Competition: Commission action against cartels – Questions and answers
European Commission - MEMO/05/454 30/11/2005
Brussels, 30th November 2005
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What is a cartel?
It is a secret agreement concluded between firms carrying out comparable activities with a view to restricting competition and gaining more effective control of the market. The agreement may take a wide variety of forms but often relates to sales prices or increases in such prices, restrictions on sales or production capacities, sharing out of markets or customers, and collusion on the other commercial conditions for the sale of products or services.
Why are cartels harmful to the economy?
Cartel members rely on restrictive agreements and do not supply new quality products or services at competitive prices. It is the customers who foot the bill. They may be consumers who finish up paying more for lower quality and narrower choice or they may be companies too. If it is other companies that suffer, this adversely affects the competitiveness of the economy.
What legal basis underpins the Commission’s action to combat cartels?
Article 81 of the Treaty establishing the European Community prohibits agreements and concerted practices between firms that distort competition within the Single Market. Fines of up to 10% of their worldwide turnover may be imposed on the guilty parties.
What happens to the proceeds from fines?
The amount of the fines is paid into the Community budget, helps to finance the European Union and, in the final analysis, reduces the tax burden on individuals.
Does the Commission have the last word?
All cartel decisions by the Commission may be appealed against before the Court of First Instance (CFI) and then before the Court of Justice of the European Communities in Luxembourg. They can, therefore, be closely scrutinised by these two courts, which are empowered to reduce or increase fines, where this is deemed appropriate.
What is the European Commission’s leniency programme?
It encourages firms to provide the Commission with insider information on cartels. The first firm to do so is granted total immunity from fines. Other firms that follow suit may be granted a reduction in the amount of the fine. This policy is very effective in uncovering cartels but does not prevent the Commission from conducting investigations on its own initiative. For further information, see IP/02/247 and MEMO/02/23.
What practical steps has the Commission taken to step up action against cartels?
Since June 2005 an entire directorate (Directorate F, with a staff of around 60) in the Competition Directorate-General has been involved exclusively in detecting and combating cartels.
What action is open to consumers who feel that have been victims of such illegal agreements?
Any firm or individual adversely affected by practices censured by the Commission, such as those set out in today's decision, may bring the matter before a court in a Member State of the European Union with a view to seeking compensation for damage suffered as a result of such practices. Fines imposed by the Commission are different from the damages awarded by national courts. While action for damages before a court also acts as a deterrent, its main purpose is to compensate victims of anti-competitive behaviour or to secure compensation for damage suffered. A Commission Green Paper on facilitating action for damages before courts in the Member States is due to be published in December 2005.
What are the ten largest fines imposed by the Commission in cartel cases?
1 Appeal lodged before the CFI.
2 Following decision by the CFI.
Fines imposed on cartels by the Commission in the last three years: