THE EU COMMISSION POWERS IN COMPETITION LAW

This article sets out the procedures for prosecuting and sanctioning violations of the EU competition law in respect to restrictive agreements (vertical and horizontal), abuse of dominant position and merger control. 

i.           Commission powers

The Commission has three main categories of powers under EU Regulation No 1/2003.

a.      Commission decisions

First of all, lets sets out a series of decisions which the Commission is entitled to adopt in this context.

Pursuant to Article 7 of Regulation No 1/2003, the Commission, acting on complaint or on its own initiative, may find that there is an infringement of Article 101  (restrictive agreements which may effect the prevention, restriction and distortion of competition) or of Article 102 (abuse of dominant position) TFEU and adopt a decision requiring the undertakings and associations of undertakings concerned to bring such infringement to an end (infringement decision).

The Commission may impose behavioral or structural remedies which are proportionate to the infringement committed and necessary to bring the infringement effectively to an end. Usually, in the case of an infringement of Article 101 TFEU, the Commission orders the undertakings concerned to stop implementing the anti-competitive agreement(s) or concerted practices.

Behavioural remedies may also justify a positive order in the context of an abuse of dominance, as was the case in Cases 6/73 and 7/73, Commercial Solvents Co v. Commission [1974] ECR 223.

Article 7(1) further states that structural remedies – i.e. changes in the structure of an undertaking – can be imposed only where there is no equally effective behavioural remedy or where any equally effective behavioural remedy would be more burdensome for the undertaking concerned than the structural remedy. 

Recital 12 in the Preamble to Regulation No 1/2003 makes it clear that changes to the structure of an undertaking as it existed before the infringement was committed would only be proportionate where there is a substantial risk of a lasting or repeated infringement that derives from the very structure of the undertaking. 

Although the Commission has not yet imposed any structural remedy under Article 7 of Regulation No 1/2003, it has offered on several occasions structural commitments on the basis of Article 9, which were accepted by the undertakings concerned.

Where the Commission has a specific interest in doing so (for instance in order to facilitate private enforcement through actions for damages or to clarify an important point of law), it may find that an infringement has been committed in the past. 

Next, in cases of urgency due to the risk of serious and irreparable damage to competition, Article 8(1) of Regulation No 1/2003 provides that the Commission, acting on its own initiative may order, on the basis of a prima facie finding of infringement, interim measures (interim measures decision).

These measures apply for a specified period of time and may be renewed in so far as this is necessary and appropriate. The Commission has however on a number of occasions informally negotiated interim settlements with undertakings.

The undertakings concerned may offer commitments in order to meet concerns expressed to them by the Commission in its preliminary assessment (commitments decision). 

In such case, Article 9 of Regulation No 1/2003 enables the Commission to adopt a decision making those commitments binding on those undertakings and concluding that there are no longer grounds for action. Such a decision may be (but must not be) adopted for a specified period. It appears from the judgment in Commission v Alrosa  that this mechanism, which was introduced by Regulation No 1/2003, is intended to ensure that competition rules laid down in the Treaties are applied effectively through the finding of rapid solutions to competition problems identified by the Commission, instead of proceeding by making a formal finding of an infringement. The possibility to require legally binding commitments ‘is based on considerations of procedural economy, and enables undertakings to participate fully in the procedure, by putting forward the solutions which appear to them to be the most appropriate and capable of addressing the Commissions’ concerns’.

The following illustrates this: Carmakers (DaimlerChrysler, Opel, Toyota and Fiat) and Cisac.

Pursuant to Article 9(2) of Regulation No 1/2003, the Commission may reopen the proceedings, upon request or on its own initiative, where 
(1) there has been a material change in any of the facts on which the decision was based (rebus sic stantibus), 
(2) where the undertakings concerned act contrary to their commitments (infringement), 
or (3) where the decision was based on incomplete, incorrect or misleading information provided by the parties (mala fide). 
Pursuant to Article 23(2)(c) of Regulation No 1/2003, a fine can be imposed on an undertaking which fails to comply with a commitment. This was the case, for example, in Commission Decision of 6 March 2013 addressed to Microsoft Corporation relating to a proceeding on the imposition of a fine pursuant to Article 23(2)(c) of Regulation No 1/2003 for failure to comply with a commitment made binding by a Commission decision pursuant to Article 9 of Regulation No 1/2003. Likewise, the Commission may impose on such undertaking periodic penalty payments up to 5 % of their average daily turnover in the preceding business year in order to compel them to comply with a commitment made binding  under Article 9. Such fines can be imposed under the same conditions as in the case of an infringement of Articles 101 or 102 TFEU.

The scope of Article 9 is however limited. It is apparent from recital 13 in the Preamble to Regulation No 1/2003 that commitment decisions ‘are not appropriate in cases where the Commission intends to impose a fine’. Consequently, such decisions cannot in principle be adopted in the context of large-scale cartels.

