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European Commission

[Check Against Delivery]

Joaquín ALMUNIA

Vice President of the European Commission responsible for Competition Policy

Fighting against cartels: A priority for the present and for the future

SV Kartellrecht

Brussels, 3 April 2014

Ladies and Gentlemen,

I would like to thank Frank Montag for inviting me to your conference again. When we met last year, we talked about cartel settlements and the relative merits of prohibition and commitment decisions in antitrust.

Today, I would like to pick up the conversation where we left off – as it were – and share my views on our fight against cartels, which has been a constant priority for me since I took up my post.

In fairness, fighting cartels has been a core task for the EU competition authority for the past 15 years at least; since Karel van Miert who, as Competition Commissioner, set up the first team of enforcers entirely devoted to cartels, the first leniency programme, and the first guidelines on fines.

Thanks to his vision and the continuing dedication of DG Competition, today we have a powerful and resilient array of tools to detect and sanction the companies that take the ill-considered decision to set up a cartel. The Commission is widely recognised as one of the top cartel busters.

But we will not rest on our laurels. Over the past five years, our work has kept pace with the Court’s jurisprudence and with the evolution of these illegal business practices.

Firstly, our practice shows a growing number of international cartels. Recent examples include the Libor and Euribor manipulation cases, the car-parts cases, and yesterday’s power cables decision.

Secondly, although economists often claim that expanding industries are not suited to cartels, our many decisions in the information-technology sector show that they are.

We have even seen a domino effect in this area, where we first intervened in the market for DRAMs in 2010, and then in those for LCDs, TV and computer monitor tubes, and CRT glass. We have also sent statement of objections to alleged participants in smart card chips and optical disc drives cartels.

It seems that, when a technology expands, companies are tempted to collude to set prices as high as possible – as was the case for LCDs – and to prop them up when it is being phased-out, as in the cathode ray tubes cases.

In the course of my presentation I will identify more such trends and tell you how we respond to them. But first, let me give you some figures on our enforcement work.

In the current mandate, the European Commission has adopted 25 cartel decisions – including the two we took yesterday – involving 167 groups and 389 entities.

These decisions have produced fines for a total of €8.6 billion, an amount that I am confident is both deterrent and appropriate for the infringements we have pursued.

As you know, since 2010 companies have the option to settle cartel cases with the Commission. 13 settlement decisions have been taken to date, with fines totalling almost €4 billion. So, the prediction I made speaking to you last year that, over time, about half of the cases would result in settlements is gaining strength.

Our sister authorities in the European Competition Network have also been quite active. Between 2008 and 2013, they have reported about 145 cartel decisions and one case in three over the past ten years has been a cartel case.

To complete this quick review of our action, let me just mention the long-awaited proposal for a Directive on private enforcement.

This proposal, which is about to become law when both the Parliament and the Council confirm the recent political agreements, reaches out to victims of antitrust infringements so that they can obtain compensation for the harm they suffered.

It also includes rules to preserve the effectiveness of public enforcement by the Commission and the national authorities. Later on, I will give you more details on this important policy initiative as well as on settlements.

Ladies and Gentlemen:

Detecting cartels is not easy, because they are secret by definition and because they come in all shapes and sizes. But we are undeterred and won’t leave any stone unturned.

Our portfolio of cases includes different kinds of infringement – from market sharing, to price-fixing and bid rigging.

It also includes cases ranging from global cartels to European cartels and networks of regional schemes that cover a number of Member States. However, a few trends emerge amid this diversity.

One is the clear increase in the importance of antitrust compliance, which now regularly rates as one of the top concerns of general counsels. I like to take this as a sign that our action is having an impact.

This is the good news. The bad news is that many cartels have an ever more complex set-up, often using artful networks of bilateral arrangements and communication lines.

This is probably because the pressure of world-wide enforcement is pushing cartelists to find new and more devious ways to cover their shenanigans.

In several recent cases, we have seen cartelists deliberately change their working methods to try and avoid detection when cartels were uncovered in other sectors.

Some cartelists have also taken a time-out when they smelled danger, only to reappear in a less structured manner with no secretariat and fewer multilateral contacts.

