European Cartel Enforcement and Investigations ABA Antitrust 51st Annual Spring Meeting Alec Burnside April 2003

1 Introduction Dramatic increase by European Commission in cartel enforcement and investigations –Highest ever imposed fine Hoffman-LaRoche 2001 (€462m) for 8 infringements –Highest ever imposed fine Lafarge 2002 (€249m) for 1 infringement –Commission imposed fine equivalent to entire value of market Methylglucamine 2002 (€2.85m) –Commission imposed fines on a cartel which has no European presence Nucleotides 2002 (€20m) –Commission conducting simultaneous Dawn Raids with other competition authorities e.g. alleged PVC cartel 12/02/2003 involving EU, US, Japan & Canada

2 Some numbers… –1969 to date >70 cartel decisions imposing fines in excess of €4.3 billion –2001 to date 19 cartel decisions imposing fines in excess €3 billion –Commission making on average 1 cartel decision a month (previously 1 cartel decision every 2-3 years) –Recent success partly due to new Leniency Notice ( ) –Since new Leniency Notice, Commission has received >30 applications for full immunity and a further 10 applications for a reduction in fine. –Commission receiving increasing simultaneous applications for immunity (US, Canada, Japan)

3 Enforcement –Article 81(1) EC Treaty prohibits all agreements between undertakings which both affect trade between EU Member States and have as their object or effect the prevention restriction or distortion of competition –Regulation 17 grants Commission substantial powers to terminate infringements of Article 81(1), initiate proceedings and issue decisions –Article 11 Requests - demand information from companies –Dawn Raids - surprise investigation where the Commission: –searches business premises, company car, diary, computer etc –is assisted by officials from NCA –can take away copies including computer copies (2001 conducted first “paperless” Dawn Raid) –can demand on the spot explanations of documents (except self-incrimination)

4 Modernisation Regulation 1/2003 will enter into force 1 May 2004 replaces Regulation 17 and strengthens the Commission’s powers of enforcement and investigation –Role of NCAs be substantially increased - especially important with enlargement and additional 10 countries joining the EU –Commission will be able to search private homes –Commission will be able to conduct interviews with executives –Commission will be able to affix seals on areas to ensure that evidence is not tampered with –Some EU Member States have enacted legislation criminalizing infringements of antitrust rules

5 Leniency Notice Immunity from fines (100%) –1st to whistleblow –1st to provide the Commission with evidence of infringement –cooperate fully with the Commission’s investigation –cease participation in the infringement –not coerced others to participate in the cartel Reduction in fine (20%-50%) –cease participation in the infringement –provide evidence which represents “significant added value”

6 Oral Presentations The Commission will accept oral presentations “hypotheticals” –Greatly benefit companies not wishing to produce a paper-trail e.g. facing US discovery rules –Commission has already processed 5 Leniency applications on the basis of oral statements rather than corporate statements.

7 Legal Privilege General principle of confidentiality for correspondence between lawyers and their clients Legal Privilege not available for: –In-house counsel (whatever their status under national rules) –Non-EU lawyers (unless admitted to an EU-bar) Therefore the Commission can seize these documents in a Dawn Raid! Ensure that all documents pass through an EU qualified lawyer in private practice. NB: when dealing with a Dawn Raid undertaken by an NCA take care as different rules of privilege may apply e.g. in Germany and Italy any document located in “the client’s hands” may be removed.

8 Double Jeopardy (“Ne Bis in Idem”) In addition to the EU regime, each EU Member States is able to undertake parallel, or even sole, investigations into cartel behaviour –Immunity granted by the Commission under the Leniency Notice does not prevent NCAs from acting - no double jeopardy! –However Walt Wilhem principle requires NCAs to take account of fines imposed by EU –Article 4 of Protocol No.7 European Convention on Human Rights (ECHR) provides right not be to punished twice in criminal proceedings. Although civil fines they have a criminal character. –Article 50 Charter of Fundamental Rights of EU (CFR) applies Ne Bis in Idem between several Member States. Therefore, CFR provides for principle of double jeopardy.

9 UK development… –Enterprise Act 2002 provides for individual criminalisation (no UK or EU criminal offence for companies) –Criminal offence for individuals who dishonestly agree to engage in hard-core cartel agreements (Sect 188 EA) –Maximum 5 years imprisonment or unlimited fine –OFT will have power to disqualify company directors for up to 15 years –Criminal Leniency available (OFT “no action” letter) –admission of guilt –not the ringleader –cease participation in the cartel –full cooperation with the investigation –full disclosure

10 UK development… A Director/ employee whistleblowing and claiming criminal leniency does not provide immunity from civil liability for the company! –Results in a race to the finishing post –individual vs. individual (UK individual criminal leniency) –individual vs. company (UK individual criminal & UK corporate civil leniency) –company vs. company (UK/EU corporate civil leniency) –Conflict of interest - company lawyers will not be able to act for individuals subject to criminal proceedings –Criminal offence extraditable to countries which have equivalent offences (e.g. Sir Anthony Tennant Fine Art Auction Houses Cartel would now be extradited - fortunately for Sir Anthony, EA not retrospective) –EA expected to come into force June/July 2003

11 Conclusion –Commission more aggressive towards combating cartels –Growing recognition of international cooperation for international cartels –Increased level of fines –However, no criminal sanctions at EU level and therefore no “ultimate” deterrent.

12 Questions