In Commission v Alrosa, the Court made it clear that an infringement decision under Article 7 and a commitment decision under Article 9 pursue different objectives, one of them aiming to put an end to the infringement that has been found to exist and the other aiming to address the Commission’s concerns following its preliminary assessment.  As a result, there is no reason why the measure which could possibly be imposed in the context of Article 7 of Regulation No 1/2003 should have to serve as a reference for the purpose of assessing the extent of the commitments accepted under Article 9 of that regulation, or why anything going beyond that measure should automatically be regarded as disproportionate.

The Commission is not required to address the undertaking(s) concerned a statement of objections before adopting a commitment decision. A preliminary assessment (which is usually shorter than a formal statement of objections) may suffice. The undertaking(s) concerned must be granted a certain period of time to react to the Commission’s concerns and offer commitments.

Since the adoption of a commitment decision does not entail formal recognition of an infringement and is specifically intended to avoid further harm to be caused to competition, Regulation No 1/2003 grants third parties procedural rights. Pursuant to Article 27(4), the Commission publishes a concise summary of the case and the main content of the commitments or of the proposed course of action before adopting a commitment decision. Interested parties may then submit their observations within a time limit which is fixed by the Commission and which may not be less than one month.

These observations may sometimes reveal a weakness in the commitments and give rise to a renegotiation with the undertaking(s) concerned. See the decision in Cisac.

Lastly, Article 10 of regulation No 1/2003 provides that where the Community public interest relating to the application of Articles 101 and 102 TFEU so requires, the Commission, acting on its own initiative, may declare that Article 101 TFEU is not applicable to an agreement, a decision by an association of undertakings or a concerted practice, either because the conditions of Article 101(1) TFEU are not fulfilled, or because the conditions of Article 101(3) are satisfied (inapplicability decision). Such decisions are conceivable in exceptional cases only and cannot be requested by the undertakings concerned. Recital 14 in the Preamble to Regulation No 1/2003 explains that such decisions may be appropriate in the context of new types of agreements or practices that have not been settled in the existing case-law and administrative practice.

b.      Powers of investigation

Chapter V of Regulation No 1/2003 provides the Commission with various powers of investigation, which aim to identify and further prosecute violations of Articles 101 and 102 TFEU.

                                                                                                           i.      Sectoral investigations

First of all, Article 17 enables the Commission to conduct sectoral investigations or investigations into a particular type of agreements across various sectors ‘[w]here the trend of trade between Member States, the rigidity of prices or other circumstances suggest that competition may be restricted or distorted within the common market. The Commission may in this context request the undertakings or associations of undertakings concerned to communicate to it all agreements, decisions and concerted practices, and conduct inspections in business premises.

One of the most recent inquiries conducted by the Commission on the basis of this provision concerns the pharmaceutical sector.

                                                                                                         ii.      Requests for information

One of the most important provisions of Regulation No 1/2003 is its Article 18, which enables the Commission, ‘in order to carry out the duties assigned to it by [that] Regulation […], by simple request or by decision, [to] require undertakings and associations of undertakings to provide all necessary information’. When the Commission makes a simple request, it must indicate the legal basis and the purpose of that request, specify what information is required and fix the time-limit within which the information is to be provided. The Commission must also inform the undertaking or person concerned of the penalties provided in Article 23 for supplying incorrect or misleading information. While there is no obligation to answer a simple request of information, a person or an undertaking is required to provide the Commission with the information which it has requested by decision.

Pursuant to Article 18(4) of Regulation No 1/2003, the owners of the undertakings or their representatives and, in the case of legal persons, companies or firms, or associations having non legal personality, the persons authorized to represent them by law or by their constitution must supply the information requested on behalf of the undertaking or the association of undertakings concerned. Likewise, lawyers duly authorized to act may supply the information on behalf of their clients.

The Commission is of course under a duty to respect fundamental rights when investigating and prosecuting violations of EU competition law. Recital 23 in the Preamble to Regulation No 1/2003 reminds Court’s judgments in Orkem v Commission  and Solvay & Cie v Commission  when it states that when complying with a Commission request for information, the undertakings concerned cannot be forced to admit that they have committed an infringement, but they are in any event obliged to answer factual questions and to provide documents, even if this information may be used to establish against them or against another undertaking the existence of an infringement. In other terms, as the General Court put it in Mannesmann-Röhrenwerke AG v Commission,  an undertaking in receipt of a request for information can be recognised as having a right to silence ‘only to the extent that it would be compelled to provide answers which might involve an admission on its part of the existence of an infringement which it is incumbent upon the Commission to prove’. 

