cartels 2018...denmark olaf koktvedgaard, frederik andré bork & søren zinck, bruun &...

CartelsEnforcement, Appeals & Damages Actions 2018Sixth Edition

Contributing Editors: Nigel Parr & Euan Burrows

CONTENTS

Preface Nigel Parr & Euan Burrows, Ashurst LLP

Albania Anisa Rrumbullaku, CR Partners 1

Belgium Hendrik Viaene, Stibbe 8

Canada Randall J. Hofley, Joshua A. Krane & Chris Dickinson, Blake, Cassels & Graydon LLP 18

China Dr. Zhan Hao, Song Ying & Stephanie (Yuanyuan) Wu, AnJie Law Firm 36

Denmark Olaf Koktvedgaard, Frederik André Bork & Søren Zinck, Bruun & Hjejle Advokatpartnerselskab 57

European Union Euan Burrows, Irene Antypas & Laura Carter, Ashurst LLP 66

Finland Ilkka Aalto-Setälä & Henrik Koivuniemi, Borenius Attorneys Ltd 86

France Bastien Thomas & Cécile Mennétrier, Racine 96

Germany Prof. Dr. Ulrich Schnelle & Dr. Volker Soyez, Haver & Mailänder Rechtsanwälte Partnerschaft mbB 109

India Naval Satarawala Chopra, Manika Brar & Aman Singh Sethi, Shardul Amarchand Mangaldas & Co. 122

Indonesia Benedicta Frizka, Jonathan Tjenggoro & Lia Alizia, Makarim & Taira S. 136

Israel Eytan Epstein, Mazor Matzkevich & Shani Galant-Frankfurt, M Firon & Co 147

Italy Davide Cacchioli, Alessandro Bardanzellu & Lisa Noja, Pedersoli Studio Legale 158

Japan Catherine E. Palmer, Daiske Yoshida & Hiroki Kobayashi, Latham & Watkins 170

Malaysia Raymond Yong & Penny Wong, Rahmat Lim & Partners 180

New Zealand Jennifer Hambleton & Oliver Meech, MinterEllisonRuddWatts 189

Pakistan Hira Ahmad, Ameer Nausherwan Adil & Ali Qaisar, LMA Ebrahim Hosain 201

Romania Silviu Stoica & Mihaela Ion, Popovici Nițu Stoica & Asociații 208

Singapore Lim Chong Kin & Corinne Chew, Drew & Napier LLC 220

Sweden Peter Forsberg, Haris Catovic & David Olander, Hannes Snellman Attorneys Ltd 230

Switzerland Mario Strebel, Christophe Pétermann & Renato Bucher, Meyerlustenberger Lachenal Ltd. 242

Taiwan Belinda S. Lee, Christopher B. Campbell & Elizabeth H. Yandell, Latham & Watkins LLP 267

Turkey Gönenç Gürkaynak & Öznur İnanılır, ELIG, Attorneys-at-Law 274

Ukraine Sergey Denisenko, Yevgen Blok & Anna Litvinova, AEQUO Law Firm 287

United Kingdom Giles Warrington & Tim Riisager, Pinsent Masons LLP 296

USA Peter K. Huston, Sidley Austin LLP 309

PREFACE

We are delighted to present the sixth edition of Global Legal Insights – Cartels. This edition covers the most significant developments in 26 jurisdictions around

the world and, as before, is designed to provide in-house counsel, government agencies and private practice lawyers with a practical insight into cartel enforcement policy and procedure, including leniency/amnesty regimes, administrative settlement, sanctions and appeals.

The aim of this edition, as with other volumes in the Global Legal Insights series, is to collect the views and opinions of a group of leading competition law practitioners from around the world in a single volume. Authors continue to be encouraged to focus their chapter on what they consider to be the most important practice points and recent developments in their jurisdictions, with a free rein to determine the content of their chapter. By giving the authors the opportunity both to select the legal and policy issues which they wish to discuss, and to offer insights into the practical operation of their national regimes, this book aims to look beyond the anti-cartel provisions and enforcement procedures which apply in the various jurisdictions. It also facilitates an up-to-date comparative analysis of the approaches currently being taken by competition agencies around the world to some of the difficult issues that can arise in practice, which we hope will prove to be helpful when considering enforcement initiatives and developments in your own jurisdiction.

Nigel Parr and Euan Burrows,

Ashurst LLP

GLI – Cartels 2018, Sixth Edition 1 www.globallegalinsights.com

AlbaniaAnisa Rrumbullaku

CR Partners

Overview of the law and enforcement regime relating to cartels

The law no 9121/2003 “On the protection of competition” (the Competition Law) covers, inter alia, collusive agreements between undertakings. Similarly to article 101 (1) TFEU, Article 4 of the Competition Law provides a general prohibition for all agreements between undertakings having as their object or effect the prevention, restriction or distortion of competition. A non-exhaustive list of the prohibited conducts is set out in the law and includes agreements related to:(a) directlyorindirectlyfixingpricesorothertradingconditions;(b) sharingmarketsorsourcesofsupply;(c) limitingorcontrollingproduction,trade,technicaldevelopmentorinvestment;(d) applying to some parties dissimilar conditions for equivalent transactions, thereby

placingthematacompetitivedisadvantage;and(e) making the conclusion of contracts subject to acceptance by the other party of

supplementary obligations or to the conclusion of additional contracts that, by their nature or in accordance with commercial usage, have no connection with the subject of the main contract or to its performance.

The meaning of ‘agreement’ is very broad and it covers any kind of the agreements and/or concerted practices of two or more undertakings, and decisions or recommendations of associations of undertakings, regardless of their form, written or not, or binding force. Agreements are ‘horizontal’, meaning agreements between competing undertakings operating in the same market or ‘vertical’, meaning between undertakings operating in differentmarketlevels.Giventheverybroaddefinitionof‘agreement’,thelegislatorhasnot seen it necessary to introduce a special legal notion for ‘cartels’. Indeed, cartels fall under the regime of all other types of collusive agreements under the Albanian Competition Law. Similar to all other breaches under Article 4 of the law, participation in a cartel constitutes a serious administrative infringement subject to a pecuniary sanction of up to 10% of the annual turnover of the cartel member. On the other hand, the Competition Authority (Authority) may impose, for less serious infringements, fines amounting up to 1% ofthe turnoverofacartelmemberduring the lastfinancialyear incase itobstructscartelsinvestigations such as when it does not provide the required information within the required deadline, refuses to allow access to investigation, provides misleading, incomplete or false information, provides misleading, incomplete or false records during the inspection, refuses to accept authorised inspections, refuses to respond or provides misleading, incomplete or false answers, removes seals, etc.


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Fines for individuals who either with intent or out of negligence participate in a cartel, cannot exceed 5 million LEK (approx. 35,000 EUR). The Authority is the competent authority for the enforcement of cartel prohibition. The Authority is composed of the Commission, which is the decision-making body and the Secretariat that in turn conducts the investigations in relation to potential infringements, provides to the Commission the relevant investigation reports and monitors the implementation of the decisions of the Commission.

Overview of investigative powers in Albania

According to theCompetitionLaw, theofficialsof theAuthorityhaveall the followinginvestigation rights in place in relation to alleged cartel behaviour:Request for information: The Authority can request information from any third party, person or undertaking information that is necessary for its investigation, including information containing business secrets. If the required parties do not provide the information within the set timeframe, the Commission may adopt a decision to demand the required information from the relevant parties. This decision must provide the deadline for the submission of information,legalbasesfortherequestandfinesincaseoffailuretorespond.Information from public bodies: The Authority may request all necessary information from state authorities and public bodies which have a duty to cooperate with the Authority. Dawn raids: The Authority may conduct dawn raids in cases of suspected cartel and abuse of dominance cases. Dawn raids at business premises require a prior decision of the Commission while inspection of non-business premises requires the prior authorisation of the relevant administrative court having jurisdiction over the location of the inspection. During a non-business premises inspection, the inspectors of the Authority may enter the residence of the administrators, managers, directors and other staff members and other premises similar to residence, as well as residence and business premises of persons and entities, in house or external, in charge of financial, accounting, tax or administrativeactivities of the undertakings concerned, only between 7:00 and 18:00 hours.During unalerted inspections, the inspectors of the Authority may:• inspect books and records of the economic activity of the undertaking, in hard or

electroniccopy;• seizedocuments,records,registersorobtaincopiesthereof;• sealpremises,recordsorbooksfornotmore72hoursifnecessaryfortheinspection;

and/or• conduct interviews with representatives or employees of the undertaking with respect.Regarding inspections at non-business premises, seizure of evidence may be made upon prior court decision and may be extended up to six months from the original 72 hours. The personaffectedbytheseizuremustbenotifiedthroughminutesandhastherighttoappealthe seizure with the relevant court. The Authority’s inspectors are usually accompanied by IT specialists, who can search the entireITenvironmentandstoragemedia,runningkey-wordsearchesonstoredfilesandemails.

Overview of cartel enforcement activity during the last 12 months

The cartel enforcement practice of the Competition Authority is not very rich, although a positive trend has been observed in terms of the number of third parties’ complaints


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received by the Authority regarding alleged cartel behaviour. Most of the alleged cartels investigated during 2017 (some six cases) were closed after preliminary investigation procedures with the Authority concluding that during the inspections no evidence of direct or indirect communication between the investigated undertakings were found and that economic evidence based on OECD methodology did not point to a potential collusive behaviour between the parties. As a result, all the investigations were closed mainly with recommendations from the Authority for the investigated undertakings or the regulatory authorities, where relevant. Investigated markets during 2017 included the telecommunications market, market for the distribution of movies in cinemas, market for the production and sale of milk, liquid gas market, market for the production of bread, etc.

Key issues in relation to enforcement policy

One of the most important factors of an effective anti-cartel practice in Albania is the full implementation of a leniency programme, which gives incentives for the members of a cartel to voluntarily disclose their conduct to the Authority. The effectiveness of the leniency programme, however, has not been yet tested and applied in Albania. Further, the success of cartel enforcement depends on strong sanctioning policies by the Authoritywhichinturnshouldprovideforsufficientpreventiveeffectforcartelmembers.Public awareness and competition advocacy is also important. It is not exaggerated to say thatmanyundertakingsinAlbaniaarestillignorantofthefactthatprice-fixingpracticesareillegal and are unaware that dawn raids and investigative powers of the Authority in their business premises are all in accordance with the Competition Law and cannot be obstructed.

Leniency/amnesty regime

A leniency regime has been in place in Albania since 2004 but to the best of our knowledge, no applications for leniency had been received by the Albanian Competition Authority due to the fact that companies in Albania are still not very familiar with the Competition Law. Article 77 of the Competition Law provides the possibility for a cartel member to obtain total orpartialrelieffromfinancialpenaltiesshoulditmeetcertaincriteria.Further,theRegulation‘On Fines and Leniency Policy’ (the Regulation) details the leniency policy in full.The leniency policy is drafted along the lines of the European Commission’s leniency regime. To the extent an undertaking helps to establish cartel behaviour and identify its members by providing items of information not previously available to the Authority, the Commissionmaygranttotalorpartialrelieffromthefinancialpenalties.Suchreliefwillbe granted in proportion to the contribution made to identify and prohibit the infringement. ThefirstundertakingthatsubmitssufficientevidencetotheAuthorityiseligibletoreceiveimmunityfromanyfinewhichwouldotherwisehavebeenimposed.Otherundertakingsthatdonotmeettheconditionsforimmunityfromanyfinecanbenefitfromafinereductionup to 50%, the exact percentage depending on the value of the contribution to exposing the cartel and the order of the applications where several cartel members have applied for leniency.

Administrative settlement of cases

There is no legal framework or case law with respect to settlement procedures outside the leniency policy.


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Third-party complaints

The Competition Law sets out the right of any interest party to report on an alleged cartel or other Competition Law infringements by submitting a complaint to the Authority. The complainant may reserve the right of its anonymity. The Authority has approved a complaint form but complaining parties are free to supplement the form with additional information andalsorequestconfidentialityofcertaininformationsubmitted.WhentheCommissiondeemsthattheinformationsubmittedbythecomplainingpartyisnotsufficienttopromptan inspection, it authorises the Secretariat to inform the complaining party on its decision and to set a deadline for the complainant to make its observations regarding the decision not to open an investigation. If the observations of the complaining party do not convince the Commission to alter its decision, it will inform the complainant accordingly. The complainant may appeal the decision of the Commission not to act with the relevant court. A crucial right of a complaining party is the right to obtain a copy of the in-depth investigation report of the Authority (the equivalent of the Statement of Objections) in relation to a cartel investigation where confidential information is omitted. Thecomplainant is given a deadline to submit its written observations on the report and also a request to participate in a hearing session. Lastly, the complainant has the right to access information where the Commission supports its decision not to start an investigation. Such information can be used by the complainant only for the purpose of court procedures.

Civil penalties and sanctions

As noted above, participation in a cartel constitutes a serious administrative infringement subject to a pecuniary sanction of up to 10% of the annual turnover of the cartel member. Ontheotherhand,theAuthoritymayimposeforlessseriousinfringementsfinesamountingupto1%oftheturnoverofacartelmemberduringthelastfinancialyear.Fines for individuals who either with intent or out of negligence participate in a cartel, cannot exceed 5 million LEK (approx. 35,000 EUR). The Regulation on Fines and Leniency approved by the Authority is based on the 2006 EuropeanCommissionGuidelinesonthemethodofsettingfinesimposedpursuanttoArticle23(2)(a)ofRegulationNo1/2003.Asarule,theAuthorityshouldfirstdeterminethebasicamountforthefinethatitwilladjustupwardsordownwardsaccordingtoaggravatingormitigatingcircumstancesoftheinfringement,byreferencetothevalueofthespecificsalesofservicestowhichtheinfringementrelatesinAlbania.Thebasicamountofthefinewillthen be determined as a proportion of the value of sales, multiplied by the number of years of infringement. The proportion of the value of sales considered will be set at a level of up to 30% of the value of sales and, in the case of cartel behaviour, will have to be on the higher end. The Authority has the right to include in the basic amount a sum of between 15% and 25% of the value of sales in order to further discourage undertakings from cartel behaviour. Thefinalamountof thefinecannotexceed10%of the total turnover in theprecedingfinancialyearoftheundertakingconcerned.There is lack of transparency on the methodology applied by the Authority in determining thefinesforcartelsorabuseofdominanceinfringements.Incertaincases,theAuthoritywilllimititselftoproposingafinethatisequalto10%oftheturnoveroftheundertakingconcernedinthepreviousfinancialyear.


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Right of appeal against civil liability and penalties

A decision of the Competition Authority at the end of the in-depth investigation to impose finesonthecartelmemberscanbechallengedwithin30dayswithTirana’sadministrativecourt of first instance. The appeal of the decision does not automatically suspend thecollection offines as under theCompetitionLaw,fines are considered as an ‘executivetitle’. The undertaking concerned can request a freezing order from the court to suspend thecollectionofthefineuntilthedisputeistrialledinthemeritsalthoughisnotverylikelythat administrative courts grant a freezing order when public institutions are involved. It is worthnotingthatthepaymentofthefineisnotaconditionforthefilingofanappealwithTirana’sAdministrativeCourtoffirstinstance.

Criminal sanctions

There are no criminal sanctions for cartel infringement under the Albanian Criminal Code or the Competition Law.

Cross-border issues

As a rule, the Albanian Competition Law is applicable in all instances when the impact of behaviour is present in the local market, irrespective of the location of the undertakings concerned. In practice, however, the Authority has not asserted its extra-territorial jurisdiction to date and there is no clarity on the issues that the Authority may face in these cases.

Developments in private enforcement of antitrust laws

In addition to the public enforcement of competition rules, the Competition Law also provides for the right of any person to privately enforced competition infringements with the Albanian District Court. Hence, any person prevented in its activity due to alleged prohibited agreements or abusive practices may challenge such practice in court and demand (a) the cessation of illegal practice, and (b) damage compensation pursuant to the Albanian Civil Code provisions. Such actions are independent of the proceedings before the Authority or previous decisions on the same matter. As an exception, exemption of agreements from the general prohibition provided in the law cannot be applied by the court given that the Authority has exclusive rights to review applications for exemptions under the law. In practice, this means that if the defendant in private enforcement procedures invokes before the court conformity of the agreement or practice with the exemption rules, the court will have to suspend the process and wait for the Authority to decide whether to make an exemption. The court will ultimately decide if an agreement is fully or partially invalid with retroactive effect and, where applicable, the obligation of the defendant to enter into an agreement with the plaintiff under usual commercial terms. Damage compensation claims, on the other hand, are strictly based on the Albanian Civil Code provisions according to which, any person who illegally and with fault causes damage to a person or his/her property, should compensate for the damage caused. The claimant in this case must prove the illegality of the conducts, the damages caused and the causal link between the illegal conduct and the damages.AdecisionoftheCompetitionAuthorityfindingthatthereiscartelbehaviourwillserve as direct evidence that there has been illegal conduct, i.e. in this case, the plaintiff will not have to prove the illegality of the behaviour.


