European Commission proposes cartel settlement procedure

On 26 October 2007, the European Commission published for consultation details of a new procedure aimed at speeding up the resolution of cartel cases and thereby freeing resources for the pursuit of further cartels. The procedure essentially involves the parties to a cartel investigation acknowledging their cartel participation and foregoing their right to access to the European Commission’s file on the case and an oral hearing, in return for a reduction in their competition law infringement fines.

The European Commission has taken this step following a review of its leniency notice and fining guidelines. It believes the procedure will ensure more effective decision-making and enable it to punish cartels more quickly. The United States operates a successful cartel settlement system although there are significant differences between it and the European Commission’s proposed settlement procedure.

The European Commission invites comments on its proposal by 21 December 2007.

The main points of the European Commission’s settlement procedure are as follows:

• The European Commission will not negotiate the use of evidence or the appropriate sanction with the parties but can reward the parties’ cooperation to attain procedural economies;
• Parties do not have the right or duty to settle – whether settlement will be available is at the discretion of the European Commission;
• Parties who have already applied for leniency may apply to use the settlement procedure but leniency will not be available once the settlement procedure is formally open;
• Reductions of the fine under the settlement procedure will be less significant than those under the leniency notice;
• All parties settling in the same case will receive equivalent reductions of the fine;
• The amount of settlement reductions will be established after public consultation;
• The European Commission may only apply the settlement procedure on the parties’ written request;
• Settlement discussions between the European Commission and the parties will cover the alleged facts, their classification, the gravity and duration of the infringement and the liability for the individual involvement in the cartel. This will include discussing the potential maximum fine;
• If parties chose to introduce a settlement submission acknowledging the European Commission’s envisaged objections and evidence, the European Commission’s statement of objections (SO) endorsing the contents of the parties’ settlement submission could be much shorter than an SO issued to face contradiction;
• If no settlement was explored or reached, the standard procedure would apply by default and remain the fall-back option.

The idea of a settlement option is to be welcomed. Whether the proposed settlement procedure will in fact bring more speedy case resolutions, an increase in the detection rate and overall efficiency of the Commission’s anti-trust enforcement, as vaunted by the European Commission, remain to be seen.

The detail of the proposal does raise some significant questions. For example, settlement applicants are required to make a written submission acknowledging liability for cartel involvement. Many companies may have concerns about making such a submission in view of the threat that it could be discoverable in US cartel damages claims. The European Commission recently changed its standard cartel procedure to allow oral leniency applications to be made. Would the proposed settlement procedure be more attractive if oral settlement applications were permitted? In addition, settlement decisions will be open to appeal which raises the question of whether this will short-circuit the intended gains of the settlement procedure. The opportunity to provide comments to the European Commission is therefore especially important.

Please click here for the European Commission’s information on the proposed settlement procedure and how to comment.