Although Regulation No 1/2003 does not deal specifically with this issue, the case-law makes it clear that certain documents benefit from a special protection related to professional privilege. The leading case in this respect is AM & S Europe ltd v Commission. The Court observed first in that judgment that the corresponding provisions of Regulation No 17 aimed in particular to empower the Commission to require the production of business records, that is to say, documents concerning the market activities of the undertakings, and the written communications between lawyer and client fell, in so far as they have a bearing on such activities, within the categories of documents which the Commission was entitled to request on this basis. However, any person must be able, without constraint, to consult a lawyer whose profession entails the giving of independent legal advice to all those in need of it. Based on the legal traditions common to the Member States, the Court held that EU law protects the confidentiality of written communications between lawyer and client subject to two conditions: first, such communications must be made for the purposes and in the interests of the client’s rights of defence and, second, they emanate from independent lawyers, that is to say, lawyers who are not bound to the client by a relationship of employment. In Akzo Nobel Chemicals Ltd v Commission, the Court confirmed that the latter condition applies even in situations where the in-house lawyer remains subject to the legal professional rules of the bar.

                                                                                                       iii.      Power to take statements

Article 19 of Regulation No 1/2003 empowers the Commission to interview any natural or legal person who consents to be interviewed for the purpose of collecting information relating to the subject-matter of an investigation. The interview may be conducted by any means, including by telephone or electronic means. The Commission may record the statements made by the persons interviewed in any form, a copy of the recording being made available to the person concerned for approval. That power often reveals very important to understand fully how an infringement has occurred and how it has altered the competitive environment. For example, leniency applicants are often required to make oral statements to the Commission commenting on documents seized in the course of inspections. There are however no sanctions so far for submitting incorrect or misleading information during an interview (other than losing entitlement to a reduction of the fine or even immunity under the leniency program). 

                                                                                                       iv.      The Commission’s powers of inspection

As cartel participants are in most cases aware of the illegal nature of their activities, it may be necessary to conduct surprise inspections at business premises (Article 20 of Regulation No 1/2003) and sometimes also in other premises (Article 21).

Pursuant to Article 20, the Commission, in order to carry out the duties assigned to it by Regulation No 1/2003, may conduct all necessary inspections in the undertakings’ premises, including:

To enter any premises, land and means of transport of undertakings and associations of undertakings;

To examine the books and other records related to the business, irrespective of the medium on which they are stored;

To take or obtain in any form copies or extracts from such books or records;

To seal any business premises and books or records for the period and to the extent necessary for the inspection;

To ask any representative or member of staff of the undertaking or association of undertakings for explanations on facts or documents relating to the subject-matter and purpose of the inspection and to record the answers.

 the consequences which may result from the breach of a seal: E.ON Energie v Commission.

Pursuant to Article 4 of Regulation No 773/2004, the explanations provided to officials or any other accompanying persons authorized by the Commission may be recorded in any form. A copy of the recording is made available to the undertaking or association of undertakings concerned after the inspection.

The rules concerning the protection against self-incrimination and legal privilege examined above are applicable mutatis mutandis to inspections conducted on the basis of Article 20 of Regulation No 1/2003.

Whenever the Commission conducts a voluntary investigation, Article 20(3) of Regulation No 1/2003 provides that the officials and other accompanying persons authorized by the Commission to conduct an inspection shall exercise their power upon production of a written authorization specifying the subject matter and purpose of the inspection and the penalties provided for in Article 23 in case the production of the required books or other records related to the business is incomplete or where the answers to questions asked by the Commission are incomplete or misleading. 

In SGL Carbon v Commission, inter alia, the Court decided that, despite its judgment in Orkem v Commission, an undertaking which is being investigated is under an obligation to cooperate actively, which implies that it must make available to the Commission all information relating to the subject-matter of the investigation.

Article 20(4) of Regulation No 1/2003 sets out the procedure for mandatory investigations, that is to say situations in which the Commission adopts a decision requiring an undertaking to submit to an inspection. Such decision must specify the subject matter and purpose of the inspection, appoint the date on which it is to begin and indicate the penalties provided for in Articles 23 and 24 and the right to have the decision reviewed by the Court of Justice. The Commission is also under a duty to consult the competition authority of the Member State in whose territory the inspection is to be conducted.

As illustrated by Case T-402/13, Orange v. Commission [2014], EU Courts may verify that a decision to conduct a mandatory investigation (in this case, concerning a possible abuse of a dominant position) is proportionate and not arbitrary.

Incorrect conduct during investigations on the part of the undertaking concerned may lead up to heavy fines. For instance, in its decision of 28 March 2012 relating to a proceeding under Article 23 of Regulation No 1/2003 (refusal to submit to an inspection), the Commission imposed on two Czech companies a fine of 2,5 million euros for refusing to submit to the inspection carried out at their premises on 24-26 November 2009 pursuant to Article 20(4) of Regulation No 1/2003 by negligently allowing access to a blocked e-mail account and intentionally diverting e-mails to a server. Procedural fines may not however be the only way to sanction such misconduct. The Commission has also decided on a number of occasions to take it into account as an aggravating factor when determining the level of fines for the substantive infringement of EU competition rules. For instance, in its decision of 20 November 2007 relating to a proceeding under Article 81 of the EC treaty and Article 53 of the EEA Agreement, the Commission increased the fine imposed on Sony by 30 % in order to take account of two incidents which had occurred during the inspection, one involving the destruction of documents and the other a refusal to reply to questions.