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Despite the existing legal framework, there are no cases of private litigation in Albania that seek to privately enforce the provisions of the Competition Law. According to the UNCTAD Voluntary Peer Review of Competition Law and Policy Report for Albania, this situation is mainly due to lack of public awareness for private enforcement possibility, lack of trust in Albanian Courts, length of civil proceedings and lack of procedural instruments for the private parties to secure evidence for the infringements.

Reform proposals

There are no reform proposals in the pipeline regarding cartel enforcement.


CR PartnersRr. Ibrahim Rugova, Sky Tower, Suite 5/2, Tirana, Albania

Tel: +355 4222 8181 / URL: www.crpartners.al

Anisa RrumbullakuTel: +355 4222 8181 / Email: [email protected] Rrumbullaku is a Partner covering the Corporate and Competition practiceofthefirm.Sheisspecialisedinallaspectsofcompetitionpractice,i.e. merger control, abuse of dominance, prohibited agreements and individual exemption filings, and has also participated as speaker regarding mergercontrol procedures in workshops organised by the Albanian Competition Authority. Before co-founding CR PARTNERS, she worked for another Albanian leadinglawfirmwhereshewasapartnerinchargeoftheM&A/competitionpractice providing clients with legal advice across all sectors onM&As,contracts, PPPs, merger control, abuse of dominance and assisting them in dawn raids conducted by the competition authority. Chambers Global 2017 acknowledgesAnisaasaLeadingLawyerintheCorporate/Commercialfieldfor Albania.She has graduated with Honours from the Tirana Law Faculty (2004) and holds an LL.M. (cum laude) in Business and Trade Law from Erasmus University of Rotterdam (2007).

CR Partners Albania


BelgiumHendrik Viaene

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Article IV.1 of the Code of Economic Law (“CEL”) is the Belgian equivalent to Article 101 of the Treaty on the Functioning of the European Union (“TFEU”). Similar to the TFEU, Article IV.1 CEL prohibits agreements between undertakings and concerted practices that have as their object or effect the restriction of competition on the relevant Belgian market,orasignificantpartthereof.Itappliestobothhorizontalandverticalagreements.If such actions also affect trade between Member States, Article 101 TFEU can be applied simultaneously.Competition law enforcement bodiesCompetition law in Belgium is enforced through an administrative and/or civil law procedure. The two main bodies responsible for enforcing competition law are the Belgian Competition Authority and the national courts. The Minister of Economy likewise plays a (modest) role.1. Belgian Competition Authority (“BCA”) The BCA, initially an administrative court, was transformed into an independent

administrative authority in 2013. The new BCA is responsible for investigation, prosecution and decision-making in relation to anti-competitive practices. Although there is no institutional separation between the investigation and decision phase, other procedural guarantees were put in place to ensure the BCA’s impartiality.

The main organs of the BCA in its current form are the Public Prosecution Service (“Auditoraat”/“Auditorat”) and the Competition College. Whereas the former isresponsible for the investigation and prosecution of anti-competitive behaviour under supervision of the Auditor-General, the latter is responsible for the consequent decision-making and – as the case may be – for the imposition of sanctions. Upon submission of a motivated draft decision by the Public Prosecution Service, the procedure before the Competition College commences. Ultimately, the Competition College decides whether an infringement of competition law is present. If so, it will order its cessation and–ifappropriate–imposeafine.ItisalsopossiblethattheCompetitionCollegedeclares the parties’ proposed commitments binding, without formally ruling upon the existence of an infringement.

2. Minister of Economy Based on Article IV.41 §1 CEL, the Minister of Economy is granted a limited role in

competition law enforcement. In particular, it has a positive injunction right, i.e., it can order the Auditor-General to investigate a certain case. The Public Prosecution Service or (if the case proceeds) the Competition College remains nonetheless at liberty to dismiss the case.


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3. National courts Competition law may be privately enforced through national courts (see infra), which

are competent to assess damage claims brought before them by victims of competition law infringements. They also hear cases where an infringement of competition law is invoked. Typically, that would be the case where one of the parties invokes the nullity of an agreement.

WithintheBrusselsCourtofAppeals,anumberofchambershavenowbeenappointedto constitute a separate section, called the Market Court, which will, among others, be the only court competent to hear an appeal against a decision by the Competition College. Afterwards, only an appeal on points of law remains possible, and can be submitted to the Court of Cassation.

Finally, in case commitments were made binding by the Competition College, as a result of which there is no longer reason for it to proceed, national courts are still competent to rule upon the presence of an infringement in the past.

Sanctions for cartel infringementsTheCompetitionCollegecanimposefinesupontheundertakingsconcernedwhenorderingcessation of a restrictive competition practice, as well as accompany the cessation order with a periodic penalty payment (see infra). Under certain circumstances, individuals canalsobefinedbytheCompetitionCollege.NocriminalsanctionsareavailableunderBelgian law.

Overview of investigative powers in Belgium

The Public Prosecution Service is charged with investigating anti-competitive practices. Investigations can be initiated either ex officio, upon complaint, or upon ministerial request. The BCA’s investigative powers resemble the European Commission’s investigative powers as enshrined in Regulation No. 1/2003 – an important difference being the capability of the BCA to carry out searches at private individuals’ homes. As discussed below, most cartels are discovered by an ex officio investigation following a leniency application.General investigative powersThe prosecutors may request the undertakings concerned for information, upon which the undertakings have to respond within a certain indicated time limit. If the required information is not provided after such period has elapsed, a motivated decision can be adopted requiring the undertakings to provide the requested information. The prosecutors are furthermore competent to conduct interviews and take written or oral statements. They may also request and copy all documents or information deemed necessary in order to carry out their investigative duties. Dawn raidsBy far the most intrusive measure is a dawn raid. Prosecutors are empowered to carry out inspections in any premises, means of transport, or other land of the undertakings concerned where the presence of data relevant for their investigation can reasonably be presumed. Inspections in the private homes of the undertakings’ directors, managers and other staff are also possible but rarely conducted (since 2007, only two dawn raids in private premises have been carried out). Assistance to conduct the inspection can be requested of the police and of experts. The inspections require prior authorisation of an investigating judge as well as a warrant specifying the subject matter and purpose of the inspection, issued by the prosecutor in charge of the investigation.During the course of the inspection, the prosecutors may interview persons in charge as well as staff members in relation to the subject matter of the inspection and in relation


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to the internal organisation of the undertaking in order to facilitate the inspection. The prosecutors may also seize and seal, but in case such actions are carried out at premises other than those of the undertakings concerned, their duration may not exceed 72 hours. Regarding the examination of electronic documents, the BCA has put forward transparent guidelines they abide by when examining such documents. Accordingly, a prima facie examination of the content and structure of the electronic data is made in order to identify the personsandfilespossiblyrelatedtothesubjectmatter.Subsequently,eitherkeytermsareusedwithincopiesofthesefilesinordertofacilitatetheselectionofindividualdocumentsrelevanttotheinvestigation,orthedataisexaminedmanuallyonsite.Inthefirstscenario,the documents are selected without examining their content. The list of used key terms is, in any event, provided to the undertaking concerned. In principle, the undertaking concerned or its advisers should be present during such selection. Unfortunately, the prosecutors seem tohavedevelopedadifferentpracticewhereonly theclassification into threecategories(“in-scope”, “out-of-scope”, or “legal-professional-privilege” (“LPP”)) is conducted in the presence of the undertaking or its advisers, while the selection is made in their absence. Evidently, such a practice does not allow for control over which documents are or are not examined by the prosecutors.The “in-scope” documents can be examined immediately by the investigation team, while the other documents are sealed pending an examination by an independent prosecutor. It is nonetheless possible that a document is consulted immediately to identify its possible out-of-scope or LPP character. Sanctions related to the investigationFailure to comply with certain obligations during the investigation phase may lead to an additional fine of up to 1% of the turnover for undertakings. Although legislationspecificallyreferstoindividualsaswellasundertakings,thefactthatthefineisbasedontheundertaking’sturnoverseemsincompatiblewithimposingsuchfinesonindividuals.Itthereforeremainstobeseenwhetherthesefinescanandwillbeimposedonindividuals.Fines can be imposed in case one deliberately or negligently provides inaccurate, incomplete, misleading or untimely information following a request by reasoned decision, as well as in cases where investigations are prevented or impeded.


To date, the BCA is not particularly active in the context of cartel enforcement. In 2017, only two cartel decisions were taken: one concerning a public tender issued by Infrabel, the Belgianrailinfrastructureoperator;theotherconcerningverticalresalepricemaintenanceand exclusionary behaviour in the market for yeast. Both cases were settlement decisions. The total amount of the fines imposed was approximately €7.3million. In 2016, twosettlementdecisionsweretaken,resultingintotalfinesofabout€3.9million.Similarly,in 2015, only one cartel decision was adopted, which was once again concluded via a settlement procedure.1TheBCAnonethelessimposedarecordfineof€174million.The relatively low number of decisions is not surprising given the BCA’s decision practice in the past, where the number of cartel decisions was not necessarily higher. Furthermore, the BCA still had to deal with a larger number of cases started under the old authority. Many of those were dismissed. Reasons for dismissal may be “limited resources and priorities”, lack of evidence or prescription. For instance, in 2015, 17 cases were dismissed by the college of auditors.


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Furthermore, based on its recent investigative practice, these numbers are not expected to increasesignificantlyinthenearfuture.


As in most jurisdictions, the BCA has the discretionary power to decide whether or not to pursue cases brought to its attention “in light of the available resources and priorities”. The BCA announces its priority policy for the following year in an annual document. For 2017, the BCA intended to undertake action within the following five sectors (mainlycoinciding with its priority policy in 2015 and 2016): the liberalised sector of network-industries; the sector ofmass distribution, including relationswith suppliers; the sectorof media and digital economy; the services sector; logistics; and the sector of publicprocurement. The BCA adds that it will investigate all serious competition law violations it deems necessary, regardless of its priority policy. In practice, the BCA will pursue both cases brought to its attention (through leniency applications or complaints) and cases initiated ex officio. The likelihood that a complaint might lead to a full-on investigation is nonetheless higher when it concerns a priority sector. As to the nature of the infringements primarily pursued, no general trend can be identified. The year 2017 saw one settlement decision following a cartel during apublic tender process and one settlement following an issue of vertical resale price maintenance, client partitioning and exclusionary behaviour. Both cartel decisions in 2016 concerned agreements or concerted practices relating to price-setting, and were directly organised amongst competitors, either in the form of formal agreements or in the form of meetings and contacts leading to a common understanding. The cartel decision in 2015, however, concerned an indirect information exchange (hub and spoke) leading to a concerted practice. In particular, information concerning price increases was exchanged through a common supplier, which negotiated and arranged the ultimate concerted practice amongst distributors.

Key issues in relation to investigation and decision-making procedures

A couple of issues in relation to the investigation and decision-making procedures, as implemented by the 2013 competition legislation, are worth mentioning. An issue that has particularly occupied practitioners since 2013 concerns the means of appeal during the investigation phase. As the enforcement procedures are now conducted through a monistic rather than dual system, the Court of Appeal is considered to be an essential factor in the checks-and-balances in order to safeguard the procedural rights of the parties concerned. Evidently, the law provides for means of appeal against cartel decisions or dismissals by the Competition College. Regarding the investigation procedure, certain safeguards are put in place as well, for instance the possibility to have the Competition CollegereviewdecisionsofthePublicProsecutionServiceregardingconfidentiality.The 2013 competition legislation has nonetheless been criticised for not properly safeguarding the parties’ procedural rights during the investigation phase. This is especially due to the fact that no immediate means of appeal are available against a dawn raid which has been the subject of a lot of debate. According to Article IV.79 §1 CEL, an undertaking can contest a decision of the Public Prosecution Service to use data obtained through an inspection, but only after the grievances (i.e. statement of objections) are communicated


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and only as far as such data is used to prove said grievances. As expected, case law has been abundant on this matter. In 2014, the Constitutional Court ruled Article IV.79 §1 CEL to be compliant with the Constitution and the relevant human rights, as nothing in the CEL precludes national courts from suspending the decision in question pending the appeal, thereby preventing the Competition College from obtaining access to the disputed data in the meantime.2 One could read a recent judgment of the Brussels Court of Appeal as continuing to take issue against this point of view, and arguing for earlier appeal potential.3 It remains to be seen how case law will evolve on this matter.Other issues in relation to thecurrent legislative frameworkcanalsobe identified. Forinstance, according to Article IV.45 §3, parties are not allowed to submit additional documents – not submitted during the investigation phase – to the Competition College (subject to certain exceptions). This may lead to inequality, as the Public Prosecution Service is not subject to any time limit to formulate its grievances, while the undertakings are expected to submit all necessary documents within a short period of time after the grievances are communicated. Furthermore, criticism has been expressed against the lack of a possibility to appeal by third parties against commitments and by the undertakings in question against cartel decisions concluded through a settlement procedure (a possibility which is nonetheless provided for under European competition law).Finally, it is worth mentioning that Belgian case law accepts LPP for Belgian in-house counsel. Indeed, the Court of Cassation confirmed4 that advice provided by in-house counsel(membersoftheBelgianInstituteforin-housecounsel)isconfidential,asaresultof which such documents cannot be seized or examined by the BCA within the framework of a dawn raid. However, the privilege does not apply in case the BCA assists the European Commission in conducting inspections.


As in most jurisdictions, Belgian competition law provides for a leniency regime similar to that of the European Commission. An undertaking is able to obtain immunity for, or reduction of, the fine itwould normally risk, if it contributes to proving the prohibitedpractice and in identifying its participants, either by providing intelligence the BCA did not yet possess, by proving a prohibited practice the BCA did not yet know of, or by acknowledgingtheexistenceofsuchpractice.Thespecificconditionsinordertoqualifyforimmunityfor,orreductionof,thefinearesetoutintheBCA’srecentlyamendedleniencyguidelinesandareidenticaltothoseoftheEuropeanCommission.Thereductionofthefineis proportionate to the undertaking’s contribution to proving the infringement. In 2016, the BCA’s leniency guidelines were amended to extend the possibility of leniency to private individuals. As a result, private individuals can likewise request immunity for theirfines,undersimilarconditionsasundertakings.Asimmunitymayalsobegrantedtoindividuals cooperating with a leniency application of the undertaking he or she works for, applying for individual immunity is, in any event, advised if the individual’s undertaking decides to submit a leniency application. Importantly, an immunity request of an individual does not preclude undertakings from obtaining immunity.The leniency regime can be considered a relatively important aspect of cartel enforcement in Belgium. Since 2013, there have been considerably more leniency applications than third-party complaints or ex officio investigations. For instance, the total amount of complaints in relation to restrictive practices (therefore including cartels as well as abuses of dominance) in 2014 was six, compared to a total of 17 leniency applications (in 10


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cases). Similarly, a total number of four complaints were lodged in 2015, compared to eight leniency applications. In addition, all major cartel cases that have been successfully prosecuted in recent years involved a leniency applicant. Indeed, in all four cartel decisions in 2015–2017, one undertaking was granted full immunity. Some of the other undertakings consequently obtained a fine reduction of between 50% and 20%, depending on theircontribution and timing.


As stated above, all 2015, 2016, and 2017 cartel decisions were ultimately concluded through a settlement procedure (“transaction” according to the CEL). In any given investigation (but prior to submitting its draft decision to the Competition College), the Public Prosecution Service may propose a time limit within which the parties can communicate their readiness to hold transaction talks. If so, a short version of the grievances are communicated and access is given to the relevant evidence. If a transaction turns out to be a possibility, the undertakings in question give a statement of transaction, wherein they admit their involvement, assume responsibility for the quoted infringement and accept the proposed sanction. The transaction is “rewarded” by a reduction of up to 10% of the initially calculatedfine.Inpractice,themaximumof10%isalmostalwaysgranted.Thesettlementprocedure ends with a transaction decision of the Public Prosecution Service addressed to all settling undertakings, against which no appeal is possible (see supra). The Competition College is therefore not involved in the procedure.The settlement procedure is clearly distinct from the leniency procedure, both in law and inpractice.Theymayalsobecombined,asaresultofwhichtherelevantfinereductionswill be combined.


