Just because you can’t see anti-competitive behavior doesn’t mean it isn’t there. On the contrary, secrecy is a key element for the existence of cartels and an impediment to eliminating them.
For this reason, competition authorities are constantly trying to find mechanisms that will enable effective cartel detection. In this regard, the European Commission (“Commission”), the authority charged with enforcing EU competition rules, outlines its “leniency policy” as a very successful tool for this purpose.
The leniency policy is the possibility for involved companies to report a competition infringement to the Commission (or to another competent authority in another jurisdiction) in exchange for full immunity or at least a reduction of the potential fine. Only one leniency applicant can benefit from full immunity of the fine, in most cases, the first company that provides sufficient information and evidence for initiating an investigation or proving the infringement (in case an investigation is already underway).
As companies pursue cross-border activities beyond EU jurisdiction, primarily into neighboring countries aspiring toward membership (“Accession Countries”), alleged infringements are increasingly likely to affect these markets as well. Thus, in the case of transnational cartels, potential “whistle blowers” must file leniency applications with the EU Commission and with the competent authority in any affected non-EU jurisdiction. In other words, a competition infringement can easily spill-over, while an EU Commission leniency application might not.
Pan-European Impacts
Considering that anti-competitive behavior among companies is hard to identify and prove, over the last 10 years the Commission intensified its promotion of the leniency policy on both the EU and national levels. In line with the promotion, the Commission presented the European Competition Network Model Leniency Program, a document designed to provide legal certainty to leniency applicants despite dealing with different competition regulators. More practical in its approach, the Model Program introduced a uniform summary application system which enables involved companies within the program’s scope to file a full-form leniency application to the Commission and a short-form application the the relevant Member State authority.
Macedonian lawmakers also recognized the need for an effective leniency program and in early 2014, they went beyond the ability to award only legal entities with immunity or reduce fines. Specifically, the Criminal Code was changed to allow legal representatives of involved companies to be released from punishment if s/he significantly contributes to the discovery of prohibited market practices.
In terms of protection of competition within the EU, the strings between the Commission and the respective authorities of Accession Countries are well tied. However, national regulators of the Accession Countries are separate and a very important piece of the competition puzzle concerning transnational cartels that affect their jurisdiction. Subsequently, when it comes to enforcing leniency policy on international cartels, these competition authorities act independently within their jurisdictions.
If an Accession Country’s competition authority becomes aware that the Commission sanctioned a cartel that also operated in their jurisdiction, they are likely to launch an investigation. Such an operation would likely have EU practice and know-how behind it, even if the specific details of the case would not be shared. Further, the respective authority would likely obtain information and evidence regarding the cartel in question that would enable them to pursue an efficient and effective misdemeanor procedure.
For example, the Toshiba case – which took place before the Czech Republic acceded to the EU – involved separate prosecution by the Commission and the Czech Competition Authority 2. In that case, both the Commission and the Czech Competition Authority sanctioned the involved companies to pay fines totaling roughly EUR 790 million.
Conclusion
There is no ‘one-stop leniency shop’ for competition infringements that affect both EU and Accession Countries. If a company is ready to expose an infringement to the Commission, it should be prepared to file leniency applications simultaneously with all the relevant authorities, lest other parties beat them to it. If the leniency applicant omits this step, the consequences of any potential proceedings before the authorities of affected Accession Countries would not only be counterproductive, but potentially very painful.
For the purposes of this article, the term "Accession Countries" encompasses the countries that showed willingness to become Member States of the EU by fulfillment of the Copenhagen criteria. This includes, inter alia, Bosnia and Herzegovina, Macedonia, Montenegro, Serbia and Turkey.
By Leonid Ristev, Senior Associate, Bozidar Milosevic, Associate, Karanovic & Nikolic