As it appears from recital 26 in the Preamble to Regulation No 1/2003, experience has shown that there are cases where business records are kept in the homes of directors or other people working for an undertaking. Therefore, in order to safeguard the effectiveness of inspections, officials and other persons authorized by the Commission should be empowered to enter any premises where business records may be kept, including private homes. Such inspections are nevertheless subject to a distinct regime.

First, inspection of other premises is limited to cases where there is a reasonable suspicion that books or other records related to the business and to the subject-matter of the inspection, which may be relevant to prove a serious violation of Article 101 of 102 TFEU, are being kept outside the business premises. A Commission decision is necessary to conduct such inspection. The decision must specify the subject matter and purpose of the inspection, appoint the date on which it is to begin and indicate the right to have the decision reviewed by the Court of Justice. It must also state the reasons that have led the Commission to conclude that there was a suspicion of business records being kept outside the business premises.

Furthermore, Regulation No 1/2003 balances effectiveness in prosecuting infringements of competition rules laid down in Articles 101 and 102 TFEU with the special need to protect the right to private and family life by requiring prior authorization from the national judicial authority of the Member State concerned. Pursuant to Article 21(3), the national judicial authority is to control that the Commission decision is authentic and that the coercive measures envisaged are neither arbitrary nor excessive having regard in particular to the seriousness of the suspected infringement, to the importance of the evidence sought, to the involvement of the undertaking concerned and to the reasonable likelihood that business books and records relating to the subject matter of the inspection are kept in the premises for which the authorization is requested. The national judicial authority may not however call into question the necessity for the inspection nor demand that it be provided with information in the Commission’s file, the legality of the Commission’s decision being subject to review only by the Court of Justice. The first inspection of private premises took place in the marine hoses cartel investigation.

c.       The power to impose penalties

Regulation No 1/2003 entitles the Commission to adopt two categories of penalties as against undertakings when the latter are found to have breached Article 101 or 102 TFEU. While Article 23 of Regulation No 1/2003 deals with fines, Article 24 concerns periodic penalty payments.  It is also important to discuss in that context the Commission Notice on Immunity from fines and reduction of fines in cartel cases. 

1.      Introduction

Article 23(1) of Regulation No 1/2003 provides first for the possibility to impose fines on undertakings for procedural infringements of that regulation.  Such fines may not exceed 1 % of the total turnover of the undertakings or associations of undertakings concerned in the preceding business year.

Article 23(2) of Regulation No 1/2003 for its part entitles the Commission to impose fines on undertakings or associations of undertakings where, either intentionally or negligently, they infringe Article 101 TFEU or Article 102 TFEU, they contravene a decision ordering interim measures under Article 8 or they fail to comply with a commitment made binding by a decision pursuant to Article 9.

For each infringement, the fine cannot exceed 10% of the total turnover of the undertaking and association of undertakings participating in it, during the preceding business year. The practical consequences of that upper limit have been significantly influenced by two parallel phenomena, which are examined below. On the one hand, the Commission has defined the concept ‘undertaking’ very broadly in its recent practice, including in many cases parent companies of cartel participants. On the other hand, the 2006 Guidelines on the method of setting fines imposed pursuant to Article 23(2)(a) of Regulation No 1/2003 have resulted in a general increase of those fines.

2.Calculation of the basic amount of the fine

In fixing the amount of the fine, the Commission must have regard to two parameters, namely the gravity and the duration of the infringement (Art. 23(3) of Regulation No 1/2003).

The Commission enjoys wide margin of discretion when setting fine on that basis.

However, the Commission Guidelines on the method of setting fines imposed pursuant to Article 23(2)(a) of Regulation No 1/2003 were published both with a view to ensure transparency and impartiality when setting fines and to set the level of fines sufficiently high so that they have a deterrent effect.

According to settled case-law, those guidelines may not create obligations for third parties but cannot be departed from by the Commission without justification. The recent car-glass cartel offers an illustration: point 13 of the 2006 Guidelines provides that, in determining the basic amount of the fine, the Commission takes into account the sales to which the infringement directly or indirectly relates and which were made by the undertaking concerned ‘during the last full business year of its participation in the infringement’; considering however that the car-glass cartel had lasted for more than five years and that its impact on the market varied considerably over that period, the Commission opted for a more calibrated approach by calculating the basic amount of the fine on the basis of the average sales during the whole of that period.

These Guidelines, which replaced the 1998 Guidelines and apply in cases in which the Commission has issued a statement of objections after 1 September 2006, have resulted in an overall increase of the level of the fines.