According to Articles IV.41 and 42 CEL, complaints can be submitted to the Auditor-General by anyone who demonstrates their direct and immediate interest in the claim. There is no obligation to initiate a formal investigation procedure, but a formal dismissal decision nonetheless has to be adopted. The Public Prosecution Service is free to dismiss complaints based on its priority policy and the available means (see supra). In addition, complaints may be dismissed as unfounded, inadmissible or due to their prescription. WhenthePublicProsecutionServiceisconsideringdismissingacomplaint,itmay decide tohearthecomplainant.Incaseofdismissal,thecomplainantisnotifiedandprovidedwiththepossibilitytoconsulttheproceduralfileandbringanappealbeforethePresidentoftheCompetition College.Informal complaints are also possible. They will be analysed and inquired into by the Public Prosecution Service if so requested by the Auditor-General. Contrary to formal complaints, informal complaints can remain unanswered. Interestingly, whereas formal complaints are communicated to the undertakings concerned, informal complaints are not. As a result, if the Public Prosecution Service decides to investigate upon informal complaint, a request forinformationwillbesenttotheundertakingswithoutnecessarilyindicatingthespecificreasons for its sudden interest. Undertakings can therefore be tempted to be less careful in responding to such requests.As stated above, there are very few complaints per year: only six complaints were submitted in 2014 and four in 2015 (including both cartel and abuse of dominance complaints). The precise number for 2016 is yet to be announced. Furthermore, in recent years, no cartel case was successfully prosecuted based on a complaint.


Stibbe Belgium


As stated above, the Competition College can impose a fine upon the undertakingsconcerned when ordering cessation of a restrictive competition practice, capped at 10% of their respective turnovers. Furthermore, it can accompany the cessation order with a periodic penalty payment, capped at 5% of the average daily turnover. According to the guidelines of the BCA, the Competition College will follow the “2006 Guidelines on the methodofsettingfines”oftheEuropeanCommission,withafew(evident)alterations.Thecap of 10% (respectively 5% for the periodic penalty payment) is calculated based on the company’s turnover generated on the Belgian market and through export.The aggravating or mitigating circumstances that might increase or decrease the fineare identical to those listed in the Commission’s guidelines. However, in relation to the aggravating circumstance of repetition, only infringements that have been the subject matter of a Commission decision, or a decision by a national competition authority in one of Belgium’s neighbouring countries, are taken into account. Thedraftdecision,includingthefineclaimedbythePublicProsecutionService,issenttothe parties simultaneously with its submission to the President of the Competition College. Incasepartiesarepreparedtosettle,theminimumandmaximumamountofthefinethePublic Prosecution Service is considering to propose is communicated earlier, along with the grievances it is raising.In relation to the imposition of administrative fines upon individuals, a fine of €100 to€10,000canbeimposedfornegotiatingoragreeingto,andonbehalfofanundertakingwithitscompetitors,tofixprices,limitproductionorsales,orallocatemarkets.Asstatedabove,no criminal sanctions are available under Belgian law.


Parties can lodge an appeal against a cartel decision taken by the Competition College, includingagainstthefinesimposedtherein.SuchanappealhastobelodgedwiththeMarketCourt section of the Brussels Court of Appeal and is a “full merits” appeal regarding both the facts and the law. The Court assesses the situation as it existed at the time of the decision, basedontheinvestigationfileandformulatedgrievancesofthePublicProsecutionService.It may not inquire into additional facts or evidence, nor reformulate the initial grievances. The Court may substitute the cartel decision of the Competition College with its own decision,includinganegativestatementthatnoinfringementispresent.WhentheCourtcomes to the conclusion that an infringement of Article 101 TFEU is present (contrary to the BCA decision), it can only annul the relevant decision without rendering a substitute decision.Furthermore,inrelationtoanappealagainstthefinesimposed,itcanbeinferredthattheCourtisfreetodecreasethefinebasedonreasonsofexpediency,proportionalityorlegitimacy.However,itcanbeinferredthatifitconsidersthefinetoolow,itsonlyoptionis to annul the decision of the Competition College.An appeal cannot be lodged against a transaction decision (see supra). As a result, and given that cases are often concluded through a settlement procedure, there is not a lot of caselawonthismatter.Oneappealinrelationtothefinecalculationisnonethelessworthmentioning. In 2016, the Court of Appeal ruled that the principle of ne bis in idem might berelevantifanothernationalcompetitionauthorityhasalreadyimposedafine,takingintoaccount the Belgian turnover. In those cases, the BCA is in principle not precluded from imposing a fine in relation to theeffectson theBelgianmarket. TheCourtnonetheless


Stibbe Belgium

stated that the BCA hadtocalculatethefineinrelationtotheBelgianmarket,andcouldnottherefore impose a lump sum penalty.5 The Court was quite active in overturning decisions taken during the investigation phase. As such, there have been cases wherein the Court ruled dawn raids conducted by the Public Prosecution Service illegitimate, primarily because no prior authorisation of an investigating judge was required under the previous legislation, and means of appeal were uncertain.6Similarly,theCourt–asconfirmedbytheCourtofCassation7 – ruled on the illegitimacy of seizing documents containing advice of in-house counsels or based on a “fishingexpedition”withoutpredeterminingtheirrelevancetothesubjectmatter.8

Cross-border issues

To date, neither the BCA, nor national courts attempt to exert their competition law jurisdiction extraterritorially. Decisions are therefore limited to the infringing facts related to (a part of) the Belgian territory.Cooperation efforts within the European Competition Network should be mentioned, however. In particular, the BCA has already assisted in several inspections of the European Commission, conducted multiple inspections upon request of other national authorities, and answered numerous questions of other national authorities. The BCA rarely seems to ask assistance of other national authorities itself, however. Regardless, cartels have already been successfully prosecuted in the past, (partly) based on information provided by the European Commission.9


As in most EU jurisdictions, private enforcement is still a developing area rather than a significantsourceofcompetitionlawcases.PrivateenforcementofBelgianorEuropeancompetition law through national courts is nonetheless an existent feature. However, more prominent in this regard are actions attempting to achieve the annulment of an agreement contrary to competition law (as opposed to third-party enforcement actions).10 By theAct of 6 June 2017, Belgium finally transposed the EU Directive on antitrustdamages actions (“Damages Directive”). The Act entered into force on 22 June 2017. AnyproceduralrulesintroducedbythisActwillnotbeappliedtoclaimsfordamagesfiledbefore 26 December 2014. The Belgian Act is mainly in line with the Damages Directive, with a few interesting deviations, including: the impact of voluntary damage payments on thefinecalculationbytheBelgianCompetitionAuthority;andthefactthatthedefinitionofa cartel also included hub-and-spoke cartels.

* * *

Endnotes1. BCA Decision of 22 June 2015, Case CONC-I/O-06/0038 – Hausses coordonnées des

prix de vente de produits de parfumerie, d’hygiène et de droguerie, No. ABC-2015-I/O-19-AUD.

2. Constitutional Court, 10 December 2014, No. 179/2014.3. Brussels Court of Appeal, 9 July 2015, No. 2014/MR/1, TBM 2016, vol. 1, p. 48, §31.4. See i.a. Brussels Court of Appeal, 9 July 2015, No. 2014/MR/1, TBM 2016, vol. 1, p.

48 and Brussels Court of Appeal, 18 February 2015, No. 2013/MR/19, 22, 24–25, TBM 2015, vol. 1–2, p. 73.


Stibbe Belgium

5. Inrelationtotheflour-cartel,seeBrusselsCourtofAppeal,30June2016,No.2013/MR11-15, not published.

6. Court of Cassation, 22 January 2015, AR C.13.0532.F.7. Court of Cassation, 22 January 2015, AR C.13.0532.F.8. Brussels Court of Appeal, 5 March 2013, 2011/MR/3, not published.9. See e.g. BCA Decision of 30 August 2013, Case CONC-I/O-05/0075 – Cimenteries,

No. 2013-I/O-24.10. See e.g. Brussels Court of Appeal, 28 April 2010, TBH 2011,vol.8,p.808;Antwerp

Court of Appeal, 2 December 2013, No. 2010/AR/1938, TBM 2014, vol. 4, p. 335.


Stibbe Belgium

StibbeRue Loksumstraat 25, 1000 Brussels, Belgium

Tel: +32 2 533 54 21 / Fax: +32 2 533 53 97 / URL: www.stibbe.com

Hendrik ViaeneTel: +32 2 533 54 21 / Email: [email protected] Viaene is a partner at Stibbe Brussels, where he mainly focuses on European and Belgian competition law (merger control, cartels and abuse of dominant position), state aid and EU internal market provisions. He regularly assists clients before the Court of Justice, the General Court, the European Commission, national courts and administrative authorities. Mr. Viaene published various contributions relating to the application of European and Belgian competition law. He is a member of the board of editors of the Revue de la Concurrence Belge and an editor of the EU Competition Law Handbook. He also teaches competition law in the framework of the Brussels Bar Association.


CanadaRandall J. Hofley, Joshua A. Krane & Chris Dickinson

Blake, Cassels & Graydon LLP


Statutory regimeCartelconductisaseriouscriminaloffenceinCanada,attractingbothpenalandfinancialsanctions (indeed, the potential imposition of the highest penalties of any “corporate crime” in Canada). Canada’s cartel prohibitions are set out in sections 45 to 47 of the Competition Act (the “Act”),1 which is a federal law of general application that applies to all conduct which either occurred in, or has effects in Canada.2

Section45criminalisesagreementsbetweencompetitorsorpotentialcompetitorstofixorcontrol prices or output, or to allocate sales, territories, customers or markets for the supply of any good or service. Prior to amendments which entered into force in March 2010, it was an indictable criminal offence to conspire or otherwise agree with another person (not just a competitor) to prevent or lessen competition “unduly” with respect to a good or service in Canada. Today, section 45 is a per se offence, such that proof of an undue lessening of competition (or anti-competitive effects) is not required to establish culpability.Given the amended provision’s reference to supply, the Canadian Competition Bureau (the “Bureau”) has indicated in guidelines that section 45 does not apply to agreements which relate only to the purchase of products, i.e., joint purchasing agreements.3

Under section 46, a corporation is prohibited from implementing a “directive, instruction, intimation of policy or other communication” from a person outside of Canada to give effect to a “conspiracy, combination, agreement or arrangement” that would have contravened section 45 had it occurred in Canada. The communication must come from a person who is “inapositiontodirectorinfluencethepoliciesofthecorporation”.Section 47 criminalises agreements to submit pre-arranged bids or providing that one or more of the parties will not submit a bid or will withdraw a bid. As with the conspiracy provision, bid rigging is per se a criminal offence.The Commissioner of Competition (the “Commissioner”) and his department, the Bureau, are responsible for investigating alleged violations of the Act, including the cartel provisions. They can refer cartel matters to the Public Prosecution Service of Canada (the “PPSC”) for prosecution. Aswithothercriminaloffences,Canadianconstitutionallawaffordsprotectionstofirmsandindividuals under investigation or being prosecuted for cartel conduct (e.g., the presumption of innocence, the protection against self-incrimination, the right to counsel, etc.).4

While cases may be prosecuted in either the provincial superior courts or the FederalCourt Trial Division, contested cartel cases in Canada are uncommon and more typically,


Blake, Cassels & Graydon LLP Canada

prosecutions are resolved by way of a plea agreement submitted to a provincial superior court.5 In the case of international cartels, a company typically will enter into a plea agreement in Canada once it has pled guilty to conspiracy in the US, or sometimes elsewhere. While there is no limitation period for the prosecution of cartel conduct inCanada, the Bureau can exercise its discretion to discontinue an investigation and not refer past conduct to the PPSC.6 The Bureau has published several guidelines in respect of its enforcement approach to the cartel provisions of the Act. In May 2009, the Bureau published its Competitor Collaboration Guidelines which describe the Bureau’s approach in applying the cartel and competitor collaboration provisions of the Act, and outline the competition issues that may arise from collaborations.7 The Bureau has also published bulletins regarding its Immunity andLeniencyPrograms,whichitupdatesfrequentlytoreflecttheBureau’scurrentapproachto the administration of these programmes. The most recent bulletins for the Immunity and Leniency Programs were released in 2010 along with a set of Frequently Asked Questions in September 2013, although proposed changes are forthcoming.8 The Bureau recently released a revised version of its Immunity Program bulletin for public comment.9 Proposed amendments to the programme include:• areturntotheBureau’spreviousprocessofgrantinginterimimmunityfirst,withfull

immunitylater(oncetheBureauandthePPSCaresatisfiedwithaparty’scooperation);• employeesandpersonnelofimmunityapplicantswillnotnecessarilyreceiveimmunity;• profferscouldberecorded;• witnessinterviewsmaybeunderoathandrecorded;and• non-privileged internal investigation records may be treated as disclosable (and claims

of privilege will be dealt with pursuant to a process established by the programme).In June 2015, the Bureau published an updated Corporate Compliance Programs bulletin, setting out the Bureau’s view of the essential components of a credible and effective programme and appending a model compliance programme framework for companies touse, a certification letter for employees, andaduediligencechecklist.10 The Bureau also released a final version of itsCompetition and Compliance Framework bulletin in November 2015, which explains the outreach, enforcement and advocacy instruments the Bureau utilises to promote compliance with the Act.11

PenaltiesThe penalties for a violation of the cartel provisions are severe. A violation of section 45 (conspiracy) or section 47 (bid rigging) carries a possible term of imprisonment of 14 years. MaximumfinesforconspiracyareCan$25mpercount(andapersonmaybechargedwithmultiplecounts),andthereisnomaximumfineforbidrigging(ortheimplementationofaforeign directive). A plea agreement may contemplate sanctions other than those prescribed bytheAct,includingthedisqualificationofindividualsfromholdingcertainofficeswithina company or asset forfeiture.The fundamental principle of sentencing in Canada is that a sentence must be proportional to the gravity of the offence and the degree of responsibility of the offender. The general principles of sentencing law in Canada require that judges consider sentences imposed on similar offenders in similar circumstances; however, there are no formal sentencingguidelines or rules. It is standard practice in Canada for the PPSC to make formal submissions on sentencing to the court considering the plea agreement, if one exists.12

The magnitude of the economic harm caused by a cartel goes to the gravity of the offence. The usual notion of “economic harm” from a cartel is the “overcharge”. This is the amount



paid by victims of the cartel over-and-above what they would have paid for the products in theabsenceoftheconspiracy.TheBureauwillnormallyrecommendthatthefinebegreaterthantheoverchargetoensurethatthefineisnot“simplyacostofdoingbusiness”andtoensure that an appropriate level of punishment and deterrence is achieved.Inmostcases it isdifficult toquantify theovercharge resulting fromcartelbehaviour.In such cases, the Bureau typically will use 20% of the volume of commerce affected in Canada (e.g., the value of the conspirator’s sales of the products in Canada over the relevant time period) by the cartel participant as a proxy for the economic harm and as the starting point for its sentencing assessment (provided it is not above the maximum allowablefine);thisissaidtobemadeupof10%fortheassumedoverchargeand10%for deterrence. In a conspiracy matter involving multiple counts, the resulting fines may exceed thestatutory maximum for one count. In dealing with multiple counts, the Bureau will consider the totality of the conduct and surrounding circumstances to arrive at the appropriate sentencing recommendation. In reasons delivered in R v. Maxzone Auto Parts (Canada) Corp,13 Crampton C.J. emphasised the need for a full evidentiary record and detailed submissions for the court tobecomesatisfiedthatasentencearrivedatbypleaagreementisinthepublicinterestand would not bring the administration of justice into disrepute.14 The submission should set out the aggravating, mitigating and other sentencing considerations, some of which arenotalwayssubmittedasamatterofcourse, including theamountof illegalprofitsattributable to the conduct, the economic harm attributable to the conduct, and whether the corporate defendant has paid restitution. Additional requirements may need to be met with respect to individual defendants. The Commissioner has stated publicly that despite the greater detail required in sentencing submissions, companies have continued to come forward seeking leniency, and the Bureau and cooperating parties have managed to work with the framework set out by Crampton C.J. Indeed, since the release of the decision, theredoesnotappeartohavebeenasignificantchangeinthenumberortypeofcasesresolved by plea in Canada. In addition to criminal penalties, plaintiffs in third-party civil actions can recover damages, as well as investigation costs and costs to bring the proceeding. Moreover, provincialassetforfeiturestatutesallowfortheconfiscationbytheCrownofproceedsofcrime as well as offence-related property.15

