subject of future TFTA amendments.


The TFTA’s leniency programme was introduced in the 2011 amendments to the TFTA. Article 35 establishes a framework for leniency that can provide either fine immunity or fine reduction to qualifying applicants. The options available to a leniency applicant vary depending on whether the applicant applies for leniency prior to or during the TFTC’s investigation, and based on the quality of information and evidence that the applicant provides to the TFTC.

A. Application Prior to Investigation (Article 35, Subparagraph 1) Article 35, Subparagraph 1 provides for leniency if the applicant files a complaint or informs the TFTC of illegal conduct, submits evidence of the violation, and assists in the investigation “before the [TFTC] is aware of the said illegal conduct or initiated an investigation”. In




such cases, the applicant must provide evidence that it is “able to assist the [TFTC] to initiate an investigation”. See Regulations on Immunity and Reduction of Fines in Illegal Concerted Action Cases (“Immunity Regulations”), Art. 3. This means that the applicant must provide “concrete details of the concerted action in which they have been involved” that the TFTC does not already possess (or that the TFTC is unaware of), an outline of the concerted action in question, the time and location of the mutual understanding, and the content of the mutual understanding. Id. Art. 4. If the TFTC has already obtained sufficient evidence to initiate the investigation when the application is submitted, the TFTC may reject the application. Id. Art. 3.

B. Application During Investigation (Article 35, Subparagraph 2) Article 35, Subparagraph 2 permits leniency if the applicant reveals the illegal conduct, submits evidence, and assists the investigation “during the period in which the [TFTC] investigates the said illegal conduct”. When an entity applies under this provision, the evidence submitted must assist the TFTC to “establish that the involved enterprises have violated” TFTA, Art. 15. This means the applicant must provide “a statement of concrete details of the concerted action in question, along with evidence that the applicant has already obtained at the time of application and is capable of proving the violation of the said concerted action” or a statement and evidence that “are able to assist the [TFTC] in the investigation on the concerted action in question”. See Immunity Regulations, Art. 5. Applicants seeking fine immunity must provide evidence that falls in the first category, while those applying for fine reduction may provide evidence that falls in the second category. Id. Similar to applications submitted prior to an investigation, the TFTC retains the right to reject an application submitted during an investigation if the TFTC has already obtained enough evidence to establish the named parties’ involvement. Id. Art. 3.

C. Conditions for Leniency

Several conditions attach to a grant of leniency, including that the applicant withdraw from the concerted action immediately upon filing an application, or at a later time which the TFTC specifies. From the time the application is filed, the applicant must follow the TFTC’s instructions and provide “honest, full and continuous assistance” during the investigation. Id., Art. 6, subparagraph 2. This includes turning over evidence, providing facts the TFTC may request, and allowing the TFTC to question employees. The applicant also must not conceal or misrepresent any information related to the concerted action, destroy or alter evidence, or disclose its application to any other parties before the case is concluded. See Id., Art. 6.

D. Fine Immunity Versus Fine Reduction

Fine immunity is available both before and during a TFTC investigation if the applicant is the first to apply, meets the relevant criteria, agrees to all leniency conditions, and no other enterprise in the investigation has already been granted leniency. An otherwise qualifying applicant that applies during an investigation is eligible for fine reduction only if the applicant is either not the first party to apply or is not able to submit evidence “capable of proving the violation”. Immunity Regulations, Art. 5, Subparagraph 1. The first qualifying applicant for fine reduction is eligible for a 30% to 50% reduction; the second qualifying applicant is eligible for a 20% to 30% reduction; the third qualifying applicant is eligible for a 10% to 20% reduction; and the fourth qualifying applicant is eligible for a reduction of up to 10%. Id., Art. 8.

Enterprises intending to apply for immunity, but which do not yet have all of the required information, may file a marker application requesting preservation of their priority status.




Id. Art. 11. After an application has been received and approved, the TFTC is required to keep the identity of the applicant confidential unless the applicant agrees otherwise.

E. Related Amendment: The Antitrust Fund

The 2015 amendments empowered the TFTC to develop an “Antitrust Fund”, which has commonly been referred to as a “Whistleblower Fund”. The stated purpose of the fund is to “strengthen the investigation and sanction over concerted actions and promote the healthy development of market competition”. TFTA Art. 47-1. The TFTA provides for the fund to be capitalised by 30% of the fines collected under the TFTA, among other sources, which can be used to reward parties that report illegal concerted action.


The TFTC publishes guidelines that govern the administrative settlement of cases and investigations. The current guidelines went into effect in February 2012. Settlements may be proposed by either the TFTC or the target enterprise. Proposed settlements must be submitted by a Commissioner for review during a TFTC Commissioners’ Meeting. In deciding whether to approve a settlement, the commissioners consider: “(1) the legality and appropriateness with regard to the mutual concession of the FTC and counterpart; (2) the maintenance of public interest; and (3) the potential harm incurred by the interested party due to the constitution of settlement contract”. See Fair Trade Commission Disposal Directions on Handling Administrative Settlements, ¶ 2. The TFTC reserves the right to “withdraw or alter” a proposed settlement prior to it becoming final due to a party’s violation of the settlement’s terms or when otherwise “necessary”. Id. ¶ 7. Parties that do not qualify for leniency can consider settlement as another route to resolution of an investigation.

The frequency of TFTC settlements is unknown (the TFTC does not publish statistics on the cases resolved by settlement), but the TFTC’s August 2018 settlement with Qualcomm was the first litigation settlement justified on the basis of public welfare in the TFTC’s history of appearing before the Intellectual Property Court. It has been the subject of significant criticism by legislators who suspect the settlement was directed by high-level government officials. Members of the Control Yuan, a supervisory agency, announced an investigation into the settlement, and lawmakers have also called for an investigation. The critical reaction to the TFTC’s settlement of the Qualcomm matter may cause the TFTC to proceed more cautiously with respect to enforcement actions and settlement resolutions involving large multinational corporations.


Third parties may report suspected violations of the TFTA to the TFTC. The TFTC is required to review a third party’s report to assess whether a formal investigation should be opened.

Punishment and fines

Civil Penalties

The TFTC is empowered to impose administrative fines on entities and individuals found to be in violation of the TFTA. Any party found to have engaged in illegal concerted action may be ordered to cease the conduct or take corrective action, and may be fined no less than NT$100,000 and not more than NT$50 million. TFTA Art. 40. The 2011 amendments to the TFTA added a provision that provides for an additional administrative fine if a party is found to have engaged in a “serious violation”. In the case of a serious violation, the TFTC




may impose a penalty of up to 10% of an enterprise’s total sales income from the previous fiscal year, of which a penalty does not contribute to the fine limits that otherwise apply. Id. In April 2012, the TFTC adopted regulations that define the term “serious violation” under the new law. The regulations, titled Regulations for Calculation of Administrative Fines for Serious Violations of Article 9 and Article 15 of the Fair Trade Act, describe a “serious violation” as “unlawful conduct that has seriously affected market competition and order”. The regulations set out factors that should be considered in determining whether a violation is “serious”:

(1) the scope and extent of the market competition and order affected;

(2) the duration of the damage to market competition and order;

(3) the market status of the enterprise in violation and the structure of the corresponding market;

(4) the total sales and profits obtained from the unlawful conduct during the violation period; and

(5) the type of concerted action – joint product or service price decision, or quantity, trading counterpart or trading area restriction.

Conduct may also constitute a serious violation if the total product sales achieved during the violation period exceeds NT$100 million, or the total profits obtained from the unlawful conduct exceed the upper limit for administrative fines under the TFTA (i.e., NT$50 million).

Criminal Penalties

Article 34 of the TFTA provides that in certain circumstances, criminal penalties may be imposed in addition to the civil penalties described above. Specifically, if a party is ordered to cease conduct or take corrective action, but fails to do so or repeats the violation, the TFTA provides for imprisonment of the responsible persons for not more than three years, and/or a fine of not more than NT$100 million.

Right of appeal

Prior to the 2015 amendments, penalised parties were required to first appeal a decision of the TFTC to the AAC. If the party was dissatisfied with the AAC’s decision, only then could the party file an appeal with the High Administrative Court. The 2015 amendments repealed the AAC requirement, and parties may now appeal a TFTC decision directly to the High Administrative Court. TFTA Art. 48. The High Administrative Court reviews TFTC decisions for errors of both fact and law.

After the High Administrative Court issues its opinion, either party may file an appeal to the Supreme Administrative Court. In contrast to the High Administrative Court, the Supreme Administrative Court reviews decisions only to determine if the lower court failed to apply, or wrongfully applied, the law. The Supreme Administrative Court can affirm or overrule the lower court, and it can dismiss the appeal entirely.

The TFTC reports that no cases were appealed in 2017. See 2017 Statistical Yearbook of Fair Trade Commission, Table 23.


Private enforcement is authorised under the TFTA. Chapter V provides for damages or an injunction (“removal of infringement” and “prevention” of an infringement) when a violation of the TFTA results in infringement of another’s “rights and interests”. TFTA Arts. 29, 30.




Article 31 provides for punitive damages in cases of intentional violations, but the amount cannot exceed three times the proven amount of damages. The statute of limitations for private actions is 10 years from the time the conduct occurs or two years from the damaged party’s discovery of the conduct. TFTA Art. 32.






Belinda S. Lee Tel: +1 415 395 8851 / Email: [email protected] Belinda Lee is a litigation partner in the Antitrust & Competition Practice Group in the San Francisco office of Latham & Watkins. Her practice focuses on the defence of Asian-based companies in multi-jurisdictional cartel matters and civil class actions.

Christopher B. Campbell Tel: +1 415 391 0600 / Email: [email protected] Christopher Campbell is a litigation partner in the Antitrust & Competition Practice Group in the San Francisco office of Latham & Watkins. Mr. Campbell represents major U.S. and Asian-based companies in the technology, financial, and transportation industries in multi-jurisdictional civil and criminal antitrust litigation.

Meaghan Thomas-Kennedy Tel: +1 415 391 8821 / Email: [email protected] Meaghan Thomas-Kennedy is a litigation associate in the Antitrust & Competition Practice Group in the San Francisco office of Latham & Watkins. Ms. Thomas-Kennedy represents major U.S. and Asian-based companies in the manufacturing, healthcare, and technology industries in multi-jurisdictional criminal and civil cartel matters.

505 Montgomery St., Ste. 2000, San Francisco, CA 94111-6538, USA Tel: +1 415 646 7802 / URL: www.lw.com

Latham & Watkins LLP


Turkey


The national competition authority for enforcing the cartel prohibition and other provisions of the Competition Law in Turkey is the Turkish Competition Authority (“Competition Authority”). The Competition Authority has administrative and financial autonomy. It consists of the Competition Board (“Board”), Presidency and service departments. There are five divisions, with sector-specific work distribution, that handle the Competition Law enforcement work through approx. 130 case handlers. The other service units consist of the following: (i) the department of decisions; (ii) the economic analysis and research department; (iii) the information management department; (iv) the external relations, training and competition advocacy department; (v) the strategy development, regulation and budget department; and (vi) the cartel and on-site inspections support division (“Leniency Division”).

The statutory basis for cartel prohibition and the enforcement regime is Law No. 4054 on the Protection of Competition of December 13, 1994 (“Competition Law”). The Competition Law finds its underlying rationale in Article 167 of the Turkish Constitution of 1982, which authorises the state to take appropriate measures to secure the functioning of the markets and to prevent the formation of monopolies or cartels. The Turkish cartel regime by nature applies administrative and civil (not criminal) law. The Competition Law applies to individuals and companies alike and even to public corporations if they act as an undertaking within the meaning of the Competition Law.

Article 4 of the Competition Law is the applicable provision for cartel-specific cases and provides the basic principles of the cartel regulation. The provision is akin to and closely modelled on Article 101(1) of the Treaty on the Functioning of the European Union (“TFEU”). Article 4 prohibits all agreements between undertakings, decisions by associations of undertakings and concerted practices which have (or may have) as their object or effect the prevention, restriction or distortion of competition. Similar to Article 101(1) of the TFEU, the provision does not define the term “cartel” explicitly. However, Article 4 prohibits all kinds of restrictive agreements, including any form of cartel agreements.

Unlike the TFEU, Article 4 does not refer to additional requirements such as “appreciable effect” or “substantial part of a market”, and consequently does not provide for any de minimis exception. Therefore, Article 4 applies even to violations with minor effects on any market. The practice of the Board has not recognised any de minimis exceptions either. However, the enforcement trends and proposed changes to the legislation are increasingly focusing on de minimis defences and exceptions.

Gönenç Gürkaynak & Öznur İnanılır ELIG Gürkaynak Attorneys-at-Law



Article 4 also prohibits any form of agreement that has the “potential” to prevent, restrict or distort competition. Again, this is a specific feature of the Turkish cartel regulation system, granting broad discretionary power to the Board. Additionally, Article 4 brings a non-exhaustive list which provides examples of possible restrictive agreements.

The prohibition on restrictive agreements and practices does not apply to agreements that benefit from a block exemption or an individual exemption issued by the Board. Vertical agreements are also caught by the prohibition laid down in Article 4, to the extent they are not covered by block exemption rules or individual exemptions.

The Board’s general practice shows that horizontal restrictive agreements such as price-fixing, market allocation, collective refusals to deal (group boycotts) and bid rigging, have consistently been deemed to be per se illegal.

The Turkish competition regime also condemns concerted practices. The Competition Authority may apply “the presumption of concerted practice” and thus can easily shift the burden of proof for the investigated parties in connection with concerted practice allegations too. Similar to the EU Competition Law regime, a concerted practice is defined as a form of coordination between undertakings which, without having reached the stage where a so-called agreement has been properly concluded, knowingly substitutes practical cooperation between them for the risks of competition. Therefore, this is a form of coordination, without a formal “agreement” or “decision”, by which two or more companies come to an understanding to avoid competing with each other. The coordination does not need to be in writing; it is sufficient if the parties have expressed their joint intention to behave in a particular way, perhaps in a meeting, via a telephone call or through the exchange of letters.

Overview of investigative powers in Turkey

The Competition Law provides vast investigative powers to the Competition Authority such as the power to conduct dawn raids and to apply other investigatory tools (e.g., formal information request letters). The Board only needs a judicial authorisation if an undertaking refuses to allow the dawn raid. The prevention or hindering of a dawn raid could result in the imposition of an administrative monetary fine.

Article 15 of the Competition Law authorises the Board to conduct on-site investigations. Accordingly, the Board is entitled to:

• examine the books, paperwork and documents of undertakings and trade associations, and, if necessary, take copies of the same;

• request undertakings and trade associations to provide written or verbal explanations on specific topics; and

• conduct on-site investigations with regard to any asset of an undertaking.

Refusal to grant the staff of the Competition Authority access to business premises may lead to the imposition of a fixed fine of 0.5% of the annual turnover. It may also lead to the imposition of a fine of 0.05% of the turnover for each day of the violation.

Although the Competition Law obliges employees to provide a verbal testimony during the dawn raid, case handlers usually allow for providing an answer after the occurrence of the dawn raid. Therefore, in practice, employees can avoid providing answers on issues that are uncertain to them, provided that a written response is submitted in a mutually agreed timeline. Case handlers of the Competition Authority may fully examine computer records, including, but not limited to, deleted mail items.

ELIG Gürkaynak Attorneys-at-Law Turkey



Officials conducting a dawn raid must be in possession of a deed of authorisation issued by the Board. The deed of authorisation must specify the subject matter and purpose of the investigation. The inspectors are not entitled to exceed their authorisation. Hence, the inspectors must not exercise their investigative powers in relation to matters that do not fall within the scope of the investigation specified in the deed of authorisation. Therefore, the Competition Authority officials may not copy documents or record verbal testimonies which are not related to or covered by the scope of the investigation.

At the site of a dawn raid, the Competition Authority’s staff is not obliged to wait for a lawyer to arrive. However, the staff usually agree to wait for a short while for a lawyer to arrive, but may impose certain conditions (e.g., to seal file cabinets or disrupt email communications).

The Competition Authority may also request all information it deems necessary from all public institutions and organisations, undertakings and trade associations. Officials of these bodies, undertakings and trade associations are obliged to provide the necessary information within a fixed period of time. Failure to comply with a decision ordering the production of information may lead to the imposition of a turnover-based fine of 0.1% of the turnover generated in the financial year preceding the date of the fining decision (if this is not calculable, the turnover generated in the financial year nearest to the date of the fining decision will be taken into account). The Board may impose the same amount of fine if an undertaking provides incorrect or incomplete information in response to the Competition Authority’s request for information.

An overview of cartel enforcement activity during the last 12 months

Developments in cartel enforcement in Turkey may be illustrated with an overview of the most notable cartel cases that the Board has examined in recent years. The Board is usually reluctant to identify a violation as a cartel and prefers to use terms such as “concerted practice”, “agreement” or “information exchange” instead. The reasons for this approach are not totally clear; however, it appears that the Board may be aiming at avoiding the risk of having to impose astronomical monetary fines which could be deemed as disproportionate compared to the respective case at hand.

The Competition Authority’s annual report for 2017 provides that the Board finalised a total of 80 cases relating to competition law violations. Among the 80 cases, 37 were subject to Article 4 (anticompetitive agreements) only, 29 cases were subject to both Article 4 and Article 6 (abuse of dominant position) and one case was subject to Article 4, Article 6 and Article 7 (merger control). The Board issued monetary fines amounting to a total of TL 41,320,930 (approximately €6.3 million at the time of writing) (TL 38,776,937 [approximately €6 million at the time of writing] for cases analysed in terms of Article 4 and TL 2,543,993 [approximately €0.3 million at the time of writing] for cases analysed in terms of Article 4 as well as Article 6). The monetary fine figures of 2017 show that the Competition Board has in total imposed roughly four times less monetary fines to Article 4 cases while the monetary fines imposed to Article 6 cases has tripled. Besides, the Competition Board imposed monetary fines to cases that are both evaluated with respect to both Article 4 and Article 6 the first time in five years. The trend over the course of several years has shown that the Board does not hesitate to impose administrative monetary fines when it comes to horizontal anti-competitive and cartel arrangements. In fact, although no monetary fines for cartel arrangements were issued in 2015, the Board imposed monetary fines totalling TL 79,367,156 (approx. €12 million at the time of writing) and TL 21,279,796 (approx. €3 million at the time of writing) to horizontal anti-competitive arrangements.