At other times, instructions were given to send low-level representatives to meetings. People were also told to use only web-based email accounts and special mobile phones and SIM cards.

Finally, we have seen code names used for meetings, members and products. You may remember the freight forwarders talking of the price of ‘asparagus’ and ‘baby courgette’ – a curious detail revealed in our decision two years ago.

Clearly, cartelists have gone a long way since Adam Smith observed that when tradesmen meet their “conversation ends in a conspiracy against the public”. But we’ve not been sitting on our hands either.

Leniency programmes have produced a consistent stream of good applications; on average four per month, including immunity applications.

The figure will likely go up when the private-enforcement Directive takes effect because of the limits it puts on joint liability.

Secondly, we have developed the right forensic tools for the digital business environment. Digital evidence is easy to store and to spirit away. But our systems can search data in an efficient and targeted manner and restore deleted information.

Thousands of deleted documents were retrieved during the inspections in the power cables case which eventually proved crucial in yesterday’s decision. Let me add here that our searches are carried out in full respect of the fundamental rights of the parties.

Another strategy we adopt to fight today’s global cartels is international cooperation. Every competition authority knows that it needs to work with many others to discover the best evidence.

Coordinating the timing of searches has become standard practice. Only last week you have read of the inspections at the premises of exhaust systems’ manufacturers.

Let me mention here the work done in the International Competition Network. Thanks to this forum – which now includes 128 agencies from 114 jurisdictions – we can develop common standards and tools; learn from each other; and build a global environment of trust among competition enforcers.

The power of leniency programmes to bring down a cartel from within; the use of advanced forensic tools; and global enforcement would persuade any company to stay away from collusion. But for some that may not be enough. So, let me turn to fines – the most visible form of deterrence.

I’ve already said that the present Commission has meted out fines for a total of €8.6 billion against companies that had formed cartels.

These include €1.47 billion for two cartels in the market for TV and computer monitor tubes that had lasted for nearly a decade, €1.71 billion in our financial decisions of last December concerning interest-rate derivatives, and almost €1 billion in the recent automotive ball bearings settlement.

I invite managers and counsels to carefully consider these figures – and the cost of a tarnished reputation – and set them against the gains they hope to make by breaking the law.

These fines are set following our 2006 fining guidelines. Their design tells companies a simple, three-point message. Don’t get involved in a cartel. If you did, get out of it as fast as you can. And when you’re out, don’t do it again.

Over the last years, the Court has confirmed all the main features of the guidelines; including on fundamental principles and rights, gravity, duration, entry fee, and deterrence multiplier.

In addition, while exercising a high level of scrutiny on the facts and the points of law, the Court does not hesitate to exert its unlimited fine-setting jurisdiction.

In the E.ON/Gaz de France judgment of 2012, the Court reduced the duration of the cartel but set fines that were much higher than our Guidelines would have provided for that duration. In the Bathroom Fittings verdicts of last year, it also reduced the scope of the cartel for one party without reducing its fine.

Let me add a word here on fines and criminal sanctions.

I can see the point of those who claim that jail terms or other sanctions for individuals have a strong deterrent effect. But that does not imply that the fines imposed on a company through an administrative system are soft next to them.

Corporate fines encourage companies to set up compliance programmes and their need is uncontested even in jurisdictions where criminal sanctions exist.

Deterrence is not only about setting fines that match the infringement and all its circumstances. It is also about identifying the companies that deserve to pay them.

Our policy is to include the companies that directly participated in the cartel and those that control them – the so-called parent companies.

The reason is twofold. First, willingly or not, it is the parent that pockets the gains of the cartel. Second, this policy makes it impossible for companies to manipulate the corporate structure to get off scot-free.

When can a company be considered the parent of a cartel participant? Clearly, when it has full control. But there are other cases, too. Again, the power cables case will help me explain this point.

In yesterday’s decision, the Commission imposed a fine on Goldman Sachs as the parent of Prysmian – one of the cartelists.