There are business implications to convictions as well. For example, bidders for federal government contracts must comply with the requirements set down by Public Services and Procurement Canada (“PSPC”), the department which provides procurement services to the Canadian Federal Government.16 These requirements prohibit any bidder from biddingonacontractwhereitor itsaffiliateshavebeenconvictedofcertainoffences,including criminal offences under the Act and even equivalent foreign offences. These requirements are part of the Government of Canada’s Integrity Regime, which was updated in April 2016 in an effort to provide more clarity with respect to the disclosure requirements for potential suppliers to the federal government, as well as how the Integrity Regime is administered.17 In continuing to assess the effectiveness of the Integrity Regime, a public consultation was held from September 25 to November 17, 2017 and a report summarising the feedback received is expected to be released in January 2018.18

Administrative settlementConvictions in the context of cartels have to date been obtained almost exclusively through the plea bargaining process. In addition to, or in lieu of, a plea agreement for criminal



conduct, section 34(2) of the Act provides a mechanism whereby a person can consent to a prohibition order. The order may appear very similar to a plea agreement (e.g., include conditions for the payment of a monetary penalty, a prohibition on individuals holding certainoffices,etc.),butwillnotresultinacriminalconvictionorcriminalrecord.TheBureau typically will not seek prohibition orders in lieu of plea agreements. Alternative trackThe Commissioner can also prosecute competitor collaborations under section 90.1 of the Act. Under this section, the Commissioner can apply to a specialised competition court, the Competition Tribunal (the “Tribunal”), to prohibit the continuation or entry into of an agreement or arrangement between competitors. Responsibility for enforcing section 90.1 lies exclusively with the Commissioner and a decision to commence proceedings under section 90.1 bars the PPSC from prosecuting the conduct criminally.19 The Tribunal mayissueaprohibitionorderwhereitfindsthattheagreementpreventsorlessens,orislikely to prevent or lessen, competition substantially in a market. The Tribunal may not, however,imposeotherpenalties(e.g.,finesorimprisonment)andnoprivaterightofactionfor damages exists (strictly speaking) with respect to conduct governed by section 90.1.20

Cartel investigationsFact-gathering toolsCartel conduct typically will come to the Bureau’s attention in a number of ways. Most commonly, a person or firm will approach the Bureau under the Immunity Program(described below) and seek immunity in respect of cartel conduct. Sometimes companies that are affected by a cartel will complain to the Bureau about cartel conduct involving their suppliers or customers. If the Bureau finds the complaint to be credible, it caninvestigate the complaint using its many information-gathering powers. When cartelinvestigations in other foreign jurisdictions become public, the Bureau is increasingly pursuing investigations on its own accord. In addition, the Bureau may discover possible cartel conduct in the course of another matter such as a merger review.The Commissioner also has extensive powers to obtain information through search warrants, orders for the production of data, and records and wiretaps. Search warrants may be obtained by means of an ex parte application pursuant to section 15 of the Act. Underthissection,thecourtmustbesatisfiedthattherearereasonablegroundstobelieveacriminal offence has been committed and that relevant evidence is located on the premises to be searched. It is a criminal offence to prevent access to premises in Canada or otherwise obstruct the execution of a search warrant. The Act also provides special procedures for sealing privileged documents and for determining the validity of privilege claims within a certain time frame. The Bureau also has the power to investigate cartel behaviour through wiretaps, although it requires prior judicial authorisation in order to do so.Warrantsarenotsubjecttoappeal,butcanbereviewedwheretherehasbeenmaterialnon-disclosure ormisrepresentation in the affidavit supporting theCommissioner’s ex parte application. Targets may also request a retention or privilege hearing.The Bureau also may apply to the courts for production orders or orders for oral examination under section 11 of the Act. The Bureau will generally only use section 11 while in the initial fact-gathering stage. If the Bureau has a reasonable belief that a crime has been committed, it will typically obtain a search warrant instead. Section 11(2) of the Act also provides that the Bureau may seek on an ex parte basis, and the courtsmay issue, a production order in respect of a foreign affiliate of aCanadian



corporation when: (i) the Bureau has sought a similar order in respect of the domestic subsidiary;and(ii)theBureaucanestablishthattheforeignaffiliatehasrecordsthatarerelevant to an inquiry. In Canada (Commissioner of Competition) v. Pearson Canada Inc.21 and Canada (Commissioner of Competition) v. Indigo Books & Music Inc.,22 Crampton C.J. provided guidance on the Bureau’s burden in obtaining production orders and a respondents’ ability to challenge such orders, notably rejecting challenges based on discovery being available in other ongoing proceedings or the existence of other persons who might have relevant information or records. In Canada (Commissioner of Competition) v. Bell Mobility Inc.,23 Crampton C.J. provided further guidance regarding the relevant time period for what constitutes an excessive, disproportionate or unnecessary burden on respondents in relation to a production order;specifically,heexplainedthattheCommissioner’sinformationrequirementsshouldbe tailored to the individual investigation and where a “reasonable efforts” standard is feasible (i.e., where a “reliable, representative amount” of information, as opposed to an ordertoproduceallinformationoveralengthytimeperiod,wouldbesufficienttoprovetheCommissioner’s case), it should be negotiated by the parties and applied.24 Section 29 of the Act protects the identity of informants and requires that the Bureau hold confidentialanyinformationprovidedbyinformantsunderthesearchandseizurepowersofthe Act.In international cartel cases, the Bureau will work closely with other competition agencies either through formal procedures, involving the application of mutual legal assistance treaties (“MLATs”), or through reliance on Canada’s competition cooperation agreements to obtain information. Currently, Canada has MLATs or competition cooperation agreements with most major jurisdictions including the US, the EU, Japan, Australia, Brazil and others.Immunity and Leniency ProgramsCanada’s Immunity and Leniency Programs are of integral importance to cartel enforcement. Although no statistics are available publicly, it can be safely assumed that the Immunity and Leniency Programs assist the Bureau in the vast majority of its investigations. In Canada, the Bureau will assign an “immunity marker” to an individual or a company that is“first-in”,orfirsttorequestimmunity,oftencalledthe“immunityapplicant”.Whereapartydoesnotqualifyforimmunity(i.e.,thepartyisnot“first-in”)butthepartycooperateswith the Bureau, often called the “leniency applicant”, the Bureau typically recommends that theprosecutiongrantsomeformofleniency,intheformofareducedfinancialpenaltyand/or deferral of prosecution of any individual related to the leniency applicant.To obtain immunity or leniency, the requesting party must provide evidence of an offence of which the Bureau is currently unaware, or of which the Bureau is aware but on which the Bureau has not yet obtained enough proof to mandate a criminal referral to the prosecution (a “proffer”). The party also must terminate its participation in the illegal activity and must not have coerced others to be a party to the illegal activity. The party must commit to full cooperation throughout the entirety of the Bureau’s investigation and the PPSC’s prosecution of the case vis-à-vis any other party.Once a party has received a marker (on a “no-names” basis by indicating the relevant product) and has indicated to the Senior Deputy Commissioner of Competition of Criminal Matters (the “SDC”) that it wishes to participate in the Immunity or Leniency Program, the SDC willconfirmthecontinuationofthemarker,usuallyforaperiodof30days,inorderfortheapplicant to provide a proffer. If the proffer is not provided on a timely basis, the marker may



belost.ParticipationintheImmunityandLeniencyProgramsisvoluntary,confidential,andon a (as against the participant) “without prejudice” settlement privileged basis. Applicants should be aware, however, that in 2015, the Ontario Superior Court in R. v. Nestlé held that “factual information” disclosed (as opposed to legal arguments or procedural submissions made) by a participant in the Immunity and Leniency Programs is not settlement-privileged and, even if it were settlement-privileged, an exception must be allowed to accommodate the Crown’s duty to disclose relevant evidence to a defendant in a criminal proceeding.25

Immunityisgrantedonlytothefirstparticipantinvolved–includingitsemployees,officersanddirectors– inaconspiracy tocomeforward. After that, thefirst leniencyapplicantinCanadagenerallyiseligibleforuptoa50%reductioninthefinethatwouldotherwisehave been recommended by the Bureau to the prosecution, and individuals related to the applicant are not generally subject to prosecution (although potential reforms to the Bureau’s Leniency Program include the removal of this protection for individuals and the discretion for the Bureau to recommend a per cent discount for leniency applicants irrespective of their “first”,“second”,etc.status).Subsequentleniencyapplicantsareeligibleforareductionofup to 30%, but later applicants will not be eligible for a greater leniency discount than prior applicants. In addition, the length of the offence period is typically a matter of negotiation withtheauthoritieswherethepartycooperateswiththeinvestigation;theperioddeterminedto be relevant, for example, in US proceedings, can have a bearing on the period used in Canada. In addition, the Bureau may consider (and recommend that the courts consider) the pre-existence of a “credible and effective” compliance programme as a mitigating factor whenassessingafineagainstafirmchargedwithacarteloffence.Immunity Plus is available should a company provide the Bureau with probative evidence of a second conspiracy or other criminal conduct unrelated to the Bureau’s current investigation, or in respect of products not presently being examined by the Bureau under its current investigation. Immunity Plus status provides immunity with regard to the “additional” conspiracy or criminal conduct, as well as an additional discount (generally in the range of 5% to 10%) for the initial criminal conduct (although this amount may increase depending on the extent of the party’s cooperation).The Bureau typically will not share the identity of an immunity or leniency applicant, or the information provided by the applicant with a foreign law enforcement agency, unless the applicant provides a waiver giving the Bureau consent to do so (or it is required by law to do so). As part of an applicant’s ongoing cooperation, under either the Immunity or Leniency Program, the Bureau expects the applicant to provide waivers allowing communication of information with jurisdictions to which the applicant has made similar applications for immunity or leniency. The request for a waiver, however, is typically limited to the jurisdictions which are most relevant to the case in Canada. At times, the Bureau may be willing to accept a limited waiver (e.g., allowing the agencies to discuss only certain information), if legitimate reasons for doing so are provided. Eventually, however, the applicant may be required to provide a full waiver allowing for the sharing of any information the Bureau obtains in the course of cooperation, including documents. As a matter of practice, there tends to be minimal document exchange (the agencies have often received production of the same documents) and moderate oral exchanges between the agencies.Strict confidentiality as to the identity of informants may reduce potential exposure tocivilactionsforimmunityandleniencyapplicants;however,onceguiltypleasareentered,leniency applicants are readily exposed to third-party actions for damages. The information providedbyimmunityandleniencyapplicantsissubjecttostrictconfidentialityagreements



with the Bureau. Third parties seeking damages cannot require, without a court order which the Bureau will resist, the Bureau to disclose information obtained from leniency and immunity applicants in their investigations, and thus their exposure to damage actions is limited to the material made publicly available.26 Potential immunity and leniency applicants should be aware that plaintiffs in private actions may rely on the Supreme Court of Canada’s (the “SCC”) decision in Imperial Oil v. Jacques (discussed below) to obtain access to certain Bureaufilesandinformationobtainedduringacriminalinvestigation.However,suchaccessis limited by Canada (Attorney General) v. Thouin (discussed below), where the SCC held thatinapricefixingclassactioninwhichthegovernmentisnotaparty,Bureauinvestigatorscannot be compelled to be examined for discovery.In October 2017, the Bureau released a revised version of its Immunity Program for public comment, with proposed changes (described in more detail below) focused on ensuring credible and reliable evidence is provided earlier in the process.27 The Bureau gave interested parties until December 29, 2017 to provide their views on the proposed changes. No timetable has been set for publishing the updated Immunity Program.Duration of investigationsThe duration of time from the receipt of an immunity marker to the end of the immunity applicant’scooperationobligationsishighlycase-specific.Indeed,thetiminghasrangedanywhere from one to 10 years following the initiation of an investigation through, for example, a dawn raid(s).28 This timing will depend on a number of factors including: thenumberofparticipantsinthecartel;thedurationoftheconduct;theaffectedvolumeofcommerce; theextent towhich thatcommercedirectlyor indirectlyaffectsCanadianconsumers; the jurisdiction where the conduct occurred; the location of the principalwitnesses and evidence; and the timing considerations of other enforcement agencies(principally, the US Department of Justice).

Overview of cartel enforcement activity during 2017

Cartel enforcement activity can be measured in terms of new charges laid, convictions obtained, number of investigations under way, and international efforts. Convictions obtainedThe PPSC obtained a total of eight guilty pleas against one individual and seven companies (comparedtoatotalofsevenguiltypleasagainst twoindividualsandfivecompaniesin2016)inonepricefixingmatterandfivebidriggingmatters.Allsevencompanieswerefined,whiletheindividualreceived50hoursofcommunityservice.ThePPSC’sdomestic focus resulted inobtainingguiltypleas inonepricefixingmatterandthreebidriggingmatters. Thepricefixingmatter involvedfixingthepriceofretailgasoline.29Thebidriggingmattersinvolvedcontractsfor:sewerservices;30 private sector ventilation(whichinvolvedthreeseparateguiltypleas);31 and municipal water services.32 The PPSC’s international focus resulted in obtaining guilty pleas in two bid rigging matters for the supplyof carparts; specifically, contracts for alternators and ignitioncoils33 and spark plugs.34 Guiltypleas in2017 resulted infines that ranged from$13.4million forthealternatorsandignitioncoilscontractmatterto$85,000forthesewerservicescontractmatter.InvestigationsTheBureau recentlycommencedan investigation intopricefixing for freshcommercialbread in Canada.35 On October 31, 2017, the Bureau executed search warrants at a number



of bread manufacturersandgroceryretailersinsearchofevidenceofpricefixingdatingback to 2001. The Bureau indicated publicly the searches were undertaken to determine the facts and that no decisions to prosecute have been made. As at the time of writing, no charges have been laid.International effortsIn 2017, the Bureau advanced its inter-agency cooperation agenda by: (i) reinforcing existing relationships with the Department of Justice’s Antitrust Division and the Federal Trade Commission of the United States, the Federal Economic Competition Commission of MexicoandtheEuropeanCommissionoftheEuropeanUnion;36 (ii) signing a Memorandum of Understanding with the Superintendence of Industry and Commerce of the Republic ofColombia;37 (iii) entering into a Cooperation Arrangement with the Japan Fair Trade Commission;38 and (iv) promoting best practices in international cartel enforcement by participating in the Organisation for Economic Co-operation and Development and the Hungarian Competition Authority Regional Centre for Competition’s Seminar on Best Practices in Cartel Procedures,39 the International Competition Network’s 16th Annual Conference,40andtheInternationalCompetitionNetworkCartelWorkshop.41

Private enforcement of cartel laws

The primary cause of action for the private enforcement of cartel laws is found under section 36 of the Act, which confers a private right of action on any person in Canada that has suffered a loss or damage as a result of a breach of one of the criminal provisions of the Act.42 In addition to damages suffered, plaintiffs can sue to recover investigation costs and costs to bring the proceeding, but unlike the US, a plaintiff is not entitled to treble damages. Proceedings may be commenced in the provincial courts or the Federal Court and typically arise by way of class action. Limitation periods apply but case law is not settled on whether the discoverability principle applies to toll the period until concealed conduct is discovered,43 although the trend is clearly towards the application of this principle. The lack of a conviction or even the refusal of the Commissioner to investigate a potential violation of the cartel provisions does not bar a third-party action. That being said, a prior conviction for the offence is, absent evidence to the contrary, proof of liability. As a consequence, once a person or firm admits to cartel conduct as part of theBureau’sLeniency Program, with such conviction, prima facie proof is made of the violation of the law. In practice, where an investigation becomes public or a conviction is announced, all potential participants, including an immunity applicant, become the subject of a class action in one (and normally more) provincial court(s) in Canada.

