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THE DIRECT SETTLEMENT OF EC CARTEL CASES

Published online by Cambridge University Press:  14 July 2009

Andreas Stephan
Andreas Stephan
Affiliation:
Lecturer in Law, Norwich Law School and ESRC Centre for Competition Policy, University of East Anglia. Email: a.stephan@uea.ac.uk.
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Abstract

In June 2008 the European Commission adopted a system of direct settlement for cartel cases, inspired by a comparative glance across the Atlantic where the majority of antitrust defendants enter negotiated guilty pleas. Whereas settlements in Europe are viewed as a method for expediting the conclusion of cases (distinct from the leniency notice), in the US they complement the offer of immunity as a device for encouraging cooperation. In both jurisdictions they have the effect of reducing the levels of fines imposed. This paper compares how well the two systems fare at enhancing administrative efficiency and deterrence, while maintaining transparency.

Type
Article
Information
International & Comparative Law Quarterly , Volume 58 , Issue 3 , July 2009 , pp. 627 - 654
Copyright
Copyright © 2009 British Institute of International and Comparative Law

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References

1 M Monti ‘Cartels Why and How? Why should we be concerned with cartels and collusive behaviour?’ Speech delivered to 3rd Nordic Competition Policy Conference, Stockholm. September 2000.

2 Verizon Communications Inc v Law Offices of Curtis V Trinko LLP, 124 S Ct 872, 879 (2004).

3 N Kroes, ‘Enforcement of Prohibition of Cartels in Europe’ in C Ehlermann and L Atanasiu (eds), European Competition Law Annual 2006: Enforcement of Prohibition of Cartels (Hart Publishing, Oxford, 2006).

4 JW Rowley and M Low, Getting the Deal Through: Cartel Regulation (Law Business Research, London, 2006).

5 N Kroes, ‘The First Hundred Days’ Speech delivered to the International Forum on Competition Law, Brussels. April 2005.

6 SD Hammond, ‘The US Model of Negotiated Plea Agreements: A Good Deal With Benefits For All’ Speech delivered to OECD Competition Committee Working Party No. 3, Paris. October 2006. 1.

7 ‘Commission Notice on the conduct of settlement procedures in view of the adoption of Decisions pursuant to Article 7 and Article 23 of Council Regulation (EC) No 1/2003 in cartel cases’ OJ [2008] C 167; ‘Commission Regulation (EC) No 622/2008 of 30 June 2008 amending Regulation (EC) No 773/2004, as regards the conduct of settlement procedures in cartel cases Text with EEA relevance’ OJ [2008] L 171; DG Competition Press Release, ‘Antitrust: Commission introduces settlement procedure for cartels’ IP/08/1056 (30 Jun 2008) and ‘Antitrust: Commission introduces settlement procedure for cartels—frequently asked questions’ MEMO/08/458 (30 June 2008).

8 Press Release (n 7).

9 For the policy see: ‘Commission notice on immunity from fines and reduction of fines in cartel cases’ OJ [2006] C 298/17 preceded by OJ [2002] C 45/3 and OJ [1996] C 207/4; Commentators include: Joshua, J and Camesasca, P ‘Where Angels Fear to Tread: the Commission's ‘New’ Leniency Policy Revisited’ (2004) Global Competition Review 7(9)Google Scholar Supp (The European Antitrust Review 2005), 10–14; Joshua, J, ‘Criminalisation, Cartels, Leniency and Class Actions: a Look into the Future’ (2004) Competition Law Insight 22(3)Google Scholar 12 October.

10 Hammond (n 6).

11 See for example: Kroes (n 5); Hammond (n 6).

12 Grand Jury Manual, Chapter IX, Rule 11.

13 Settlement Notice (n 7) 5.

14 Settlement Notice (n 7) 9.

15 ibid 11.

16 ibid 16.

17 ibid 20.

18 ibid 32–33.

19 ‘Guidelines on the method of setting fines imposed pursuant to Article 23(2)(a) of Regulation No 1/2003’ OJ [2006] C 210.

20 Gallo, J C et al. , ‘Department of Justice Antitrust Division Enforcement 1955–1977: An Empirical Study’ (2000) Review of Industrial Organization 17, 75–133 at 108CrossRefGoogle Scholar; Grand Jury Manual, Chapter IX.

21 North Carolina v Alford, 400 US 25 (1970).

22 Under Federal Rules of Criminal Procedure, Rule 11(e)(f) a guilty plea made through a plea bargain is admissible in civil (private) actions unless nolo contendere.

