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Guidelines for setting fines

New guidelines have been agreed, refining the method for calculating the fines imposed on firms which infringe European Union (EU) rules prohibiting cartels and other restrictive business practices and abuses of dominant position. In order to enhance the deterrent effect of such fines, greater weight is given to the duration of the infringement when calculating the level of a fine. Fines also include an amount simply for committing the infringement, regardless of its duration, and higher fines are imposed in the event of re-offending.

ACT

Commission Guidelines on the method of setting fines imposed pursuant to Article 23(2)(a) of Regulation (EC) No 1/2003 [Official Journal C 210 of 1.9.2006].

SUMMARY

The level of a fine must be sufficiently high both to punish the firms involved and to deter others from practices that infringe the competition rules.

The new guidelines refine the method used by the Commission, imposing stiffer fines on firms that violate the provisions of the Treaty establishing the European Community (TEC) prohibiting cartels and other restrictive business practices (ex-Article 81 TEC, now Article 101 of the Treaty on the Functioning of the European Union (TFEU)) and abuses of dominant position (ex-Article 82 TEC, now Article 102 TFEU).

The new guidelines introduce four main changes to enhance the deterrent effect of the fines imposed by the Commission. These are a basic amount for simply committing the infringement, an amount related to the value of sales involved in the infringement, a closer correlation between the fine and the duration of the infringement and higher fines in the event of re-offending.

Basic amount of the fine

The basic amount is calculated as a percentage of the value of the sales connected with the infringement, multiplied by the number of years the infringement has been taking place.

The percentage of the value of sales is determined according to the gravity of the infringement (nature, combined market share of all the parties concerned, geographic scope, etc.) and may be as much as 30 %.

The Commission then adds to this initial calculation a further amount that is applied to all cartel cases and, at the Commission's discretion, to certain other types of infringement. This will be between 15 and 25 % of the value of annual sales, irrespective of the duration of the infringement. This is intended to deter firms from engaging in illegal practices in the first place.

Adjustments to the basic amount

The basic amount, calculated according to the method described above, may then be adjusted by the Commission, downwards if it finds that there are mitigating circumstances, or upwards in the event of aggravating circumstances.

Firms that commit similar infringements again will now be fined more heavily. The Commission will penalise re-offending, taking into account not only its own earlier decisions but also rulings by national authorities. Firms that re-offend could now face a 100 % increase in their fine for each subsequent infringement.

The new guidelines for setting fines do not affect the application of the EU’s leniency rules.

The maximum fine for each firm remains 10 % of its total turnover in the preceding business year (Regulation EC No 1/2003).

Background

The Commission adopted the first guidelines for setting fines for infringements of Articles 81 and 82 TEC in 1998. Its aim was to ensure that its decisions were transparent and objective.

The Commission has used the experience gained over the past eight years to develop and refine the method of calculation.

RELATED ACTS

Commission Notice on immunity from fines and reduction of fines in cartel cases [Official Journal C 298 of 8.12.2006].

Last updated: 21.02.2011
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