Key issues in Canadian cartel policy

Indirect purchaser actionsIn October 2013, the SCC issued its most anticipated decisions regarding competition law related private actions, allowing indirect purchasers to bring civil cases against upstream suppliers. In a trilogy of cases, Pro-Sys Consultants Ltd v. Microsoft Corporation, Sun-Rype Products Ltd v. Archer Daniels Midland Company and Infineon Technologies AG v. Option consommateurs, the SCC held that indirect purchasers are not foreclosed from claiming losses passed on to them, and that the risk of double or multiple recoveries in actions brought by both direct and indirect purchasers could be managed by the courts.44 However, the SCC noted that in bringing their actions, the indirect purchasers assume the burden of establishing thattheyhavesufferedloss.Whethertheyhavemettheirburdenofproof is a factual question to be decided on a case-by-case basis.



The SCC rejected the “robust and rigorous” standard used in the US to establish a common claimoflossat thecertificationstageandaffirmedthat theplaintiffs,at least inBritishColumbia andOntario, need only advance a “sufficiently credible”methodology to doso. Although plaintiffs can point to multivariate regression as an accepted methodology to establish overcharge, establishing a methodology for pass-through will prove more difficult. In addition, the SCC required that the plaintiffs demonstrate the availabilityof underlying data to support the methodologies advanced by the certification expert.Such data may not always be in the defendants’ possession (and could very well be in the possession of foreign persons/companies), particularly if the defendants are located several levels up the distribution chain. SincetheSCCdecisions,courtshavecertifiedclassactionsincasesinvolvingcontestedissues significantly complicating the determination of commonality of injury, such asnetwork effects and differences in bargaining power.45 In 2017, courts in both British Columbia and Ontario considered whether the ability to bring civil cases extended to so called “umbrella purchasers”, i.e. individuals who did not buy products directly from the defendants but nonetheless claim damages based on the fact that the alleged conspiracy drovemarketpricesup,includingthepricestheypaidtonon-conspirators.Affirminga2016 decision of the British Columbia Supreme Court, the British Columbia Court of Appeal (the “BCCA”) held in August 2017 that it is not plain and obvious that umbrella purchasersdonothaveacauseofactionundertheActandupheldthecertificationofaclass action including all purchasers, with non-umbrella purchasers as a sub-class.46 In April 2017, the Ontario Divisional Court had reached the opposite conclusion when it upheld the decision of amotions judge to deny certification of an umbrella purchaserclaim on the basis that it would expose the respondents to indeterminate liability.47 The uncertaintyresultingfromtheseconflictingjudgmentsmayultimatelyberesolvedbytheSCC,asanapplicationforleavetoappealtheBCCA’sdecisionwasfiledinOctober2017.Recently, in the decision Ewart v. Nippon Yusen Kabushiki Kaisha, the British Columbia Supreme Court considered the certification of a class consisting of different levels ofindirect purchasers as well as a claim made on behalf of “umbrella purchasers”.48 Citing Godfrey, the court found that there was no requirement for the plaintiff to show pass-through of overcharges to each level of indirect purchasers, requiring only that their proposed methodology offer a reasonable prospect of establishing that the overcharges have been passed through to the indirect purchaser level.49 The main focus of analysis was on the common issue requirement under section 4(1)(c) of the Class Proceedings Act, R.S.B.C.1996, c. 50, which the court held is subject to a low threshold for purpose of certification, simply requiring the proposal of a credible and plausible economicmodel to show harm to the prospective class members (i.e. the indirect purchasers) as a group.50 Despitenotingthelowcertificationthreshold, thecourtdeclinedtocertifytheindirect purchaser action on the basis that the proper steps had not been taken to show the availability of the data required to apply the econometric methodology proposed by the plaintiff.51Further,thecourtrefusedtocertifytheumbrellapurchaserclaim,findingthattheplaintiffanditsexpertdidnotprovidesufficientevidenceofhowharmtotheumbrellapurchasers could be shown.52

Limitations on civil liabilityThe Act imposes a two-year limitation period for civil actions. It begins from the later of the day on which the conduct was engaged in, or the day on which any criminal proceedings relating theretowerefinallydisposedof. Theway the limitationperiod is



definedproduces uncertainty since it is possible for a defendant to be faced with a civil lawsuit more than two years after the infringing conduct has ceased. In practice, however, private antitrust class actions are increasingly commenced at the early stages of related criminal proceedings, thereby reducing some of the uncertainty for defendants.Another point of ambiguity in establishing limitation periods for civil actions under the Act is the concept of “continuing practices”. Garford Pty Ltd v. Dywidag raised the question of what behaviour constitutes a continuing offence under the Act.53 The Federal Court held that in order for an offence to be “continuing”, such that the limitation period had not yet commenced, ongoing acts in contravention of the statute would be required. A continued lesseningofcompetitionduetoactsthatarenolongeroccurringwouldnotbesufficienttoextend the limitation period.54

Most Canadian statutory limitation periods include a “discoverability” provision whereby the limitation period begins to run from the time that the behaviour was discovered by the plaintiff.TheCanadiancourtshaveprovidedconflictingjurisprudenceontheapplicabilityof the discoverability principle to the Act. Notably in Garford, the Federal Court held that discoverability does not apply to actions brought under the Act. Given that section 36(4) of the Act is expressed as running from a particular date (the date of the impugned conduct or of the disposition of criminal proceedings), the court concluded that the limitation period commences on that date, regardless of the plaintiff’s knowledge of a potential claim.55 The SCC’s reasons in the indirect purchaser trilogy also seemed to support the view that the limitation period is strict, as it noted, in obiter, that the short, two-year limitation period makesthequantificationofcarteldamagesamanageableexercise.In2016,theOntarioCourt of Appeal in Fanshawe College of Applied Arts and Technology v. AU Optronics Corporation releaseda judgment that conflictswith the “strict” limitationperiodview.IntheprocessofaffirmingaSuperiorCourtjudgmentthatexplicitlyrejectedtheviewinGarford, the court ruled that the discoverability principle applies to sub-paragraph 36(4)(a)(i) of the Act due to the fact that it expressly links the limitation period to conduct that gives rise to any damage or loss.56 After noting that sub-section 36(4)(a)(ii) provides an alternative event for the limitation period that is arguably not connected to the plaintiff’s cause of action or knowledge, the court acknowledged that it was probably not subject to discoverability, but that this was not necessarily a problem as there is no rule that suggests both limitation periods must operate in the same way.57 However, in Mancinelli v. Royal Bank of Canada, a 2017 decision of the Ontario Superior Court, the discoverability principle was found to apply to section 36(4) of the Act as a whole.58 An application for leave to appeal the Fanshawe decision was discontinued in June 2017.Pre-Trial delayIn April 2017, the Superior Court of Québec in Les Industries Garanties limitée c. R, ruled that a lengthy delay between the laying of bid rigging charges and the anticipated end of trial does not violate the constitutional right to be tried within a reasonable time.59 The court allowed the prosecution of a company and its employee to proceed despite a 40-month delay between the laying of charges and the trial, determining that the delay was not unreasonably long in view of the complexity of the case (arising from both the large volume of disclosure and the specific legal and evidentiary issues raised).60 Importantly, the prosecution was allowed notwithstanding the SCC’s ruling in R. v. Jordan, which established a ceiling of 30 months for cases going to trial in superior court, beyond which delay is presumptively unreasonable.61 The finding that the bid rigging prosecution wasmore complex than atypical murder trial suggests that defendants in criminal prosecutions under the Act may face difficultyobtainingCharterreliefforlengthypre-trialdelays.



InformationflowControllingtheflowofinformationtoandfromtheBureaucanhaveimportantimplicationsfor companies that are involved in a cartel investigation. In addition to raising claims of settlement and work-product privilege, the Bureau and immunity and leniency applicants rely onsection29oftheActtomaintainconfidentialityofanyinformationvoluntarilydisclosedduring proffers. That being said, following the Nestlé ruling (discussed above), immunity and leniency applicants must be cognisant of the fact that the Bureau may ultimately disclose theinformationtheyproducetotheaccused,notwithstandingtheconfidentialityassurancesthat were given when the information was originally provided.62

In March 2017, the Bureau released for comment a draft bulletin on its general approach torequestsforaccesstoconfidentialinformationinitspossessionfrompersonsinvolvedin private actions under section 36 of the Act.63 The draft bulletin highlights the Bureau’s general position to not voluntarily provide information to persons contemplating or taking part in proceedings under section 36 of the Act, noting that opposing the production of such information is important to prevent interference with ongoing examinations, inquiries or enforcement proceedings andmaintain the confidentiality of information the Bureaureceives. The draft bulletin also reiterates that the Bureau will rely upon applicable privileges, including public interest privilege, to protect against the disclosure of information in its possession and control.In September 2017, the SCC in Canada (Attorney General) v. Thouin held that Competition Bureau investigators, in their capacity as representatives of the Crown, could not be compelled to be examined for discovery in an action to which the government was not a party.64 The case involvedagasolinepricefixingclassaction inwhich theplaintiffsattempted togetan order permitting them to examine the Bureau’s chief investigator in its investigation intogasolinepricefixing.ThecourtheldthattheCrown’simmunityfromdiscoverywasnot lifted in proceedings in which it was not a party, and therefore, the Bureau investigator could rely on the Crown’s discovery immunity to refuse to submit to an examination for discovery. At the end of its decision, the SCC noted that the question they considered was different than the one decided in Imperial Oil v. Jacques,65 where the SCC allowed the disclosure of records of private communications intercepted by the Bureau in the course of a criminal investigation into allegations of a conspiracy affecting gasoline pump prices in Québec. In the course of its investigation, the Bureau obtained judicial authorisations from the court in Québec under the Criminal Code that enabled it to intercept and record more than 220,000 private wiretapped communications. Plaintiffs who had commenced a class action in the Québec Superior Court sought the disclosure of the recordings that had already beendisclosedtotheaccusedinthecriminalproceedings.TheSCCfoundthatthespecificcircumstances of this particular case favoured the disclosure of the wiretap evidence. It referenced the rule in the Québec Code of Civil Procedure that expressly allows records within the possession of a third party to be produced, but noted that whether records should be produced often involves a number of considerations, such as a determination of relevancy togetherwiththeconsiderationofconfidentialityrights,privacyrightsandtheefficiencyofthe judicial process as against facilitating the search for truth. The court noted that (at least implicitly) before third-party records are produced, the court should engage in an analysis to ensure there are no factual or legal impediments that should militate against disclosure of the records requested and that courts always have the ability, responsibility and control to impose such measures and conditions on any disclosure as may be appropriate in the circumstances. It should be noted that, while section 29 of the Act prevents the Bureau from disclosing, among other things, information provided to the Bureau on a voluntary basis to



third parties except “for the purposes of the administration and enforcement” of the Act, the wiretap evidence in this case was collected under the Criminal Code rather than the Act. Hence, section 29 of the Act was held not to apply. This decision should therefore not affect the Bureau’s ability to resist third-party discovery efforts of information it obtains under its Immunity and Leniency Programs.Finally, it is important to note that, where a foreign-incorporated company has a branch officeinCanada,theBureaumayinvokeitsauthorityundersection11(2)oftheActtoissueproductionorderstotheCanadianbranchofficeforrecordsorinformation,evenifthoserecords are in the possession or control of the foreign parent. In addition to the penalties for non-compliance, the issuance of a production order under section 11(2) is a matter of publicrecordand theaccompanyingaffidavit fromtheBureauwillsetout, typically ingreat detail, the alleged criminal conduct being investigated and the involvement of the companybeinginvestigated.Theseaffidavitshaveformedaroadmapforclasscounsel,even if a conviction has yet to be secured from the company.

Legislative and policy changes

The Bureau released a draft update for public consultation of its Immunity Program bulletin inOctober2017, thefirstmajor change for cartel policy since the coming-into-forceofthe amendments to the Act in March 2010.66 Under the revised programme, should it be implemented as proposed, applicants will initially receive only an interim grant of immunity from the Crown, with full immunity to follow later in the process when the applicant’s cooperation and assistance is no longer required. Applicants will have ongoing cooperation and disclosure obligations with the Bureau able to recommend that the Crown not enter into afinalimmunityagreementwiththeapplicantifitbelievestheapplicanthasnotmettheconditions of the grant. The addition of this interim immunity step is aimed at ensuring the BureauandCrownreceivefromtheapplicantthepromptandsufficientcooperationneededforprosecution.“Automatic”coverageforalldirectors,officerandemployeeswillnotbeprovidedbutinstead,allcurrentdirectors,officersandemployeesofacompanythathasqualifiedforanimmunityrecommendationwillberequiredtodemonstratetheirknowledgeof the conduct in question and their willingness to cooperate with the Bureau’s investigation in order to receive the same recommendation of immunity. The revised programme also contemplates the greater use of oaths and recordings when collecting information – both at the initial proffer stage and throughout the continuing investigation. Finally, under the proposed revisions, applicants will now be required to justify their claims of privilege over documents and records that relate to the anti-competitive conduct for which immunity is sought. The Bureau has indicated that there will be changes coming to its Leniency Program as well, but as of yet a draft update to that programme has not been released for comment. In a September 2017 speech, the Bureau outlined some of the expected revisions to the Leniency Program, which are intended to further incentivise subsequent parties to come forward and cooperate with the Bureau’s investigations.67 Major anticipated revisions relate to the ability for all leniency applicants to be eligible for a discount of up to 50 per cent (asopposedtojustthefirstleniencyapplicantinthecurrentprogramme),withtheamountof the discount available to an applicant to be based on the “value of its cooperation” with theinvestigation,andtheremovalofimmunityfordirectors,officersandemployeesofthefirst-in(secondoverall)leniencyapplicant.Otherprojectedchangesmirrorthoseseeninthe revised Immunity Program, such as the greater use of oaths and recordings and updated rules regarding the treatment of privilege claims.



In 2017, the Bureau has continued to focus on cartel and competition issues in relation to innovation and government procurement, including hosting the International Competition Network’s 14thAnnualCartelWorkshopinOctober2017,focusedon“combatingcartelsin public procurement”.68 In April, a joint initiative of the Bureau, Public Services and Procurement Canada and the Royal Canadian Mounted Police, saw the launch of the Federal Contracting Fraud Tip Line, an initiative that will accept anonymous tips from Canadians who suspect fraud, collusion or corruption in federal government contracts and real property agreements.69 Consistent with this focus on public procurement, the Canadian government also launched a public consultation in September seeking answers to targeted questions aimed at making its Integrity Regime more effective and considering the potential adoption of deferred prosecution agreements in certain circumstances.70 A speech by the Senior Deputy Commissioner of Competition in November highlighted the Bureau’s continuing work related to big-rigging detection and prevention in the procurement process, including promoting the use of Certificates of Independent Bid Determination by all tenderingauthorities in Canada and the use and development of innovative tools to detect and prevent bid rigging, such as bid-screening algorithms that are able to sift through electronic bidding data for possible signs of collusion.71 Emerging technologies can also be used to facilitate anti-competitive behaviour in the cartel context, as noted in the Bureau’s draft discussion paper on the implications of big data and innovation on competition policy.72 The discussion paper addressed the ability of cartels to take advantage of new technologies to facilitate collaboration and collusion, such as through the use of automated pricing algorithms and other data tools to monitor and adjust pricing without manual interference.

* * *

Endnotes1. Competition Act, RSC 1985, c C-34, as amended.2. See Fairhurst v. Anglo American PLC, 2011 BCSC 705. The British Columbia

Supreme Court has reiterated that foreign defendants are subject to the jurisdiction of Canadian courts for cartel conduct where harm is sustained in Canada. The Court found that its jurisdiction extended to a group of foreign defendants in a proposed class action, claiming that the defendants conspired to increase the price of diamonds. It was sufficientthatharmwassufferedinB.C.andthatthedefendantskneworshouldhaveknown the diamonds would be shipped to B.C. in the ordinary course of distribution. See also Libman v. The Queen, [1985] 2 SCR 178. The Supreme Court held that in orderforanoffencetobesubjecttothejurisdictionofCanadiancourts,itissufficientthat there exist a “real and substantial link” between the offence and Canada.

3. Competition Bureau, “Competitor Collaboration Guidelines” (8 May 2009) at 11, online: http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03177.html. A purchase side agreement could give rise to a section 45 offence if, for example, the parties enter into the agreement as a sham to control the production of a downstream product.

4. For example, prosecutors cannot use admissions made in the context of settlement discussionsinfutureprosecutionsagainstthefirmorindividualsmakingtheadmission.