23 United States v Booker 124 US Supreme Court 2531, 12 Jan 2005; SD Hammond ‘Antitrust Sentencing in the post-Booker Era: Risks Remain High for Non-Cooperating Defendants’ American Bar Association Section of Antitrust Law, Spring Meeting, Washington, DC March 2005.

24 OECD ‘Plea Bargaining/Settlement of Cartel Cases’ (2006) Directorate for Financial and Enterprise Affairs, Competition Committee. Working Party No 3 on Co-operation and Enforcement. DAF/COMP/WP3(2006)3 FN14.

25 See Alschuler, A W ‘Plea Bargaining and its History’ (1979) Columbia Law Review 79:1, 40CrossRefGoogle Scholar; Langbein, J H, ‘Understanding the Short History of Plea Bargaining’ (1979) 13 Law & Society Review 261, 265.CrossRefGoogle Scholar Alschuler notes: whereas American courts typically completed six jury trials a day in the 1890s, criminal trials averaged well over a week by the late 1960s.

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27 Kroes (n 5).

28 Case C-397/03P Archer Daniels Midland v Commission (Judgment) (18 May 2006) unpublished; Case T-224/00 Archer Daniels Midland v Commission [2003] ECR II-2597; See also OECD (n 24).

29 USA v Michael D Andreas and Terrance S Wilson (2000) No 96 CR 762 USCA 7th District.

30 Settlement Notice (n 7) 25.

31 ibid 26.

32 Pursuant to Articles 7 and/or 23 Regulation 1/2003 and Article 14 of Regulation 1/2003.

33 Press Release (n 7).

34 Calculated from the author's own database of Article 81 decisions from 2001.

35 ibid.

36 Settlement Notice (n 7) 5.

37 OJ 2003 L 1/1; See generally, C Harding and J Joshua, Regulating Cartels in Europe: A Study of Legal Control of Corporate Delinquency (OUP, Oxford, 2003).

38 Based on the author's own cartel database of horizontal Article 81 decisions, average case duration can be shown to have fallen: 1975–1996 (pre-Leniency Notice)—48 months; 1997–2001—44 months; 2002–2005—42 months.

39 In 2005, the Commission claimed to have received 80 applications for immunity and 79 applications for a reduction of fine under the 2002 leniency notice. A total of 80 applications were received in the six and a half years of the 1996 notice. B Van Barlingen and M Barennes, ‘The European Commission's 2002 Leniency Notice in Practice’ (2005) EC Competition Policy Newsletter, Autumn, 6.

40 J Ratliff, ‘Plea Bargaining in EC Anti-Cartel Enforcement A System Change’ in C Ehlermann and I Atanasiu (eds), European Competition Law Annual 2006: Enforcement of Prohibition of Cartels (Hart Publishing, Oxford, 2006) 1; Joshua and Camesasca (n 9) 10–14.

41 Automec II Cases T-24 and 28/90 [1992] ECR 2223.

42 Van Barlingen and Barennes (n 39) 7.

43 See responses to the public consultation published on the DG Competition website at: <http://ec.europa.eu/comm/competition/cartels/legislation/settlements.html> accessed 20 July 2008.

44 Kroes (n 5).

45 Unless otherwise stated, statistics from author's own database of cartel decisions.

46 Veljanovski, C, ‘Penalties for Price-Fixers: An Analysis of Fines Imposed on 39 Cartels by the EU Commission’ (2006) 27 ECLR 510, 512.Google Scholar

47 In the Graphites Electrode appeal, the CFI reduced SGL Carbon's fine from €80 to €60.69 million, but this was subsequently increased to €75.7 million by the ECJ. See: Judgment of the Court of Justice of 29 June 2006 in Case C-301/04 P Commission v SGL Carbon OJ [2006] C 224.

48 Based on actions brought against Commission decisions in 2005–2007. According to Joshua and Camesasca (n 9) 10–14 the propensity to appeal was as high as 90 per cent before 2005.

49 Based on 50 judgments delivered between 2003–2006.

50 Settlement Notice (n 7) 41.

51 Press Release (n 7).

52 Van Bael, I ‘Fining a la carte: the Lottery of the EU Competition Law’ (1995) ECLR 16(4), 237–243Google Scholar; Wils, WPJ ‘The Commission's New Method for Calculating Fines in Antitrust Cases’ (1998) ELR 23(3) 252–263Google Scholar; Richardson, R ‘Guidance without Guidance—A European Revolution in Fining Policy? The Commission's new Guidelines on Fines’ (1999) ECLR 20(7) 360–371Google Scholar; JM Joshua and PD Camesasca ‘EC Fining Policy Against Cartels after the Lysine Rulings: the Subtle Secrets of X’ (2004) The European Antitrust Review 5; J Killick ‘Is it Now Time for a Single Europe-wide Fining Policy? An Analysis of the Fining Policies of the Commission and the Member States’ (2005) unpublished paper. CLASF Working Paper No 07 <http://www.clasf.org/assets/CLaSFWorkingPaper07.pdf> accessed 20 July 2008.