In a first step, the Commission calculates the basic amount of the fine. The starting point is, for each undertaking which participated in the infringement, the value of the sales of goods or services relating to the infringement in the relevant geographic area within the EEA (consistent with Wood-Pulp), made during the last year of their participation in the infringement. Where the geographic scope of the infringement extends beyond the EEA, the relevant sales of the undertakings within the EEA may not properly reflect the weight of each undertaking in the infringement. In such circumstances, in order to reflect both the aggregate size of the relevant sales within the EEA and the relative weight of each undertaking in the infringement, the Commission may assess the total value of the sales of goods or services to which the infringement relates in the relevant geographic area (wider than EEA), may determine the share of the sales of each undertaking party to the infringement on that market and may apply this share to the aggregate sales within the EEA of the undertakings concerned. The result will be taken as the value of sales for the purpose of setting the basic amount of the fine.

Depending on the gravity of the infringement, the Commission then calculates a proportion of those sales, up to 30% for the most serious violations of EU competition law. The Commission takes into account, in particular, the nature of the infringement, the combined market-share of all the undertakings concerned and, therefore, the likely harmful effects on the market, the geographic scope of the infringement and whether or not the infringement (especially a cartel) has been implemented.

Pursuant to point 23 of the 2006 Guidelines, horizontal price-fixing, market-sharing and output-limitation agreements, which are usually secret, are, by their very nature, among the most harmful restrictions of competition, for which the proportion of the value of sales taken into account will generally be set at the higher end of the scale (that is to say between 16 and 30%).

Under the 2006 Guidelines, the duration of an infringement has a much more important impact on the fine than under the lump-sum system of fining previously applicable: pursuant to point 24 of these guidelines, ‘[i]n order to take fully into account the duration of the participation of each undertaking in the infringement, the amount determined on the basis of the value of the sales [see above] will be multiplied by the number of years of participation in the infringement […]’. The underlying rationale of this new rule is that an infringement of EU competition rules is more likely to have harmful (distortive) effects on the market if it lasts for a long period.

Irrespective of the duration of the participation, the Commission includes in that basic amount a sum of between 15% and 25% of the value of sales. That ‘entry-fee’ is intended to deter undertakings from even entering into horizontal price-fixing, market-sharing and output-limitation agreements. That entry-fee illustrates the general deterrence pursued by Regulation No 1/2003 and the 2006 Guidelines; by fixing fines at a sufficiently high level, undertakings in general are deterred from acting in violation with EU competition rules.

3.Adaptation of the basic amount to the specific infringement of each of the undertakings concerned

Specific deterrence (setting fines at a sufficiently high level with a view to avoiding that the penalised undertakings again infringe EU competition rules in the future) is pursued in particular through adapting the basic amount of the fine on the basis of aggravating circumstances. These aggravating circumstances include:

where an undertaking continues or repeats the same or a similar infringement after the Commission or a national competition authority has made a finding that the undertaking infringed Articles 101 or 102 TFEU (recidivism), the basic amount can be increased up to 100% for each such infringement established; the applicable test is whether an undertaking has the tendency to infringe EU competition rules and does not draw appropriate conclusions from a finding of infringement on the part of the Commission.

Question: is there a limitation period for considering past infringements? See Case C-3/06 P Groupe Danone v Commission [2007] ECR I-1331.

Important condition: the same undertaking must be involved (directly or indirectly) in the various infringements: analysis of Cases T-39/07 ENI v Commission [2011], and T-56/09, Saint-Gobain and Others v Commission [2014].

Refusal to cooperate with or obstruction of the Commission in carrying out its investigations;

Role of leader in, or investigator of, the infringement: the Commission will also pay particular attention to any steps taken to coerce other undertakings to participate in the infringement and/or any retaliatory measures taken against other undertakings with a view to enforcing the practices constituting the infringement.

The Commission recognizes however that some circumstances may on the contrary result in a decrease of the basic amount. Point 29 of the 2006 Guidelines provides a series of examples of such mitigating circumstances:

the undertaking concerned provides evidence that it terminated the infringement as soon as the Commission intervene (although that is no mitigating circumstance in the case of secret agreements or practices);

the undertaking provides evidence that the infringement has been committed as a resut of negligence (unlike in relation to criminal indictments, liability for infringements of EU competition rules does not presuppose the finding of a ‘subjective’ element) ;

the undertaking provides evidence that its involvement in the infringement is substantially limited and thus demonstrates that, during the period in which it was party to the offending agreement, it actually avoided applying it by adopting competitive conduct in the market: the mere fact that an undertaking participated in an infringement for a shorter duration than others will not be regarded as a mitigating circumstance since this will already be reflected in the basic amount; it should be noted that such mitigating circumstance relates to the conduct of the undertaking concerned in the context of the infringement itself and should therefore be distinguished from (partial) immunity which may result from an undertaking from its cooperation with the Commission in finding and prosecuting an infringement of EU competition rules;

where the undertaking concerned has effectively cooperated with the Commission outside the scope of the Leniency Notice and beyond its legal obligation to do so; in practice, that mitigating circumstance does not apply in secret cartel cases because the Leniency Notice covers all cases in which an undertaking discloses its participation in such a cartel;

the anti-competitive conduct of the undertaking has been authorized or encouraged by public authorities or by legislation.

Conversely, the Commission has not committed itself to reduce the amount of the fine if the undertaking concerned has compensated the damages suffered by the victims of the anti competitive behavior.

Pursuant to point 35 of the 2006 Guidelines, the Commission may, in exceptional circumstances and upon request, take account of the undertaking’s inability to pay in a specific social and economic context. It will not base any reduction granted for this reason in the fine on the mere finding of an adverse or loss-making situation. A reduction could be granted solely on the basis of objective evidence that imposition of the fine as provided for in the 2006 Guidelines would irretrievably jeopardize the economic viability of the undertaking concerned and cause its assets to lose all their value. Both the Commission and Union courts interpret that exception in a restrictive way. The General Court has made clear on several occasions that reducing the fine in all cases where the undertaking concerned is liable to face economic difficulties would amount to granting an undue advantage to those undertakings which are the least adapted to the market and hence risk jeopardizing the objectives pursued by EU competition policy. This exception is thus limited in practice to situations where there there is a sufficiently serious risk of winding-up of the undertaking concerned if the latter had to bear the whole amount of the fine.

The Commission must respect the principle ne bis in idem when penalizing infringements of EU competition rules.

Case C-308/04 P, SGL Carbon AG v. Commission [2006] ECR I-5977, esp. paragraphs 26 to 39. 

4.    The Commission’s Leniency Notice in cartel cases

Another important document in relation to the calculation of fines is the Commission Notice on Immunity from fines and reduction of fines in cartel cases. As the Commission observes, by their very nature, secret cartels are often difficult to detect and investigate without the cooperation of undertakings or individuals involved in them. Therefore, the Commission considers that it is in the Union’s interest to reward undertakings involved in this type of illegal practice that are willing to put an end to their participation and cooperate in the Commission’s investigation, independently of the rest of the undertakings involved in the cartel. The interests of consumers and citizens in ensuring that secret cartels are detected and punished outweigh the interest in fining those undertakings that enable the Commission to detect and prohibit such practices.

a. Principles

In practice, the Commission grants total immunity to the whistleblower, and grants reductions to undertakings that submit evidence enabling the Commission to proceed more effectively with the investigation of a fine and fulfill certain conditions. In that latter case (which may arise if the undertaking concerned is not the first to blow the whistle), evidence provided to the Commission must ‘represent significant added value’.

The Commission grants immunity from any fine which would otherwise have been imposed to an undertaking disclosing its participation in an alleged cartel affecting the Union if that undertaking is the first to submit information and evidence which in the Commission’s view will enable it to carry out a targeted inspection in connection with the alleged cartel, or find an infringement of Article 101 TFEU in connection with the alleged cartel. Although it does not suffice avoiding infringements, this commitment by the Commission indisputably creates an incentive for cartel participants to denounce such infringements in the first place. 

Granting immunity is of course a far-reaching measure to adopt vis-à-vis an undertaking which (often willfully) infringed EU cartel rules. It is therefore not surprising that the conditions for obtaining it (besides being the first to denounce a cartel and cooperate with the Commission) are particularly strict. The undertaking in question must provide the Commission with a corporate statement that includes in particular a detailed description of the alleged cartel arrangement (aims, activities and functioning;

-product(s) or service(s) concerned. Geographic scope;
- duration; estimated market volumes affected by the alleged cartel;
-pieces of evidence), the name and address of the legal entity submitting the immunity application as well as the names and addresses of all the other undertakings that participated in the alleged cartel, the names, positions, office locations and, where necessary, home addresses of all individuals who, to the applicant’s knowledge, are or have been involved in the alleged cartel, including those individuals which have been involved on the applicant’s behalf, and information on which other competition authorities, inside or outside the EU, have been approached or are intended to be approached in relation to the alleged cartel.

 The undertaking must also provide other evidence relating to the alleged cartel in possession of the applicant or available to it at the time of the submission, including in particular any evidence contemporaneous to the infringement.

The Commission does not grant immunity if, at the time of the submission, it had already sufficient evidence to adopt a decision to carry out an inspection in connection with the alleged cartel or had already carried out such an inspection.

