16 February 2012
The purpose of a company whistleblowing to a competition authority about its involvement in a cartel is to obtain immunity from fines, or at least a reduction in the fine imposed on a first-come, first-served basis. The European Commission's Directorate General for Competition provides a leniency notice setting out the terms for companies wishing to whistleblow in relation to EU law infringements. Most national competition authorities within the European Union have similar procedural rules in relation to relevant national competition law regimes.
The interoperability between the EU and national regimes is largely based on the principle of avoiding double jeopardy (that the same party cannot be penalised more than once for a single unlawful course of conduct) as provided by the EU Charter of Fundamental Rights and the European Convention on Human Rights, as interpreted by the EU courts. Consequently, different competition authorities cannot prosecute and penalise the same cross-border anti-competitive
To date, there have been no major concerns regarding the division of competences between the directorate general and national competition authorities. EU Regulation 1/2003, the implementing regulation for the enforcement of competition rules by the directorate general, provides that national competition authorities are "relieved of their competence to apply EU law" once the directorate general initiates proceedings.
Two recent decisions by the directorate general and the French competition authority raise questions as to the division of competences between EU authorities and serve as reminders of an important procedural point concerning application for immunity. The question as to who has jurisdiction – the directorate general or the relevant national competition authority – concerning cartels involving similar products and similar practices over a similar time period can create confusion. This confusion is hindered by the practical point that a company which discovers that it is party to a possible cartel is not certain of the scope of the cartel in terms of time, product or service or geography, at least at first. The decisions demonstrate the confusion caused and the
On April 13 2011 the directorate general ruled that a cartel had existed in relation to heavy duty laundry detergent powders which were sold to consumers in Belgium, France, Germany, Greece, Italy, Portugal, Spain and The Netherlands. The cartel operated between 2002 and 2005. The parties to the cartel were Henkel, Procter & Gamble (P&G) and Unilever. Henkel obtained immunity because it was the first to inform the directorate general. The other two companies cooperated with the directorate general, which resulted in a settlement (a procedure by which the parties acknowledge culpability, so allowing for a quicker procedure and a reduction in fine). Nevertheless, P&G and Unilever were fined €211 million and €104 million, respectively.
Henkel made its application for immunity to the directorate general on April 28 2008, and as a result was granted conditional immunity by the directorate general on June 12 2008. Unilever and P&G made their applications for immunity on May 23 2008 and September 8 2008, respectively. In June 2008 the directorate general conducted dawn raids on the parties' premises.
French competition authority case
On December 8 2011 the French competition authority held that a cartel had existed in relation to standard detergents in France in breach of both EU and French law. The cartel operated between 1997 and 2004, although it was suspended in October 1998 for about one year. The parties to the cartel were Unilever, Henkel, P&G and Colgate. Unilever obtained immunity because it was the first to blow the whistle to the French competition authority. The other three companies cooperated with the authority, but were fined €92 million, €240 million and €35 million, respectively. Unilever made its application for immunity to the French competition authority on March 4 2008, Henkel made an application on April 28 2008, P&G on September 26 2008 and Colgate on February 11 2009.
Division of competences: confusion
Unilever was the first to apply for immunity to the French competition authority in March 2008 in relation to anti-competitive activity in France, quickly followed by Henkel in April 2008. Also in April 2008, Henkel applied for immunity to the directorate general, followed by Unilever and the other cartel participants. For the next three years the directorate general and the French competition authority conducted their respective investigations. While the French competition authority does not investigate conduct outside France, the directorate general included activities in France in its investigations for arguably a similar product and an overlapping time period.
When a company discovers, perhaps through an internal audit, that it may have been party to a cartel, the first phase of the internal review is crucial and fraught with difficulties. Several questions may arise:
- Who is involved within the company?
- What is the scope (geographic, product, time)?
- Which other companies are involved?
There is tension between on the one hand, hoping that there is no issue and, on the other hand, obtaining the evidence and seeking clarity as soon as possible, because a decision must be taken on whether to seek immunity and crucially, where to do so. Making that application sooner rather than later can, as the above cases demonstrate, make the difference between a hefty fine and no fine at all.
When the directorate general first introduced the leniency programme and as other national competition authorities followed, competition law practitioners advised that as a precaution, companies seeking leniency should consider applying to all potentially relevant national competition authorities and the directorate general. As a result, some companies applied to the directorate general and every EU national competition authority that had a leniency programme.
Over time, this practice became less common for the following reasons:
- high costs were involved;
- a single application to the directorate general seemed sufficient for cartels other than those
limited to the territory of a single EU member state; and
- the increasing cooperation between the directorate general and the EU national competition
authorities suggested that in many cases, the directorate general was acting as a one-stop
shop for leniency applications.
The detergents cases indicate that a company finding itself party to a cartel in a single EU member state that wishes to apply for immunity should do so to both the relevant national competition authority and to the directorate general. Applying only to either the directorate general or the national competition authority may be insufficient to protect the company. In short, the working rule perhaps is not tell one, but tell all.