In terms of its recent cartel enforcement activity, the Board’s one of the most recent and important decision concerning leniency applications is the Corporate Loans decision (28 November 2017, 17-39/636-276). The Board launched an investigation against 13 financial institutions, including local and international banks active in the corporate and commercial banking markets in Turkey with respect to whether they have violated Article 4 of Law No. 4054 by way of exchanging competitively sensitive information on loan conditions (such as interest and maturity) regarding current loan agreements and other financial transactions. The Bank of Tokyo-Mitsubishi UFJ Turkey A.Ş. (“BTMU”) made a leniency application on October 14, 2015 to benefit from the Article 4 of the Regulation on Leniency. After 19 months of an in-depth investigation, the Board has unanimously concluded that BTMU, ING Bank A.Ş. (“ING”) and the Royal Bank of Scotland Plc. Merkezi Edinburgh İstanbul Merkez Şubesi (“RBS”) have violated Article 4 of Law No. 4054. In this respect, the Board imposed an administrative monetary fine on ING and RBS in the amount of TRY 21.1 million and TRY 66.4 thousand, respectively, over their annual turnover in the financial year of 2016. However, the Board resolved that BTMU should not have an administrative monetary fine imposed pursuant to its leniency application, granting full immunity to BTMU while also relieving the other investigated undertakings from an administrative monetary fine.

Another recent decision concerns allegations that 10 undertakings active in producing ready-mix concrete in the İzmir region in Turkey would have artificially increased the prices of ready-mix concrete by entering into an anti-competitive agreement or concerted practice (August 22 2017, 17-27/452-194). The Board took into account that the economic evidence that show the relevant undertaking was not involved in any kind of anticompetitive agreement or concerted practices and it is understood that the Board took the view of the defendants that it is implausible to reach into an agreement within the alleged duration of the agreement, which was three months. Moreover, it could be argued that the decision constitutes a good example that the undertakings subject to investigation based on the allegations on anti-competitive agreements or concerted practice are able to defend themselves based on economic and legal evidence even under the presumption of concerted practice of Article 4 of the Competition Law and marks the importance of economic evidence.

In addition, another decision where the Board imposed a monetary fine on the undertakings is Ready mixed concrete manufacturers (16-05/117-52, February 18, 2016) decision. In this decision, the undertakings were alleged to have violated Article 4 of the Competition Law through a joint production and commercialisation agreement made between them. In this decision, the Board defined the relevant market as “ready mixed concrete” and recognised two different geographical markets due to the fact that ready-mixed concrete must be used within a maximum of two hours after it is manufactured and that it is transportable only within a 50km radius of a manufacturing plant. In its assessments, the Board indicated that establishing a new ready mixed concrete manufacturer could not be considered as a “joint venture”, as executives of the undertaking have no joint control over the alleged joint venture. Therefore, the Board concluded that the relevant entity should not be considered a joint venture under the rules of Communiqué 2010/4 on Mergers and Acquisitions Requiring the Approval of the Competition Board (“Communiqué No. 2010/4”). The Board evaluated the newly formed commercial relationship between relevant undertakings as a “joint manufacturing and commercialisation agreement”. The Board stated that this agreement is within the scope of Article 4 of the Competition Law, considering that it may raise several competitive concerns, such as customer allocation, price-fixing and coordination. The Board further evaluated the agreement within the scope of Article 5 of the Competition Law. However, the Board decided that this activity cannot be subject to an exemption as it will not




be in accordance with the “not eliminating competition in a significant part of the relevant market” requirement stated in Article 5 of the Competition Law. It concluded that the manufacturing and commercialisation agreement does not satisfy the requirements laid down in the Article 5 of the Competition Law and thus the relevant undertakings violated the Competition Law. Consequently, a monetary fine at the rate of 0.2% over their annual turnover was imposed on each undertaking. That said, two Board members dissented the majority opinion, stating that the relevant market did not bear any entry barriers as it did not require high investment cost and that the agreement enabled undertakings to minimise equipment, workforce and fuel expenses and reflect the cost difference to the prices and create a favourable outcome for consumers. In other words, the dissent centred on the fact that the agreement failed to fulfil the requirements provided in Article 5 of the Competition Law.

The investigations that have been initiated by the Competition Authority so far clearly show that it does not focus on any specific sectors when it comes to the investigation of cartel behaviour but rather aims to tackle any conduct or practice which might point to a restriction of competition among competing undertakings. It is expected that the trend will continue in its future cases.

Key issues in relation to the enforcement policy

The Turkish Competition Authority places equal emphasis on all areas of enforcement. The significance of the cartel enforcement regime under the Competition Law has nonetheless been repeatedly underlined by the Presidency of the Competition Authority.

There are neither industry-specific offences nor defences which lead to a particular scrutiny. The Competition Law applies to all industries, without exception. In terms of cartel enforcement, cement, insurance and mail-cargo transportation have recently been under investigation for cartel and concerted practice allegations.

It is fair to say that the Board may at times consider policies which are not directly related to the protection of competition in the markets. The Turkish paper sector investigation (13-42/538-238, July 8, 2013) marks one of the extremely rare files in Turkey where a policy concern not directly related to the Competition Law (i.e. a policy concern relating to minimising trade deficit) may have played a role in the ultimate decision, together with a state action defence of the parties concerned, as the parties’ collective behaviour was influenced by a set of rules brought by the relevant ministry tackling trade deficit. The Board found that seven paper recycling companies had violated the competition laws by harmonising their commercial behaviours and colluding against waste paper producers that aimed to export waste paper. However, the Board did not levy turnover-based monetary fines against the defendants, and granted three-year exemptions under objective criteria.


As the competent body of the Competition Authority, the Board is responsible for, inter alia, investigating and condemning cartel activity. A cartel matter is primarily adjudicated by the Board.

The Board may ex officio, or as a result of a notice or complaint, launch a preliminary-investigation prior to initiating a full-fledged investigation. At this preliminary stage, the undertakings concerned are usually not notified that they are under an investigation, unless the Competition Authority decides to conduct a dawn raid or apply other investigatory tools (i.e., formal information request letters).

The Competition Authority experts submit a preliminary report to the Board within 30 days




after the Board decides to launch a preliminary investigation. The Board then decides within 10 days whether to launch a full-fledged formal investigation. If the Board decides to initiate an investigation, it sends a notice to the undertakings concerned within 15 days. The investigation is to be completed within six months. If deemed necessary, this period may be extended by the Board only once, for an additional period of up to six months.

Once the investigation notice has been formally served, the investigated undertakings have 30 days to prepare and submit their first written defences. Subsequently, the main investigation report is issued by the Competition Authority. Once this is served on the defendants, they have 30 calendar days to respond, extendable for a further 30 days (this is the second written defence). The investigation committee will then have 15 days to prepare an additional opinion concerning the second written defence. The defending parties will have another 30-day period to reply to the additional opinion (third written defence). When this reply is served on the Competition Authority, the investigation process is to be completed (i.e., the written phase of investigation involving the claim/defence exchange will close with the submission of the third written defence).

An oral hearing may be held upon the request of the parties. The Board may also ex officio decide to hold an oral hearing. Oral hearings are held between 30 and 60 days following the completion of the investigation process under the provisions of Communiqué No. 2010/2 on Oral Hearings before the Board. The Board renders its final decision within 15 days from the hearing, if an oral hearing is held. Otherwise, the decision is rendered within 30 days from the completion of the investigation process. It usually takes around three to five months (from the announcement of the final decision) for the Board to serve a reasoned decision on the counterpart.

The Competition Authority’s administrative enforcement is also supplemented with private lawsuits. Accordingly, in case of private suits, cartel members are adjudicated before the courts. Due to a treble damages clause allowing litigants to obtain three times their loss as compensation, private antitrust litigations increasingly make their presence felt in the cartel enforcement arena. Most courts wait for the decision of the Competition Authority and build their own decision on the Board’s decision.


The Competition Law underwent significant amendments in February 2008. The current legislation brings about a stricter and more deterrent fining regime, coupled with a leniency programme for the undertakings. The secondary legislation specifying the details of the leniency mechanism is the Regulation on Active Cooperation for Discovery of Cartels (“the Regulation on Leniency”). The Guidelines on Explanation of the Regulation on Leniency were published in April 2013. With the enactment of the Regulation on Leniency, the main principles of immunity and leniency mechanisms have been set.

The Regulation on Leniency provides that the leniency programme is only available for cartelists. It does not apply to other forms of antitrust infringements. A definition of a cartel is also provided in the Regulation on Leniency for this purpose.

A cartelist may apply for leniency until the investigation report is officially served. Depending on the application order, there may be total immunity from, or reduction of, a fine. This immunity/reduction includes both the undertakings and its employees and managers, with the exception of the “ring-leader” which can only benefit from a second-degree reduction of a fine. The conditions for benefiting from the immunity/reduction are also stipulated in the Regulation on Leniency. Both the undertaking and its employees and managers can apply




for leniency. A manager or employee of a cartelist may also apply for leniency until the “investigation report” is officially served. Such an application would be independent from applications by the cartelist itself, if there are any. Depending on the application order, there may be total immunity from, or reduction of a fine, for such manager or employee. The requirements for such individual application are the same as stipulated above.

According to the annual report of the Turkish Competition Authority, the Authority has accepted two leniency applications in 2017. In these two most recent Board decisions where the Board granted full immunity to the applicants, the other undertakings were fined. One application is the Board’s decision on the 13 financial institutions (November 28, 2017, 17-39/636-276) as explained above. The other leniency application concerned the mechanical engineering sector (December 14, 2017, 7-41/640-279) within the Burdur region. The case largely rested on the allegation that mechanical engineers in the Burdur region pooled their revenue and shared it on the basis of predetermined percentages. One of the defendants applied for leniency and was granted immunity.

One of the Board’s notable decisions where it granted full immunity is the Yeast Cartel case (14-42/783-346, October 22, 2014). As summarised above, the Board launched an investigation against four fresh yeast producers to determine whether they had violated Article 4 of the Competition Law through colluding to set prices for fresh bread yeast. It resolved that the investigated companies violated Article 4 and imposed administrative monetary fines on three of the undertakings, with a total amount of TL 14 million (approximately €2.1 million at the time of writing). The fourth undertaking, Mauri Maya, obtained full immunity, though it submitted its application for leniency after the preliminary investigation was initiated and following the dawn raids conducted at the premises of the undertakings. The Board considered the value and sufficient content of Mauri Maya’s leniency application.

Overall, the Turkish leniency regime requires high standards for cooperation in the leniency procedure. For instance, in the Steel Ring Manufacturers case (12-52/1479-508, October 30, 2012), the Board stated that the undertakings, MPS Metal Plastik Sanayi Çember ve Paketleme Sistemleri İmalat Tic. A.Ş. (“MPS”) and BEKAP Metal İnş. San. ve Tic. A.Ş., fixed the prices of steel strapping materials and were acting in collusion regarding certain tenders, and decided that both undertakings had violated Article 4 of the Competition Law. The Board considered the leniency application of MPS and imposed a fine equal to 1% of its annual gross income in 2011. The reason for the granting of partial immunity was that the documents gathered at the on-site inspection allegedly already proved a cartel. However, it could be said that in this case the Board set a high standard for cooperation within the context of the leniency programme.

Another decision where the Board sent a negative message to the business community by showing that leniency applications might not always be beneficial was the 3M case (12-46/1409-461, September 27, 2012). In the 3M case, the investigation team recommended to the Board to revoke the applicant’s full immunity on the grounds that the applicant did not provide all the documents that could be discovered during a dawn raid. Unfortunately, the Board’s reasoned decision did not go into the details of the matter, as the case was closed without a finding of violation. It remains to be seen whether the Board will apply this approach again in the future.

In the Sodium Sulphate case (12-24/711-199, May 3, 2012), the Board imposed fines both on the cartelists and the persons having a determining effect on the violation, but eventually offered reductions on the fines after one cartelist and its general manager filed for leniency.




In its decision, the Board stated that the undertakings, Otuzbir Kimya and Sodaş Sodyum, fixed prices of sodium sulphate and shared customers between the years 2005 and 2011. Additionally, it is also stated that Alkim Alkali Kimya, Otuzbir Kimya and Sodaş Sodyum collectively determined the prices of raw salt. The Board imposed a fine on Sodaş Sodyum equal to 3% of its annual gross income in the 2011 fiscal year, and simultaneously imposed a fine on Sodaş Sodyum’s general manager, who was actively engaged in the infringement, in the amount of 3% of the administrative fine applied to Sodaş Sodyum. Sodaş Sodyum and its general manager filed for leniency and eventually received reductions at the rate of one-third and 50%, respectively, of the fines to be imposed.

In the decision regarding Gaz Cartel (10-72/1503-572, November 11, 2010), the Board offered full immunity to a leniency applicant, in spite of the fact that the new evidence uncovered during the on-site inspection had shed light on the investigation. This constituted a landmark decision. Berk Gaz, who received full immunity, was the first applicant to apply for leniency. That said, Berk Gaz managed to convince the Board that it provided sufficient documents and information, while also fulfilling the other conditions set out in the Leniency Regulation.


The current Turkish Competition Law regime does not provide for a settlement procedure. However, a settlement process has recently been considered and is expected to be considered again, once the reform regarding the Competition Law is included in the government’s agenda.


A notice or complaint may be submitted verbally or through a petition. The Competition Authority has an online system in which complaints may be submitted by the online form on the official website of the Competition Authority. In the case of a notice or complaint, the Board rejects the notice or complaint if it deems the complaint not to be serious. Any notice or complaint is deemed as rejected if the Board remains silent on the matter for 60 days. The Board will decide to conduct a pre-investigation if it finds the notice or complaint to be serious.

Investigated parties have a right to access the file (Communiqué No. 2010/3 on Regulation of Right to Access to File and Protection of Commercial Secrets (“Communiqué No. 2010/3”)). The right to access the file can be exercised upon a written request at any time until the end of the period for submitting the last written statement.

Complainants and other third parties may request access to file for follow-on actions (Law No. 4982 on the Right to Access to Information). The approach of the Competition Authority is to consider not only the interests of the person requesting information, but also the personal data of other natural and legal persons, public interest as well as all other individuals’ interests. This balance is regulated by way of exceptional provisions under Law No. 4982 on the Right to Access to Information. Most of the time, the Competition Authority is reluctant to grant access to the file and justifies the denial of access on the grounds that the access concerns internal documents and business secrets. Based on that, the Competition Authority usually denies access to documents such as investigation reports or information petitions submitted by the investigated parties.

A recent decision (16-26/433-192, August 4, 2016) defines the parties who have the right to access the file narrowly, stipulating that Communiqué No. 2010/3 allows the access request only of those who are being investigated. In this regard, the Competition Authority did not grant the complainant permission to access the file.

Third parties can attend the oral hearing and be heard by submitting a petition and presenting information and documents that show their interest in the subject matter of the oral hearing.





In case of a proven cartel activity, the companies concerned may be subject to fines of up to 10% of their Turkish turnover generated in the financial year preceding the date of the fining decision (if this is not calculable, the turnover generated in the financial year nearest to the date of the fining decision will be taken into account).

Employees and managers of the undertakings or association of undertakings that had a determining effect on the creation of the violation can also be fined up to 5% of the fine imposed on the undertaking or association of undertaking. The current minimum fine is set as TL 21,036 (approximately €3,135 at the time of writing).

The Competition Law makes reference to Article 17 of Law on Misdemeanours to require the Board to take into consideration factors such as: (i) the level of fault and the amount of possible damage in the relevant market; (ii) the market power of the undertaking within the relevant market; (iii) the duration and recurrence of the infringement; (iv) cooperation or driving role of the undertaking in the infringement; (v) the financial power of the undertaking; and (vi) compliance with the commitments in determining the magnitude of the fine. In line with this, the Turkish Competition Authority enacted the Regulation on Monetary Fines for Restrictive Agreements, Concerted Practices, Decisions and Abuses of Dominance (“the Regulation on Fines”). The Regulation on Fines provides detailed guidelines regarding the calculation of monetary fines applicable in cases of antitrust violations. The Regulation on Fines applies both to cartel activity and abuse of dominance, but illegal concentrations are not covered by the Regulation on Fines.

According to the Regulation on Fines, fines are calculated by determining the basic level first, which in the case of cartels is between 2% and 4% of the company’s turnover in the financial year preceding the date of the fining decision. Aggravating and mitigating factors are then factored in.

The Regulation on Fines also applies to managers or employees that had a determining effect on the violation (such as participating in cartel meetings and making decisions that would involve the company in cartel activity), and provides for certain reductions in their favour.

In addition to the monetary sanction, the Board is authorised to take all necessary measures to terminate the restrictive agreement, to remove all de facto and legal consequences of every action that has been taken unlawfully, and to take all other necessary measures in order to restore the level of competition and status as before the infringement.

Furthermore, such a restrictive agreement shall be deemed as legally invalid and unenforceable with all its legal consequences. Similarly, the Competition Law authorises the Board to take interim measures until the final resolution on the matter, in case there is a possibility for serious and irreparable damages.

The sanctions that could be imposed under the Competition Law are administrative in nature. Therefore, the Competition Law leads to administrative fines (and civil liability) but no criminal sanctions. That said, there have been cases where the matter had to be referred to a public prosecutor after the Competition Law investigation has been completed. On that note, bid rigging activity may be criminally prosecutable under sections 235 et seq of the Turkish Criminal Code. Illegal price manipulation (i.e., manipulation through misinformation or other fraudulent means) may also be condemned by up to two years of imprisonment and a civil monetary fine under section 237 of the Turkish Criminal Code. The abovementioned sanctions may also apply to individuals if they engage in business activities as an undertaking. Similarly, sanctions for cartel activity may also apply to




individuals acting as the employees or board members or executive committee members of the infringing entities in case such individuals had a determining effect on the creation of the violation. There are no sanctions specific to individuals other than those mentioned above.


The Board decisions can be submitted for judicial review before the administrative courts in Ankara by filing an appeal case within 60 days upon receipt of the justified (reasoned) decision of the Board by the parties. Filing an administrative action does not automatically stay the execution of the decision of the Board. However, upon request of the plaintiff, the court, by providing its justifications, may decide for stay of the execution if the execution of the decision is likely to cause serious and irreparable damages; and if the decision is highly likely to be against the law (i.e., showing of a prima facie case). The judicial review period before the administrative court usually takes about 12 to 24 months. If the challenged decision is annulled in full or in part, the administrative court returns it to the Board for review and reconsideration.

After the recent legislative changes, administrative litigation cases (private litigation cases as well) are subject to judicial review before the newly established regional courts (“regional courts”), creating a three-level appellate court system consisting of administrative courts, regional courts and the Council of State (the Court of Appeals for private cases). The regional courts will (i) go through the case file both on procedural and substantive grounds, and (ii) investigate the case file and make their decision considering the merits of the case. The regional courts’ decisions will be considered as final in nature. The decision of the regional court will be subject to the Council of State’s review in exceptional circumstances, which are set forth in Article 46 of the Administrative Procedure Law. In such cases, the decision of the regional court will not be considered as a final decision and the Council of State may decide to uphold or reverse the regional court’s decision. If the decision is reversed by the Council of State, it will be returned to the deciding regional court, which will in turn issue a new decision which takes into account the Council of State’s decision.

