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© Hogan & Hartson LLP. All rights reserved.
CartelsFines, Leniency, Settlement
John PheasantNovember 28, 2007
Brussels
© Hogan & Hartson LLP. All rights reserved.
Outline
• Fining policy
• Leniency
• The proposed settlement procedure
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Total Cartel Fines Imposed
0.0
0.5
1.0
1.5
2.0
2.5
3.0
€ b
illion
2002 2003 2004 2005 2006 2007
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Fines - 2006
0
100
200
300
400
500
600
700
800
900
1000
€ millio
n
BleachingChemicals
Acrylic Glass RoadBitumen
CopperFittings
SyntheticRubber
Overall cartel fine Highest individual fine
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Fines - 2007
0
100
200
300
400
500
600
700
800
900
1000
€ millio
n
GasInsulated
Switchgear
Lifts &Escalators
Beer Fasteners Bitumen ProfessionalVideotape
Overall cartel fine Highest individual fine
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Fines
The New Fining Guidelines
1. Up to 30% of relevant turnover
2. Multiplied by each year of the infringement
3. 15 to 25% for cartel “entry fee”
4. Adjusted for aggravating and/or mitigating factors, including
5. 100% recidivist uplift (for each previous infringement)
6. Increase for deterrence
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Fines1. Relevant turnover = 100 x 20% = 20
2. Duration = 5 years x 5 = 100
3. + entry fee + 25% = 125
4. Aggravation/ mitigation
+ 0 = 125
5. Recidivism (one previous infringement)
+ 100% = 250
6. Deterrence + 0 = 250
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Fines
First case under the New Guidelines
Professional Videotape: Sony, Fuji, Maxell
Total annual sales = €115m (in 2001)
Duration = 3 years
Total fines = € 75m
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Fines
Professional Videotape
€m
115 x 20% = 23
x 3 years = 69
Aggravation Sony +30%
Leniency Fuji -40%
Maxell -20%
75
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Leniency
Immunity applicant: 100%
First leniency applicant: 30-50%
Second leniency applicant: 20-30%
Subsequent leniency applicants: up to 20%
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Settlement
• 200+ leniency applications since 2002
• Fewer than 10 cartel decisions annually
• Significant backlog (the time bomb)
• Need for an expedited administrative procedure
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Stage 1 - Commencement
Party requests
settlement discussions
Commission does not
consider case suitable at any time
Standard procedure
Commission considers
case suitable
Min. 2 weeks for other parties to declare
Bilateral procedure
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Stage 2 – Disclosure and Discussion
Disclosure by Commission of essential elements: • alleged facts• gravity• duration• attribution of liability• range of fines• evidence
Party can assert views and
decide whether to settle
Common understanding:• scope of objections• range of fines
Possible access to Commission’s file:• re any other aspect of the cartel• if procedural efficiencies not jeopardised
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Stage 3 – Settlement Submissions
Commission sets time limit for final
WSS
WSS• acknowledgement
• facts• legal qualification• duration
as per Stage 2• maximum amount of
fine• rights of defence respected• no access to file or
hearing• Community language
WSS =• commitment to cooperate• irrevocable unless
Commission does not endorse
WWS in SO and then Decision
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Stage 4 – Statement of Objections & Reply
SO:Endorses WSS if it reflects:• description of cartel• undertaking’s involvement• legal qualification
Reply:Min. 1 week time-limit:• simple/unequivocal confirmation that SO and WSS correspond• continued commitment to
settlement procedure
SO: Does not endorse:• standard procedure• acknowledgements in
WSS withdrawn
New Defence
No confirmation:Standard procedure
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Stage 5 – Decision & Settlement Reward
Consultation with Advisory Committee
NO other procedural step, e.g. no hearing or access to file
Decision:• if consistent with WSS, settlement request cannot be revoked• amount of the fine
Commission may still adopt a different position
New SO
• Reduction in the fine ?• Equivalent for all parties• Increase for deterrence not greater than x 2• Added to leniency
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Stage 6 – Appeal
Decision may be appealed to CFI
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Settlement - Issues
• Procedural efficiency v. Rights of the Defence
• Bilateral settlements in a multilateral environment
• Commission’s discretion: no certainty until Decision
• Determination of incentives: what is the discount?
• Is it too complicated?
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Final Thought
BEWARE – THE TIME BOMB!
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