Are settlement proceedings the poor relation of EU antitrust policy?

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Leniency and settlement policies are crucial antitrust enforcement tools. They reward defendants’ cooperation and seek to reinforce effectiveness in law enforcement by replacing a non-cooperative equilibrium with a more cooperative dynamic between defendants and competition enforcers.

As recently acknowledged by the OECD, settlements are picking up, and becoming an essential aspect of antitrust enforcement. Accordingly, a significant challenge of every leniency policy lies in the need to align with settlement.

Regulation 1/2003 did not establish an EU-wide leniency policy (see here). Nor did it harmonize settlement policies. Thus, companies engaged in anticompetitive practices with a cross-border dimension are faced with the need to undertake multijurisdictional risk assessments and to assess in advance how their cooperation will be handled by authorities acting under different leniency and settlement legal frameworks.

Indeed, determining the core features of leniency and settlement programmes has been left at the discretion of the EU Member States, and the features vary from state to state.

Since Regulation 1/2003 the competition community has witnessed a sharp increase in the number of leniency programmes in place. In 2006, within the context of the European Competition Network (“ECN”), a Model Leniency Programme (“MLP”) was developed. A major goal of the non-binding programme was to eradicate divergences amongst leniency programmes, concerning the treatment that potential applicants can anticipate from competition enforcers.

Potential problems arising from divergences in national leniency programmes could not go unnoticed when, in 2016, in the DHL case, the Court of Justice confirmed the independence of national leniency programmes from the ECN MLP (see here). As argued elsewhere (“The Seven Deadly Sins: Shortfalls of a ‘true European solution’ for a ‘one-stop leniency shop’” (2016) 37 European Competition Law Review 186), there was indeed the need to harmonise core features of leniency programmes (see also here).

Against this background, in an additional effort to harmonise essential features of leniency policy, the ECN+ Directive was adopted in January 2019.

The ECN + Directive

Indeed, “it’s not all doom and gloom in the EU”. In quantitative terms, there is no doubt that the ECN has been a great success. NCAs have become primary enforcers of the EU competition rules (see here). In qualitative terms, the ECN has been playing a major role in promoting a common competition culture.

Yet, to bring about a genuine common competition enforcement area in the EU, in its “10 years Communication”, the Commission identified a number of problems that could undermine the action of NCAs, including on (i) NCA’s independence and resources; (ii) NCA’s investigative, decision-making and sanctioning powers (iii) and leniency programmes. Thus, it presented a proposal – the ECN + Directive – “to put in place fundamental guarantees of independence, adequate financial, human, technical and technological resources and minimum enforcement and fining powers for applying Articles 101 and 102 TFEU and for applying national competition law in parallel to those Articles so that national administrative competition authorities can be fully effective”, as enshrined in recital 8.

It has been said that the Directive “has missed several opportunities to make enforcement even more effective” though.

Specifically as regards leniency policy, recital 11 sets forth that “differences between the leniency programmes in the Member States lead to legal uncertainty for potential leniency applicants. This may weaken their incentives to apply for leniency. If Member States were able to implement or apply clearer and harmonised rules for leniency in the area covered by this Directive, this would not only contribute to the objective of maintaining incentives for applicants to disclose secret cartels, in order to render competition enforcement in the Union as effective as possible, but would also guarantee a level playing field for undertakings operating in the internal market”.

Whilst the NCAs and the Commission should be commended for the initiative, in times when settlements proceedings have taken precedent over ordinary antitrust proceedings to become the norm (see here), a potential harmonisation of settlement policy was left out of the ECN+ Directive in its entirety.

This may have been because in some Member States settlement procedures do not exist or were only recently introduced. EU competition enforcers may have felt that there was not enough experience to draw on as to enact legislation on this field.

Hitherto, the ECN had adopted a number of Recommendations on Investigative and decision-making powers. None of them specifically focus on settlement proceedings.

Settlement Policy

A fundamental question arises as to whether settlement proceedings should be limited to procedural efficiencies. Should they – as a matter of law and/or practice – amount to a bargaining game? Should they also play a role in detecting infringements? Is there the need to safeguard and strengthen equal treatment?

Indeed, the Dutch competition authority explicitly states that it does not negotiate with settlement parties whereas the French antitrust watchdog may enter into discussions, in particular on the reductions in the fines. In practice and contrary to what is publicly acknowledged by the Commission, at the EU level, it has been said that the “talking phase is a bargaining game” and that settlement procedures may indeed “allow for greater proportionality in charging and sentencing”.

Should vertical restraints be eligible under settlement proceedings? At the EU level, although settlement proceedings are restricted to cartels, in other antitrust cases (e.g. vertical restraints), cooperation may be rewarded within the framework of the Commission’s 2006 Fining Guidelines, as occurred for instance in Guess or Nike. Recently, the Commission issued a short note on the reduction of fines for cooperation in antitrust cases other than cartels.

It is extremely important to define whether a settlement agreement can be reached after the issuance of a Statement of Objections. What are the limits of the discretion enjoyed by competition enforcers? What about staggered hybrid cases (see here)? Arguably, settling parties may be more exposed to civil damages than holds-outs to the extent that there may be a significant time difference in the adoption of a settlement decision and a decision under “ordinary” antitrust proceedings.

From an effectiveness point of view, these and many other fascinating questions remain unanswered. Solutions vary across the EU.

Interestingly, an option considered in the ECN+ Directive Impact Assessment involved taking further soft action on targeted specific areas, including having an ECN Recommendation on formal settlement procedures.

Indeed, there is a glimmer of light at the end of the tunnel. Although endorsing rather different approaches, recently both the French and Dutch competition enforcers issued guidance on settlement proceedings. Let the debate begin.

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Virgilio Pereira

Virgilio Pereira is a PhD Candidate at King’s College London. He was a Blue Book Trainee at the Directorate General for Competition of the European Commission.

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