1. www.blplaw.com Cartels and competitor contacts Chris Bryant September 2015

2. www.blplaw.com The basics

3. What this is not about….

4. What this is about….

5. Reminder of Article 101/Chapter I Article 101 TFEU and Chapter 1 Competition Act 1998 prohibit: agreements and concerted practices between “undertakings’” or “associations of undertakings” which have as their object or effect the prevention, restriction or distortion of competition which affects trade between Member States (or within the UK or part of the UK) to an appreciable extent Cartels are the clearest example of a breach

6. What is a cartel? The European Commission’s definition: “Cartels are agreements and/or concerted practices between two or more competitors aimed at coordinating their competitive behaviour on the market and/or influencing the relevant parameters of competition through practices such as: the fixing of purchase or selling prices or other trading conditions, the allocation of production or sales quotas, the sharing of markets including bid-rigging, restrictions of imports or exports and/or anti-competitive actions against other competitors. Such practices are among the most serious violations of Article [101].”

7. How do cartels operate? Usually no formal written agreement Usually highly secret meetings and communications to establish and continue the cartel Behaviour varies, but often includes: Use of codenames, private email addresses and pay-as-you-go mobile phones Meetings in hotels – especially at airports Meetings around legitimate industry events, such as conferences Contacts passed on to successors through handover meetings Duration varies from weeks to decades “These companies knew very well that what they were doing was illegal. This is why they acted cautiously and with great secrecy.” Commissioner Almunia (2014)

8. www.blplaw.com Sanctions for cartel behaviour

9. Overview of enforcement Top priority of antitrust enforcement agencies worldwide European Commission Fines of up to 10% of world group turnover (not profit) Over €6 billion in fines imposed since 2011 24 infringement decisions since 2010 Criminal sanctions Success of immunity/leniency programmes

10. Fines in EU cartel cases GUESS THE BIGGEST FINE IN A CARTEL CASE IN THE EU? GUESS THE BIGGEST CARTEL FINE FOR ANY SINGLE COMPANY IN THE EU?

11. Fines in EU cartel cases Cathode ray tubes (2012): €1.47bn Car glass (2008): €1.18bn Highest ever EU cartel fine on one company: €715m on Saint Gobain Euro interest rate derivatives (2013): €1bn Automotive bearings (2014): €953m Lifts and escalators (2007): €832m Airfreight (2010): €799m Vitamins (2001): €790m Yen interest rate derivatives (2013/2015): €684m Gas insulated switchgear (2007/2012): €675m

12. Overview of EU fines imposed

13. Fines in cartel cases – UK Some big… BA (fuel surcharges) – £58.5 million in 2012 - 100% immunity for Virgin Dairy producers and supermarkets: £49.5 million in 2011 RBS (loan pricing) £28.6 million in 2011 - 100% immunity for Barclays Many smaller… Care home medicines (2014) - £370,226 Access control alarms (2013) - £53,410 Competition law applies to very local agreements – e.g. fines for agreeing to share bus routes in Leeds

14. Fines in cartel cases – other Member States France Consumer goods (2014) €345 million – personal hygiene products €606 million – cleaning products 6 companies involved in both cartels Germany Brewers (2014) – €106.5 million Sausages (2014) – €338 million Greece Poultry (2014) - €39.9 million Romania Supermarkets and suppliers (2015) - €35 million

15. EU procedure for fixing fines 2006 Fining Guidelines Basic amount: percentage of company’s value of sales in the relevant market (up to 30%), depending on seriousness of infringement Multiplier applied based on duration of infringement “Deterrence” amount added Assessment of attenuating and aggravating circumstances, including recidivism Reduction under the Leniency Notice, if applicable Settlement Fines possible even where a company has no EU presence or sales

16. Criminal sanctions and extradition Criminal liability arises in a number of EU Member States Some actively enforce: Germany Greece Ireland UK Some use their powers rarely (so far…): Czech Republic France In US: criminal sanctions, jail-time, and possible extradition of non-US citizens to the US for prosecution

17. UK - Cartel offence under Enterprise Act 2002 Up to 5 years in prison and unlimited fine Some defences possible No concealment from customers or authorities Legal advice was sought Notification and publication exclusions Limited use so far Prison sentences plus director disqualification for three individuals involved in the marine hose cartel Galvanised steel tank cartel trial in 2015 Requirement of dishonesty removed in April 2014 Disqualification of directors – up to 15 years Actual knowledge irrelevant