53 M Hviid and A Stephan, ‘The Graphite Electrodes Cartel: Fines that Deter?’ forthcoming in B Lyons Cases in European Competition Policy: the Economic Analysis (CUP, Cambridge, 2009); A Stephan, ‘The Bankruptcy Wildcard in Cartel Cases’ (2006) JBL, August Issue, 511–534.

54 Settlement Notice (n 7) 16, 20.

55 Judgement of the Court of First Instance of 12 December 2007—Joined Cases T-101/05 and T-111/05 BASF and UCB v Commission OJ [2008] C22/41.

56 The United States Sentencing Commission, Guidelines Manual is available at: <http://www.ussc.gov/GUIDELIN.HTM> accessed 20 February 2009; For a discussion see: SD Hammond, ‘Antitrust Sentencing in the Post-Brooker Era’ Speech delivered to the American Bar Association, Washington DC, 30 March 2005.

57 Motta, M, ‘On Cartel Deterrence and Fines in the European Union’ (2008) ECLR 29(4) 209–220.Google Scholar

58 Kroes (n 5).

59 Kroes (n 3); K Dekeyser, ‘The Commission's Fight against Cartels: Two Years with Neelie Kroes’ Speaking at 9th Competition Law Scholars Forum (CLaSF) Workshop, Deterrence: Cartels, Leniency and Criminalisation. Glasgow 12 April 2007.

60 Hammond (n 6) 3.

61 D Nagin and G Pogarsky, ‘Integrating Celerity, Impulsivity and Extralegal Sanction Threats into a Model of General Deterrence’ (2001) 39 Criminology 4, 865–892; see also: A Von Hirsch et al, Criminal Deterrence and Sentence Severity: an Analysis of Recent Research (Hart, Oxford, 1999) 11.

62 See generally: Stucke, M E, ‘Morality and Antitrust’ [2006] Columbia Business Law Review 461 quotingGoogle Scholar: Young, A A, ‘The Sherman Act & the New Anti-trust Legislation’ (1915) 23 Political Economy 201.CrossRefGoogle Scholar

63 SD Hammond, ‘Cornerstones of an Effective Leniency Program’ Speech delivered to ICN Workshop on Leniency Programs, Sydney. November 2004; OECD (n 24) 7.

64 eg N Boari and G Fiorentini, ‘An Economic Analysis of Plea Bargaining: the Incentives of the Parties in a Mixed Penal System’ (June 2001) 21 Int'l Rev L & E 213, 229.

65 2006 leniency notice (n 9) 13.

66 OECD (n 24) FN39.

67 Whereby further concessions are granted in return for information pertaining to another infringement. Conversely, where it is later revealed that a firm held information about another infringement that it did not produce, it may be subject to penalty plus under which fines are increased; see Hammond (n 73).

68 Settlement Notice (n 7) 32.

69 SJ Schulhofer, ‘Plea Bargain as Disaster’ (June 1992) 101 Yale L J 1979.

70 See Stephan (n 53) 530; H Mutchnik and C Casamassima, ‘United States v Hynix Semiconductor, Inc.: Opening the Door to the Inability-to-Pay Defence?’ (September 2005) Antitrust Source, 4.

71 EC Guidelines on the method of setting fines (n 19) 35.

72 The Commission can use a number of different justifications for lowering fines in specific cases, one of which is ‘… the consequences which payment of the fine would have, in particular by leading to an increase in unemployment …’ Joined Cases T-236/01, T-239/01, T-244/01, T-251/01 and T-252/01 Tokai Carbon and others v Commission of European Communities [2004] ECR II-1181, para 371.

73 Stephan (n 54).

74 For discussions see: Wils, WPJ, ‘The Use of Settlements in Public Antitrust Enforcement: Objectives and Principles’ (2008) 31 World Competition: Law and Economics Review 314Google Scholar; Motta (n 57).

75 WPJ Wils, The Optimal Enforcement of EC Antitrust Law: Essays in Law and Economics (Kluwer Law International, The Hague, 2002) 6.5.2; P Buccirossi and G Spagnolo, ‘Optimal Fines in the Era of Whistleblowers, Should Price Fixers Still Go to Prison’ (2005) unpublished paper. Lear Research Paper 05-01 <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=871726> accessed 20 July 2008.

76 The OECD estimates that some cartels can achieve overcharges as high as 60 per cent: OECD ‘Fighting Hard Core Cartels: Harm, Effective Sanctions and Leniency Programmes’ (2002) Reports to the Organization for Economic Co-Operation & Development. Meanwhile, the probability of detection is estimated to be as low as 13 per cent: Bryant, P G and Eckard, E W, ‘Price Fixing: The Probability of Getting Caught’ (1991) 73 Review of Economics and Statistics 3 531.CrossRefGoogle Scholar

77 A Stephan, ‘The UK Cartel Offence: Lame Duck or Black Mamba?’ (2008) CCP Working Paper 08-19.

78 Hviid and Stephan (n 53); Wils (n 75) 6.5.2; Buccirossi and Spagnolo (n 75); The cap is contained in Council Regulation (EC) No 1/2003, Article 23.

79 Department of Trade and Industry (DTI), A World Class Competition Regime. Cm 5233. (2001). (The Stationery Office, London, 2001; CM 5233) 7.13–7.18.

80 See generally: KJ Cseres (ed), Criminalization of Competition Law Enforcement (Edward Elgar, London, 2006).

81 Baker, DI, ‘Revisiting History—What Have We Learned About Private Antitrust Enforcement That We Would Recommend To Others?’ (2004) 16 Loyola Consumer Law Review 4 379.Google Scholar

82 Hanover Shoe v United Shoe Machinery Corp 392 US 481 (1968); Illinois Brick Co v Illinois 431 US 720 (1977); A I Gavil ‘Antitrust Remedy Wars Episode I: Illinois Brick from inside the Supreme Court’ (2005) 79 St John's Law Review 553; F Cengiz, ‘Passing-on Defense and Indirect Purchaser Standing in Actions for Damages Against the Violations of Competition Law: What can the EC Learn from the US?’ (2007) unpublished paper. Centre for Competition Policy Working Paper 07-21 <http://www.ccp.uea.ac.uk/publicfiles/workingpapers/CCP07-21.pdf> accessed 20 July 2008.

83 DG Competition White Paper: Damages Actions for Breach of the EC Antitrust Rules. COM(2008) 165 final (2 April 2008) 3; See also: DG Competition Green Paper: Damage Actions for Breach of EC Antitrust Rules. COM(2005) 672 (19 December 2005).

84 See the published responses to the public consultation (n 43).

85 See: D MacLeod, ‘Elite schools “breached law” on fees’ The Guardian (9 Nov 2005); and remarks by BA Chief Executive, Willie Walsh: ‘OFT/DOJ competition investigation resolved’ British Airways Press Release, 01 August 2007. Available: <http://www.britishairways.com/travel/bapress/public/en_gb> accessed 20 July 2008.

86 See for example: Blair, RD and Page, WH, ‘“Speculative” Antitrust Damages’ (1995) 70 Washington Law Review 423Google Scholar; Lopatka, JE and Page, WH, ‘Economic Authority and the Limits of Expertise in Antitrust Cases’ (2005) 90 Cornell Law Review 617.Google Scholar

87 Baker, DI, ‘Revisiting History—What Have We Learned About Private Antitrust Enforcement That We Would Recommend To Others?’ (2004) 16 Loyola Consumer Law Review 4 379.Google Scholar

88 Press Release (n 7).

89 Settlement Notice (n 7) 20.

90 For a summary of literature up to 1979, see Alschuler (n 25).

91 K Yeung, Securing Compliance: A Principled Approach (Hart Publishing, Oxford, 2004) 132–138.

92 M Loughlin, Swords and Scales (Hart Publishing, Oxford, 2000).

93 Grossman, M and Katz, M, ‘Plea Bargaining and Social Welfare’ (1983) American Economic Review 73, 749–757.Google Scholar

94 Wesselling, R, ‘The Draft-Regulation Modernising the Competition Rules: The Commission is Married to One Idea’ (2001) 26 ELR 357Google Scholar; Van Bael (n 52); Levitt, M ‘Access to the File: The Commission's Administrative Procedures in Cases Under Article 85 and 86’ (1997) 34 CMLR 1413.Google Scholar

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96 ACCC v J McPhee (1998) ATPR 41-628; ACCC v NW Frozen Foods Pty Ltd (1996) ATPR 41–515 42, 441; Yeung (n 91) 145 & FN19.

97 BH Kobayashi and JR Lott Jr, ‘Low-Probability-high-Penalty Enforcement strategies and the efficient operation of the Plea-bargaining System’ (1992) IRLE 12, 69–77.

98 See Hviid and Stephan (n 53).

99 For example, the competition authority is typically able to withdraw from a settlement procedure at any time before its completion; Furse, M, ‘The Decision to Commit: Some Pointers from the US’ (2004) 25 ECLR 1 5–10.Google Scholar

100 ‘Draft Commission Notice on the Conduct of Settlement proceedings in view of the adoption of Decisions pursvant of Article 7 and Article 23 of Council Regulation (EC) No 1/2003 in cartel cases’ OJ [2007] C255.15.

101 Yeung (n 91); S Bibas, ‘Harmonizing Substantive-Criminal-Law Values and Criminal Procedure: The Case of Alford and Nolo Contendere Pleas’ (July 2003) 88 Cornell L Rev 1361; Scott and Stuntz (n 95); Kobayashi and Lott Jr (n 97); F H Easterbrook, ‘Plea Bargaining as Compromise’ (June 1992) 101 Yale L J 1969; SJ Schulhofer ‘Criminal Discretion as a Regulatory System’ (1988) 17 JLS 43; Grossman and Katz (n 93).

102 Van Bael (n 52).

103 Yeung (n 91) at 115; Kobayashi and Lott Jr (n 97).

104 Scott and Stuntz (n 95).

105 Joined Cases T-67/00 T-68/00, T-74/00 and T-78/00 JFE Engineering Corp v Commission (8 July 2004) unpublished; see also Van Barlingen and Barenes (n 39).

106 It is not uncommon for the leniency policy to uncover cartels that have already failed, rather than active ones: Stephan, A, ‘An Empirical Assessment of the European Leniency Notice’ (2008) Journal of Competition Law and Economics.Google Scholar

107 OECD (n 24) para 53; BH Kobayashi, ‘Deterrence with Multiple Defendants: An Explanation for ‘unfair’ Plea Bargains' (Winter 1992) THE RAND Journal of Economics, Vol 23, No4 507–517.

108 [1998] ECT II-2099; Harding and Joshua (n 37) 251.

109 Appeal brought on 21 May 2002 by Dansk Rørindustri A/S against the judgment delivered on 20 March 2002 by the Court of First Instance of the European Communities (Fourth Chamber) in Case C-189/02 P Dansk Rørindustri A/S v Commission of the European Communities OJ [2002] L 202.

110 DG Competition Press Release, IP/06/1222 (20 Sept 2006).

111 Ratliff (n 40).

112 Wils, WPJ, ‘The Principle of Ne Bis in Idem in EC Antitrust Enforcement: A Legal and Economic Analysis’ (2003) 26 World Competition 131.Google Scholar

113 Scott and Stuntz (n 95); Waelbroeck, D, ‘The Emergence of a New Settlement Culture: What is Left to the Courts?’ (2008) Speech delivered to Fourth Annual Conference of the Global Competition Law Centre 19–20 June, BrusselsGoogle Scholar.

114 Hammond (n 6) 1.

115 Yeung (n 91) 141; K Mack and S Anleu, Pleading Guilty: Issues and Practices (Carlton South Victoria 1995) p98; OECD (n 24) 14.

116 ibid 116.

117 Yeung points to an Australian case in which the court accepted a plea agreement, even though the defendant in this case consented to the allegations without admitting their truth; NW Frozen Foods Pty Ltd v ACCC (1996) 71 FCR 285, 296–7; Yeung (n 91) 145.

118 Settlement Notice (n 7) 18.

119 ibid 29.

120 OECD (n 24) para 63; O Gazal, ‘Partial Ban on Plea Bargains’ (2005) unpublished paper. The John M Olin Center for Law & Economics Working Paper Series, Working Paper 59 <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=794549> accessed 20 July 2008.

121 Press Release (n 7); OECD (n 24) 6.

122 Settlement Notice (n 7) para 17.

123 A O'Brien, ‘Cartel Settlements in the US and EU: Similarities, Differences & Remaining Questions’ Speech delivered at 13th Annual EU Competition Law and Policy Workshop, Florence, Italy. 6 June 2008 3.

124 Kobayashi and Lott Jr (n 97).

125 Graphite Electrodes—Commission Decision of 18 July 2001 (Case 36.490) OJ [2002] L 100 70.

126 Settlement Notice (n 7) 35.

127 This characteristic has been cited as one of the reasons why US plea bargaining failed to succeed in Italy see eg Boari and Fiorentini (n 64).

128 Settlement Notice (n 7) 1; Press Release (n 7).

129 Yeung (n 91) 130.

130 O'Brien (n 123) 8.