The undertaking’s behavior in the course of the proceedings is also decisive. It must cooperate genuinely, fully, on a continuous basis and expeditiously from the time it submits its application throughout the Commission’s administrative procedure, including by providing the Commission with all evidence relating to the cartel that comes into its possession or is available to it, by remaining at the Commission’s disposal to answer promptly to any request that may contribute to the establishment of the facts, by making current (and, if possible, former) employees and directors available for interviews with the Commission, not destroying, falsifying or concealing relevant information or evidence relating to the alleged cartel, or by not disclosing the fact or any of the content of its application before the Commission has issued a statement of objections in the case, unless otherwise agreed.

b. Procedural rules

Timing is very important in the context of leniency proceedings. In principle, only the first undertaking providing critical information on a cartel is entitled to benefit from the Leniency Notice. The Commission put in place a detailed procedure for lodging a request for leniency, in order both to ensure equal treatment between undertakings and reinforce the Leniency Notice’s efficiency.

The procedure differs depending on whether an undertaking applies for immunity or reduction of a fine.

An undertaking wishing to submit an application for immunity must contact the Commission’s Directorate General for Competition. In order to secure its (first) place in the queue (and considering the fact that gathering all information requested for benefiting from immunity may take some time), the undertaking concerned may initially apply for a marker before submitting a formal application for immunity. To be eligible for that marker, the applicant must provide the Commission with information concerning its name and address, the parties to the alleged cartel, the affected product(s) and territory(-ies), the estimated duration of the alleged cartel and the nature of the alleged cartel conduct. The applicant should also inform the Commission of other past or possible future leniency applications to other authorities in relation to the alleged cartel and justify its application for a marker. If those conditions are fulfilled, the Commission grants the marker and determines the period within which the applicant has to submit the information and evidence required to qualify for immunity. If the information and evidence provided meet the required threshold, it will be deemed to have been submitted on the date the marker was granted.

If requested (and again considering the importance of timing), the Directorate General will provide the undertaking concerned with an acknowledgment of receipt of the application for immunity, confirming the date and, where appropriate, time of the application. Whenever it has received all the information and evidence required, the Commission will grant the undertaking conditional immunity from fines in writing. If on the contrary the undertaking concerned fails to fulfill the conditions, the Commission will inform it in writing. The undertaking may in that case either withdraw the evidence disclosed or request the Commission to grant a reduction of fine on that basis.

The Commission considers only one application for immunity at a give time, irrespective of whether the immunity application is presented formally or by requesting a marker.

The ‘marker’ system is not available in the context of an application for reduction of a fine. If requested, the Directorate General provides the undertaking concerned with a receipt confirming the date and, where appropriate time of the submission. The Commission decides first on applications for immunity before it decides on any application for reduction of a fine. The Commission informs the applicant in writing both if it intends to grant the reduction and if it considers provisionally that the conditions for granting a reduction are not satisfied. The Commission may reject any application for a reduction of a fine if the application is submitted after the statement of objections has been issued. The Commission takes a final position on each of the applications for reduction of a fine in the decision penalizing an infringement of Article 101 TFEU.

According to the Leniency Notice, the undertakings applying for immunity or reduction of a fine may submit declarations to the Commission in writing and, unless the applicant has already disclosed the content of the corporate statement to third parties, orally. The latter possibility contributes in an essential way to the Leniency Notice’s efficiency: an undertaking might be discouraged from submitting ‘confessions’ in writing, which risk being utilized by competition authorities in third-countries (especially the United States). Oral corporate statements are recorded and transcribed at the Commission’s premises but do not formally constitute a document emanating from the undertaking concerned. Such statements cannot thus in principle serve as direct evidence of an infringement of competition rules before competition authorities of a third country.

5.      Periodic penalty payments

The Commission may also decide to impose periodic penalty payments on undertakings or associations of undertakings in order for example to put an end to an infringement of Article 101 or 102 TFEU or in order to comply with a decision ordering interim measures. These payments may not exceed 5% of the average daily turnover in the preceding business year per day and calculated from the date appointed by the decision. For example, in 2006, the Commission decided to that Microsoft had not complied with its 2004 decision imposing on that undertaking an obligation to supply full interoperability information and imposed a periodic penalty payment of EUR 1.5 million per day as from 16 December 2005 until 20 June 2006.

ii.         Right to be heard and access to information

As earlier stated, the Commission is under a duty to conduct proceedings in full compliance with fundamental rights, including the rights of the defense. Both Regulation 1/2003 and Implementing Regulation 773/2004 reflect that requirement and provide detailed rules ensuring (subject to judicial review) that the undertakings concerned have been duly heard in their arguments before the Commission may adopt final decisions on grounds, in particular, of Articles 23 and 24 of Regulation 1/2003.

Pursuant to Article 27(1) of Regulation 1/2003, the Commission shall base its decisions only on objections on which the parties have been able to comment and the complainants are associated closely with the proceedings. At the end of the preliminary investigation, the Commission informs the parties concerned in writing of the objections raised against them in a document entitled the ‘statement of objections’. The Commission sets a time-limit within which the parties may inform it on writing of their views. They set out in these answers all elements which are relevant to their defence. Answers communicated by the Commission after the time-limit for submitting them has expired may not be taken into consideration. Upon request of the parties, the Commission organizes an oral hearing.