5. For all convictions obtained under the Act, there is an automatic right of appeal to a provincial court of appeal or to the Federal Court of Appeal, depending on which court tried the indictment. The decision of any court of appeal generally may be brought, by leave, to the Supreme Court of Canada (although there is an automatic right of appeal



when there is a dissenting opinion on the Court of Appeal). Given that convictions for cartel offences in Canada are obtained most often through the plea bargaining process, appeal courts do not generally hear cases concerning matters of cartel enforcement.

6. Competition Bureau, “Remarks by Melanie L. Aitken, Commissioner of Competition −CanadianBarAssociationCompetitionLawSection2012CompetitionLawSpringForum: Best Practices in a Time of Active Enforcement, Toronto, Ontario (2 May 2012), online: http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03474.html.

7. Competitor Collaboration Guidelines, supra note 3.8. Competition Bureau, “Immunity Program under the Competition Act” (7 June 2010),

online: http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03248.html;Competition Bureau, “Leniency Program Bulletin” (29 September 2010), online: http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03288.html; CompetitionBureau, “Competition Bureau Publishes Revised Immunity and Leniency FAQs” (25 September 2013), online: http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03609.html.

9. Competition Bureau, “Competition Bureau invites feedback on revisions to its Immunity Program” (26 October 2017), online: https://www.canada.ca/en/competition-bureau/news/2017/10/competition_bureauinvitesfeedbackonrevisionstoitsimmunityprogram.html [Immunity Revisions].

10. Competition Bureau, “Corporate Compliance Programs – Bulletin” (3 June 2015), online: http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03942.html.

11. Competition Bureau, “Competition and Compliance Framework – Bulletin” (10 November 2015), online: http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03999.html.

12. See discussion in R v. Maxzone Auto Parts (Canada) Corp, 2012 FC 1117, [2012] FCJ No 1206 [Maxzone].

13. Maxzone, supra note 12.14. Maxzone, supra note 12, at para. 4.15. See, e.g., Civil Remedies Act, 2001, SO 2001, c 28.16. PSPC, “Government of Canada’s Integrity Regime”, online: http://www.tpsgc-pwgsc.

gc.ca/ci-if/ci-if-eng.html. 17. Similar “debarment” regimes also exist in certain Canadian provinces with respect

to procurement by provincial governments. For example, in Québec since 2013, the Integrity in Public Contracts Act has required bidders for government contracts to obtain authorisation from the Autorité des marchés financiers (“AMF”) before entering into provincial government contracts. The AMF can withhold authorisation for entities found guilty of certain offences (including Competition Actoffences)inthepastfiveyears. The AMF’s decisions are reviewable by courts and must meet the minimum requirements of procedural fairness, including disclosing the information on which it bases its decisions to allow an applicant to make a defence. See Terra Location inc. c. Autorité des marchés financiers, 2015 QCCS 509. In New Brunswick, under the Procurement Act, a suppliermay be disqualified fromprovincial procurement for aperiodofuptofiveyearsifconvictedofacarteloffenceundertheCompetition Act (as wellasoffencesunderfiveotherfederalstatutes).

18. PSPC, “Integrity Regime consultation: Expanding Canada’s toolkit to address corporate wrongdoing”, online: http://www.tpsgc-pwgsc.gc.ca/ci-if/ar-cw/integrite-integrity-eng.html.

19. Competition Act, supra note 1, s. 45.1.



20. Private parties could try to frame a section 90.1 matter as a conspiracy and seek damages on that basis.

21. Canada (Commissioner of Competition) v. Pearson Canada Inc, 2014 FC 376, 119 CPR (4th) 313.

22. Canada (Commissioner of Competition) v. Indigo Books & Music Inc., 2015 FC 256.23. Canada (Commissioner of Competition) v. Bell Mobility Inc., 2015 FC 990.24. Note that the decision was issued in the context of the Bureau’s investigations into

reviewable (non-criminal) practices in potential violation of the Act – though the principles articulated may apply for criminal investigations as well since sections 10 and 11 of the Act make no distinction between civil and criminal investigation in terms of enforcement or review standards for production orders.

25. R. v. Nestlé Canada Inc., 2015 ONSC 810 at paras. 69, 83 [Nestlé].26. Middlekamp v. Fraser Valley Real Estate Board, [1992] BCJ No 1947, 96 DLR (4th)

227 (BCCA).27. Immunity Revisions, supra note 9.28. Competition Bureau, Press Release, “Embraco North America Inc. Pleads Guilty to

Price-Fixing Conspiracy” (27 October 2012), online: http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03307.html; Competition Bureau, Press Release, “SECCarbon Pleads Guilty to Conspiracy” (9 November 2007), online: http://news.gc.ca/web/article-en.do?crtr.sj1D=&mthd=advSrch&crtr.mnthndVl=&nid=360319&crtr.dpt1D=&crtr.tp1D=&crtr.lc1D=&crtr.yrStrtVl=2008&crtr.kw=&crtr.dyStrtVl=26&crtr.aud1D=&crtr.mnthStrtVl=2&crtr.yrndVl=&crtr.dyndVl=.

29. Competition Bureau, “Irving pleads guilty in Québec gasoline cartel case” (6 November 2017), online: https://www.canada.ca/en/competition-bureau/news/2017/11/irving_pleads_guiltyinquebecgasolinecartelcase.html.

30. Competition Bureau, “Seventh guilty plea concludes the Competition Bureau’s Québec sewer services cartel case” (29 November 2017), online: https://www.canada.ca/en/compet i t ion-bureau/news/2017/11/seventh_gui l ty_pleaconcludesthecompetitionbureausquebecsewerserv.html.

31. CompetitionBureau,“CardinalVentilationfined$375,000forriggingbidsforventilationcontracts in Montréal” (27 October 2017), online: https://www.canada.ca/en/competition-bureau/news/2017/10/cardinal_ventilationfined375000forriggingbidsforventilationcontr.html.

32. Competition Bureau, “Aquaréhab pleads guilty to rigging bids for municipal contracts, pays a $160,000 fine” (17 February 2017), online: http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/04184.html.

33. CompetitionBureau, “Mitsubishi Electric to pay $13.4million for rigging bids forcar parts” (25 April 2017), online: https://www.canada.ca/en/competition-bureau/news/2017/04/mitsubishi_electrictopay134millionforriggingbidsforcarparts.html.

34. Competition Bureau, “NGK to pay $550,000 for rigging bids for car parts” (13December 2017), online: https://www.canada.ca/en/competition-bureau/news/2017/12/ngk_to_pay_550_000forriggingbidsforcarparts.html.

35. ArminaLigaya, “CompetitionBureau investigatesallegationsofbreadpricefixing”Financial Post (31 October 2017), online: http://business.financialpost.com/news/retail-marketing/newsalertwatchdog-raids-offices-of-grocery-retailers-in-price-fixing-probe-2.

36. Competition Bureau, “Competition Bureau reinforces ties with U.S. and Mexican competition authorities” (20 November 2017), online: https://www.canada.ca/en/competition-bureau/



news/2017/11/competition_bureaureinforcestieswithusandmexicancompetitionautho.html;CompetitionBureau,“CanadaandEuropeworkingtogethertoboostcompetitionenforcement” (27 March 2017), online: https://www.canada.ca/en/competition-bureau/news/2017/03/canada_and_europeworkingtogethertoboostcompetitionenforcement.html.

37. Competition Bureau, “Canada and Colombia enhance cross-border collaboration in competition law enforcement” (21 June 2017), online: https://www.canada.ca/en/competition-bureau/news/2017/06/canada_and_colombiaenhancecross-bordercollaborationincompetition.html.

38. Competition Bureau, “Competition Bureau and Japan Fair Trade Commission enhance cooperation in cross-border enforcement” (11 May 2017), online: https://www.canada.ca/en/competition-bureau/news/2017/05/competition_bureauandjapanfairtradecommissionenhancecooperationi.html.

39. Competition Bureau, “The Competition Bureau’s month in review – 2017” (30 November 2017), online: http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/h_03159.html.

40. Competition Bureau, “The Competition Bureau’s month in review – 2017” (30 August 2017), online: http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/h_03159.html.

41. Competition Bureau, “Competition Bureau hosts the 14th ICNCartelWorkshop” (4October 2017), online: https://www.canada.ca/en/competition-bureau/news/2017/10/competition_bureauhoststhe14thicncartelworkshop.html [ICN Cartel Workshop].

42. In the 2015 case of Airia Brands v. Air Canada, Justice Leitch considered whether plaintiffs could bring claims for a class including persons residing outside Canada, ultimatelyfindingtheycouldnotduetothelackofanyjurisdictionofthecourtoverforeign class members not residing in Ontario or consenting to the court’s jurisdiction. Justice Leitch held in the alternative that even if such jurisdiction existed, she would stay the claims based on the real and substantial connection test (if applicable) not being met and based on forum non conveniens. Airia Brands v. Air Canada, 2015 ONSC 5332.

43. Compare Garford Pty v. Dywidag Systems International, 2010 FC 996 at para. 33 [Garford](findingdiscoveryprincipledoesnotapply)withFanshawe College v. AU Optronics,2015ONSC2046atpara.115(findingdiscoveryprincipledoesapply).

44. Pro-Sys Consultants Ltd v. Microsoft Corporation,2013SCC57;Sun-Rype Products Ltd v. Archer Daniels Midland Company,2013SCC58;Infineon Technologies AG v. Option consommateurs, 2013 SCC 59.

45. Watson v. Bank of America Corporation, 2015 BCCA 362 at paras. 153–173.46. Godfrey v. Sony Corp., 2017 BCCA 302 at paras. 247-248, 257, aff’g 2016 BCSC 844,

leave to appeal to SCC requested.47. Shah v. LG Chem. Ltd., 2017 ONSC 2586 at para. 48, rev’g on other grounds 2016

ONSC 4670.48. Ewart v. Nippon Yusen Kabushiki Kaisha, 2017 BCSC 2357 [Ewart].49. Ewart, supra note 48, at paras. 22–28.50. Ewart, supra note 48, at para. 34.51. Ewart, supra note 48, at paras. 54–55.52. Ewart, supra note 48, at para. 60.53. Garford, supra note 43.54. Garford, supra note 43, at para. 39–45. See also, Eli Lilly and Co v. Apotex Inc, 2009

FC 991 at 736, aff’d 2010 FCA 240, leave to appeal to SCC ref’d [2010] SCCA No 434.



55. See Garford, supra note 43, at 31–33, following the same conclusion expressed in obiter in Laboratoires Servier v. Apotex Inc, 2008 FC 825 at 488, aff’d 2009 FCA 222, leave to appeal to SCC ref’d, [2009] SCCA No 403.

56. Fanshawe College of Applied Arts and Technology v. AU Optronics Corporation, 2016 ONCA 621 at paras. 32–49, aff’g 2015 ONSC 2046 [Fanshawe].

57. Fanshawe, supra note 56, at para. 47.58. Mancinelli v. Royal Bank of Canada, 2017 ONSC 7384.59. Industries Garanties limitée c. R., 2017 QCCS 1504 [Industries Garanties].60. Industries Garanties, supra note 59, at paras. 78–82.61. R. v. Jordan, 2016 SCC 27 at para. 49.62. Nestlé, supra note 25.63. Competition Bureau, “Information requests from private parties in proceedings for

recovery of loss or damages” (8 March 2017), online: http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/04204.html.

64. Canada (Attorney General) v. Thouin, 2017 SCC 46 [Thouin].65. Imperial Oil v. Jacques, 2014 SCC 66, [2014] SCJ No 66.66. Competition Bureau draft Bulletin for Public Consultation, “Immunity Program under

the Competition Act” (26 October 2017), online: http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/04316.html.

67. Competition Bureau, “Remarks by Matthew Boswell, Senior Deputy Commissioner of Competition–EventatBordonLadnerGervaisLLP:Oninnovation,efficienciesandimmunity: the year ahead” (26 September 2017), online: https://www.canada.ca/en/competition-bureau/news/2017/10/on_innovation_efficienciesandimmunitytheyearahead.html.

68. ICN Cartel Workshop, supra note 41. 69. Royal Canadian Mounted Police, “Government of Canada launches tip line to help

Canadians report contracting fraud” (20 April 2017), online: http://www.rcmp-grc.gc.ca/en/news/2017/20/government-canada-launches-tip-line-help-canadians-report-federal-contracting-fraud.

70. Government of Canada, “Government of Canada seeks views on addressing corporate wrongdoing” (25 September 2017), online: https://www.canada.ca/en/public-services-procurement/news/2017/09/government_of_canadaseeksviewsonaddressingcorporatewrongdoing.html.

71. Competition Bureau, “Remarks by Matthew Boswell, Senior Deputy Commissioner of Competition – Canadian Public Procurement Council Forum 2017: Innovation in Public procurement: Bid rigging detection and prevention: ensuring a competitive and innovative procurement process” (7 November 2017), online: https://www.canada.ca/en/competition-bureau/news/2017/11/bid-rigging_detectionandpreventionensuringacompetitiveandinnovat.html.

72. Competition Bureau, “Draft Discussion Paper: Big Data and Innovation: Implications for Competition Policy in Canada” (17 September 2017), at Part IV, online: http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/vwapj/Big-Data-e.pdf/$file/Big-Data-e.pdf.


Blake,Cassels&GraydonLLP199BayStreet,Suite4000,CommerceCourtWest,Toronto,OntarioM5L1A9,Canada

Tel: +1 416 863 2400 / Fax: +1 416 863 2653 / URL: www.blakes.com

Randall J. HofleyTel: +1 416 863 2387 / Email: [email protected] over 25 years, Randall has been a trusted counsel, advising on all aspects of competition law with a focus on contentious matters. Randall has worked on many of the most high-profile competition law matters, substantiallyinfluencingcompetitionlawsandpoliciesastheyapplytocompaniesdoingbusinessinCanada.Thesemattersincludethefirstabuseofdominancecaseto reach the Federal Court of Appeal and the Supreme Court of Canada, the only Federal Court of Appeal decision to address the application of the Competition Act (Act) to patents, the only case considering the (then) new price maintenance provisions of the Act, the only case considering the (then) new competitor collaboration provisions of the Act and the only appellate level decision in Canadian history on the compliance of agreements between purchasers of products with the criminal provisions of the Act. Randall is consistently ranked as a leading competition lawyer and litigator in Canada. Randall is currently on leave of absence from Blakes to serve as General Counsel and Senior Enforcement Advisor at the Competition Bureau Legal Services (Canada).

Joshua A. KraneTel: +1 416 863 4187 / Email: [email protected] advises domestic and foreign firms on all aspects of Canadiancompetition law, including cartel investigations. He has extensive experience working with companies on internal investigations, preparing submissions to the Competition Bureau, responding to subpoenas under the Competition Act and negotiating resolutions with the Competition Bureau and civil plaintiffs. Before joining Blakes, Joshua worked for several government agencies, including the Competition Bureau − Legal Services Branch, theMinistryof theAttorneyGeneral ofOntario−ConstitutionalLawBranch, and theFederal Prosecution Service (now the Public Prosecution Service of Canada).


Chris DickinsonTel: +1 416 863 3254 / Email: [email protected] advises on all aspects of Canadian competition law, including cartel investigations and regulatory compliance matters.