Criminal sanctions

The sanctions that could be imposed under the Competition Law are administrative in nature. Therefore, the Competition Law does not lead to criminal sanctions. However, cases might be referred to a public prosecutor after the Competition Law investigation is completed. On that note, bid rigging activity may be criminally prosecutable under sections 235 et seq. of the Turkish Criminal Code. Illegal price manipulation (i.e., manipulation through misinformation or other fraudulent means) may also be condemned by up to two years of imprisonment and a civil monetary fine under section 237 of the Turkish Criminal Code.

Cross-border issues

Turkey is one of the “effect theory” jurisdictions where the effect that a cartel activity has produced on Turkish markets is what matters, regardless of the nationality of the cartel members, where the cartel activity took place, or whether the members have a subsidiary in Turkey. The Board refrained from declining jurisdiction over non-Turkish cartels or cartel members (e.g., the suppliers of rail freight forwarding services for block trains and cargo




train services, 15-44/740-267, December 16, 2015; Güneş Ekspres/Condor, 11-54/1431-507, October 27, 2011; Imported Coal, 10-57/1141-430, September 2, 2010; Refrigerator Compressor, 09-31/668-156, July 1, 2009; Şişecam/Yioula, 07-17/155-50, February 28, 2007; and Gas Insulated Switchgear, 04-43/538-133, June 24, 2004) in the past. It should be noted, however, that the Board has yet to enforce monetary fines or other sanctions against firms located outside of Turkey without any presence in Turkey, as this is mostly due to the enforcement handicaps (such as difficulties of formal service to foreign entities).


The most distinctive feature of Turkish Competition Law regime is that it allows for lawsuits for treble damages. Hence, administrative enforcement is supplemented with private lawsuits.

Articles 57 et seq. of the Competition Law entitles any person who may be injured in his business or property by reason of anything forbidden in the antitrust laws to sue the violators for three times their damages plus litigation costs and attorney fees. The case must be brought before the competent general civil court. In practice, courts usually do not engage in an analysis as to whether there is an actual condemnable agreement or concerted practice, and wait for the Board to render its opinion on the matter, thereby treating the issue as a prejudicial question. Since courts usually wait for the Board to render its decision, the court decision can be obtained in a shorter period in follow-on actions.

Due to a treble damages clause allowing litigants to obtain three times their loss as compensation, private antitrust litigations increasingly make their presence felt in the cartel enforcement arena. In 12 banks decision (March 8, 2013, 13-13/198-100), the Board had launched an investigation to determine as to whether 12 banks violated Article 4 of Law No. 4054 by a reconciliation to harmonise their trade terms for cash deposit interests, credits, and credit card fees. The Board imposed administrative fines ranging between 0.3% and 1.5% to investigated undertakings involved. Moreover, the Board ruled that courts shall have absolute discretion to award treble damages in Competition Law-based damages claims, establishing a strong deterrent from cartel activity. Recently, in light of the abovementioned Board decision, Istanbul 12th Consumer Court on May 9, 2017 awarded single damages up to an intimidating total of TL 11,479.73 to a single plaintiff (approximately €1,710.84 at the time of writing).

Turkish procedural law denies any class action or procedure. Class certification requests would not be granted by Turkish courts. While Article 25 of Law No. 4077 on the Protection of Consumers allows for class actions by consumer organisations, these actions are only limited to violations of Law No. 4077 on the Protection of Consumers, and do not extend to cover antitrust infringements. Similarly, Article 58 of the Turkish Commercial Code enables trade associations to take class actions against unfair competition behaviour, but this has no reasonable relevance to private lawsuits provided under Article 57 et seq. of the Competition Law.

Reform proposals

The most recent changes with respect to the Turkish cartel regime were the publication of the amended Guidelines on Vertical Agreements, which concluded the two-year work of the Competition Authority. The amended version of the Guidelines now includes internet sales, which are acknowledged to provide a wider data set that allows price comparison to the consumers. Furthermore, there are revisions concerning Most Favoured Customer




(“MFN”) clauses, a contemporary topic deemed significant by competition authorities around the globe.

In addition, the major development expected in the Turkish Competition Law regime is the adoption of the draft law amending Law 4054 on the Protection of Competition. To that end, the draft law was officially submitted to the presidency of the Turkish Parliament on January 23, 2014 and was reviewed by a parliamentary sub-committee. However, the parliamentary sub-committee could not conclude its work on the necessary changes within the relevant parliamentary legislative year. Therefore, at present the draft law is statute-barred. In order to re-initiate the parliamentary process, the draft law must again be proposed and submitted to the presidency of the Turkish Parliament. Although it is impossible to say when this will happen, it is likely that a draft reform law will remain on the Competition Law agenda.

The draft law aims to achieve further compliance with the EU competition regime, on which it is closely modelled. It adds several new dimensions and changes which should result in a procedure that is more efficient in terms of time and resource allocation. The draft law proposes several significant changes in terms of merger control:

• The substantive test for concentrations will be changed. The EU significant impediment of effective competition test will replace the existing dominance test.

• In accordance with EU Competition Law, the draft law will adopt the term ‘concentration’ as an umbrella term for mergers and acquisitions.

• The draft law will eliminate the exemption for acquisition by inheritance.

• The draft law will abandon the Phase II procedure (which was similar to the investigation procedure) and provide a four-month extension for cases requiring in-depth assessments. During in-depth assessments, parties can deliver written opinions to the Competition Board, which will be akin to written defences.

• The draft law will extend the appraisal period for concentrations from the existing period of 30 calendar days to 30 business days, which equates to approximately 40 days in total. As a result, the period in which to obtain a decision on a preliminary review is expected to be extended.

Further, the draft law proposes to abandon the fixed turnover rates for certain procedural violations, including failing to notify a concentration and hindering onsite inspections; and to cap the monetary fines imposed for these violations. This new arrangement gives the board discretion to set fines by conducting case-by-case assessments.

Another significant anticipated development is the Draft Regulation on Administrative Monetary Fines for the Infringement of Law on the Protection of Competition, which will replace the Regulation on Monetary Fines for Restrictive Agreements, Concerted Practices, Decisions and Abuse of Dominance. The draft regulation is heavily inspired by the European Commission’s guidelines on the method of setting fines imposed pursuant to Article 23(2)(a) of Regulation 1/2003. Thus, the introduction of the draft regulation clearly demonstrates the authority’s intention to bring the secondary legislation into line with EU Competition Law during the harmonisation process. The draft regulation was sent to the Turkish Parliament on January 17, 2014, but as yet no enactment date has been announced.






Gönenç Gürkaynak Tel: +90 212 327 17 24 / Email: [email protected] Mr. Gönenç Gürkaynak is a founding partner of ELIG Gürkaynak Attorneys-at-Law, a leading law firm of 90 lawyers based in Istanbul, Turkey. Mr. Gürkaynak graduated from Ankara University, Faculty of Law in 1997, and was called to the Istanbul Bar in 1998. Mr. Gürkaynak received his LL.M. degree from Harvard Law School, and is qualified to practise in Istanbul, New York, Brussels and England and Wales (currently a non-practising Solicitor). Before founding ELIG Gürkaynak Attorneys-at-Law in 2005, Mr. Gürkaynak worked as an attorney at the Istanbul, New York and Brussels offices of a global law firm for more than eight years. Mr. Gürkaynak heads the competition law and regulatory department of ELIG Gürkaynak Attorneys-at-Law, which currently consists of 45 lawyers. He has unparalleled experience in Turkish competition law counselling issues with more than 20 years of competition law experience, starting with the establishment of the Turkish Competition Authority. Every year Mr. Gürkaynak represents multinational companies and large domestic clients in more than 35 written and oral defences in investigations of the Turkish Competition Authority, about 15 antitrust appeal cases in the high administrative court, and over 85 merger clearances of the Turkish Competition Authority, in addition to coordinating various worldwide merger notifications, drafting non-compete agreements and clauses, and preparing hundreds of legal memoranda concerning a wide array of Turkish and EC competition law topics. Mr. Gürkaynak frequently speaks at conferences and symposia on competition law matters. He has published more than 150 articles in English and Turkish by various international and local publishers. Mr. Gürkaynak also holds teaching positions at undergraduate and graduate levels at two universities, and gives lectures in other universities in Turkey.

Öznur İnanılır Tel: +90 212 327 17 24 / Email: [email protected] Ms. Öznur İnanılır joined ELIG Gürkaynak Attorneys-at-Law in 2008. She graduated from Başkent University, Faculty of Law in 2005 and following her practice at a reputable law firm in Ankara, she obtained her LL.M. degree in European Law from London Metropolitan University in 2008. She is a member of the Istanbul Bar. Ms. İnanılır became a partner within the “Regulatory and Compliance” department in 2016 and has extensive experience in all areas of competition law, in particular: compliance to competition law rules; defences in investigations alleging restrictive agreements; abuse of dominance cases; and complex merger control matters. She has represented various multinational and national companies before the Turkish Competition Authority. Ms. İnanılır has authored and co-authored articles published internationally and locally in English and Turkish pertaining to her practice areas.

Çitlenbik Sokak No.12, Yıldız Mahallesi, Beşiktaş, 34349, İstanbul, Turkey Tel: +90 212 327 17 24 / Fax: +90 212 327 17 25 / URL: www.elig.com

ELIG Gürkaynak Attorneys-at-Law


Ukraine


The main legislative acts in the cartel field are the following: the Law of Ukraine “On Protection of Economic Competition” (the “Competition Law”) and the Law of Ukraine “On Antimonopoly Committee of Ukraine”, Recommendations on fines calculation for violations of competition law adopted in September 2015 (the “Recommendations on Calculation of Fines”).

Investigation, prosecution, decision-making and the imposition of sanctions are all conducted solely by the Antimonopoly Committee of Ukraine (“AMC”) and its regional departments. There is no separate term in Ukrainian legislation for “cartel”. Ukrainian competition law rather applies the notion “anticompetitive concerted actions”.

Concerted actions are defined as agreements and any other concerted competitive behaviour or omission by undertakings engaged in commercial activities as well as any governmental agencies. The notion of concerted actions covers both horizontal and vertical concerted actions. Article 6 of the Competition Law contains a prohibition of anticompetitive concerted actions, which “have led or may lead to prevention, restriction or distortion of competition”. The prohibition of concerted practices does not distinguish between horizontal and vertical conduct. The Competition Law provides for a non-exhaustive list of anticompetitive practices that constitute potential violations. The list covers price-fixing, market division, limiting of outputs and inputs, tying, bid rigging, boycotts and other conduct-restraining market entry or exit, and actions designed to impede the competitive ability of other companies “without an objective basis”.

Articles 7, 8 and 9 of the Competition Law create conditional exemptions from the prohibition in Article 6 to protect concerted actions of small and medium-sized enterprises, contracts concerning the supply and use of commodities that do not substantially restrict competition and that enhance the competitive ability of the participating firms, and agreements for the transfer of intellectual property rights.

In some circumstances, the Competition Law allows the AMC to permit conduct that would otherwise violate Article 6, and issue individual exemptions that excuse the participants in the specified conduct from liability. The criteria for exemption are: improvement of the production or distribution of goods, or promotion of technology or economic progress; development of small and medium-sized enterprises; optimisation of export or import trade; development and application of uniform standards; and “rationalisation” of production. At the same time, such actions should not eliminate competition on the market or its significant part. Furthermore, pursuant to Article 7 of the Competition Law, the AMC has elaborated the draft regulations related to joint purchase agreements by small and medium-sized

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enterprises. The said regulations are expected to be adopted by the AMC in the nearest future.

Certain exemptions are stipulated by the effective legislation. In particular, with respect to horizontal concerted actions, the parties may be generally exempted if their aggregate market share is below 5% of the respective market (with exception to some specific categories of concerted actions). With respect to the vertical concerted actions, on 5th December 2017 the Vertical Block Exemption Regulation (the “Regulation”) came into effect. Pursuant to the Regulation, the following vertical agreements are exempted:

1. vertical agreements are exempted if the market shares of the supplier and the buyer on the market where they, respectively, sell and buy the contract goods or services, do not exceed 30%; and

2. vertical agreements between an association and its members or suppliers if (i) all members of the association are retailers, and (ii) no member of such association had annual turnover in Ukraine in excess of EUR25 million in the preceding financial year.

Except for certain cases, the Regulation also exempts agreements related to intellectual property rights as well as agency agreements. The Regulation does not apply to competing undertakings.

Furthermore, the Regulation sets forth the “hard-core” restrictions which may not benefit from the block exemption regulation. Such “hard-core” restrictions include:

• restrictions on resale price (except for maximum or recommended prices);

• restrictions by territory or by customers (with some exceptions);

• restrictions of sales to end users by members of a selective distribution system operating at retail level;

• restrictions of cross-supplies within a selective distribution system;

• restrictions of the supplier’s ability to sell the components as spare parts to end-users or to repairers;

• non-compete obligations, the duration of which exceeds five years or is indefinite;

• obligations causing the buyer, after termination of the agreement, not to manufacture, purchase, sell or resell goods or services; and

• obligations causing the members of a selective distribution system not to sell the brands of particular competing brands.

In accordance with part 2 of article 52 of the Competition Law, a fine for anticompetitive concerted actions may constitute up to 10% of income (revenue) of an undertaking from sales of products (goods and services) for the last financial year.

Still, it is worth mentioning that in practice the AMC tends to apply the Recommendations on Calculation of Fines. The respective document provides for transparent principles of fines calculation, i.e. criteria for the AMC to determine the basic fine amount that may be adjusted depending on aggravating or mitigating circumstances applicable to a particular case.

The Recommendations set up basic fine amounts for each type of antitrust law violations. In terms of fines for anticompetitive concerted actions, the Recommendations primarily distinguish between: (i) the most severe anti-competitive actions between competitors (price-fixing; allocation of markets, consumers, suppliers, territorial restraints, bid rigging, restrictions to market entry); and (ii) severe anti-competitive actions (other than those qualified as the ‘most severe’ violations).

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Although the Recommendations on Calculation of Fines is not a legally binding document, over the last three years the AMC has shown its adherence to use the said document for calculating the fines for competition law violations (please refer to section ‘Civil penalties and sanctions’ below for detailed information).

Another noteworthy detail in the enforcement regime relating to cartels is publication of information on undertakings who engaged in bid rigging. Undertakings included on this list will not be eligible to participate in public procurement procedures for three years from the date of the AMC decision on bid rigging.

Overview of investigative powers in Ukraine

The AMC is the single state body vested with the powers and authority to investigate competition law infringements. The AMC has the authority to request information in writing, conduct inspections (dawn raids) of businesses and seize evidence located on the premises. The AMC also has the power to examine office premises and transport vehicles belonging to the undertakings. In order to exercise these powers, the AMC can ask for the assistance of the police, customs and other law enforcement authorities in the investigation. Over the course of inspection, the AMC has powers to request statements from the undertaking’s employees and officials.

According to the Competition Law, non-cooperation and obstruction of inspection (dawn raid) may entail a statutory maximum fine in the amount of up to 1% of income (revenue) of an undertaking from sales of products (goods and services) for the last financial year. Nevertheless, pursuant to the Recommendations on Calculation of Fines, the sanctions for non-cooperation and obstruction of inspection could be significantly lower.


In 2018 the AMC continued to be very active in pharmaceutical markets. For instance, in August 2018 the AMC took the decision to declare that certain arrangements between the Ukrainian importer of medicines and its distributors were anticompetitive concerted actions. The AMC has imposed the aggregate fine in the amount of approximately EUR 560,000 on all participants of the alleged concerted actions.

Another landmark case related to alleged concerted actions is the liquefied natural gas (“LNG”) retail sector. The AMC has imposed the aggregate fine in the amount of approximately EUR 1,280,000 on several LNG retailers.

It should be noted that the above-mentioned AMC decisions, as well as some other decisions, date back to between 2016–2017 on alleged anticompetitive concerted actions in pharmaceutical and fuel retail markets and are still being challenged in Ukrainian courts.

It is also worth mentioning that in 2018 the AMC was involved in investigations of collusive practice in procurement procedures and took a number of important decisions.


The AMC may commence an investigation (i) on its own initiative, (ii) in response to complaints received from business entities and individuals, and (iii) at the request of governmental or local authorities. The AMC shall consider the complaint within 30 days. If needed, this term may be extended up to an additional 60 days. Overall, the AMC shall either dismiss the complaint or initiate the formal investigation no later than 90 days from the date of the complaint. Once investigation is commenced, a notice is sent both to the defendant and the complainant.




Unfortunately, there are no clear legislative guidelines in respect of the clear timeframe within which an investigation must be accomplished, and the AMC can repeatedly request documents and information, and reconsider the evidence collected. In practice, investigations of alleged concerted actions usually last for several years. Business and law practitioners have raised concerns about indefinite investigation terms for years and eventually, steps have been taken to solve this issue. The Parliament of Ukraine considers the draft law “On Amendments to Certain Legislative Acts of Ukraine regarding Ensuring Principles of Procedural Equality and Increasing Efficiency of Investigations in Cases on Violation of Legislation on Protection of Economic Competition” (the “Draft Law”). The Draft Law introduces a five-year deadline for AMC investigations related to concerted actions.

As a result of the investigation, the AMC issues the decision that either terminates the investigation or declares the violation and directs various actions such as the termination of unlawful actions, remediation of the consequences of violation, cancellation of the concerted actions permit or the imposition of fines.

The AMC has been specifically active in the energy, fuel, pharmaceutical and food retail sectors. As the practice shows, the AMC pays special attention to the cases involving the exchange of information between competitors. The exchange of information between competitors may serve as a solid ground for the AMC to impose a fine on undertakings for “parallel behaviour” (that is qualified as anticompetitive concerted actions), unless the undertakings provide the AMC with a plausible explanation for such “parallel behaviour”.


Investigation, prosecution, decision-making and the imposition of sanctions are all integrated into a single body – the AMC and its subordinated bodies. The AMC has the authority to request information in writing, conduct inspections (dawn raids) of businesses and seize evidence located on the premises. The AMC also has the power to examine office premises and transport vehicles belonging to the undertakings. In order to exercise these powers, the AMC can ask for the assistance of the police, customs and other law enforcement authorities in the investigation. Over the course of the inspection, the AMC has the power to request statements from the undertaking’s employees and officials.

Decisions adopted by the AMC’s subordinated bodies and territorial branches may be re-examined by the AMC headquarter through its internal appeal procedure. Such re-examination may be commenced by the AMC’s own initiative or application of a party to the proceeding. In the case where a decision is issued by the AMC headquarter, it may not be further re-examined through internal AMC appeal procedure. In such case, parties may challenge the AMC’s decision in a commercial court only.

Decisions by the AMC or its subordinated bodies and territorial branches may also be challenged directly to commercial courts. Both re-examination and challenging the AMC decisions in commercial courts may be accomplished on procedural and substantive matters within two months of the AMC’s decision date.

In certain exceptional cases, decisions adopted by the AMC or its subordinated bodies and territorial branches based on inaccurate, incorrect information or in absence of information regarding sufficient circumstances of the case, may be reviewed by the AMC itself. Respective review may be initiated by the AMC’s own initiative or application of an interested party.




Leniency

The leniency programme in Ukraine covers any anticompetitive concerted practices. The programme grants immunity from the fines that the AMC may impose on an undertaking.

In order to obtain immunity in a cartel case, the party has to comply with all of the following conditions:

• to be the first to provide the AMC with the information on violation;

• to address the AMC voluntarily and before the AMC issues preliminary conclusions in the relevant investigation case;

• to submit information which has essential importance for the adoption of the decision in the case; and

• to take effective measures to cease its participation in cartel.

No immunity can be granted if the applicant: (i) was the initiator of the anticompetitive arrangements; (ii) was in charge of the anticompetitive arrangement; or (iii) failed to provide all essential information related to the alleged infringement.

The Leniency Programme came into force in October 2012, but the relevant practice is very scarce and vague. To the best of our knowledge, there are still no signals of its successful implementation in Ukraine. This may be principally explained by the following reasons: (i) full immunity is granted only to the undertaking to be the first to notify the AMC while there are no encouragement mechanisms for other undertakings that also decide to cooperate with the AMC; and (ii) practical application of the priority system for leniency notifications and the means of ensuring confidentiality in such notifications raise concerns.

The Draft Law brings fundamental changes into an existing leniency programme. The cartel participant (not ringleader) who is the first to inform the AMC of an undetected cartel may enjoy the full immunity. The cartel participants who do not qualify for full immunity may benefit from reduction of a fine if they provide the AMC with evidence that constitutes significant value for case consideration. The AMC reduces the fine depending on the priority of submission of such evidence by cartel participants:

• the first to submit evidence is granted a 50% reduction;

• the second to submit evidence is granted a 30% reduction; and

• the third and others who submit evidence are granted a 20% reduction.

Due to the envisaged changes, the leniency programme seems to become a more effective remedy at the AMC disposal for detecting cartels.


Ukrainian laws do not provide for any administrative settlement procedures. Still, the Draft Law provides for the possibility of settlement agreements and grants a 20% fine discount to a respondent provided that such respondent acknowledges the violation and cooperates with the AMC.


The case on violation of competition legislation may be initiated by a third party complaint. In such case, the AMC shall consider the complaint within 30 days. If needed, this term may be extended up to an additional 60 days. Overall, the AMC shall either dismiss the complaint or initiate the formal investigation no later than 90 days from the date of




complaint. As it was already mentioned in the ‘Key issues in relation to enforcement policy’ section, currently, the time of investigation is not limited, and practically it may last for several years.

Procedural rights of the parties in the investigation process are governed by the Temporal Rules on Investigations of the Competition Law Violations adopted in 1994. The said document is seen as one of the most outdated documents of the AMC which does not meet the standards of the developed jurisdictions. Practically, the parties may access certain non-confidential documents of the investigation based on the provisions of the Law of Ukraine “On Access to Public Information”. However, the Draft Law provides for some developments in procedural rights of the parties, including ensuring the right of the third parties to access the materials of the case and the evidence on which the AMC decisions are based.

According to Competition Law, third parties who suffer damages as a result of anticompetitive concerted actions may seek compensation by filing a respective claim to the commercial court.


The statutory maximum of a fine the AMC may apply amounts up to 10% of the annual revenue of each party of anticompetitive concerted actions. The amount of fine is calculated based on the results of the financial year preceding the year of fine imposition.

However, as mentioned above, in September 2015 the AMC adopted Recommendations on calculation of fines and further officially committed to apply the document in its activity. The document sets up the initial fine amounts for anticompetitive practices depending on the graveness of the violations:

• 15% of the revenue of an undertaking from sales of products (goods and services) related to the violation – for the most severe (“hard-core”) violations, i.e. price setting, allocation of markets, consumers, suppliers, territorial restraints, bid rigging and restrictions to market entry; and

• 10% of the revenue of an undertaking from sales of products (goods and services) related to the violation – for the other concerted actions than those qualified as the ‘most severe’ violations, i.e. for applying different conditions to equivalent agreements, agreements providing supplementary obligations to other undertakings and restriction of the competitive ability of other undertakings, etc.

The initial fine amount may be further adjusted following the application of modifying coefficients (varying from 0.05 to 2 depending on the sensitivity of the markets involved and the effect of violation on competition and profitability of the commercial activity associated with such violation). Thereafter, the basic fine may be further decreased or increased (by up to 50%) depending on aggravating and mitigating circumstances, as defined in the Recommendations on Calculation of Fines. It should be noted that the list of mitigating circumstances provided in the document is not exhaustive.

Although the Recommendations on Calculation of Fines contains a rather transparent approach to fine calculation, the AMC does not disclose how the final amount of the fine has been calculated in each particular case. Practically, the market players still may not technically challenge the amount of fine applied by the AMC, the parties may only challenge the decision of the AMC entirely. However, this is a matter of vast discussions in recent years, which practically even led to some legislative initiatives.





Decisions adopted by the AMC’s subordinated bodies and territorial branches may be re-examined by the AMC headquarter through its internal appeal procedure. Such re-examination may be commenced by the AMC’s own initiative or application of a party to the proceeding. In the case where a decision is issued by the AMC headquarter, it cannot be re-examined through internal AMC appeal procedure and may be further challenged in a commercial court only.

Decisions by the AMC or its subordinated bodies and territorial branches may also be challenged directly in commercial courts. Both re-examining and challenging the AMC decisions may be accomplished on procedural and substantive matters within two months of the AMC’s decision date.

As a matter of practice, the courts do not examine material competition issues which are referred to exclusive competence of the AMC (e.g. market definition issues) and tend to defer to the assessment of the AMC in such issues. There is a presumption that the AMC shall by itself prove the facts which confirm the concerted actions of the parties and substantiate the direct influence of such actions (omissions) on the competition environment.

In the case that the AMC’s decision is successfully challenged by the parties, the court usually sets aside the decision of the AMC. According to currently available statistics, approximately 20% of the AMC’s decisions have been appealed in court in 2017 (for reference 15% in 2016). An absolute majority of significant fines applied by the AMC are further appealed by the parties in courts.

In certain exceptional cases, decisions adopted by the AMC, its subordinated bodies and territorial branches based on inaccurate, incorrect information or in absence of information on sufficient circumstances of the case, may be reviewed by the AMC itself. Respective review may be initiated by the AMC’s own initiative or on application of an interested party.

Criminal sanctions

No criminal sanctions are provided for cartel infringements by applicable legislation of Ukraine.

Cross-border issues

Ukrainian competition legislation is applicable to relations which affect or may affect economic competition in Ukraine. Therefore, in the case where certain practices of foreign undertakings affect Ukrainian competition, the AMC makes no distinction between national and foreign market players. However, practically the AMC is not able to collect evidence or conduct effective cartel investigation outside the territory of Ukraine.

Currently, the AMC is a party of a number of inter-agency agreements with competition authorities of other jurisdictions as well as some agreement at intergovernmental level. According to the relevant documents, AMC and other competition authorities may cooperate to promote effective competition, including by way of information exchange. Thus, the AMC may request exchange of information, including confidential data, with competition authorities of other countries. However, recently the AMC has not reported any examples of such interaction with foreign jurisdictions concerning investigation or termination of anticompetitive concerted actions.

The AMC tends to take into consideration the practice of the European Commission as a




supportive argument in cases. However, the decisions of the European Commission are not binding to the AMC.


According to Competition Law, third parties who suffer damages as a result of anticompetitive concerted actions may seek compensation by filing a respective claim to the commercial court.

Damages caused as a result of anticompetitive concerted actions shall be reimbursed in double the amount of the actual sustained damages. Considering the rather burdensome procedure of substantiating damages in court and the absence of practical guidelines on this matter, there have been a rather limited number of successful cases on damages compensation.

However, the court practice of recent years demonstrates a gradual increase of such type of cases. Moreover, in view of the introduction of the judicial reform in Ukraine and adoption of the new procedural codes, the number of successful complaints and private antitrust actions is expected to further increase.

Reform proposals

The main vector of reform in recent years has been focused on the implementation of Association Agreement with the EU in respect of competition rules.

Among the recent developments in the field of anticompetitive concerted actions regulations are: (i) elaboration of the draft regulation related to joint purchase agreements by small- and medium-sized enterprises; (ii) elaboration of the regulation regarding agreements for technology transfer to be adopted by the AMC in the nearest future. The said regulations are expected to be officially approved by the AMC in the nearest future; (iii) the adoption of the Vertical Block Exemption Regulation (the “Regulation”), which came into effect on 5th of December 2017 (please refer to ‘Overview of the law and enforcement regime relating to cartels’ section above for detailed information); and (iv) the adoption by the AMC of Recommendations on Calculation of Fines, which provides for transparent approach to calculation of fines (please refer to ‘Overview of the law and enforcement regime relating to cartels’ and the ‘Civil penalties and sanctions’ sections above for detailed information).

The above-mentioned Draft Law (please refer to the ‘Key issues in relation to enforcement policy’, ‘Leniency’ and the ‘Third party complaints’ sections above) passed to its second reading in 2018. The Draft Law provides for amendments to the main legislative acts on protection of economic competition in part of procedural rules. In particular, the Draft, inter alia, provides for:

• establishment of fixed terms within which an investigation must be accomplished by the AMC;

• ensuring the right of the person participating in the case, including third parties, to access the materials of the case and the evidences on which the AMC decisions are based;

• improvements to the Leniency Programme;

• establishment of the rules for introduction of settlement procedures in cartel cases; and

• ensuring the conditions for the effective implementation of the right to appeal against the AMC’s decisions in court.






Sergey Denisenko Tel: +380 44 490 91 00 / Email: [email protected] Sergey advises clients on various competition issues, including those related to unfair commercial practices, competition compliance, merger control and abuse of dominance. He has extensive experience of representing the firm’s clients in competition (including cartel) investigations initiated by the Antimonopoly Committee of Ukraine including some of the most recent and significant cases initiated by the regulator. Sergey Denisenko is recognised by Chambers Europe for his active presence in the competition arena and his strong market feedback: “practical and very easy to work with”. Best Lawyers lists Sergey among the leading Ukrainian experts for Competition/Antitrust. Ukrainian Law Firms. A Handbook for Foreign Clients mentions Sergey Denisenko as one of the notable practitioners in Antitrust and Competition.

Yevgen Blok Tel: +380 44 490 91 00 / Email: [email protected] Yevgen has over 10 years of experience in the Antitrust and Competition area. Yevgen advises on various competition issues, in particular, on merger control, concerted actions and unfair competition practices. He also has experience in conducting antitrust due diligence, competition compliance trainings and representing clients before the Antimonopoly committee of Ukraine in unfair competition cases. According to Ukrainian Law Firms. A Handbook for Foreign Clients 2017, Yevgen “bring[s] significant input” in antitrust and competition practice. The Legal 500 2018 recommends Yevgen in Antitrust and Competition as the “Next generation lawyer”. Before joining AEQUO, Yevgen worked as a competition lawyer in leading Ukrainian law firms.

Anna Litvinova Tel: +380 44 490 91 00 / Email: [email protected] Anna advises on competition compliance and unfair commercial practices. She has significant experience in representing clients before the Antimonopoly Committee of Ukraine in merger control, concerted actions procedures, as well as various investigations initiated by the regulator on pharma and retail markets. Anna regularly provides assistance and advises clients on a wide range of competition compliance and regulatory matters.

Senator Business Сenter, 15th floor, 32/2 Moskovska St., Kyiv 01010 Ukraine Tel: +380 44 490 91 00, +380 44 233 65 99 / URL: www.aequo.com.ua

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Cartel activity in the UK may be punished using both civil and criminal law. The civil enforcement regime is contained in Chapter I of the Competition Act 1998 (CA98) and closely reflects its EU equivalent, Article 101 of the Treaty on the Functioning of the European Union (TFEU). Chapter I CA98 prohibits agreements or concerted practices between two or more undertakings which have the object or effect of preventing, restricting or distorting competition and which may affect trade within the UK (the Chapter I Prohibition).

The Chapter I Prohibition is enforced in the UK by the Competition and Markets Authority (CMA). The regulators for the gas and electricity, water, broadcasting, electronic communications, postal, healthcare, rail, civil aviation, financial services and payment systems sectors have concurrent civil enforcement powers with the CMA in their respective sectors. At least until the UK leaves the EU, the CMA and the sectoral regulators also have powers to enforce EU competition law where the activity/conduct may affect trade between Member States.

The following sanctions are available to the CMA (and the sectoral regulators) if they establish a civil law infringement of the Chapter I Prohibition (and/or Article 101 TFEU). They may:

• impose a fine of up to 10% of worldwide turnover;

• declare the offending agreement void;

• impose behavioural undertakings; and

• apply to the Court for an order to disqualify directors from the infringing companies for up to 15 years.

The Courts also have a role in enforcing the Chapter I Prohibition. Third parties (such as customers of cartel participants) may bring private actions for damages arising from a breach of the Chapter I Prohibition (or EU competition law). The Courts may also find an agreement which breaches competition law to be void (in whole or in part) and/or order a cessation of any breach.

The civil regime also contains a prohibition on an abuse of a dominant position, modelled on the EU equivalent (Article 102 TFEU), which is enforced by the same bodies and generally subject to the same procedures and penalties as the Chapter I Prohibition.

The criminal regime sits alongside the civil regime. Any individual convicted of implementing, or causing to be implemented, arrangements for price-fixing, market-sharing, bid rigging or limiting supply or production, may receive a maximum five-year custodial

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sentence and/or an unlimited fine. The criminal cartel offence is more restrictive than its civil counterpart. The offence is designed to catch ‘hard-core’ cartel activity; for a cartel to be criminal, it must be a reciprocal horizontal agreement which is knowingly entered into.

The CMA has jurisdiction to investigate and prosecute alleged criminal cartels in England, Wales and Northern Ireland. The Serious Fraud Office may seek prosecutions with the permission of the CMA. The Crown Office and Procurator Fiscal Service have responsibility for enforcement in Scotland. Sectoral regulators do not have powers to enforce the offence.

Overview of investigative powers in the United Kingdom

Before opening a civil investigation, the CMA must have reasonable grounds for suspecting an infringement (the following civil powers apply to the sector regulators where relevant).

Once the CMA has started an investigation, it may acquire information through:

• dawn raids on businesses where, depending on the authorisation it has, it may: access data held electronically (such as on laptops and mobile phones); review, copy and/or remove soft-copy and hard-copy documents; ask for factual explanations of documents relevant to an investigation; and interview individuals. In practice, its dawn raids often involve taking copies of electronic servers and reviewing these at a later stage; and/or

• formal mandatory requests in writing for information and for categories of, or specific documents.

The CMA may formally require individuals connected with a company (including ex-employees, suppliers and customers) to answer questions.

In criminal investigations, the CMA may also obtain evidence through surveillance and covert human intelligence sources.

Obstruction of the CMA whilst it exercises any of these powers, or failure to comply with any requirements (such as response deadlines) may lead to civil or criminal proceedings against undertakings and individuals.


In contrast to 2017, the previous 12 months have seen a slow down in the number of cartel infringement decisions issued by the CMA. Over the course of 2018, the CMA issued two fines (amounting to approximately £5 million): the price-fixing of car parking services at Heathrow airport (total fines of £1.6 million); and the supply of solid fuel and charcoal products (market sharing, bid rigging & exchange of commercially sensitive pricing information – fines of just under £3.5 million) for infringements of the Chapter I Prohibition. These two decisions compare with five from 2017.

The Heathrow car parking decision involved an agreement between the airport operator and a hotel operator (for the lease of the hotel site at the airport) whereby the hotel operator agreed not to charge non-guests using its car park lower prices than those charged at the airport operator’s own car parks. This decision is notable for being the first time that the CMA has exercised its enforcement powers in the context of a land agreement restriction. The Chapter I Prohibition has only been fully applied to land agreements since 2011.

Whilst the number of concluded investigations dropped in 2018, the number of new investigations launched by the CMA was similar to previous years, at least in numerical terms. In total, eight new investigations into suspected infringements of the Chapter I prohibition were opened in 2018, compared to nine in 2017. No new criminal investigations

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were launched. The sectors under investigation remain diverse, targeting: aviation; financial services; residential estate agencies; and the supply of musical equipment. However, five of these were related to the supply of musical equipment, following dawn raids across several leading instrument manufacturers. As they were started on the same date, they may cover similar facts. The investigation into estate agencies was prompted following the receipt of information during the CMA’s previous investigation into estate agency services in the Burnham-on-Sea area (which resulted in fines and director disqualifications being imposed).

The CMA has also announced that it will review the Atlantic Joint Business Agreement between a numbers of airline operators. Following an investigation in 2010, the European Commission accepted 10-year commitments from several operators (including American Airlines, British Airways & Iberia and Finnair) to address competition concerns arising from a revenue sharing joint venture. Given that five of the six routes subject to commitments have a UK base, the CMA has decided to explore the competitive impact of this agreement in anticipation of the expiry of the parties’ commitments. This case represents an important shift of enforcement activity from the EU back to the UK in advance of Brexit.

The CMA also carried across a significant number of civil investigations from 2017. At the start of 2019, the CMA had 20 ongoing investigations into alleged Chapter I breaches. The construction and pharmaceutical sectors accounted for 11 of these (although no new cases were opened in either sector during 2018). The CMA has no ongoing criminal cases at this point.

There has been little outward progress in the majority of these cases (although potentially a significant amount of internal work and/or investigation activity). One exception relates to the CMA’s decision in November 2018 to issue a Statement of Objections to the price comparison website, Compare the Market. The CMA alleges that Compare the Market entered into a series of agreements with home insurers which contained “wide Most Favoured Nation” clauses (Wide MFNs). These restrictions allegedly prevented the insurers from offering their home insurance products more cheaply through any other platform or direct sales to consumers. The CMA has considered this issue before, banning the use of Wide MFNs in agreements between price comparison websites and car insurers following a Market Investigation in 2016. The CMA has confirmed that in 2019 it will continue to scrutinise larger industries, such as insurance and utilities, where the impact on consumers from anti-competitive behaviour is most significant.

