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SPEECH/06/595












Neelie Kroes

European Commissioner for Competition Policy




Delivering on the crackdown: recent developments in the European Commission's campaign against cartels


















The 10th Annual Competition Conference at the European Institute
Fiesole, Italy, 13th October 2006

Ladies and Gentlemen,

I am delighted to be here again in Fiesole for the 10th Annual Competition Conference.

Today I would like to talk about the European Commission's work on cartel enforcement. Cartels strike a killer blow at the heart of healthy economic activity. Secret agreements between independent economic entities undermine competition. They raise prices for consumers and reduce the diversity, quality and innovation of European companies. This makes it harder for us to deliver the Lisbon goals of high growth, job creation and innovation. Yet sadly, the fact of the matter is that increasing numbers of cartels are being exposed, and many more are not.

So what is the European Commission doing to stop cartels? We have sought to develop a system that:

• 1. First, deters companies from entering into cartels, through a clear risk of discovery and heavy sanctions;

• 2. Second, detects existing cartels, through the actions of enforcement agencies, whistleblowing and leniency; and

• 3. Third, deprives companies of their unlawful gains.

I. State of Play

In recent years the Commission has made great strides in fighting cartels. Between 2000 and 2005 the Commission adopted 38 infringement decisions. That is an average of 6 decisions per year, twice the average of the previous 30 years. We have targeted both European and worldwide cartels, and imposed total fines of €4.4 billion. The average fine per addressee also increased significantly.

'Prevention is better than cure', as the saying goes. But sometimes a substantial fine is quite a direct way to really drive our deterrent message home!

And so far I have only talked about what the European Commission has been doing. If you add to that the activities of the National Competition Authorities, you can see that we really are waging a European war on cartels.

But when I began my mandate nearly two years ago it was clear to me that more needed to be done. As you know, I first looked at our in-house structures, and set up a dedicated cartel-busting directorate within DG Competition. I also launched in April 2005 a wide-ranging review of our enforcement tools in this area. Today I would like to talk about our first deliverables, and in particular the recent measures for improving our fines regime and leniency programmes.

II. Fines Policy

Let's first look at fines. The increased level of fines levied under the 1998 Guidelines on Fines has had a positive effect. It gave companies the right incentives to race to file for leniency. The European Courts have confirmed the validity of the 1998 Guidelines, but have also confirmed that we can change them too. And there was room for improvement! For example, fines have not always adequately reflected the duration of the infringement, the actual weight of each participant or even the overall significance of the infringement in economic terms.

It is that process that we have now taken forward in the new Guidelines on the method of setting fines, which we published on 1st September. We want to increase deterrence and ensure greater predictability.

Allow me to briefly describe the main changes we have made. First, from now on, the basic amount of the fine will be calculated as a percentage of the turnover of each cartelist in the relevant product market during the last business year the company participated in the infringement. The percentage may well reach 30% of the relevant sales for cartels. Second, the Commission will look at how many years a company participated in an infringement, and will multiply the initial amount of the fine by the number of years. So, contrary to the previous system, each additional year of participation in an infringement will be fully reflected in the level of the fine. Finally, repeat offenders – of which there are far too many – can be penalised by a 100% increase in the fine for each previous offence. Even for a single prior infringement, this is twice as much as the former maximum increase. Companies that have already breached the competition rules need to be very, very careful not to do so again. Or the fine will hurt even more.

These innovations are likely to increase average fines, particularly for long lasting infringements in large markets, where fines could well increase by a factor of three. I think all this will make potential cartelists think twice! The new guidelines will also make our Leniency Programme more attractive, especially in conjunction with the changes we have recently proposed to this.

III. Leniency Policy

Leniency has certainly proved its worth as a tool to detect and destabilise hard-core cartels. But still we needed to make our Leniency programme more efficient, and to ensure greater consistency between the Leniency programmes of the Commission and the Member States.

So I am very pleased to be able to report progress on each of these points.

a) Revision of the Leniency Notice

First, improving our effectiveness. Last month the Commission launched a public consultation on changes to the current Leniency Notice, in which we set out:

- clearer definitions of key concepts, such as the threshold that must be met in order to qualify for immunity;

- the conditions that must be fulfilled by applicants to benefit from immunity or reduction of fines; and

- certain procedural improvements.

The draft provides clear definitions of the type of information and evidence immunity applicants should submit to the Commission, in paragraph 8a of the Notice, to get immunity from fines relating to an alleged cartel that is as yet undetected. The threshold for immunity is linked to the information needed by the Commission to carry out a “targeted” inspection. Applicants also need to disclose their participation in the cartel, thereby acknowledging their own fault.

On the conditions to be met for immunity or reduction of fines, the draft provides a mechanism introducing flexibility as to the requirement to cease participation in a cartel. Indeed when a company suddenly leaves a cartel, the other parties might take note and the Commission investigation could be undermined.

