Vice President of the European Commission responsible for Competition Policy
Cartels: the priority in competition enforcement
15th International Conference on Competition: A Spotlight on Cartel Prosecution
Berlin, 14 April 2011
Ladies and Gentlemen:
I would like to thank Andreas Mundt for his kind invitation to your conference, this year devoted to cartels.
The Bundeskartellamt is one of longest established competition authorities and it shows. Over the years, you have developed a sophisticated system and your enforcement record is just outstanding.
Cartels are the top priority in competition enforcement. I am sure we all agree on this point, regardless of our respective roles and of the different characteristics of our competition systems.
Cartel control is different from the other areas of competition policy. The question is not whether cartels should be allowed; nobody would be in favour of this option. Our only task here is finding the best way to fight them.
Today, I would like to talk about how we carry out this task at the European Commission.
I will start with the relationship between prevention and repression. I put prevention first because we want to help companies understand the rules, stay on the right side of the law, and take their own responsibilities seriously.
But it’s our duty to investigate and punish the companies that, in the end, decide to break the law.
In this context, I will tell you about a change in our practice with implications for the companies that fall under our scrutiny.
Then, I will share with you my thoughts on the judgement and balance required to find the right sanctions when we discover a cartel.
Finally, I will touch upon international co-operation, because no competition authority can go it alone in the age of global business.
In 2010 we adopted seven cartel decisions. Four of them were purely European, while the remaining three involved companies from other world regions, including one – the cartel for LCD screens – organised exclusively by Asian companies.
The existence of cartels cuts across virtually every sector of the economy. The industries involved last year include air cargo, memory-chip manufacturers, the manufacturers of additives for animal feed, and the producers of the steel that is used in the building industry.
In two cases, the LCD and the bathroom fittings, the cartels harmed final consumers directly; in the other five cases, the direct victims were other businesses.
The 69 companies involved in our decisions last year were very diverse too. What I find most shocking is that large, global companies are not immune. Just think that the companies we fined last year included major airlines such as Air France and BA, and leaders in electronics such as Samsung and Toshiba.
Two more points to note in the work we carried out in 2010 were the duration of the animal feed cartel, which lasted 35 years and was one of the longest we have ever discovered; and the new settlement procedure we used for the first time. I will say more on settlements later.
Let me now to share with you some thoughts based on the work carried out since the beginning of my mandate.
We have done a lot to improve and speed up our investigations; however, are we doing enough to help companies comply with the rules?
I’m putting this issue on the table because I don’t enjoy imposing fines per se. Instead, I would like to promote a culture of compliance in the business community that minimises the need for sanctions.
I commend the many companies throughout the EU that have set up compliance programmes. And I invite the business people who wish to follow their example to make good use of the advocacy work we are developing to this end.
We are trying to support the adoption of compliance programs through different channels:
We disseminate comprehensive information on EU competition rules and their implementation through the web and other means.
We are also in constant dialogue with business people and other stakeholders to refine our guidelines, notes, and other information material.
And we never pass up an opportunity – such as your conference today – to encourage companies to build their own compliance and training programmes.
But I should immediately add one point here.
A successful compliance programme brings its own reward. The main reward for a successful compliance programme is not getting involved in unlawful behaviour.
Instead, a company involved in a cartel should not expect a reward from us for setting up a compliance programme, because that would be a failed programme by definition.
My services will assist the businesses that intend to take this road in every possible way. I will consider additional forms of support – such as exchanges of guidance and best practices – especially for smaller businesses, which cannot afford large legal departments and expensive competition lawyers.
But when companies do decide to break the law, it is our responsibility to punish them.
In this context, let me tell you about a couple of changes we are introducing to improve our enforcement practice: the inclusion of a section on fines in the Statement of Objections and the new settlement procedure.
The first responds directly to an issue often raised by our stakeholders.
The Commission will indicate already in the Statement of Objections itself, the S.O. the elements for the calculation of the fine such as the value of the cartelised sales – which is a critical factor – but also, for example, an indication of the gravity and issues of recidivism.
This innovation will open a channel for dialogue with the parties and will give them a better idea, at an early stage, of the size of the fines that may be imposed on them.
The change will help us exchange information relevant to the calculation of the fines, engage a discussion at an early stage and avoid post-decision corrections or revisions that although they remain rare are always unpleasant for both sides.
The cartel settlement innovation – in other words the option to settle cartel cases through a simplified procedure – is already producing results.
In 2010, we saw the first two settlements in the DRAMs and animal feed cases. The third one was concluded only yesterday in the detergents case with Henkel, Procter & Gamble and Unilever.