The CMA recognised, in its Annual Concurrency Report published in April 2018, that co-operation has continued to deepen with the sectoral regulators in the detection of anti-competitive activity. This has been seen, for example, in the airport car parking decision noted above where a case which might have been pursued by the Civil Aviation Authority (CAA) was dealt with by the CMA (the CAA had previously dealt with a car parking investigation itself back in 2016). In addition, the case opened by the CMA into the financial services sector in 2018 (which is reported to concern bond trading) was the subject of discussions with the Financial Conduct Authority (FCA), regarding which organisation was most appropriate to exercise jurisdiction. This is also perhaps another example of the CMA gearing up for Brexit (previous investigations into LIBOR and other benchmark indices had been pursued by the European Commission).

There are also examples of investigations by the concurrent regulators themselves. For example, Ofcom launched an investigation into the parcel delivery sector for suspected market sharing and customer allocation arrangements in September 2018. The FCA has an ongoing investigation into asset management firms in respect of international public




offerings, and Ofgem has an ongoing investigation into two energy suppliers. Both of these are still at the Statement of Objections stage.

The CMA’s draft annual plan for 2019/2020 (the Draft Annual Plan) restated the organisation’s commitment to pursuing a high volume of cases, at speed. It remains to be seen whether 2018 was simply a lull in the CMA’s enforcement activities or is symptomatic of the difficulties of balancing the CMA’s finite resources across its portfolio of non-discretionary work (such as merger enquiries) and discretionary work (including CA98 investigations), particularly as the organisation’s workload will increase after Brexit.


The CMA is not obliged to open a formal investigation into all allegations of anti-competitive conduct which it receives. Indeed, it investigates only a small proportion of these allegations. It assesses its priorities for investigation against its published prioritisation criteria: these assess likely consumer impact; strategic significance (particularly in terms of deterrence); likelihood of success; and cost of investigation.

Many of the policy themes discussed last year continue to be relevant this year, including consumer protection and online markets.

The Draft Annual Plan emphasises that the protection of vulnerable individuals carries a particular strategic importance to enforcement activity. These are customers identified as being most at risk of suffering detriment in poorly performing markets. The current market investigation into the UK funeral industry and the implementation of a statutory energy price cap are examples of the CMA’s actions in this area, whilst the Statement of Objections issued to Compare the Market (discussed above) demonstrates how this policy impacts cartel enforcement.

The appointment of Andrew Tyrie as Chairman of the CMA, described by the business secretary Greg Clark as a “…proven consumer champion…”, may be seen as symptomatic of this focus on consumer welfare. Indeed, one of Mr. Tyrie’s first policy interventions was to call for an end to the so-called “poverty premium”, where vulnerable customers may pay more for goods and services due to their reduced ability to access resources required to make informed choices (such as price comparison websites). The CMA’s response to the UK Government’s Modernising Consumer Markets Green Paper (the Green Paper) also recommended that the revised Strategic Steer document, which highlights policy areas where the Government considers the CMA could focus its efforts, should include a specific reference to the CMA’s consumer protection responsibilities. The focus on vulnerable consumers is, therefore, likely to involve the CMA using its range of powers, including its consumer law and market investigation powers, in addition to cartel enforcement.

During a keynote speech, the CMA’s executive director Dr. Michael Grenfell noted that the latest manifestations of digitisation, in the form of pricing algorithms and artificial intelligence, pose fundamental and important questions for detection of anti-competitive practices. The use of pricing algorithms and AI are likely to remain a core focus of CMA scrutiny in 2019 with the CMA promising to step up its digital forensic capabilities. In particular, the Draft Annual Plan and the response to the Green Paper indicate that the CMA is likely to enhance regulatory oversight of algorithms and other forms of AI (particularly in setting prices), to ensure they do not become a vehicle for collusion and leave “less digitally literate” customers behind.

In 2018, the CMA also launched a number of digital campaigns to enhance awareness of




competition law and of the role of the CMA amongst businesses. These included industry specific guidance for the construction, manufacturing, recruitment, estate agents and property management and maintenance sectors, which the CMA considers have been historically more prone to cartel activities and were generally found to have limited knowledge of competition law, in a survey carried out by the CMA. These campaigns also aim to raise awareness amongst SMEs, who are identified in the Draft Annual Plan as a particular focus of future enforcement action. The CMA has highlighted that it received a number of contacts (potentially, calls to its cartels hotline, leniency applications and/or complaints) following these campaigns.


During a keynote speech, Ann Pope, the senior director of antitrust enforcement at the CMA, emphasised that the CMA will continue to develop its investigative techniques to try to ensure that cases maintain momentum while also ensuring fairness and rigour.

As mentioned above, the most notable issue in 2018 was the slowdown in the number of Chapter I investigations completed by the CMA compared to previous years, and many of the investigations carried over from 2017 are still ongoing without the statement of objections stage having been reached. We have speculated on the potential reasons for this above. In addition, there is a possibility that some of the cases involving the pharmaceutical sector raise particularly complex issues. Some may involve ‘pay-for-delay’ and/or market sharing allegations. The precise scope of the application of the rules in this respect to the pharmaceutical sector is not fully clear. For example, a previous ‘pay-for-delay’ decision (in relation to paroxetine) has been appealed to the CAT and the CAT has, in turn, made a reference to the European Court of Justice. Whilst no details are available publicly, the uncertainty may be a reason for the delay.

Despite a marginal slowdown in the speed of enforcement, case progression appears to remain at the forefront of the CMA’s objectives. Following the government’s pledge (in its November 2017 budget) to allocate an additional £2.8 million funding per year to the CMA from 2018/19 onwards, the CMA has increased its annual target for launching new Chapter I and Chapter II enforcement investigations to a combined total of 10 in its reporting year (which runs from April to March). This represents an increase from its previous yearly target of six new cases. The CMA does not set targets for launching criminal enforcement actions. As part of its revised Draft Guidance on investigation procedures (the Draft Investigation Procedures Guidance) the CMA is committed to improving processes and challenging ways of working to decrease the time taken to conclude CA98 investigations across a rolling three-year benchmark. As noted in last year’s chapter, some of the burden for faster enforcement is falling on the parties as the CMA condenses the timetable for parties to submit responses. For example, the Draft Investigations Procedures Guidance replaces previous minimum timescales for reviewing the CMA’s case file and responding to a Statement of Objections, with a flexible approach subject to a maximum of 12 weeks.

The CMA must strike a delicate balance in implementing these more flexible guidelines as condensing the timetable may raise important access to justice questions if investigated parties are not able to defend themselves effectively. For example, in the Asda/Sainsbury’s merger phase II merger enquiries, the parties successfully obtained an extension of time (following appeal to the Competition Appeal Tribunal (CAT)) for responding to the CMA’s working papers. Unlike cartel investigations, the CMA’s merger enquiries are subject to statutory deadlines and therefore inevitably involve more challenging timescales. However,




this case is still important for demonstrating a willingness by the courts to supersede the CMA’s authority if it is considered that parties’ procedural rights have not been appropriately safeguarded.

One of the issues which we previously identified was the combination of these tighter timescales with an increasing use of the CMA’s civil penalties where parties fail to comply with any requirements of an investigation. The CMA’s response to the Green Paper highlighted concerns that the level of these civil sanctions is too low. In particular, the CMA contrasted its maximum fining levels (fixed £30,000 penalty and £15,000 daily penalty) with the European Commission’s maximum of 1% of turnover. The CMA also proposed that the current criminal offence of providing false or misleading evidence should be supplemented with an alternative civil offence. This would enable the CMA to impose a fine itself, whereas a criminal sanction must be imposed by a court. Clearly, parties to an investigation must continue to be mindful of these sanctions.

As can be expected with a commitment to launch higher volumes of investigations, appeals continue to be brought. In October 2018, the CMA successfully defended an appeal by the golf club manufacturer Ping Europe against a fine of £1.45 million imposed for an online sales ban. Ping had argued that its online sales ban was designed to promote in-store custom fitting, which ensured that customers purchased the most suitable products and also protected Ping’s brand. The CAT upheld the CMA’s decision on liability, although it reduced the fine slightly to £1.25 million.


The CMA operates leniency/amnesty programmes for individuals and undertakings in relation to both the criminal and civil regimes. Under the civil regime, leniency is not limited merely to ‘hard-core’ cartel activity: it is also available for resale price maintenance (this approach differs from other regulators, such as the European Commission).

The potential benefits of a successful leniency application include complete immunity from fines for undertakings, immunity from prosecution under the criminal cartel offence for individual employees/directors and immunity from director’s disqualification for directors (subject to conditions). A successful leniency application does not protect a company from damages actions.

The CMA imposes stringent conditions on leniency applicants (including a requirement for full cooperation and an acceptance of breach), both at the time of the application and throughout the investigation. This includes detailed requirements concerning the gathering and preservation of evidence even before any approach has been made to the CMA. The CMA is expected to monitor compliance with leniency conditions very closely (with the possibility of leniency being withdrawn as a real possibility).

The timing of a leniency application is of paramount importance: the sooner it is made, the greater the benefit to the applicant. Leniency will be unavailable to a company once a Statement of Objections has been issued, or to an individual once he/she is charged.

Applicants may benefit from one of three categories of immunity:

• Type A immunity is only available where no investigation has been opened and the applicant is the first member of a cartel to come forward. If successful, the undertaking, all employees and directors will receive blanket immunity from civil and criminal penalties in respect of the breach.

• Type B immunity is available if an investigation has commenced and the applicant is




the first to seek leniency. Successful Type B applicants can receive the same benefits as a successful Type A applicant, although this is within the CMA’s discretion.

• Type C immunity is available to undertakings that provide evidence of the cartel activity (but fail to obtain Type A or B immunity; for example, because they are not the first leniency applicant). An undertaking’s fine may be reduced by up to 50% and an individual may receive immunity, but again this is discretionary.

Individuals whose employers have taken part in cartel activity may also approach the CMA directly in exchange for a no-action letter, granting immunity from prosecution in respect of the criminal cartel offence.

The leniency regime remains an important method of discovery of potential breach for the CMA, but is by no means the only method (information gained on merger reviews can, for example, lead to investigations).


There are two forms of administrative settlement available to parties: a settlement procedure (involving an early admission of breach in return for a reduction in fine); and the provision of commitments (a binding commitment to cease and desist conduct, and/or behave in a particular way, in lieu of an infringement decision and a fine). Both are discretionary processes, and are discrete from leniency.

The CMA has said that it is unlikely to accept commitments in the case of a secret, hard-core cartel (or a serious abuse of dominance). However, they can be a useful tool in other cases. They are by no means guaranteed. For example, the Compare The Market case highlighted above might have been a candidate for settlement, but the CMA seems to be pursuing a full infringement decision (although the circumstances behind this are not clear at this stage).

Under the settlement process, an undertaking under investigation can admit that it has breached competition law and accept that a streamlined administrative procedure will govern the remainder of the investigation. Settlement will only be available once the CMA has sufficient evidence to support an infringement decision, but prior to a final decision.

In order to reach a settlement, an undertaking must make a clear and unequivocal admission of liability for the alleged infringing behaviour, end the infringement and confirm it will pay any fine imposed by the CMA. Case-specific conditions may also be imposed.

In exchange for settlement, the undertaking will receive a reduction in its penalty of up to 20% (or 10% if the settlement occurs after the Statement of Objections has been issued). There were a number of settlements during 2018 including in relation to the airport car parking, solid fuel and pre-cast concrete pipe cases.


Complaints/information received directly from third parties represent an important source of intelligence.

Information-gathering exercises by the CMA also provide a route for third parties, such as competitors or customers of the parties under investigation, to participate in an investigation.

If the CMA opens an investigation, third-party complainants may elect to be designated as formal complainants. All formal complainants must be offered the opportunity to comment on a Statement of Objections and, depending on the confidentiality of documents, may also




be granted access to all, or some of the case file. Alternatively, a complainant may choose to be designated as an interested third party. An interested third party has no right to receive information, but may be asked for views on, for example, the Statement of Objections.

The CMA’s prioritisation principles, in practice, represent a significant hurdle for third-party complainants. Many complainants are unable to gather sufficient evidence to satisfy these principles (in particular, relating to prospects of success), and even those complaints which are supported by strong evidence can be rejected as not constituting a priority for the commitment of investigatory resource. The CMA’s Draft Annual Plan has a clear (albeit not exclusive) focus on cases directly affecting consumers (in particular, vulnerable consumers), online/digital markets and markets of strategic importance to economic growth and productivity. Such a focus, combined with the active filtering of cases, can significantly constrain its willingness to take up cases not falling into these categories brought to them by complainants (unless there is strong evidence at the outset of a serious breach).

Given the costs and evidential burden involved in pursuing a complaint through the courts, it is still generally the preferred option for a complainant to approach the CMA (or sectoral regulators). However, the increasing understanding of the Courts of competition actions, and the active application of the CMA’s prioritisation principles, means that recourse to the Courts is becoming an increasingly attractive option.

The CMA does have the power to impose interim measures, pending the final outcome of any investigation. The threshold for the application of interim measures was lowered in 2014 (to a requirement to show ‘significant damage’), but these remain a rarely used tool and their relative lack of use remains a potential weakness of the regime. This issue is identified in the CMA’s response to the Green Paper, which proposes streamlining the interim measures process.


As far as possible, the CMA tries to ensure that liability for penalties follows responsibility for the breach. The UK rules on parental and successor liability for fines generally reflect those of EU law.

The overarching policy goals in determining the level of a fine are to reflect the seriousness of the offence and to deter future infringements. The CMA has published guidance applying six steps in the calculation of a fine. The guidance requires the CMA to identify a starting figure, which may be up to 30% of the undertaking’s turnover in the relevant market. The precise level chosen will depend on the seriousness of the offence, with cartels typically towards the upper end of this scale. Through the remaining steps, the CMA makes adjustments to the starting point to reflect the duration of breach, aggravating or mitigating factors, settlement agreements and leniency applications. The CMA must also ensure that the fine does not exceed the stated maximum of 10% of the undertaking’s total, worldwide turnover.

If the CMA intends to impose a fine, it must issue a Draft Penalty Statement, which must show how these six steps are followed. The parties to the investigation must be given a reasonable period of time to make representations on the Draft Statement. The final penalty calculation will be included in the decision.

The CMA may also use civil powers to apply to the court for disqualification of directors of companies implicated in an infringement from acting as a director for a period of up to 15 years (or may agree a disqualification undertaking with the director concerned in lieu of a court order).




The CMA remains committed to pursuing enforcement against individuals as a deterrent to anti-competitive behaviour. This includes enforcing the criminal regime (see further below), and pursuing a directors’ disqualification, where appropriate. In respect of the latter, the disqualification of a director in the pre-cast concrete pipes case (noted above) follows on from the first disqualification of a director last year (in a price-fixing case relating to posters).

The Consumer Rights Act 2015 (CRA15) sets out a voluntary redress scheme applicable to Chapter I/Article 101 TFEU infringements. The legislation provides for businesses which are the subject of a competition law investigation or infringement finding to enter into a redress scheme, under which they voluntarily compensate parties which have suffered a loss due to the anti-competitive conduct in question. The intention is that such a scheme will enable parties to receive compensation without resorting to expensive and drawn-out litigation through the courts. It may also lead to a reduction in any fine imposed for the infringement. However, the infringing business is not protected from subsequent private actions, and third parties are not obliged to apply for compensation from a redress scheme where one is available.


UK law contains extensive rights of appeal against infringement decisions.

First instance appeals are made to the CAT, a specialist body with expertise in competition law matters and independent from the CMA. The CAT has the power to conduct a full merits hearing and may quash a CMA decision (in whole or in part). This includes both infringement decisions and no-grounds-for-action decisions (which interested third parties may appeal). If an appeal is successful, the CAT may also remit the decision to the CMA for reconsideration or reach its own decision, which supersedes that of the CMA. The CAT may also hear appeals on penalties alone. Decisions of the CAT may also be appealed to the Court of Appeal. The appeal system has been heavily used, and is considered to be a success.

Criminal sanctions

The CMA has the power to pursue financial and custodial sentences against individuals, although these must be imposed by a court. Undertakings and individuals may also be subject to confiscation orders.

Whilst the possibility of significant custodial sentences has existed for a number of years, there are very few examples of successful prosecutions.

The latest custodial sentence was secured by the CMA in 2017 in relation to the precast drainage products case. This is the third example of successful prosecutions in respect of the criminal cartel offence (in addition to the Marine Hose and Galvanised Steel Tanks cases), all after guilty pleas. As each of the cases concerned arrangements which existed prior to 1 April 2014, the offence involved a requirement to show that the defendants acted dishonestly. In practice, this presented a significant barrier to successful prosecutions. The CMA is yet to secure the conviction of an individual who has not pleaded guilty.

The dishonesty requirement was removed with effect from 2014. In recognition of the loss of this requirement and in the light of the fact that the criminal regime is designed to cover ‘hard-core’ cartels only, a number of exclusions apply. These include an exclusion related to: advance notification of the cartel agreement to customers; and advance publication. Three new statutory defences were also introduced. These apply where: there was no intention to




conceal the arrangement from customers or the CMA; or reasonable steps were taken to seek prior legal advice. As these reforms only apply to conduct post-dating 1 April 2014, it could conceivably be some time before an investigation under these rules is completed and the exclusions/defences are tested. As noted above, the CMA currently has no ongoing criminal cases.

Cross-border issues

The CMA values connections with other National Authorities and such relationships are of particular importance in relation to the cartels. For example, the CMA has entered into a network of bilateral agreements with other domestic Authorities. It is actively involved in international networks including the International Competition Network and the European Competition Network.

There are a number of examples of successful cooperation with other Authorities (most notably in the Marine Hose Investigation which involved active cooperation with the US, EU and Japanese authorities; the CMA also liaised with its counterparts in France and Italy in relation to the Modelling Agencies investigation in 2016). The CMA’s plans also take account of international trends in enforcement; for example, in relation to online pricing and PCWs, and note the need to ensure consistent international enforcement. Clearly, the Brexit vote has introduced considerable uncertainty as regards the future cooperation within the European Competition Network. However, the CMA has stated itself to be keen on international cooperation following the implementation of Brexit, and there is unlikely to be any change in the near term at least. The Green Paper also expresses the Government’s support for the CMA’s continuing pursuit of international co-operation.


Private enforcement of competition law is well established in the UK. The UK remains an attractive forum for damages actions due, largely, to the fact that English law disclosure rules are broader than other Member States, giving claimants greater access to defendants’ documentary evidence than in other EU jurisdictions. However, for the reasons discussed further below, the popularity of the UK as a forum for actions could decrease following Brexit.