Judgment in Joined Cases C-322/07 P, C-327/07 P and C-338/07 P, Papierfabrik August Koehler and Others v. Commission [2009]; in what sense does this judgment illustrates the importance of the statement of objections in the competition proceedings (parallelism with the discussion on the concept of ‘undertaking’ in cartel proceedings and the possibility to hold an undertaking liable for the anticompetitive conduct of its subsidiaries under certain conditions).

The parties concerned are entitled to access the Commission’s file with a view to prepare their defence. Access is granted after the statement of objections has been notified. However, the interested parties have no access to business secrets, other confidential information, internal documents of the Commission or of the competition authorities of the Member States, as well as correspondence between the Commission and national competition authorities or between the latter.
 The Notice on the rules for access to the Commission’s file (the ‘Notice on access to the file’)defines business secrets as information about an undertaking’s business activity the disclosure of which could result in a serious harm to the same undertaking, such as technical and/or financial information relating to an undertaking’s know-how, methods of assessing costs, production secrets and processes, supply sources, quantities produced and sold, market shares, customer and distributor lists, marketing plans, cost and price structure and sales strategy.

Implementing Regulation 773/2004 seeks to strike balance between the right of the parties involved to prepare their defence and the rights of other parties to the proceedings not to disclose their business secrets. According to Article 16(2), any person submitting documents or information to the Commission is invited to clearly identify any material which it considers to be confidential, giving reasons, to provide a separate non-confidential version. Without prejudice to that possibility, the Commission may require undertakings and associations of undertakings which produce documents or statements to identify documents or parts of documents which they consider to contain business secrets or other confidential information. The Commission may do the same as regards statements of objections.

Only the non-confidential version of the documents/statements concerned will be made available to the other parties. Both in the context of cartel or antitrust proceedings, however, the qualification of a piece of information as confidential is not a bar to its disclosure if such information is necessary to prove an alleged infringement or could be necessary to exonerate a party. This calls for an assessment of all relevant elements, including for instance the relevance of the information in determining whether or not an infringement has been committed, and its probative value, whether the information is indispensable; the degree of sensitivity involved, and the preliminary view of the seriousness of the alleged infringement.

If necessary, the Commission may also decide to hear other natural or legal persons or grant such persons the right to be heard on their request, provided they show a sufficient interest.

Information collected in the course of the investigation may be used only for the purpose for which it was acquired, that is to say penalizing infringements of Articles 101 and 102 TFEU. Moreover, the Commission and the competition authorities of the Member States, their officials, servants and other persons working under the supervision of these authorities as well as officials and civil servants of other authorities of the Member States cannot disclose information acquired or exchanged by them pursuant to Regulation 1/2003 and of the kind covered by the obligation of professional secrecy.

The Notice on access to the file explains that access is granted to all documents which have been obtained, produced and/or assembled by the Commission Directorate General for Competition, during the investigation, with the exception of internal documents, business secrets of other undertakings, or other confidential information. The latter category includes information other than business secrets, which may be considered as confidential, insofar as its disclosure would significantly harm a person or undertaking. This may apply to information provided by third parties about undertakings which are able to place very considerable economic or commercial pressure on their competitors or on their trading partners, customers or suppliers.

Case T-65/89, BPB Industries and British Gypsum [1995] ECR II-389 concerning the possibility to refuse an undertaking subject to an investigation for abuse of a dominant position access to letters received from its customers by the Commission.

As a matter of principle, access is granted upon request and, normally, on a single occasion, following the notification of the statement of objections to the parties. This is in order to ensure the principle of equality of arms and to protect the rights of the defence. As a general rule, no access is granted to other parties’ replies to the Commission’s objections, unless those replies constitute new evidence pertaining to the allegations concerning a party to the infringement proceedings.

The Notice on access to the file contains moreover rules applicable to complainants. It is settled case-law that complainants cannot claim a right of access to the file as established for undertakings that are the subject of infringement proceedings. However, a complainant who, pursuant to Article 7(1) of Implementing regulation 773/2004, has been informed of the Commission’s intention to reject his complaint, may request access to the documents on which the Commission has based its provisional assessment.

There may be cases where the Directorate General for Competition either disagrees with claim for confidentiality or where, on the contrary, it refuses to grant access to part of a file which a party considers important for preparing its defence. Such disputes can be resolved by the Hearing Officer, in accordance with the terms of reference of Hearing Officers. Decisions of the Hearing Officer are themselves subject to judicial review by EU Courts.

Thus, having said about the powers of the Commission concerning the procedures for prosecuting and sanctioning violations of the EU competition law in respect to restrictive agreements (vertical and horizontal), abuse of dominant position and merger control, the next article shall focus on merger control from the point of competition law.