These companies agreed the price of washing-machine powder in eight Member States for about three years; a classic example of an illegal agreement that directly harmed large numbers of consumers.
The fine – totalling € 315.2 million – included the 10% reduction granted to companies that acknowledge their participation in a cartel.
We initiated proceedings in December 2009. After discussions that took place last year, the companies formally asked to settle last January and the decision was adopted yesterday, less than one and a half years after we initiated proceedings.
I’m telling you this to give you an idea of the time and resources we can save both for the companies and the Commission. And this without mentioning the time and resources spent in litigation after the decision is taken.
Settlement discussions have started in other cases and they look promising.
Ladies and Gentlemen:
Let me now say a few words on the sanctions we impose on companies.
In the seven cartel decisions we took last year, we imposed fines of close to €3 billion; ranging from the €175 million in the animal feed case to almost €800 million for the airlines in the airfreight cartel.
Some voices coming from the business community claim that our fines are too high, especially in these difficult times. I disagree.
In the last few years, we have been refining our fining guidelines to achieve optimal deterrence – which is our ultimate goal – and we will continue do to so.
Our fines are set at levels designed to punish the companies that have broken the law and deter them or others from engaging in anti-competitive behaviour am aware that not all companies involved in cartels are awash with money during the current economic times, and if they are genuinely unable to pay without going bankrupt we take this into account.
In 2008 and 2009 we received nine inability-to-pay applications. But last year, as many as 32 out of the 69 companies we fined submitted ITP claims. We carefully looked into their financial situations and nine of them got their fines reduced.
Our fines must remain large, because companies need to understand that cartels do not pay. But at the same time my objective is not to put companies out of business.
Last week we decided to reduce the fines that had been imposed on the subsidiaries of two groups of companies involved in the pre-stressing steel cartel.
We took this decision because, in this specific case, the parent companies were liable for only a small proportion of the infringement and therefore of the fine, while the subsidiaries were solely liable for a much greater portion of the fine.
In other words, the liability gap was very wide and the normal application of our rules resulted in excessive and non-recoverable fines for the subsidiaries – several times their turnover, in fact.
This is why we have greatly reduced the fines we had imposed earlier; a reduction that I consider necessary on grounds of proportionality and effectiveness. However, this was an exceptional case.
I will now move on to my third and final topic for today’s speech – international cooperation.
In the global age, it makes little sense to enforce our competition laws from behind national or regional fences.
For example, consider that at present my services are investigating over 25 cartel cases, and only about half of them are limited to Europe in scope.
There are over one hundred active competition-law enforcement agencies around the world, and fostering cooperation among them is a must.
What happens in other countries around the world and not only here in Europe – in particular as regards leniency rules and fines – affects the decision of a company to report a cartel and cooperate in the different jurisdictions.
In the EU, national authorities and the European Commission coordinate their actions within the European Competition Network on issues such as the allocation of cases and assistance in investigations.
Internationally, the International Competition Network is a very useful multilateral platform for convergence and policy developments. In addition, bilateral cooperation between major authorities covers several areas, from dawn raids to the timing of decisions.
This cooperation is shaped by the legal provisions in the different jurisdictions. For example, the exchange of evidence collected under our powers is possible only within the ECN, where all authorities enforce EU competition rules.
However, the law in some Member States provides only for corporate sanctions, whereas in others there are additional measures against individuals.
EU legislation accommodates for this diversity; we cannot pass information on to a national authority if this can be used against an individual in a criminal proceeding.
I want to make clear, however, that I fully respect the diversity of the legal systems in the EU and around the world – as I’m sure everybody respects ours.
I am convinced that these differences in the law should not stop us from cooperating; they should, in fact, urge agencies in the various jurisdictions to focus on our common principles and work together across borders. The ICN Cartel Workshop my services will host in October will be a good opportunity to do so.
Ladies and Gentlemen:
In closing, I would like to recap my three main messages.
First, my doctrine in cartel control can be encapsulated in a maxim: ‘prevention when possible, repression when necessary’.
In an ideal world, business people would not operate a cartel because they would understand their responsibility towards their customers and society at large. As we do not live in an ideal world, we have no choice but impose fines that need to be deterrent.
Second, I am committed to making our enforcement action faster, and more transparent; and to open up more opportunities for dialogue with the parties during our investigations.
Finally, I invite our sister enforcement agencies to fully recognise the diversity of our legal systems and drive toward a pragmatic convergence of our control of cartels around the world.