ChinaDr. Zhan Hao, Song Ying & Stephanie (Yuanyuan) Wu

AnJie Law Firm


The AML delineates the legal framework for the prohibition of cartelsIn China, the Anti-Monopoly Law (‘AML’), which was promulgated on 30 August, 2007 and entered into force on 1 August, 2008, delineates the legal framework for the prohibition of cartels. Prior to the adoption of the AML, there existed several laws and rules regulating competition issues, such as the Anti-Unfair Competition Law (1993), the Pricing Law (1998) and the Law on Bid Invitation and Bidding (2000). Most of them remain in force after the enactment of the AML. These laws set out provisions to govern price-related cartel behaviours as well as other anti-competitive practices. The AML does not explicitly repealthoseexistinglawsandregulations;instead,itcoexistswiththem,andtogethertheycomprise the PRC competition law system.As the foundation of China’s antitrust regime, the AML provides several fundamental rules regarding cartels. According to Article 13 of the AML, competing undertakings are prohibited from entering into the following monopoly agreements:1

1. fixingoralteringthepricesofcommodities;2. restrictingtheproductionorsalevolumeofcommodities;3. dividingthesalesmarketorprocurementmarketofrawmaterials;4. restricting the procurement of new technologies and new equipment or restricting the

developmentofnewtechnologiesandnewproducts;5. jointlyboycottingtransactions;and6. anyothermonopolyagreementsasdefinedbytheanti-monopolyenforcementagency

of the State Council.Article 14 of the AML governs vertical monopoly agreements, inter alia, the price resale maintenance practice, so it falls outside the scope of the present analysis.In addition, Article 16 of the AML makes explicit that industry associations are prohibited from organising the undertakings in the respective industries to engage in cartel conducts.Besides this, Article 15 of the AML stipulates the circumstances in which an exemption maybegrantedtospecificcartelbehaviour. Specifically,acartelmaybeexemptedif itsimultaneouslyfulfilsthefollowingthreeconditions.(a) The agreements have (one of) the following contents:

1. improvingtechnology,orresearchinganddevelopingnewproducts;2. improving product quality, reducing costs, enhancing efficiency, harmonising

productspecificationsandstandards,ordividingworkbasedonspecialisation;3. enhancingthecompetitivenessofsmallandmedium-sizedenterprises;


AnJie Law Firm China

4. serving social public interests such as energy saving, environmental protection and disasterrelief;

5. alleviating decreases in sales or cuts in production overcapacity in periods of economicdownturn;

6. protectinglegitimateinterestsinforeigntradeandeconomiccooperation;or7. any other circumstances stipulated by the laws and the State Council.

(b) For agreements having the contents of (1)–(5), they shall not restrict competition substantially.

(c) Suchagreementsshallalsobeabletosharethebenefitstotheconsumers.In addition, the AML provides the basic rules on the investigation procedures and sanctions of China’s antitrust enforcement agencies for cartel violations. Furthermore, the Anti-Monopoly Commission under China’s State Council convened a seminar on 22 September, 2017 to discuss amendments to the AML, according to a Ministry of Commerce (‘MOFCOM’) statement.2 Regulations issued by enforcement agencies enrich the regime relating to cartelsAs the public enforcement agencies responsible for cartel cases, as well as other antitrust behaviours, the National Development and Reform Commission (‘NDRC’) and the State Administration for Industry and Commerce (‘SAIC’) have enacted a series of substantive and procedural rules regarding the implementation of the AML. The relevant rules and regulations include: 1. theNDRC’sRegulationsonAnti-PriceMonopoly;2. the NDRC’s Regulations on Procedures for Enforcement of Administrative Law on

Anti-PriceMonopoly;3. theSAIC’sRegulationsontheProhibitionofMonopolyAgreements;4. the SAIC’s Regulations on Procedures for Enforcing the Prohibition on Monopoly

AgreementsandAbuseofDominance;and5. the SAIC’s Provisions on the Prohibition of Abuse of Intellectual Property Rights for

the Purpose of Eliminating or Restricting Competition.Furthermore, 2016 has seen more “soft law” efforts being made with regards to cartels. The NDRC has already separately posted the following guidelines (including draft guidelines) onitsofficialwebsite:“TheGuidelinesforIndustryAssociationPriceBehaviour”;3 “The Draft Guidelines on Active Pharmaceutical Ingredients (‘APIs’) and Drugs Prone to Shortages”;4“TheDraftGuidelinesfortheAbuseofIntellectualPropertyRights”;5 “The Draft Guidelines for Application of the Leniency Regime to Cases of Horizontal Monopoly Agreements”;6“TheDraftGuidelinesforAutomobileIndustry”;7 “The Draft Guidelines on theGeneralConditionsandProceduresforMonopolyAgreementExemption”;8 and “the Draft Guidelines on Recognizing the Illegal Gains Obtained by Business Operators from Monopolistic Acts and Determining the Amount of Fines”.9 According to the Industry Association Price Behaviour Guidelines, industry associations are required to formulate the rules in compliance with price and antitrust laws and regulations, with their pricing conduct subject to the guidance and supervision of relevant government departments. By restricting or excluding competition, the following behaviour may violate relevant laws and regulations:1. organisingmarketplayerstoreachpricemonopolyagreements;2. exchangingpriceinformationformembersorotherpeers;3. organisingoperatorstoreachpricemonopolyagreementsthroughunifiedpreferential

termsortimelimits;



4. releasingpriceguidance,baseprices,referenceprices,andrecommendedprices;5. imposinglimitationsoncostcompositionandprofitratesbypublicisingpricecalculation

formulae;6. formulating rules, decisions, notices, and criteria that could exclude and limit price

competition;and7. requiring or encouraging operators to implement price monopoly agreements through a

penalty mechanism.Assumption of liability by industry associations will not exempt business operators that engage in unlawful practices, who will be subject to heavy penalties. Industry associations that severely breach price and antitrust laws and regulations run the risk of being blacklisted by price supervision departments, and may face joint penalties imposed by multiple relevant agencies.Although other guidelines are only at a draft stage at this point, they have the reference value tosomeextent.Therefore,keycontentsofthedraftguidelineswillbebrieflyintroducedas follows.According to Article 4 of the Draft Guidelines on Active Pharmaceutical Ingredients (APIs) and Drugs Prone to Shortages, business operators of drugs in short supply and active pharmaceutical ingredients with a competitive relationship shall not reach any horizontal price-related monopolistic agreement by:1. fixingorchanginganypricesorchangingtherangeofprices;2. fixingorchanginganytenderprices;3. fixingorchangingagencyexpenses,marketdiscountsandotherexpensesinfluencing

anyprices;4. fixingthepricebenchmarkforatransactionwithanythirdparty;5. agreeinguponastandardformulaofcalculationforanydrugprices;6. controllinganypricesbylimitingoutputorsalesvolume;7. controllinganypricesbydividingthemarket;8. controllinganypricesbymeansofboycottingtransactions;9. controlling any prices by restricting the purchase of new technology or equipment, or

thedevelopmentoftechnologyorproducts;and10. fixingorchanginganypricesinanyotherdisguisedform.However, where a business operator of drugs in short supply or active pharmaceutical ingredients can prove that any agreement signed by it conforms to Article 15 of the AML, the above provisions on monopolistic agreements will not apply.According to the Draft Guidelines for the Abuse of Intellectual Property Rights, in order to determine whether agreements related to intellectual property rights may obtain exemption according to Article 15 of the AML, the positive effects of such agreements onpromotinginnovationandimprovingefficiencyshallbethefocusforconsideration.Itis usually the case that small-market-share undertakings may not seriously eliminate or restrict competition by entering into agreements related to relevant intellectual property rights. Therefore, inordertoincreasetheefficiencyofanti-monopolylawenforcement,and provide clear expectations for market participants, if the undertakings entering into an agreement related to intellectual property rights meet one of the following conditions, it is assumed that those intellectual property rights agreements can be exempted according to Article 15 of the AML:1. the total market share of the competing undertakings in the relevant market does not

exceed15%;and



2. the market share of non-competing undertakings in any single relevant market involved in the agreements does not exceed 25%.

If the agreements related to intellectual property rights entered into by the undertakings constitute the monopoly agreements expressly stipulated in Article 13 and 14 of the AML, and price restriction stipulated in the Draft Guidelines for the Abuse of Intellectual Property Rights, the abovementioned assumption does not apply. If relevant intellectual property rights agreements are in line with the abovementioned circumstances for the assumption of the exemption, but evidence shows that Article 15 of the AML is irrelevant, exemption cannot be obtained.The Draft Guidelines for Application of the Leniency Regime to Cases of Horizontal Monopoly Agreements are formulated in accordance with the Article 46 of the AML, according to which business operators who voluntarily report information about monopoly agreements and provide important evidence to enforcement agencies, may be granted mitigation or exemption of penalty. For the purpose of providing guidance in the application of the aforesaid regulations in cases involving horizontal monopoly agreements, these guidelines cover the applicable scope, agencies dealing with business operators’ applications for leniency, prior communication between business operators and the enforcement agency, materials to be submitted by business operators for application for leniency, preliminary report for application for leniency, method of application for leniency, registration and acceptance of applications for leniency, other eligibility conditions for leniency hearings and review by the enforcement agency, and mitigation or exemption of penalty on business operatorsbytheenforcementagency;allofwhichshouldimprovetheleveloftransparencyin the administrative work of the enforcement agency, and facilitate business operators’ applications for leniency.According to the Draft Guidelines for Automobile Industry, in order to reduce the cost of administrative law enforcement and the compliance costs of operators, the Draft Guidelines for Automobile Industry set forth several circumstances where geographical restrictions and customer restrictions apply to operators without prominent market strength and to which Article 15 of the AML may be presumed to be applicable. Law enforcement practices and theoretical study both show that making allowances for such circumstances can generally improvethequalityofdealingservicesandtheefficiencyofdealing,aswellasthebusinessefficiencyandcompetitivenessofmediumandsmall-sizeddealers,andwillnotsubstantiallyrestrict the competition in relevant markets in general, thereby enabling consumers to share thebenefitsderivedtherefrominconformitywiththeconditionsstipulatedinArticle15ofthe AML.In evaluating whether or not a business operator has prominent market strength, setting adeterminingstandard for thisbasedonafixedmarket sharewouldnotbea scientific,reasonable or operable approach in practice. However, as an example, the competition evaluation of vertical agreements, law enforcement practices and theoretical study show that an operator possessing a market share of less than 25%–30% of a relevant market is likely to be determined to have no prominent market strength. In addition to this: 1. Some types of horizontal agreements, such as research and development agreements,

specialisation agreements, technology standardisation agreements, joint production agreementsandjointprocurementagreements,canusuallyimproveefficiency,promotecompetition and help to increase the welfare of consumers. For instance, horizontal cooperation agreements in the course of research, development and production of new energyautomobilescanhelpcompetitorsshareinvestmentrisks,improveefficiencyand



serve in the public interest. Therefore, operators in the automobile industry entering intoanyoftheabovelistedhorizontalagreementsthatcouldimproveefficiencyandpromote competition may show that their agreements should be exempt from Article 13 of the AML in accordance with Article 15 thereof.

2. The competition analysis of horizontal monopoly agreements in the automobile industry is not obviously different from that in other industries and, therefore, is not further detailed under the Draft Guidelines for Automobile Industry. The anti-monopoly regulation of horizontal monopoly agreements in the automobile industry is handled by the enforcement agency of the State Council in accordance with the AML, the Provisions on Anti-Price Monopoly, the Provisions of Industrial and Commercial Administrative Law Enforcement Agencies on Prohibition of Monopoly Agreements and Conducts and other relevant laws and regulations.

The Draft Guidelines on the General Conditions and Procedures for Monopoly Agreement Exemption are formulated, pursuant to the AML, with a view to specifying the general conditions and procedures for monopoly agreement exemption, stipulated with reference to self-judgment, competent authorities, time of application, application materials, and other aspects. Whenreviewingwhetheranagreementfallsunderanyofthecircumstancesforexemption,an anti-monopoly law enforcement agency shall mainly consider the following factors:1. thespecificformandeffectbywhichtheagreementfallsunderanyofthecircumstances

of exemption prescribed by items (1) through to (6) of Paragraph 1 of Article 15 of the AML;

2. causationbetweentheagreementandthecircumstanceasrealised;3. theimportanceoftheagreementtorealisingthecircumstance;and4. other factors that serve to prove that the agreement falls under the relevant circumstance

for exemption.In addition to this, to prove that an agreement falls under the circumstance of exemption specifiedinitem(7)ofParagraph1ofArticle15oftheAML,theapplicantshallalsosubmitrelevant laws and provisions of the State Council, and prove that the agreement belongs to the circumstances prescribed therein.According to the Draft Guidelines on Recognizing the Illegal Gains Obtained by Business Operators from Monopolistic Acts and Determining the Amount of Fines, the enforcement agencyshalldeterminetheamountoffinestobeimposedonabusinessoperatorwhohascommitted illegalities according to three steps: 1. firstly,determiningthesalesrevenueofthebusinessoperatorintheprecedingyear;2. secondly, determining the base percentage of fines by considering the nature and

durationoftheillegalitiescommitted;and3. thirdly,adjustingthebasepercentageoffinesbyconsideringotheraggravatingfactors

or factors to which lighter or mitigated punishments may apply, and making adjustments accordingtotheextentoftheillegalities,todeterminethefinalisedfinepercentageandcalculatethefineamountsaccordingly.

Different types of monopoly agreement are reached and implemented for different purposes, and exclude or restrain competition in different ways. Therefore, the illegal nature of monopoly agreements shall be determined mainly by considering the types of such agreement as follows:1. where a business operator implements a monopoly agreement prohibited under Items

(1),(2)or(3)ofArticle13oftheAML,andfixesorchangesthepricesofproducts,



limits the production volume or sales volume of products, or divides the sales market or the raw materials procurement markets, the enforcement agency shall determine aninitialfinepercentageof3%.Thisismainlybecausemonopolyagreementsunderthe foregoing circumstances are usually for the purpose of excluding or restraining competition, are the most damaging to competition, have almost no pro-competitive effects,andwillnotenableconsumerstoshareinthebenefitsarisingtherefrom;and

2. where a business operator implements a monopoly agreement prohibited under Item (4), (5) or (6) of Article 13 of the AML, the enforcement agency shall determine an initial finepercentageof2%.Whereabusinessoperatorimplementsamonopolyagreementprohibited under Article 14 of the AML, the enforcement agency shall determine an initialfinepercentageof1%.

Besides this, the Draft Guidelines on Recognizing the Illegal Gains Obtained by Business Operators from Monopolistic Acts and Determining the Amount of Fines also regulate the definitionofillegalgains,majorfactorstobeconsideredinrecognisingillegalgains,specialcircumstances for recognising illegal gains, circumstances under which it may be recognised that no illegal gain has been generated, circumstances under which illegal gains shall not beconfiscated,adjustmentofthebasepercentageoffinesaccordingtoaggravations,anddeterminingthefinalisedpercentageoffinesbasedontheextentofillegalitiesandmitigatedpunishments, amongst others. Sanctions for cartel behaviours and role of the courtsUndertheAML,theenforcementagenciesmayimposeceaseanddesistorders,confiscatethe illegal gains, and/or impose fines between 1 and 10% of an undertaking’s annualturnover in the preceding year for an infringement of the AML rules on a horizontal/vertical monopoly agreement. However, based on antitrust enforcement practice and the draft “Guidelines on Recognizing the Illegal Gains Obtained by Business Operators from Monopolistic Acts and Determining the Amount of Fines (“the draft illegal gain penalty guidance for monopolies”),” published by the NDRC in June, 2016, where there are no mitigatingcircumstancesandthemonopolyagreementhasbeenimplemented,thefinemaynotbe lower than3%of the relevant turnover for thepreviousfinancial year (for pricecartels, cartels on restriction of production or sales volume, as well as cartels on market division). Despite not yet having come into effect, the draft Guidelines further provide that illegal gains can be taken as referring to the additional income obtained, or expenditure saved, as a result of the cartel conduct, subject to the further methods outlined for their recognition. Fines, on the other hand, can be determined by setting a base percentage depending on the nature and duration of the cartel, and adjusting it up or down depending on other aggravating or mitigating factors. It remains to be observed if and how the rules will be laid out in the finalandofficialversionofguidelinestobereleased.In the case that an industry association has violated the rules by organising the member companiestoenterintoacartel,theenforcementagenciesmayimposeafineofnotmorethan RMB 500,000. It is worth noting that there is no criminal sanction for cartel violations under the AML. According to Article 50 of the AML, the People’s Courts are entitled to hear antitrust cases brought by individuals and entities harmed by anti-competitive conducts. However, considering the plaintiffs’ heavy burden to prove the existence of cartels, public enforcement is still the major instrument to curb cartels, though the institutional arrangement of private damages action is available to the victims.