As to procedure, the draft introduces a discretionary marker system so that in appropriate cases, the Commission can accept the applicant on the basis of more limited information, and then allow time for gathering the rest of the necessary information and evidence.

Finally, the procedure for protecting corporate statements will also be included in the amended Notice, taking into account the comments received in the public consultation earlier this year.

I am confident that changes I have just described, which draw on feedback from the legal and business communities, including some people here today, will further strengthen the efficiency of the Leniency programme and offer clearer guidance. I hope to invite the Commission to adopt the new Notice before the end of this year, once we have analysed and reflected upon the response to our public consultation. This closes on October 27th, so there is still time to submit your views!

b) ECN Model Leniency Programme

The second area in which we have brought improvements is in consistency between the various Leniency programmes in Europe.

When the Commission introduced its revised Leniency Notice in 2002, only 4 Member States had a leniency programme. Now, with Italy and Portugal hoping to come forward with their rules in the next weeks, only 4 do not. This is an impressive and remarkable evolution.

When I started this job I was concerned that having different and sometimes even conflicting rules and procedures for leniency across the Member States sometimes put companies off reporting cartels. Not to mention the procedural burden of having to file with several authorities. So in February last year, I announced that we should consider how to simplify the process. We have worked closely with our colleagues in the National Competition Authorities to design a system that should work for everyone. The result is the ECN Model Leniency Programme which was published at the end of September. This document marks a new era in ECN cooperation. It shows how we can jointly develop new methods to respond to new challenges and achieve convergence beyond what is required under Regulation 1/2003.

The ECN Model Leniency Programme is drafted as an operational programme containing the essential features of the treatment which an applicant should expect in any ECN jurisdiction. This includes:

- a uniform standard for immunity;

- a coherent set of termination and cooperation duties; and

- a streamlined procedure for processing applications.

The Programme offers a new system for standard summary applications, to streamline parallel applications to more than one competition authority. This should reduce the time and costs spent preparing and assessing applications with those authorities who will not ultimately handle the case. Applicants will be allowed to safeguard their position with national authorities by supplying very limited information, in some cases given orally. Where the authority later decides to act upon the case, the applicant will be given additional time to complete their application.

The Model Programme is just that - a model. Each national competition authority and the European Commission will continue to operate its own programme and it is still for the company to decide where it wants to apply. This is simply a logical consequence of a system of parallel competences and flexible case-allocation rules. But I hope that the Model Programme will help move away from the complexities that might today deter applicants from using our programmes, and assist the emergence of a convergent leniency policy across the EU.

Its success will depend on the willingness of the ECN members to align their respective programmes on that basis. I very much hope they pursue this as a matter of priority. The Commission has played its part with the changes we envisage for our Leniency Notice, which bring it fully into line with the Model Programme.

But let me be clear: although we have an obvious interest in keeping our leniency programmes attractive, there is a limit to what we are willing to do to facilitate the life of undertakings that are trying to avoid exposure to fines for serious breaches of competition law. I believe our chosen approach – a combination of convergent programmes and summary applications - strikes the right balance between offering an attractive leniency system and ensuring effective enforcement throughout the ECN.

IV Next Steps

Ladies and Gentlemen, I would like to conclude with some thoughts on future steps we are considering to continue to strengthen the Commission’s cartel enforcement.

We have made clear progress over the last two years, with the creation of a specialised Cartel Directorate, and the recent actions I have described to you today.

More work is underway. Look at our Green Paper on promoting the development of private antitrust damages actions. Victims of competition law infringements, in particular of cartels, should be able to recover their losses. The current situation in Europe, where cartelists rarely compensate the victims of their illegal behaviour, and courts hardly ever order them to do so, is not tenable. We are continuing our reflections on this subject, but clearly this is an area where more work will be needed.

We have also been examining the possibility of using direct settlements, something I announced 18 months ago. I have not forgotten it!

Any formula allowing for direct settlements would need to reduce the duration of the procedure and release enforcement resources, whilst at the same time maintaining a high level of deterrence. Under Regulation 1/2003 time savings could be made either after issuing a statement of objections or even beforehand, providing the bulk of the investigation had taken place and the case of the Commission is clear. In any case, I do believe that the Commission should define a clear window during which companies can enter the direct settlement procedure. We will also have to clarify the relationship between this procedure and the possibility to apply for leniency. Those choosing settlement would acknowledge the scope, duration and severity of the infringement against an authorised minimum level of fine, which would take into account any leniency benefit and settlement reduction.

Of course, these are just first thoughts, and we need to work out the details. There are many factors to reconcile, and I'm interested to hear what stakeholders have to say on these matters.

V. Conclusion

In conclusion, Ladies and Gentlemen, in the course of the last two years very considerable steps have been taken to reinvigorate the fight against cartels. But there is more work to be done.

The Commission, together with the ECN, national courts and also authorities of key trading partners - in particular the US - is working to this end. And we are only just getting started in this latest campaign in our permanent crackdown on cartels, to protect European consumers and business by promoting fair competition between companies.

Thank you for your attention.


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