Currently, claimants may bring private actions for damages following an infringement finding in respect of EU or UK competition law by the European Commission or the CMA, respectively, in either the High Court or the CAT – a ‘follow-on’ damages claim in which the claimant can rely on the infringement decision as binding evidence of liability. ‘Standalone’ civil actions, where there is no pre-existing infringement decision such that the claimant must prove liability, may also be brought in the High Court and the CAT. As well as introducing a number of procedural changes, the CRA15 brought in a regime for collective actions in the CAT which permits a representative to bring a collective damages claim on behalf of a class of claimants. Importantly, a collective action can be on an ‘opt-out’ or ‘opt-in’ basis. ‘Opt-out’ means that the relevant class of claimants is, by default, deemed to be all UK customers who might have been affected by the competition law breach (unless such customers actively ask to be excluded or ‘opt-out’ from the action). An application must be made to the CAT for a Collective Proceedings Order (CPO), and this will be determined at a certification hearing.

The CRA15 also brought in a new ‘fast track’ procedure, aimed at encouraging and facilitating competition claims by SMEs which might otherwise not be brought at all. Under




the ‘fast track’ procedure, a claim is expedited so that the hearing takes place within six months and the CAT has the power to impose caps on the parties’ costs.

There have been a number of significant developments in private enforcement of anti-trust activity in 2018, in particular in the context of collective competition actions. In the cases UK Trucks Claim Limited v Fiat Chrysler Automobiles N.V. & Others and Road Haulage Association Limited v Man SE & Others, the CAT received separate applications for CPOs. These claims incorporate numerous sets of proceedings and have arisen as a follow-on to a finding by the European Commission of illegal cartel behaviour by suppliers of trucks. The first claim relates to an application by UK Truck Claims Limited (a special purpose vehicle (SPV) formed for the purposes of the claim) and is structured on an ‘opt-out’ basis (with a fallback option of an opt-in claim). This is the first instance that an SPV has been used in a collective damages action and will potentially represent 600,000 claimants. The second application, issued by Road Haulage Association is narrower in scope and will only apply to purchasers or lessees who actively ‘opt-in’ to the private damages claim.

The hearing for these applications is scheduled for 3 to 7 June 2019. These cases are likely to provide further guidance on the law surrounding CPOs following two previously unsuccessful proceedings: Walter Hugh Merricks CBE v Mastercard Incorporated & Others and the mobility scooter action in Dorothy Gibson v Pride Mobility Products Limited. Given that the truck claims are estimated to represent substantially fewer claimants than the proposed 46 million in Merricks, the claimants may not encounter the same sort of procedural difficulties. However, the Merricks case is under appeal and will be worth watching over the next 12 months. In addition to these CPO actions, numerous individual follow-on actions have been launched following the trucks cartel and against MasterCard and Visa in relation to the multi-lateral interchange fees.

A number of standalone actions have also been pursued in 2018. For example, in Achilles Info Ltd v Network Rail, the claimants instigated a standalone claim for private damages against Network Rail on the basis of Chapter I & II infringements. This case centres on allegations that Network Rail abused its dominant position by excluding suppliers from competing for supplier assurance schemes. Achilles requested this to be dealt with on an expedited basis, and was largely successful. This judicial support highlights that private action damages claims can be progressed quickly.

Reform proposals and Brexit

At the time of writing, the UK parliament had voted down the withdrawal agreement negotiated by the Conservative government. The only alternative currently presented by the Government is a “no-deal” scenario, whereby the UK would leave the EU and revert to trading on World Trade Organisation terms. However, there is considerable uncertainty at this stage and there are multiple other potential outcomes ranging from renegotiating the deal to pausing the Article 50 process. As this range of alternative potential options is substantial and none currently represent official Government policy, we have concentrated our commentary on the potential impact of the Government’s withdrawal agreement (assuming that if it was resurrected, the provisions on Competition law (which have been uncontentious) would remain) and a no-deal scenario.

From a practical perspective, the most important difference between these outcomes is that the Government’s withdrawal agreement includes a transition period during which the relationship between the CMA and the European Commission would remain in its current format until the end of 2020. For business, this means that the Commission would retain




jurisdiction over existing cases on exit day and would continue to have the power to open new investigations into the UK elements of cartels involving cross-border trade until the end of 2020. European competition principles would also continue to take primacy in the UK. Although it is anticipated that a further trading agreement, including provisions on competition law, would be made over the course of the transition period, if there is no agreement, the “backstop” would be activated, which obliges UK authorities to use EU law as a source of interpretation in the enforcement of its domestic anti-competitive prohibitions.

In a “no-deal” scenario, there would be no transitional period and The Competition (Amendment, etc.) EU Exit Regulations (the Regulations) would make the necessary changes to implement Brexit in the UK Competition regime. The CMA has also published its own guidance notes on this legislation.

From a practical perspective, the Regulations would not substantially change the UK antitrust regime, which provides businesses with a helpful level of certainty. Section 60 of the CA98, which requires UK authorities to enforce competition law in a manner that ensures conformity with EU competition law jurisprudence, would be repealed. In its place, the Regulations introduce a new section 60A providing that competition regulators and UK courts must interpret UK competition law in line with pre-exit EU competition case law, unless departure is considered appropriate in the light of particular circumstances. Clearly, this would mean that there is no obligation to take into account changes to EU competition law post-exit.

In the event of a no-deal scenario, the CMA would cease to have jurisdiction to enforce Article 101 and the Commission would no longer be able to review the UK elements as part of a post-exit EU wide cartel investigation. This raises the prospect of multinational cartels being the subject of parallel UK and EU investigations. The Commission would continue to review UK elements of investigations which are ongoing on exit day, but the CMA would also be able to open a parallel investigation into the same conduct. From a business perspective, the added uncertainty, inconvenience and expense of parallel investigations is clearly a potential concern.

As part of the Draft Investigation Procedures Guidance, the CMA estimates that the UK exit from the EU might result in an additional five to seven complex cartel and anti-trust cases per year. In light of this expected uptick in competition enforcement activity, it will be interesting to observe how the UK competition authorities adapt their enforcement policy, particularly their prioritisation principles (discussed above). The CMA was allocated £23.6 million in additional funding in the 2018/19 financial year to assist with Brexit preparations.

The impact of a no-deal scenario on private enforcement actions is likely to be significant. In a no-deal scenario, claimants in the UK would no longer be able to rely on a Commission decision adopted post-exit as evidence of an infringement. However, claimants would still be able to bring a standalone damages claim based on a breach of EU law, provided the conduct took place pre-exit. In contrast, a deal based on the Government’s defeated withdrawal agreement would maintain the status quo for the duration of the transition period.

Acknowledgment

The authors would like to thank their colleague Sam Bailey for his invaluable help in preparing this chapter.






Giles Warrington Tel: +44 121 260 4037 / Email: [email protected] Giles is a Partner in Pinsent Masons’ International Competition, EU and Trade Group, specialising in UK & EU competition law. He has extensive experience of cartel/anti-trust investigations by the UK/EU authorities, as well as EU/UK and international merger control, market investigations and competition appeals. For example, he acted for a number of contractors in the UK construction industry investigation, and a further company on its successful appeal of the penalty imposed. He recently acted for a company on an Ofgem dawn raid. He has represented clients in three major Phase II UK market investigations in the local bus, aggregates/cement and energy sectors.

Tim Riisager Tel: +44 121 629 1602 / Email: [email protected] Tim advises clients on all aspects of behavioural and non-contentious competition law across various sectors including healthcare, utilities, financial services and transport. Tim has extensive experience of Competition Act investigations, including whilst working as a legal advisor at the water regulator Ofwat, where he was responsible for carrying out initial assessments of Competition Act complaints and led the legal team on an abuse of dominance investigation. He has also recently acted for clients who are the subject of anti-trust investigations by the CMA and Ofgem.

55 Colmore Row, Birmingham, B3 2FG, United Kingdom Tel: +44 121 200 1050 / Fax: +44 121 626 1040 / URL: www.pinsentmasons.com

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USA


The United States has the world’s most mature cartel enforcement regime. Congress enacted the key U.S. federal anti-cartel statute, Section 1 of the Sherman Act (15 U.S.C. §1), in 1890. Several states had enacted their own antitrust laws even earlier. The enforcement regime has evolved into a complex system in which the laws can be enforced criminally by the federal government (and in rare cases by state governments), and civilly by the federal government, state governments, and private parties. Cases by private parties can be further subdivided into those brought by direct purchasers and those by indirect purchasers, and on a different axis between representative class actions and individual actions.

Cartel enforcement in the U.S. takes place within an adversarial system, with government enforcers and private plaintiffs on one side, and defendants on the other. An independent judiciary presides over trials and other disputes.

At the federal government level, the Antitrust Division of the Department of Justice enforces Section 1 of the Sherman Act. The Antitrust Division exclusively brings criminal actions under the Sherman Act, sometimes working in conjunction with other components of the DOJ where there are allegations of other violations, such as wire and mail fraud. Criminal antitrust enforcement is reserved for “hard core” violations of Section 1: price-fixing; bid rigging; and market allocation schemes among horizontal competitors. The DOJ can also pursue less egregious cases civilly.

Although the Federal Trade Commission (FTC), an independent agency, does not technically enforce the Sherman Act, it does enforce the FTC Act (15 U.S.C. § 41–58), which prohibits “unfair methods of competition” and “unfair or deceptive acts or practices”, allowing the FTC to challenge conduct civilly that would also violate the Sherman Act. Additionally, the FTC can use the FTC Act to challenge coordinated conduct that does not meet all of the elements of a Sherman Act violation, such as invitations to collude that do not lead to actual collusion.

Section 4 of the Clayton Act provides for a private right of action to enforce Section 1 of the Sherman Act. The Clayton Act entitles successful antitrust plaintiffs to treble damages, typically calculated based on the amount the plaintiff was overcharged as a result of the cartel activity, and also to compensation for their attorneys’ fees and associated costs of litigation. The Clayton Act does not allow successful defendants to recover their costs of litigation. According to the U.S. Supreme Court, “by offering potential litigants the prospect of a recovery in three times the amount of their damages, Congress encouraged these persons to serve as ‘private attorneys general’”.1 Defendants in private civil suits face joint and several liability, meaning that a single defendant could find itself responsible for the total

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damages for the entire cartel, trebled, plus attorneys’ fees and costs. The prospect of an enormous damage award leads most cases to settle before trial. Contingent fee arrangements – in which the plaintiff’s attorney receives a percentage of whatever money is paid to the plaintiff to resolve the case, but receives no fees absent a monetary award to the plaintiff – are common in private antitrust cases.

The Supreme Court’s holding in Illinois Brick Co v Illinois, 431 U.S. 720 (1977), prohibits indirect purchasers from asserting federal antitrust claims based on arguments that direct purchasers “passed on” the overcharge to the indirect purchaser. Many states, however, have enacted “Illinois Brick repealer statutes”, allowing indirect purchasers to bring state antitrust and unfair competition claims (either in federal or state court). The Supreme Court in Associated General Contractors of California, Inc v California State Council of Carpenters, 459 U.S. 519 (1983), established a balancing test to determine standing of indirect purchasers to assert antitrust claims. The test considers the directness of the plaintiff’s injury; the existence of more direct victims of the antitrust violation; the potential for duplicative recovery; and the likelihood that apportionment of damages would be overly complex or speculative. The Supreme Court has also heard the argument in Apple Inc. v. Pepper, a case that will give it an opportunity to revisit the Illinois Brick doctrine.

When a DOJ criminal investigation becomes public knowledge, follow-on private civil litigation is a near certainty. Often, a single set of facts will spawn a criminal case, a direct purchaser class action, an indirect purchaser class action, and several actions by individual plaintiffs who opt out of the class actions. The DOJ will often ask the court to stay discovery in the civil cases for a period of time to allow its criminal investigation to proceed unfettered.

States have the same rights as private parties to sue under Section 1 for damages when they are the victims of cartels. State attorneys general can also sue on behalf of the state’s citizens in what are called parens patriae actions.

All states have some type of antitrust or unfair trade practice statute, most of which are based on and/or interpreted consistently with the federal antitrust laws. Many states provide for some form of criminal liability for such violations, although criminal enforcement is not common in most states and sanctions tend to be less severe than under federal law. State attorneys general are responsible for the public enforcement of these laws and nearly all states permit private civil damage actions, most for treble damages, although some states limit recovery to actual or double damages.

Criminal cases are commenced by prosecutors presenting evidence gathered during the investigation to a grand jury (a group of 16 to 23 citizens who determine whether sufficient evidence exists to indict the targeted company or individuals). An indictment is simply a finding of sufficient evidence to proceed to trial, not a finding of guilt. Prior to indictment, the DOJ will identify certain targets of the investigation whom it considers to be potential defendants based on the existence of substantial evidence linking the target to the crime. Targets are afforded the opportunity to meet with the DOJ to try to avoid indictment through a proffer of cooperation and testimony or by offering counterevidence of their own. Targets also have the right to testify on their own behalf before the grand jury, though in practice this is uncommon, in part because their lawyers are not allowed to accompany them during questioning by prosecutors.

Before a criminal defendant can be tried, the DOJ is required to disclose evidence or information favourable to the defendant, including exculpatory evidence, evidence that would permit impeachment of government witnesses, or mitigating evidence that would tend to reduce a criminal sentence.2 In general, the DOJ provides to defendants the majority of

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its investigative materials. Under certain circumstances, the government must also disclose any statements of its witnesses that relate to the subject matter on which the witness testified.3

Criminal cases under Section 1 that proceed to trial are heard in federal court, where the defendant may demand trial by jury. Prosecutors must prove criminal violations “beyond a reasonable doubt,” the highest standard of proof in the U.S.

Civil plaintiffs commence cases by filing a complaint in federal or state court. Civil plaintiffs must meet the lower “preponderance of the evidence” standard.

The majority of cartel cases are resolved prior to trial. Criminal cases are often resolved by way of a plea agreement. Civil litigation is often resolved by way of a dispositive motion or settlement.

The statutes prohibiting cartels are brief and general. The Sherman Act deems “every contract, combination… or conspiracy… in restraint of trade” to be illegal. The nuance and boundaries of the law, and guidance as to how the law applies to various fact patterns, comes from judge-made caselaw in a system of stare decisis. A central element in all cartel cases is proof of an illegal agreement. Unilateral conduct does not violate Section 1 of the Sherman Act (though it may violate Section 2 (monopolisation), the FTC Act, or other laws). Satisfying the “agreement” element does not require a formal written document. Illegal agreements may be reached informally, through emails, instant messages, orally, or even with a wink or a nod. The DOJ’s practice is to establish the existence of an agreement in criminal cases through direct evidence, reflecting the higher standard of proof that applies in the criminal context. To establish an agreement in civil cases where the evidence may be circumstantial, the U.S. Supreme Court has held that the evidence must tend “to exclude the possibility of independent action” and establish that the defendants “had a conscious commitment to a common scheme”.4 Proof that defendants engaged in parallel conduct is insufficient, standing alone, to show such a “conscious commitment”. Plaintiffs must also allege certain “plus factors” to give rise to an inference of an agreement. Plus factors are proxies for direct evidence because they tend to ensure that courts punish concerted actions as opposed to unilateral, independent competitor conduct. There is no definitive set of plus factors.

Information exchanges among competitors are not prosecuted criminally, but may be challenged civilly if the anticompetitive effect of the exchange outweighs its procompetitive benefits. However, evidence that competitors exchanged competitively sensitive information, such as pricing, production levels, capacity, margins, and the status and details of customer negotiations or bids may constitute circumstantial evidence of an underlying cartel.

While Section 1 of the Sherman Act, read literally, would seem to prohibit all restraints of trade, the Supreme Court in 1911 held that it only prohibits “unreasonable” restraints of trade.5 Subsequent decisions held that agreements among competitors to fix prices (or any component of pricing), restrict output, rig bids, or allocate customers or geographic territories lack any redeeming competitive value and are thus per se illegal. In other words, the law provides for an irrebuttable presumption that such agreements are unreasonable and have an anticompetitive effect on the market. For several decades now, the DOJ has reserved criminal prosecutions to per se cartel offences.

In order to come under the purview of Section 1, the challenged conduct must involve interstate commerce or trade with foreign nations. Most commercial activity occurring within the United States will have an interstate effect. The Foreign Trade Antitrust Improvements Act (FTAIA) (15 U.S.C. § 6a) (discussed below) covers foreign commerce.




Overview of investigative powers in the United States

Criminal enforcement:

The DOJ Antitrust Division, working in conjunction with the Federal Bureau of Investigation (FBI), other federal law enforcement agencies, and grand juries, has a significant array of traditional investigative powers at its disposal. These tools allow it to compel production of documents, question witnesses under oath and, with appropriate judicial approvals, raid private property to seize evidence.

Perhaps the DOJ’s most influential investigatory tool in cartel investigations, however, is cooperation from cartel insiders. While sometimes overlooked as an investigatory tool, and while not as dramatic as an FBI dawn raid, cooperation is probably the DOJ’s most fruitful method of gathering information and evidence. In order to reap the benefits of the Antitrust Division’s corporate leniency programme (discussed in more detail below), corporations must provide the DOJ with full cooperation, including documents, attorney proffers, and witness interviews and testimony. Companies and individuals who are not eligible for leniency but agree to plead guilty also typically provide full cooperation to the government in return for the DOJ’s agreement to request a lower sentence. In some cases, cooperating witnesses agree to gather evidence against co-conspirators during the covert phase of an investigation into an ongoing conspiracy, for example, by recording conversations with them (under Title III of the Omnibus Crime Control and Safe Streets Act of 1968, communications can be legally intercepted if there is consent of one of the parties).

Even for witnesses not covered by the Antitrust Division’s leniency programme or the cooperation obligation of a plea agreement, DOJ lawyers, often accompanied by FBI agents, will seek cooperation from witnesses by dropping in on them for unannounced interviews, often at their homes first thing in the morning. Witnesses approached in this manner are not compelled to cooperate, but often do.

In the case of witnesses located outside the U.S., the DOJ may initiate a border watch. When an individual on a border watch list voluntarily enters the U.S., immigration and border control authorities will notify the DOJ and may detain the individual or serve him or her with a grand jury subpoena for documents or testimony. There is no requirement of a warrant or showing of probable cause to place an individual on a border-watch list, which is not public and not disclosed to defence counsel. If the individual enters the U.S. and is not detained, the DOJ may conduct a drop-in interview with government lawyers and agents appearing unannounced at the person’s hotel or workplace. Although cooperation with the interviewers is voluntary, individuals often cooperate. Individuals on a border watch also may have physical evidence, such as documents and electronic devices, searched at the U.S. border, where border control authorities enjoy extensive investigative powers.

To help incentivise foreign-based cartel insiders to submit to U.S. jurisdiction and cooperate, the Antitrust Division, in 1996, reached a Memorandum of Understanding (MOU) with U.S. immigration officials allowing such individuals to travel to the U.S. even if they have pleaded guilty. Because U.S. immigration officials consider antitrust offences to be crimes involving “moral turpitude”, absent the MOU, foreign offenders, even if they agreed to plead guilty and cooperate with the government’s investigation, would normally be permanently excluded from the United States (following any term of incarceration).

When the DOJ cannot rely on cooperation, it has a number of other investigatory tools. With a grand jury subpoena, the DOJ can compel testimony and documents from individuals and corporations throughout the U.S. The DOJ also asks subpoena recipients to produce




documents located outside the United States on a voluntary basis. Grand jury subpoenas for testimony compel individual witnesses are to be questioned under oath by DOJ lawyers before the grand jury. Witnesses’ lawyers are not allowed in the grand jury room during testimony, although witnesses are permitted to take breaks to confer with their counsel. Witnesses can refuse to testify by asserting their right under the U.S. Constitution against self-incrimination. The DOJ can overcome this assertion by supplying the witness immunity for his or her testimony.

Additionally, upon a finding of probable cause by a federal judge or magistrate, the DOJ may obtain warrants permitting it, through the FBI, to search for and seize physical evidence located on private premises, including documents and electronic devices.

Civil enforcement:

Civil investigations by federal or state enforcement agencies do not involve a grand jury. Instead, the federal or state enforcement agency will generally issue civil investigative demands (CIDs) or civil subpoenas to obtain documents or sworn written or oral testimony from targets of the investigation, as well as from third parties. The evidence resulting from CIDs or civil subpoenas may form the basis of a civil lawsuit in federal court (brought by the DOJ or FTC) or an FTC administrative proceeding before an administrative law judge.

Private plaintiffs do not have the ability to use grand jury subpoenas or CIDs. Once a complaint is filed, however, private plaintiffs can use the civil discovery tools set forth in the Federal Rules of Civil Procedure or state discovery statutes – document requests, interrogatories, requests for admission and depositions – to further investigate a matter. Civil discovery can be targeted to the defendant(s) and to third parties. Prior to the filing of the complaint, private plaintiffs can look to public sources of information, or use private investigators to investigate cases.


Assistant Attorney General Makan Delrahim took the helm of the Antitrust Division on September 28, 2017, just before fiscal year 2018 began. Soon after that, he remarked that the division’s “criminal enforcement program has been and remains a core priority”. The DOJ has had success in the past year, notching guilty pleas, convictions, or arrests in many of its ongoing matters, including: packaged seafood; LIBOR; foreign currency exchange; capacitors; real estate foreclosure sales; international ocean shipping; and liquid aluminium sulfate. Yet its criminal case filings and fines have been notably low for the last two years. For example, while in the period between 2008 and 2016 the division filed an average of 61 criminal cases per year (naming an average of 59 individuals and 21 corporations), in 2017 the division filed only 24 cases (naming 27 individuals and eight corporations), and in 2018 it filed only 15 cases (naming 18 individuals and 3 corporations). While total fines exceeded $1 billion in each of fiscal years6 2012, 2013, 2014 and 2015, the fines dropped off dramatically to $399 million in 2016, and dropped off again to $67 million for fiscal 2017. They rebounded a bit to $193 million in 2018, according to an unofficial tally.

Lower fine totals and case filings, however, should not necessarily be mistaken for less vigorous cartel enforcement. For one thing, fines and case filings are not imposed evenly across the multi-year arc of a cartel investigation. No cases will be brought and no fines recorded during the investigatory phase of a matter. Toward the end of a matter, resources are often devoted to individual prosecutions, which generate relatively low fines. Moreover, fine levels suffer when enforcement efforts focus more on individuals because sentences for individuals are tilted toward prison time with relatively low fines. Moreover, the corporate




fines the DOJ is able to impose depend greatly on the industry in the DOJ’s cross hairs. Rightly or wrongly, the United States Sentencing Guidelines, which are used to calculate recommended fines, are driven by the volume of commerce affected by a cartel. The volume of commerce figures will be exponentially larger in some sectors (e.g. the financial sector) than in others. Lastly, the division was without a permanent Deputy Assistant Attorney General in charge of the criminal programme for approximately a year before the appointment of Richard A. Powers in May of 2018.

The Antitrust Division’s 2019 budget request confirms that “[v]igorous enforcement of criminal antitrust laws will continue to be the number one priority of the Division’s Criminal Program”. The division’s criminal enforcers are continuing to use all available investigatory tools, including unannounced drop-in interviews and dawn raids. In addition to the ongoing matters referenced above, the division continues to aggressively investigate the generic drug industry (state attorneys general are also active in this area) and has also reportedly launched new investigations into Chinese air cargo services and metal paints and coatings. The division has also repeatedly and publicly indicated its intent to pursue agreements among companies not to poach each other’s employees. These statements follow the guidance to human resource professionals that the DOJ issued with the FTC in 2016. State attorneys general have also been active in this area, for example, requiring franchise operations to stop including no-poach clauses in their franchise agreements.

The DOJ’s trial record was mixed. The DOJ was unsuccessful in a November 2017 trial, where an Ohio jury acquitted two Japanese firms, Tokai Kogyo Co. Ltd. and Green Tokai Co. Ltd., of price-fixing and bid rigging charges in the market for automotive body seals. The defence focused on evidence of intense price competition for the allegedly rigged components during the conspiracy period.

In October 2018, the DOJ persuaded a jury to convict two former Deutsche Bank traders in a Manhattan federal court of conspiracy and wire-fraud charges over their involvement in a scheme to manipulate the London Interbank Offered Rate (LIBOR). While the Antitrust Division assisted the Criminal Division at trial, there were no antitrust charges. Sentencing has been postponed to allow the parties to brief the issue of whether the government improperly relied on inadmissible compelled testimony. Defendants allege that the bank’s internal investigation, conducted by outside counsel, was in fact being directed by the Commodities Futures Trading Commission and that employees provided information to investigators only because the alternative was termination of their employment.

Also in October of 2018, a Manhattan jury quickly acquitted three London-based bank traders in the foreign exchange rate rigging case. The Antitrust Division had accused them of conspiring not to trade against each other and manipulating daily benchmarks. The traders had communicated in a chat room which they referred to as the “cartel” and the “mafia”. The government’s main cooperating witness, however, testified that the traders did not intend to commit a crime, and did not think they were doing anything wrong or hurting anyone. The defence relied on a foreign exchange trading expert who testified that sharing market colour is a legitimate part of the business and that he examined trading data and did not see evidence of an effect on euro/dollar rates from the chats.

The DOJ was headed toward an October 2018 trial of Nippon Chemi-con, which it considered a ringleader of the electrolytic capacitors price-fixing conspiracy, but the case ultimately settled with the company pleading guilty. The plea deal came after the DOJ offered the company a discounted fine range of $40–$60 million. It offered the discount after it came to light that a government attorney had a potential conflict of interest. The




DOJ lawyer, who had worked on a mutual legal assistance treaty (MLAT) request to the Japanese government, had previously represented Nippon Chemi-con while in private practice. While the DOJ took the position that the conflict did not prejudice the defendant, it threatened to derail the DOJ’s case. District Court Judge James Donato (who throughout the case has been frustrated by what he considers lenient plea deals for other companies) appeared especially frustrated by the inability to fine Nippon Chemi-con the maximum fine of $100 million. “Why is it in the interests of justice? How is it good for American consumers to effectively give a 40% discount based on this one issue?” he asked. Judge Donato ultimately capitulated and fined the company $60 million, the most he could under the plea deal.

At the appellate level, the Antitrust Division challenged its pre-trial loss in the heir locator matter. A federal court in the District of Utah ruled that the DOJ’s prosecution of a defendant was subject to the defendant-friendly rule of reason standard, rather than the per se standard. For decades the DOJ has, as a matter of prosecutorial discretion, reserved criminal prosecution for per se violations where the court and jurors bypass inquiry into the reasonableness of the restraint and presume the anticompetitive effect of the agreement. Consistent with its historical practice, the DOJ charged the heir location case as a per se market allocation violation, alleging that the defendants and their competitors developed and implemented a set of written guidelines that governed how the participants would allocate potential customers that had been contacted by multiple competitors. The defendant, however, persuaded the district court that the restraint was different enough from standard customer allocation agreements that it should not be analysed under the per se standard. The court also ruled that the DOJ’s claim was barred by the statute of limitations. The Tenth Circuit reversed the district court on the statute of limitations, but held that it did not have jurisdiction to decide whether the case should be decided under the rule of reason or per se standard. Courts of Appeals, as the Tenth Circuit noted, are only authorised to rule on decisions, judgments, or orders of a district court dismissing an indictment or information. Here, the district court did not dismiss the indictment, but only held that the DOJ had to proceed under the rule of reason. Following the Tenth Circuit opinion, the DOJ has asked the district court to reconsider its decision on the appropriate standard.

In Animal Sciences Products, Inc. v. Hebei Welcome Pharmaceuticals Co., a price-fixing case against Chinese manufacturers of Vitamin C, the Supreme Court sided with the plaintiffs, unanimously reversing the Second Circuit which had overturned the judgment for the plaintiffs on international comity grounds. The Second Circuit found that the Chinese corporate defendants had been compelled by the Chinese government to fix prices for the vitamin sold to U.S. companies and that the defendants could not have complied both with Chinese law and U.S. antitrust law simultaneously. After considering an amicus brief submitted by the Chinse Ministry of Commerce, the Second Circuit held that Chinese law should prevail when the conduct involves Chinese companies acting on Chinese soil. The Supreme Court, however, held that while “a federal court should accord respectful consideration to a foreign government’s submission”, it “is not bound to accord conclusive effect to the foreign government’s statements”.


The Antitrust Division’s corporate leniency programme affords full immunity from prosecution to a corporation when certain requirements are met. In 1993 the Antitrust Division redesigned the programme so that leniency was automatic for qualifying companies,




and all current officers, directors and employees who come forward with the company and cooperate are protected from criminal prosecution. With the redesign, the DOJ stressed transparency and objectivity. Following these changes, the success of the programme took off and leniency became the most important tool in the DOJ’s enforcement toolbox.

The key requirements are that: (i) the DOJ has not yet learned of the conduct (Type A leniency) or does not yet have enough information to pursue a conviction (Type B leniency); and (ii) the corporation reports the misconduct fully and cooperates completely with the DOJ’s investigation.7 The DOJ keeps the identity of leniency applicants confidential. Depending on the nature of the cartel and the parties involved, however, the identity of the leniency applicant may become known, at least among the other defendants.

In addition to immunity from criminal sanctions under the DOJ leniency programme, applicants may also be eligible for benefits in follow-on private civil cases, including reduction from treble to single damages, and the elimination of joint and several liability by virtue of the Antitrust Criminal Penalty Enhancement and Reform Act (ACPERA) which congress passed in 2004. The requirements under ACPERA include cooperation with plaintiffs in civil actions.

Leniency is available only to the first-in applicant, and no formal leniency programme exists for cooperating parties who come in later. The DOJ values cooperation, however, and cooperation is a mitigating factor under the Sentencing Guidelines that the DOJ points to in recommending sentences to the court. Earlier cooperation is likely to be more valuable to the DOJ than later cooperation and is more likely to receive a larger fine discount.

The requirement that a corporation be the first to report to the DOJ to qualify under the leniency programme is designed to create an incentive for those who uncover problematic conduct to rush to the DOJ. If a company learns of some credible evidence of a criminal antitrust violation but does not have the complete picture of whether the conduct violated the antitrust laws, the DOJ allows the company to obtain a “marker” to secure its place in line with the DOJ while investigating further whether a violation in fact occurred. Typically, the process begins with a phone call by counsel to the DOJ to see if a marker is available. Usually some information regarding the nature of the illegal conduct and the evidence supporting it is shared at this time, but merely putting in the marker does not require full details of the scope of the cartel and the applicant’s involvement. If the DOJ accepts the marker, the applicant must move quickly to conduct an internal investigation and prepare a formal proffer of evidence to the DOJ establishing that the company satisfies the leniency programme’s requirements. Successful applicants will receive a conditional letter of amnesty, setting forth the requirements of cooperation by which the company must abide in order to maintain its immunity.

Under the leniency programme, the Antitrust Division has created an “amnesty plus” programme designed to create an incentive for later-cooperating parties to confess wrongful conduct outside the scope of the existing investigation. As part of amnesty plus, a company under investigation for one cartel offence that discovers another potential cartel offence may receive immunity for the second offence (assuming it qualifies for leniency) if it reports the conduct, and may also receive a considerable reduction in fine for the original offence. Conversely, under the DOJ’s “penalty plus” policy, the government will seek fines and prison sentences at the upper end of the range recommended by the Sentencing Guidelines if a company was aware of additional antitrust violations but chose not to report them.

By most measures, the leniency programme has been dramatically successful. A series of international cartels have been brought to justice, billions of dollars of fines have been levied,




and hundreds of executives have been jailed. A huge percentage of cases in recent decades have relied on information that came, directly or indirectly, from the leniency programmes.


Following success in the U.S., leniency programmes have been adopted by many other jurisdictions. More than 80 jurisdictions now have them in one form or another. Prior to this global expansion, if a company discovered cartel activity, the decision-making process was fairly straight-forward. If the company moved quickly it could secure complete immunity from crippling fines and prison sentences for executives by fully cooperating with a few authorities. Yet with more countries adding leniency policies, the calculus has shifted. The costs of securing leniency have skyrocketed. Leniency recipients must cooperate fully and transparently; that means: review and production of millions of pages of translated documents; detailed attorney proffers; witness interviews; and testimony. Moreover, each country’s programme is administered differently. And because seeking leniency in only one or a few jurisdictions might leave you vulnerable to enforcement in others, seeking leniency anywhere means seeking it everywhere. But antitrust enforcers in one jurisdiction might issue cooperation demands that irreconcilably conflict with the demands imposed by another. Companies also have to take into account the risks (now more dire than ever) of follow-on private litigation, which is virtually inevitable when a cartel becomes public knowledge.

The new Deputy Assistant Attorney General Richard Powers is attuned to the increasing complexity and costs. He noted that the suggestions the DOJ is focusing on to reduce the burdens on leniency applicants include: 1) trying to coordinate timelines and deadlines to allow the applicant to meet them in multiple jurisdictions; 2) tailoring document demands to get the necessary evidence from the leniency applicant without unnecessary burden; and 3) where possible, coordinating the timing and locations of interviews to alleviate burdens on applicants and employees.

As the costs of applying for leniency increase, some worry that the benefits seem to be shrinking. In 2017, the DOJ published an amended version of its Frequently Asked Questions publication that explains the nuts and bolts of the leniency programme. Most observers interpreted the changes, including stricter requirements for immunity for current directors, officers, and employees in “Type B” situations (where the DOJ already has knowledge of the conduct), and a presumption against leniency for former directors, officers, and employees, as eroding predictability, transparency, and certainty, and signalling the Division’s intent to cover fewer individuals.

A consensus seems to be forming among lawyers who practice in the international cartel arena that leniency has lost some of its lustre. These lawyers and their clients are at least pausing before pulling the leniency trigger, if not turning away from leniency altogether. As mentioned above, overall cartel fines and filings continue to be sharply off the record highs of just a few years ago. Part of that reduction may well be a result of a diminished appetite for leniency programmes.


Criminal settlements

In criminal cases, the method for a target of an investigation to settle with the DOJ is for the target to admit guilt and agree to enter a guilty plea. The criminal justice system encourages resolution of criminal cases through plea agreements. Plea bargains can provide defendants with a number of benefits, including certainty, expedience, finality, and substantially reduced




criminal penalties. Before proceeding with plea discussions, the prosecution must be satisfied that it has a prosecutable case.

The Federal Rules of Criminal Procedure lay out different types of plea agreements, two of which comprise the vast majority of plea agreements in the cartel context. In an agreement pursuant to Federal Rule of Criminal Procedure 11(c)(1)(B) (known colloquially as a “B” deal), the government’s attorney will agree to recommend a particular punishment; the defence is free to oppose this recommendation and argue for a lesser sentence. However, a defendant subject to a “B” deal has no right to withdraw the guilty plea if the court rejects all or part of the government’s recommendation. The defendant must accept the sentence imposed by the court irrespective of the government’s recommendation.

The majority of the DOJ’s cases involving foreign corporations and individuals have been resolved on the basis of a “C” deal (in reference to Federal Rule of Criminal Procedure 11(c)(1)(C)). The “C” deal is a mutual recommendation by the prosecutor and defendant to the court on the appropriate sentence and the application or non-application of certain factors or provisions of the Federal Sentencing Guidelines. If the court accepts the “C” deal it is bound by the recommendation in the agreement. Some courts refuse to accept “C” deals because of the removal of the sentencing court’s discretion.

Where a company agrees to a plea bargain, its directors, officers, and employees will similarly receive immunity from future prosecution, except for those who have been “carved out” of the non-prosecution provisions of the plea agreement. The DOJ’s practice is to carve out a number of targets of the investigation who may be indicted for wrongful conduct associated with the violations set forth in the plea agreement. Not all carved-out individuals are indicted and fewer still are ultimately prosecuted. These carved-out individuals are often, though not always, higher-ranking executives who held pricing authority and actively promoted the cartel activity. The DOJ may also choose to carve out individuals who attended cartel meetings and entered into the agreements on behalf of the company, against whom the documentary evidence is often the strongest.

In 2013, the DOJ announced that it would no longer publicly disclose the names of individuals “carved out” from the non-prosecution provision of company plea agreements. In putting an end to this practice, the division recognised that “[a]bsent some significant justification, it is ordinarily not appropriate to publicly identify uncharged third-party wrongdoers”. The DOJ also announced that it would no longer carve out individuals from pleas merely for not cooperating in its investigation. Instead, the division will carve out only those individuals who are “potential targets” of the investigation (i.e., only those whom the division has reason to believe were engaged in the criminal conduct at issue and targets for potential prosecution).

During a plea negotiation for a corporate target, the DOJ typically interviews employees who may have had some involvement in the conduct (or receives attorney proffers from employees’ counsel). The plea negotiations often focus on: who will be carved out of the non-prosecution provisions; the violations for which the defendant must admit guilt; the products or services covered by the conspiratorial agreement; the duration and geographic scope of the conspiracy; the cooperation credit that will be suggested; and the sentencing recommendation. The Antitrust Division website contains a model corporate plea agreement8 and a speech by former Deputy Assistant Attorney General Scott Hammond which describes the plea agreement process.9

Civil settlements

The settlement of civil antitrust cases brought by the DOJ or FTC is by consent decree. Through consent decrees the agencies will seek to (1) stop the illegal practices alleged, (2)




prevent their renewal, and (3) restore competition to the state that would have existed had the violation not occurred.

Civil consent decrees by the DOJ (but not FTC) must comply with the Antitrust Procedures and Penalties Act of 1974 (15 U.S.C. § 16), also known as the Tunney Act. The Tunney Act subjects the DOJ’s consent judgments to public scrutiny and comment and requires the filing of a Competitive Impact Statement which sets forth the information necessary to enable the court and the public to evaluate the proposed judgment in light of the Government’s case.