The facts of the case revealed that the investment bank exercised a decisive influence over Prysmian’s commercial policy during some period. Its influence was to all intents like that of traditional industrial owners, which are regularly held liable in cartel cases.

Ladies and Gentlemen,

I said at the start that I would give more details on settlements and the Directive on private enforcement. Let me do this now before I draw my presentation to a close.

Yesterday’s steel abrasives decision was the 13th settlement since the procedure was introduced in 2010.

After almost four years of application, this has developed into a well-established, case-resolution system that is attractive to the business community and allows us to use our our resources more efficiently.

Settlements offer quicker finality, a 10% reduction in the amount of the fines, and shorter decisions.

Because one of the companies involved in the steel abrasives decision decided not to settle, this was also the fourth hybrid case.

Although I expect hybrid cases to remain the exception, they allow us to use the settlement procedure without being held hostage to the strategies of the companies that prefer not to settle.

Let me make a couple of things clear at this point.

Settlements should not be construed as a means to cut an investigation short or to bargain for lower fines. Not at all. Settling companies must come clean and pay for their mistakes.

Also, please be advised that I am not willing to settle at all costs. If there is no genuine interest to move forward quickly and in a cooperative spirit, we can discontinue settlement discussions at any time – as we have done in the smart card chips case.

The case started with the prospect of a settlement, but then the discussions faltered. So, we switched to the normal procedure and in April last year we sent out a statement of objections.

That was the first and – so far – only time we had to suspend settlement discussions. Another first was the decision taken last month by Société Générale to exercise its right to challenge a settlement decision in court.

The French bank is asking the Court to look into the method we used to calculate the fine of almost €446 million it received for participating in the Euribor cartel, despite accepting its liability and agreeing a fine range during the settlement talks.

Given the thorough and transparent procedure we follow in all cases, I look forward to the Court’s analysis of the appeal. As I said earlier, the Court has full jurisdiction on fines – either to reduce or increase them.

As to the private enforcement Directive, let me say that this is also a first. It is the first initiative in the Competition domain ever discussed by both the Parliament and the Council within the ordinary legislative procedure.

This has been an outstanding example of cooperation among institutions, because they reached a political agreement at the end of last month only nine months after the Proposal was tabled.

This agreement is expected to be formally endorsed by the Parliament in mid-April and, later, by the Council.

Member States will then have two years to implement the Directive, but this important piece of legislation is already sending a clear message to victims of antitrust infringements across Europe. It says that it will empower such victims to obtain compensation for the harm they suffered because of antitrust infringements.

The Directive goes at the core of the procedural obstacles they face today and establishes a minimum standard on which consumers and businesses can rely upon wherever they are in the EU.

This initiative has also been the opportunity to fine-tune the interaction between the actions for damages brought by victims and the public enforcement carried out by the Commission and NCAs.

For example, the new rules will preserve leniency programmes. While they will make more evidence available to victims, they also make clear that crucial documents for public enforcement voluntarily submitted by the parties can never be disclosed – namely, leniency corporate statements and settlement submissions.

In addition, victims will be allowed to wait for the Commission or the national authorities to take a final decision before they act in court, and use it to seek the compensation they are entitled to.

The new rules can make cartel enforcement in the EU more efficient. For example, the companies that obtain immunity from fines in principle will not have to compensate the customers of the other infringers.

Ladies and Gentlemen:

In closing, let me stress a couple of points I made earlier. The fight against cartels is and will remain a priority for the European Commission and for the national competition authorities in the EU. The odds that a cartel is detected and sanctioned can only go up.

Managers, counsels, and everyone in a position to either set up a cartel or walk away from it should carefully balance the facts.

On the one hand, there are the expected benefits of a cartel. Let us not forget that we are talking about an immoral and socially irresponsible practice that harms consumers, reduces incentives to innovate, and puts a brake on the economy.

On the other hand, there is the risk of paying a hefty fine, damages to the actual victims, and other indirect costs. The latter may include losing business and the trust of consumers and business partners.

I wish the day will soon come when prospective cartelists understand that the odds are stacked against them and that setting up a cartel is not only illegal but also a terrible business decision.

Thank you.


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