EC Commission Adopts Settlement Procedure for Cartels

On 30 June 2008 the EC Commission announced that it has finalised its settlement procedure for cartels which will allow it to settle cartel cases through a simplified procedure. The procedure allows the parties to have their fines reduced by 10% if, after seeing evidence in the Commission's file against them, they decide to acknowledge their involvement in the cartel and their liability for it. The aim of the settlement procedure is to simplify the administrative proceedings, helping the Commission to deal more quickly with cartel cases, thereby freeing up Commission resources to pursue other cases and increasing overall deterrence. The settlement procedure is separate from the leniency regime (where companies may whistleblow to the authorities about the existence of a cartel in return for a reduction in the level of a fine of up to 100%).

The 10% reduction in fines is at the low end of the scale and it remains to be seen whether it will be sufficient to attract companies to participate in the procedure. Although reduced involvement in procedure and shorter investigations may be an added incentive for companies, the downside to this is that it will accelerate the parties' exposure to private damages claims.

The settlement procedure

The new procedure is set out in a Commission notice which contains the details of the new procedure and guidance on its application, and in a Regulation which amends Regulation 773/2004 (on the conduct of proceedings by the Commission pursuant to Articles 81 and 82 EC Treaty) in order to reflect procedural changes in the context of a settlement. The settlement package came into force on 1 July, when it was published in the Official Journal, and can apply to any case pending before the Commission at that time or thereafter. The main features of the process are as follows:

• The Commission retains a broad margin of discretion to determine which cases may be suitable for settlement and with whom it wishes to explore the possibility of settlement. The Commission can also decide to discontinue settlement discussions if the parties to the proceedings distort or destroy evidence relevant to the establishment of the infringement or to the calculation of the fine. The Commission may only engage in settlement discussions upon the written request of the parties concerned.
   
• Settlement discussions can only be entered into after proceedings have been initiated but before a statement of objections has been issued.
   
• Where some of the parties to the proceedings request settlement discussions, the Commission may decide to pursue the settlement procedure by means of bilateral contacts between DG Competition and the settlement candidates.
   
• Early disclosure of information, including the evidence on the Commission file used to establish the case and potential fine, will allow the parties to be informed of the essential elements taken into consideration so far and will allow them to make an informed decision on whether or not to settle. The parties to the proceedings may not, without the Commission's consent, disclose to any other undertaking or third party the content of any settlement discussions or the documents to which they have been given access.
   
• If the party concerned accepts the Commission's case, the Commission will set a time limit of at least 15 working days for the company to submit a final settlement submission. The settlement submission must contain:
   
  • A clear and unequivocal acknowledgment of the parties' liability for the infringement as regards its object, possible implementation, the main facts, their legal implications and the duration of their participation;
     
  • An indication of the maximum amount of the fine the parties foresee being imposed by the Commission and which the parties would accept (the potential fine will have been discussed at the early disclosure of information stage set out above);
     
  • Confirmation that the parties have been sufficiently informed of the objections the Commission envisages raising against them and that they have been given sufficient opportunity to be heard;
     
  • Confirmation that the parties do not envisage requesting access to the file or an oral hearing, unless the Commission does not reflect their settlement submissions in the statement of objections and the decision;
     
  • Agreement to receive the statement of objections and final decision in a given official language of the EC.

  Settlement submissions will not be transmitted by the Commission to national courts without consent and in accordance with the provisions of the Notice on co-operation between the Commission and national courts. It is also possible to make an oral settlement submission.

• The Commission will issue a streamlined statement of objections. If it reflects the parties' settlement submissions, the parties concerned will have at least two weeks to reply to it by simply confirming this. The Commission can then proceed directly to a decision, after consultation with the Advisory Committee. The decision will reflect the parties' cooperation and the fine will be reduced by 10%. A decision taken following application of the settlement procedure is still subject to judicial review before the European courts and does not affect the courts' unlimited jurisdiction to review fines.

The OFT's settlement procedure

In the UK the OFT has also been operating a settlement procedure, but on a less formalistic and very much case by case based approach. The OFT itself describes its emerging attitude towards settlements as 'cautiously positive', recognising the resulting benefits both for consumers and for the parties, but careful to limit the procedure to the right cases. It has adopted different methods in different cases and the precedent value of the early cases is therefore very limited. The OFT also believes it is too early at this stage to issue formal guidance. Although settlements are most likely to take place in cartel cases, the OFT does not rule out settlements in other types of cases. Discounts in fines are assessed on a case by case basis, in line with the OFT's penalties guidance, and the OFT does not operate a fixed or maximum percentage discount. The OFT settlements have to date been more generous than the Commission's 10% reduction.
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© Herbert Smith LLP 2008