19. www.blplaw.com Procedure of a cartel investigation

20. How do investigations usually start? Complaints from customers or other industry players “Own-initiative” investigations by authority Whistleblowing Leniency programmes – EU, UK and many others Immunity from fines for whistleblowers Reductions for all further leniency applicants Advantages for whistleblowers under Damages Directive Individual whistleblowers Up to £100,000 reward from the CMA Individual immunity for employees (e.g. UK criminal regime)

21. What does a cartel investigation involve? Time Appeal Infringement decision Formal investigation Statement of Objections Preliminary investigation Dawn raid 0 4 years+ Complaint or application for immunity LeniencySettlement

22. Dawn raid – what is it? A regulatory inspection: by inspectors from a regulator and possibly police at business and/or domestic premises to inspect documents possibly to interview individuals to remove evidence relevant for an investigation Usually without prior notice Not usually at dawn!

23. Dawn raid – what can they search? Premises, land and means of transport of the company In certain circumstances, private homes and cars of directors and other members of staff

24. Dawn raid – what can they do? Depends on scope of warrant / authorisation Examine business records and company books, irrespective of storage medium Take copies of or extracts from such records and books (not originals) Image laptops and mobile phones (UK only) Conduct word searches of electronic documents

25. Dawn raid – what else can they do? Seal any business premises (normally overnight and for no more than 72 hours) Ask employees for explanations on facts or documents relating to the subject matter of the investigation Interview individuals, but only with their consent

26. Dawn raid – how far can they go? What authority do they have? Authorisation – company not obliged to allow access Decision – company must allow access Inspectors cannot use force Commission Revised guidelines on the conduct of dawn raids (2013) Includes procedures for electronic documents Increased number of court challenges Scope of inspection should be based on reasonable grounds Inspection must be limited – no “fishing expedition”

27. 27 The cost of breaking a seal In a dawn raid at E.ON’s offices, the Commission sealed a room containing documents to be reviewed the following day How much was E.ON fined for breaking the seal?

28. The other cost of breaking a seal Trainee’s role?

29. Process of EU cartel investigation Complaint/immunity application (“whistleblower”) Dawn raid Document review Possible leniency application Information requests (Article 18 requests) Statement of Objections (“SO”) Oral hearing Decision Appeal NB: UK procedure similar, but not so formalised

30. Leniency in the EU – the reductions Under the Commission’s 2006 Leniency Notice: Full immunity may be available if first to provide evidence that: enables the Commission to carry out a “targeted inspection”; or enables the Commission to find an infringement 30-50% reduction – if first to provide “significant added value” 20-30% reduction – if next to provide “significant added value” Subsequent applicants: up to 20% reduction for providing “significant added value”

31. Leniency in the EU – the obligations All applicant companies must: Provide all evidence available to them Maintain continuous and complete co-operation Refrain from further participation Not falsify, destroy or conceal evidence Coercers are not eligible for full immunity

32. Leniency in the UK Type A cases – guaranteed total immunity for 1 st to come forward before investigation starts, if CMA does not already have sufficient information Type B cases – discretionary reduction up to 100% for 1 st to come forward after investigation starts Type C cases – reduction of up to 50% may be available for companies that are not first to come forward (but do so before SO), or who do not satisfy criteria for full immunity Requirements of continuous co-operation, ending cartel and no coercion Use of “markers” Use of “no-action” letters “Leniency plus” - if provide information regarding a 2 nd cartel, also get additional reduction for 1 st cartel Detailed guidance published July 2013

33. EU settlement procedure Introduced in June 2008 Commission expects half of cases to follow settlement procedure Aims t o resolve cases within two years (NB: Issue of hybrid cases) 10% reduction in fines Where parties agree prior to SO on scope of behaviour In addition to any reduction for leniency Notable points Cases resolved more quickly Shorter decisions Appeals very rare “Early resolution agreements” used in UK

34. Parental liability Parent companies can be held responsible if they exercise “decisive influence” over subsidiaries Presumption of “decisive influence” over 100% subsidiaries Presumption can be rebutted Below 100%, various factors taken into account Both parent companies in 50/50 JV may have “decisive influence” Recent developments re: investments Goldman Sachs / Prysmian (power cables) www.blplaw.com Page 34 © Berwin Leighton Paisner

35. Legal professional privilege in the EU competition law context Written communications between a lawyer and client are considered confidential (or “privileged”) only in some circumstances Written advice from the legal department to a company employee is not privileged Communications between a company employee and outside counsel will be privileged if: the correspondence was for the purpose of exercising the company’s rights of defence; and the external lawyer is qualified to practice in an EEA jurisdiction

36. www.blplaw.com Cartels and competitor contacts Chris Bryant September 2015