Third parties (and injured parties who do not want to bring their own private litigation) can report violations to the FBI, the Antitrust Division, the FTC, or state attorneys general. All of these agencies welcome public complaints (although they are likely to be skeptical of claims that appear to be designed to hobble a competitor). The DOJ is most likely to be interested in a public complaint if the alleged harm is widespread. If the harm is focused on victims within a specific state, the DOJ may refer the matter to that state’s attorney general. A complaining party should supply as much detail as possible about the alleged violation, the products, services, companies, individuals, organisations, and victims involved. Counsel who are familiar with cartel enforcement procedures and priorities can help package and present a complaint in a way that may increase the chances that the agencies will investigate.


The DOJ may seek equitable injunctive remedies for cartel activity via civil actions (15 U.S.C. §4), but has no power to seek civil fines. Such actions rarely proceed to trial and are commonly resolved by consent decrees typically requiring the defendant to cease the problematic conduct or imposing other internal changes in response to the government’s concerns. The FTC is similarly limited to equitable remedies, including injunctive relief and disgorgement.

Right of appeal against liability and penalties

Criminal defendants have the right to appeal a guilty verdict following a trial. If a defendant is acquitted, the government’s appeal rights are limited by the United States Constitution. The 5th Amendment’s “double jeopardy” clause protects against multiple prosecutions for the same offence. Therefore, if the defendant is acquitted, the government cannot appeal. There are limited instances, however, when the government can appeal. The government may appeal court rulings which grant a defendant post-conviction relief (e.g., the reversal of a conviction). It may also appeal district court decisions on certain pre-trial motions (e.g., the suppression of evidence and sentencing issues). Criminal defendants who agree to plead guilty give up their right to appeal. In civil cases, both plaintiffs and defendants have the right to appeal adverse rulings. Convicted criminal defendants may also appeal their sentences.

Appeals from the trial decision are taken to the federal circuit Court of Appeals for the geographic region in which the trial court sits. Appellate courts generally defer to trial courts’ findings of fact, overturning them only when they are clearly erroneous. Questions of law, by contrast, are reviewed de novo, in other words the appellate court considers the law as if for the first time. Notices of appeal must be filed within a relatively short window of time or the right to appeal is lost (much more time is allowed to file substantive appellate briefs




supporting the appeal). For civil litigants, the notice of appeal deadline is usually 30 days from entry of the judgment or order appealed from; for criminal defendants, the deadline is 14 days from the date of entry of judgment, or from the filing of the government’s notice of appeal, whichever is later. From the circuit court, appeals are taken to the U.S. Supreme Court. However, review is discretionary and the Supreme Court only grants review for a tiny percentage of cases.

Criminal sanctions

The sanctions for cartel activity under the U.S. antitrust laws can be severe for both corporations and individual defendants, including high fines and, for individuals, prison time. Section 1 of the Sherman Act has always been both a criminal and civil statute, although when it was first passed in 1890, a violation was a misdemeanour with a maximum prison term of one year and a maximum fine of $5,000. The penalties have steadily increased since then. In 2004, the maximum criminal fine for corporations under the Sherman Act was increased to $100 million, where it sits today. But the Alternative Fines Act (18 U.S.C. § 3571) allows prosecutors to side-step such statutory limits and fine defendants up to “twice the gross gain or twice the gross loss” from the offence. This provision gives prosecutors powerful leverage, in certain cases involving large markets, to extract large fines in plea bargains. The DOJ has not been shy about exercising that leverage; it has collected cartel fines above the $100 million maximum many times.

To date, the largest fines levied against a corporate defendant for a Sherman Act violation are $500 million – the DOJ obtained this fine amount in two separate cases, one against F. Hoffman-La Roche, Ltd. and another against AU Optronics Corporation. With the exception of the fine against AU Optronics, the fines above the Sherman Act’s $100 million maximum have always been in the plea bargain context based on an agreed upon set of facts. The AU Optronics fine followed a trial which required the DOJ to prove twice the loss to a jury “beyond a reasonable doubt”.

In addition to significant fines, companies that engage in cartel activity face debarment and suspension from future government contracts. The Division is required to report individual defendants qualifying for debarment to the Defense Procurement Fraud Debarment Clearinghouse. The defendants are also listed in the debarment database known as the System for Award Management.

While the potential for prison terms has always been part of the Sherman Act, significant prison terms only started being imposed in the late 1980s. Violation of Section 1 became a felony in 1974, when the maximum prison term was increased to three years. In 2004, the maximum prison term was increased from three years to 10 years. In practice, prison sentences for individuals do not approach the statutory maximum of 10 years. They have averaged 22 months between 2010 and 2016.

The DOJ uses the Federal Sentencing Guidelines to recommend the penalties to impose on corporations and individuals convicted of or pleading guilty to a cartel violation. The Federal Sentencing Guidelines consider a variety of factors for the recommended penalties, including the volume of commerce affected, prior criminal history, role in the offence, cooperation with law enforcement, and compliance programme, among others. While federal courts are not required to impose sentences within the ranges provided in the Guidelines, United States v. Booker, 543 U.S. 220 (2005), they must still give “respectful consideration” to the Guidelines, Pepper v. United States, 562 U.S. 476, 501 (2011), in connection with a wider range of factors set forth in the federal sentencing statute (18 U.S.C. § 3553).




The DOJ’s view is that maximum deterrence is achieved, in both international and domestic cases, by holding culpable individuals accountable, not just their corporate employers. The Division has followed through on this belief, charging several hundred individuals over the last decade. The Division has also insisted that individuals facing charges spend time in prison, and has continued to seek incarceration in most cases. The pressure on line prosecutors to look hard at charging individuals in each case increased with the issuance in September 2015 of a memorandum from Deputy Attorney General Sally Q. Yates laying out the DOJ’s more aggressive policy on individual accountability for corporate wrongdoing.

In recommending the appropriate prison sentence for an individual defendant, the Guidelines assign a “base offense level” to a crime. For antitrust violations, the base offence level is 12, which results in a starting range of 10 to 16 months’ imprisonment. The Guidelines further recommend increases to the base offence level when the specific antitrust offence is bid rigging, or when the affected volume of commerce exceeds certain thresholds starting at $1 million. The Guidelines then consider aggravating or mitigating factors in adjusting the time up or down, such as whether the individual abused a position of trust or participated in the obstruction of justice (Guidelines, §§3B1, 3C1). With respect to individual criminal fines, the Guidelines suggest beginning amounts corresponding to one to five per cent of the affected volume of commerce but no less than $20,000. The judge may then consider aggravating or mitigating factors in setting the fine, considering the extent of the defendant’s participation in the cartel and the role he or she played, and whether and to what extent the defendant personally profited from the scheme, including through bonuses, promotions, or other career enhancements. Individuals who lack the ability to pay the fine are sentenced to community service, which the Guidelines recommend should be “equally as burdensome as a fine” (Guidelines, §2R1.1, application note 2).

For convicted corporations, the Guidelines recommend a “base fine” equal to 20 per cent of the affected volume of commerce. This base fine is then multiplied according to a “culpability score,” which is calculated based on factors including the firm’s previous criminal history, whether it has or will implement antitrust compliance programmes or policies, evidence of obstruction of justice, and self-reporting.

The Sentencing Guidelines also provide that courts can impose probation on corporations or require corporations to pay restitution under certain circumstances, and DOJ officials have increasingly considered, and in some cases requested and secured, court-supervised probation pursuant to the Guidelines as a means “to ensure an effective compliance program and to prevent recidivism”.10 The DOJ has echoed its commitment to corporate rehabilitation where “confidence is low that a defendant is committed to rehabilitating itself with appropriate compliance measures”.11

Cross-border issues

Overseas reach of the Sherman Act

The statute that governs the overseas reach of the Sherman Act – the Foreign Trade Antitrust Improvements Act (FTAIA) (15 U.S.C. §6a) – is notoriously convoluted. The FTAIA generally removes foreign commerce from the reach of U.S. antitrust law, but then adds much of it back in through important exclusions and exceptions. The FTAIA allows the Sherman Act to apply with full force to “import commerce”. In addition, the FTAIA allows the Sherman Act to apply to conduct involving foreign commerce if it has a “direct, substantial, and reasonably foreseeable effect” on domestic commerce and that effect “gives rise to” the plaintiff’s claims (the so-called “domestic effects” exception).




Courts are split on the degree of “directness” required to satisfy the domestic effects exception. The Ninth Circuit has held that an effect is “direct” only if it “follows as an immediate consequence of [defendants’] activity” (U.S. v LSL Biotechnologies, 379 F.3d 672, 680 (9th Cir 2004)). Thus “[a]n effect cannot be ‘direct’ where it depends… on uncertain intervening developments”. Id. at 681. The Second and Seventh Circuits and DOJ have interpreted directness more broadly, applying a “proximate cause” standard. See: Minn-Chem, Int v Agrium Inc, 683 F.3d 845, 860 (7th Cir 2014) (en banc); Motorola Mobility LLC v AU Optronics Corp, 775 F.3d 816, 819, 824-825 (7th Cir 2015); and Lotes Co v Hon Hai Precision Indus Co, 753 F.3d 395, 410 (2d Cir 2014).

Courts have yet to define what counts as a “substantiality” effect. At least one court has remarked, however, that Congress intended to permit antitrust claims only where the alleged “anticompetitive conduct has… a quantifiable effect on the U.S. economy”. In re TFT-LCD (Flat Panel) Antitrust Litigation, 822 F. Supp. 2d 953, 964 (N.D. Cal. 2011). Finally, courts have held that plaintiffs must demonstrate that the requisite “direct effect” on U.S. commerce was “foreseeable” to an objectively reasonable person making practical reasonable judgments. Animal Science Products, Inc v China Minmetals Corp, 654 F.3d 462, 471 (3d Cir. 2011).

Red Notices and Extradition

When the DOJ applies the Sherman Act to overseas conduct it is bound to snare individuals residing abroad, some of whom will not voluntarily submit to U.S. jurisdiction. Where provided for by treaty, the DOJ may seek extradition of individuals from foreign jurisdictions. Most treaties contain a dual criminality requirement that permits extradition only for conduct that is criminalised in both countries. This has hampered U.S. authorities’ efforts to extradite individuals for Section 1 violations because antitrust violations are not considered crimes in most of the rest of the world (although antitrust charges are often paired with fraud claims that are more likely to be criminal on both sides). The risk of extradition has increased as more jurisdictions around the world have criminalised cartel conduct. In 2014, the DOJ successfully extradited an Italian national from Germany on a charge of participating in a conspiracy to rig bids, fix prices, and allocate market shares for sales of marine hose sold in the U.S. and elsewhere.

The DOJ may place foreign individuals who have been indicted or are targets of a grand jury investigation on INTERPOL’s red notice list. Once placed on the red notice list, the individual is at risk of being detained at the borders of the 190 participating countries. Obtaining a red notice requires the issuance of a valid national arrest warrant, but not proof that the individual is guilty of any crime. Red notice listings do not expire, so unless removed from the list an individual can be essentially indefinitely confined to their home countries. Some have criticised the use of red notices as a violation of civil and human rights because of the lack of due process protections.12

Charged individuals residing outside the U.S. are usually unable to get the charges dismissed in absentia due to something called the “fugitive disentitlement doctrine” which allows courts to deny rights to those who do not agree to appear and submit to the court’s jurisdiction. That doctrine was applied in 2015 to a Swiss UBS trader charged in the LIBOR matter.


The Illinois Brick Doctrine

For over 100 years the Clayton Act has authorised “any person” injured in his “business or




property” by a violation of the antitrust laws to sue for treble damages. Accordingly, the U.S. has the world’s most established system of private antitrust enforcement. While the Clayton Act’s private enforcement provision is expansive, the judicially created Illinois Brick doctrine significantly limits who is entitled to sue for damages. The doctrine generally holds that only direct purchasers from an antitrust defendant can proceed with a federal antitrust claim. In Apple Inc. v. Pepper, the Supreme Court will revisit the 40-year old Illinois Brick doctrine. While the case is a monopolisation case, a decision doing away with or altering the doctrine would significantly impact private cartel enforcement because the Illinois Brick doctrine plays a major role in many cartel matters.

The Illinois Brick doctrine is grounded, in part, on the desire to avoid conflicting and duplicative damages and on the judgment that attempting to allocate overcharges among purchasers along a distribution chain is complex and would substantially raise the costs of antitrust enforcement.

In Apple Inc. v. Pepper end-user iPhone owners allege that Apple monopolised the distribution market for iPhone applications. The issue is whether the iPhone owners have standing or whether such claims must be brought by the app developers who are the actual purchasers of app distribution services. Apple, and the amici that support it (including the United States), argue that a straightforward application of the Illinois Brick doctrine deprives the iPhone owners of standing. This is what the district court found when it dismissed the complaint (a decision that was later reversed by the Ninth Circuit). Plaintiffs, and the amici supporting them, argue that because they purchase apps from Apple they should be considered the direct purchasers and that the policy concerns underlying the Illinois Brick doctrine support their right to seek damages. The case was argued on November 26, 2018.

While the United States submitted an amicus brief in support of Apple, the current leadership of the Antitrust Division has indicated that it is contemplating a recommendation to the Court that it reverse its Illinois Brick decision.

Class Actions

Hundreds of private antitrust cases are filed each year. A large number of private civil cartel lawsuits are brought as class actions pursuant to Rule 23 of the Federal Rules of Civil Procedure. To qualify for class treatment under Rule 23, plaintiffs must plead and prove the following:

• that the class is so numerous that a joinder of every individual plaintiff is impracticable (numerosity);

• that there are questions of law or fact common to the class (commonality);

• that the claims or defences of the class representatives are typical of the class (typicality); and

• that the class representatives will adequately represent the interests of the class (adequacy of representation).

In addition, plaintiffs must prove that common questions of law and fact will predominate over any individual questions and that the class action device is a superior method for adjudicating the dispute.

Certain circuit courts of appeals have held that a class may not be certified unless the plaintiff also demonstrates that the class is ascertainable, i.e., whether the class is defined such that one can objectively determine who is a member, and whether there is an administratively feasible method to make that determination and provide notice to the class members as required by the Due Process Clause of the U.S. Constitution. Other circuits have held that




this is not a relevant consideration at all at the class certification stage. Given the split in the circuits, it seems inevitable that the Supreme Court will eventually have to weigh in.

Opt-out litigation

Depending on the industry, purchasers of allegedly price-fixed products may be relatively large commercial enterprises. With increasing frequency, some of these purchasers have been electing to opt-out of the class procedure, retain their own separate counsel, and file individual lawsuits. As more jurisdictions around the world adopt private rights of action, procurement officials and in-house counsel at many companies are evaluating whether this strategy makes sense. Some of the benefits to filing a separate action include a potentially higher recovery, non-contingency attorney fee arrangements (and potentially lower fees), more control over the litigation, and more control over the settlement process, including the possibility for creative win-win business resolutions. Some of the drawbacks to filing separate individual opt-out actions include potential harm to supplier relationships, time and effort requirements to develop cases and damage models, increased discovery burdens, increased demands on in house legal departments and business people, and likely having to pay some attorneys’ fees if the case is unsuccessful.

Reform proposals

In the spring of 2017, the Criminal Antitrust Anti-Retaliation Act was introduced in the Senate. The bill, if it becomes law, would give whistleblower protection for employees who provide information to the Department of Justice regarding conduct that violates the criminal antitrust laws by prohibiting employers from retaliating against such employees. In November of 2017 the bill passed the U.S. Senate. It is unclear whether the House of Representatives will take up the measure.

Some commentators have proposed a law that goes further than merely protecting whistleblowers from retaliation by their employers. Robert Connelly, former Chief of the Antitrust Division’s Philadelphia field office and partner at GeyerGorey, has suggested providing whistleblowers with a financial reward for turning in a cartel. See “It’s Time for an Antitrust Whistleblower Statute” in Connolly’s blog Cartel Capers, http://cartelcapers.com/blog/time-antitrust-whistleblower-statute-part/. The financial reward would help the whistleblower defray the not insubstantial legal costs of securing immunity and cooperating with the government. The suggestion is provocative and controversial and there is no indication that legislators are considering it, but it is an idea that is now in the public sphere.




Endnotes

1. Hawaii v Standard Oil Co., 405 U.S. 251, 262 (1972).

2. See Brady v Maryland, 373 U.S. 83 (1963); Giglio v United States, 405 U.S. 150 (1972).

3. Jencks Act, 18 U.S.C. §3500.

4. Monsanto v Spray-Rite Service Corp., 465 U.S. 752 (1984).

5. Standard Oil Co. of New Jersey v United States, 221 U.S. 1 (1911).

6. The government’s fiscal year ends on September 30.

7. Further details about DOJ’s leniency programme may be found at www.justice.gov/ atr/leniency-program.

8. https://www.justice.gov/atr/file/889021/download.

9. https://www.justice.gov/atr/speech/us-model-negotiated-plea-agreements-good-deal-benefits-all.

10. “Prosecuting Antitrust Crimes,” remarks of Assistant Attorney General Bill Baer at the Georgetown University Law Center Global Antitrust Enforcement Symposium, reprinted at https://www.justice.gov/atr/file/517741/download at 8.

11. “The Measure of Success: Criminal Antitrust Enforcement During the Obama Administration,” remarks of Acting Assistant Attorney General Renata Hesse at the 26th Annual Golden State Antitrust, UCL and Privacy Law Institute, reprinted at https://www.justice.gov/opa/speech/acting-assistant-attorney-general-renata-hesse-antitrust-division-delivers-remarks-26th.

12. See Nina Marino and Reed Grantham, “Wanted by Interpol,” ABA Criminal Justice, vol. 30, No. 3, reprinted at https://www.americanbar.org/content/dam/aba/publications /criminal_justice_magazine/2015_cjfall15_ marino.authcheckdam.pdf.






Jeffrey T. Green Tel: +1 202 736 8291 / Email: [email protected] Jeffrey T. Green is a partner in Sidley’s Washington, D.C. office and firmwide chair of Sidley’s Pro Bono Committee. He focuses on criminal defence and contested litigation matters, primarily in the fields of financial fraud and corruption, antitrust law and intellectual property issues. Jeffrey’s practice emphasises counselling and zealous representation of clients in difficult situations. He has dedicated his career to achieving success for private clients. He has extensive trial work experience, including first-chair criminal trial practice. He has supervised and led numerous grand jury and internal investigations, successfully challenged a wide variety of agency actions, including suspension and debarment decisions, and defended his clients in trials, arbitration proceedings and adversary proceedings. Jeffrey also represents clients in appellate matters.

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