Overview of investigative powers in China

For most companies in China, the big and scary threats come from the two agencies responsible for policing anti-competitive behaviours, the NDRC and the SAIC. Even though the two authorities can initiate a formal investigation by serving a notice of investigation, thefirsttimemanytargetslearntheyareunderinvestigationiswheninvestigatorsfromthetwoagenciesshowupattheirofficesdemandinginformation.These“dawnraids”currentlyare getting popular among regulators, and they have used them to collect information fromtheinvestigationtargets:Microsoft;Qualcomm;andMercedes,justtonameafew.Regulators are fond of these raids because they preserve the element of surprise, preventing companies from disposing of evidence. Moreover, dawn raids in China are relatively easy to initiate, since the NDRC and the SAIC don’t need to get a warrant from a judge or any other outsider beforehand.Targets of the raids are allowed to consult with their lawyersAfter a dawn raid, regulators will review the collected documents and sometimes demand more where it is deemed necessary. Usually at this stage, the regulators will reveal what issues they are investigating. They will also allow the investigated companies to submit explanations and defences in written form.In cases of refusing to submit relevant materials, information or submitting fraudulent materials or information, or concealing, destroying or removing evidence or refusing to be investigated during the course of examination and investigation by enforcement authorities, the authorities are entitled to impose afine aboveRMB0.2million andbelowRMB1million on the offending entities. For example, in December 2016, Shandong Price Bureau finedWeifangLongshunhePharmaceuticalRMB120,000foritsresistancetotheNDRC’santitrust investigation.10WeifangLongshunhePharmaceuticalisanexclusivedistributorofboth Zhejiang Xinsaike Pharmaceutical and Tianjin Xinsaike Pharmacetical, both of which were punished by the NDRC for joint abuse of a dominant position. There is no limit on how long investigations can last, so probes can drag on for months or years. For instance, the Milk Powder case was closed within six months of commencement of the investigation, while the Tetra Pak case and Microsoft case investigated by the SAIC lastedmore than three years. If the regulators find companies have violated theAML,penalties can range from 1% to 10% of their turnover of the last year, as aforesaid.A penalised company is entitled to apply for an administrative review if they are not satisfiedwithauthorities’decisions.However,accordingtoArticle14oftheAdministrativeReconsideration Law, when refusing to accept a specific administrative act taken by adepartment under the State Council, such as the NDRC and the SAIC, the applicant shall apply to the said departments for administrative reconsideration. Article 14 also provides that when refusing to accept a decision made after administrative reconsideration, the applicant may bring an administrative lawsuit before a People’s Court, or apply to the State Councilforthefinaldecision.However,itisnoteasytosuetheregulatorsortogettheStateCouncil to overturn its department’s decisions.


Ever since the beginning of 2017, and in light of the published cases, it seems that both the NDRC and the SAIC have focused their investigations on local entities. In the PVC case,11 theNDRCfined 18Chinese PVCproductsmanufacturersRMB457million formonopolisticagreementsonprice-fixing.Itissaidthisistheheaviesteverfineimposed



on local Chinese entities. Also, according to some media reports, the NDRC is planning to impose antitrust penalties on power generation companies in Shanxi province for their cartel behaviour. However, theNDRC’s official penalty decision for this reported casehas not been released to the public.12 In addition, the NDRC and SAIC are paying more attention to legislative activities this year.

Cartel Cases Concluded by the NDRC and the SAIC 2017

Cases Date Investigating Authority

Penalty in Total (RMB, Yuan)

Insurance Industry Association of Hubei Province’s organisation of insurance companies’ Cartel13

2016-5-6 AIC of Hubei Province 0.2m

Cipher Device Suppliers’ Cartel14

2016-9-18 AIC of Anhui Province 29.76m (29.35m in disgorgement and 0.41m in fines)

Fireworks Distributors’ Cartel15

2016-12-19 AIC of Henan Province 1.52m(0.86m in disgorgement and 0.66m in fines)

The Hechi branches of Insurance Companies’ Cartel16

2017-3-20 AIC of Guangxi Zhuang Autonomous Region

0.57m

Paper Manufacturers’s Cartel in Zhejiang’s Fuyang District17

May Price Bureau of ZhejiangProvince

7.78m

PVC Products Cartels18

September NDRC 457m


The NDRC is drafting several antitrust-related guidelinesCurrently, the NDRC is leading a multi-ministry government task force to draft several antitrust-related guidelines. The guidelines relate to penalties for monopoly agreements and abuses of dominance, leniency system procedures, antitrust investigation suspension procedures, antitrust enforcement in IP-related behaviours, and antitrust enforcement in the automotive sector. It is also reported that the NDRC has drafted procedural rules on suspensions of antitrust investigations, which was issued internally among provincial-level development and reformcommissionsduringthefirsthalfoflastyear.Ascanbeobserved,theNDRChasaccumulated valuable experience in antitrust enforcement. It is now time for the NDRC to summarise and streamline detailed rules on those procedural issues in antitrust investigation based on its prior experience. For more details of these draft guidelines, please revert to the firstsectionofthisarticle.The Pharmaceutical industry and public sector is undergoing continuing scrutiny by antitrust authoritiesOver the past year, the Pharmaceutical industry has still been under the radar of China’s antitrust enforcement authorities.



In terms of the legislation, given the high spare-parts-to-car-price ratio of common car models, 10 government authorities jointly promulgated the Guidance on Promoting the Transformation and Updating of Automotive Maintenance Industry to Improve Service Quality. The SAIC also promulgated the Guiding Opinions on Strengthening the Supervision of the Automobile Market on 29 October 2014, which are intended to limit the control of automotive original equipment manufacturers in the upstream supply market and aftercare market.TheNDRChasnotimposedanyfinesoncartelsinthepharmaceuticalsector.However,theNDRCimposedcumulativefinesofCNY443,900(USD66,002)ontwodrug-makersfor alleged abuse of dominance in relation to isoniazid active pharmaceutical ingredients (APIs) on 31 July 2017. Zhejiang Second Pharma and Tianjin Handewei Pharmaceutical allegedlysoldisoniazidAPIsatexcessivepricesandengagedinanunjustifiablerefusaltotrade. As mentioned previously, the NDRC has taken a leading role in the drafting of antitrust guidelines for the automotive industry. The guidelines will cover antitrust compliance issues in the vehicle sales market and the aftercare market, including auto parts supply and after-sale maintenance. The antitrust guidelines for the automotive industry have reportedly been submitted to the State Council for review and can be expected to be published next year.

IPR-related issues and SEPs become hotspots

Duetomonopolyconcernsrapidlyraisedinrelationtointellectualpropertyfiledwithinthepast years, which have attracted agencies’ attention both nationwide and internationally, the Chinese agencies have been proactive towards IP-related issues. The SAIC has promulgated provisions to deal with matters connected to antitrust and intellectual property issues, namely Provisions on Prohibiting the Abuse of Intellectual Property Rights to Exclude and Restrain Competition. It is noteworthy that the SAIC’s Provisions provides a “safe harbour” principle for IP-related cartel behaviours. According to Article 5 of the Provisions, the exercise of intellectual property rights (‘IPRs’) may not be determined as cartels or vertical monopoly agreements, if the combined market share of the competing undertakings in the relevant market does not exceed 20%; or there exist at least four independently controlled and substitutabletechnologies that are available at a reasonable cost in the relevant market.Furthermore, under the lead of the Anti-Monopoly Commission of State Council (‘AMC’), the NDRC, the SAIC, the Ministry of Commerce (‘MOFCOM’), and the State Intellectual PropertyOffice (‘SIPO’) are drafting its version of antitrust guidelines relating to IPRs, and in particular, addressing some issues regarding standard essential patents (‘SEPs’). It is reported that these agencies have already submitted the drafts to the AMC, and the AMC willworkonthefinalversionofguidelines.


From a procedural perspective, protection of procedural rights of the undertakings concerned is a key issue in relation to cartel investigation and decision-making under the AML.

Rights of the concerned undertakings in laws and regulations

Article 43 of the AML stipulates that:The undertaking(s) concerned and third interested parties being investigated have the right to express their opinions to the administrative enforcer(s) of the AML. The administrative



enforcer(s) shall verify the facts, reasons and proofs being given by undertakings concerned and/or third interested parties being investigated.The rights of the investigated undertakings are stipulated by the Administrative Punishment Law of the People’s Republic of China (“Administrative Punishment Law”). 1. The concerned parties have the right to be informed before the issuance of a decision

containing sanction upon the party concerned.19 2. The concerned parties have the right to defend themselves before the administrative

enforcer.20

3. The Law provides a relatively detailed procedure of hearing.21 4. After the investigation, if the administrative enforcer decides to impose a sanction, the

concerned parties must be informed in writing.22 5. The Administrative Punishment Law, as well as the AML, stipulate that the investigated

parties are obliged to cooperate with the administrative enforcer and may not reject or hamper the investigation.23

It can be seen that the main rights of the concerned parties under the AML are the right to be informed and the right to defend.

Rights of the concerned parties in practice

In practice, several antimonopoly cases handled by the NDRC and the SAIC provide some clues about the protection of the rights of concerned parties in antitrust enforcement procedures. In the Lianyungang Concrete Association case,24 the investigator had collected key evidence in pre-investigation because the concrete association “did not recognise that their agreement might violate the law”. A hearing was then held for the Concrete Association. It is noteworthy that the hearing was held by the regulator itself. The concerned parties in this case did not know the purpose nor subject matter of the investigation until the key evidence had been collected by the antitrust authority. In addition, although a hearing was held for the concrete association, it was organised and chaired by the antitrust authority itself, which conducted the investigation. It isnotable that there isnoexplicitexpressionof the right toaccess theenforcers’file,the legal professional privilege or the right against self-discrimination under the AML’s investigation, which are provided in both EU and US antitrust enforcement regimes. Hopefully more detailed rules on the rights possessed by the parties in the investigation could be provided in the near future so as to bestow undertakings with more legal certainty.


The leniency rules provided by the NDRC and the SAIC are quite similar.TheSAICmaygrantfullimmunityorareductionoffinesinthefollowingcircumstances:1. Theadministrativeauthoritiesforindustryandcommercemayexemptorreducefines

imposed on the company if it voluntarily stops the conclusion of monopoly agreements. 2. The administrative authorities for industry and commerce may decide to grant full

immunitytothefirstcompanythatvoluntarilyreportsonthemonopolyagreement.3. To obtain such leniency, the company should provide important evidence to the agencies

and cooperate fully with the investigation. “Important evidence” refers to evidence that is crucial for the agencies to launch an investigation or to determine the conclusion of a monopoly agreement, including companies involved in the monopoly agreement, the scope of products involved, the content of the monopoly agreement and the way in which agreement is to be reached and the implementation of the agreement, etc.



It should be noted that the organiser of a monopoly agreement is expressly excluded from thebenefitsoftheleniency.TheNDRCmaygrantfullimmunityorreductionoffinesinthefollowingsituations:1. Forthefirstcompanywhichvoluntarilyreportsontheconclusionoftheprice-related

monopoly agreement and provides important evidence, punishment may be fully exempted.

2. For the second company which voluntarily reports on the conclusion of the price-related monopoly agreement and provides important evidence, a reduction of no less than 50% punishment may be granted.

3. For other companies which voluntarily report on the conclusion of the price-related monopoly agreement and provide important evidence, a reduction of no more than 50% punishment may be granted.

In addition to the foregoing, the NDRC published the draft Guidelines for Application of the Leniency Regime to Cases of Horizontal Monopoly Agreements (the Draft Leniency Guidelines)on3February2016. WithregardtotheamnestyrulesinChina, theNDRCpublished a draft of the “Guidelines on the General Conditions and Application Procedures for Exemption for Monopoly Agreement” by the State Council’s Anti-Monopoly Commission (“the Draft Exemption Guidelines”) on 12 May 2016.The detailed provisions have been stated previously. It should be noted that the Draft Leniency Guidelines and the Draft Exemption Guidelines have not yet taken effect, and theextent towhichtheseprovisionswillbe incorporatedinto thefinalreleasedversionsremainsuncertain,forexample,intermsofdeterminingwhoshouldberegardedasthefirstleniencyapplicantandwhowouldbethesecondandsoforth,howtodefine“significantevidence”, what types of materials should be submitted, and whether the evidence submitted in the leniency application could lead to an adverse effect in potential follow-up antitrust litigation, etc.


Legal basis for administrative settlement of antitrust cases Article 45 of the AML provides that, as for a suspicious monopolistic conduct that the enforcement authority is investigating, if the undertaking under investigation promises to eliminate the effects of the conduct through the use of concrete measures within the time limit accepted by the authority, the authority may decide to suspend the investigation. Where the antitrust authority decides to suspend an investigation, it shall supervise theimplementation of the commitments offered by relevant undertakings. If the commitments are properly and fully implemented, the authority may decide to terminate the investigation.However, under any of the following circumstances, the antitrust enforcer shall resume the investigation if:1. theundertakingfailstoimplementthecommitment;2. significantchangeshavetakenplacetothefactsonwhichthedecisiontosuspendthe

investigationwasmade;or3. the decision to suspend the investigation was made on the basis of incomplete or

inaccurate information submitted by the undertakings.Withaviewtoguidingtheapplicationoftheproceduresforbusinessoperators’commitmentsas well as the suspension and termination of investigation, the NDRC formulated the Guidelines for Business Operators’ Commitments in Anti-monopoly Cases (“The draft



Guidelines for Business Operators’ Commitments”) in February 2016. The draft Guidelines forBusinessOperators’Commitments specifies that antitrust regulators shall not acceptcommitment proposals from business operators if the relevant monopolistic behaviour has already been verified in an investigation. The draftGuidelines forBusinessOperators’Commitments also stipulate that regulators shall not accept commitment proposals or suspendinvestigationsifacaseinvolveshorizontalagreementsonprice-fixing,productionor sales restrictions, division of markets or material purchasing.

Administrative settlement in practice

In China’s antitrust regime, there is no administrative settlement as in the US or the EU. However, according to Article 45 of the AML, with respect to suspected monopolistic conduct which is under investigation by the authority, if the undertakings under investigation commit themselvestoadoptspecificmeasurestoeliminatetheconsequencesoftheirconductwithina certain period of time which is accepted by the said authority, the authority may decide to suspend the investigation. In the decision, the details of the undertakings’ commitments shallclearlybestated. Where theauthoritydecides tosuspendan investigation, itshalloverseethefulfilmentofthecommitmentsmadebytheundertaking.Wheretheundertakingfulfilsitscommitments,theauthoritymaydecidetoterminatetheinvestigation.In any of the following circumstances, the authority shall resume investigation:1. theundertakingsconcernedfailtofulfiltheircommitments;2. material changes have taken place in respect of the facts on which the decision to

suspendinvestigationwasbased;or3. the decision to suspend investigation was based on incomplete or untrue information

provided by the undertaking concerned.InJuly2015,NingxiaProvincialAICpublishedanoticeonitsofficialwebsite,statingthatit had suspended investigations against alleged tie-in sales by the regional branches of three major state-owned telecommunications companies, namely China Tietong, China Unicom and China Telecom, after accepting the remedies proposal of all of three companies. During the investigation suspension period, Ningxia Provincial AIC carried out some further inspectionsthatshowedtheremedypromiseshadbeenfulfilledandthethreecompanieshadcompletely stopped the relevant tie-in sales conduct in question. Following an 18-month rectification period, on 9December 2016, theNingxia agency decided to terminate theinvestigation, taking into account that the companies had implemented the requisite rectificationmeasuresandhadnotresortedtoanypracticethatwarrantedtherevivaloftheinvestigation, as is provided for in the third paragraph of Article 45 of the AML.On 30 June 2017, China’s Shandong Administration for Industry and Commerce (Shandong AIC) terminated an investigation into the local branch of State Grid Corporation of China. According to the published notice dated 17 July 2017 on the SAIC’s website, in July 2014 Shandong AIC received a complaint alleging that a local power supply company engaged in monopolistic conduct in the construction of power supply facilities for real estate developments in theMouping district ofYantai city. After receiving due authorisationfrom the SAIC, the Shandong AIC launched an anti-monopoly investigation into the power supplier in September 2014. During the investigation, the company submitted a formal application for suspension of the probe and committed to relevant remedies in June 2016. On 26 December 2016, the Shandong AIC decided to suspend the investigation. On 28 February2017,thecompanysubmittedareportonthefulfilmentofthecommitments.Afterascertainingthatthecompanyhadfulfilleditscommitments,theShandongAICterminatedthe investigation.



According to a published notice dated 28 March 2017 on the SAIC’s website, in April 2015, the Inner Mongolia AIC and the Ordos City Administration for Industry and Commerce (Ordos AIC) received a complaint alleging monopolistic conduct against three local LPG suppliers, namely Ordos City Sanya Liquefied PetroleumGas, Ordos City DongShengDistrictRongmeiLiquefiedPetroleumGasandOrdosCityXiandaiGas.Afterreceivingauthorisation from the SAIC on 24 July 2015, the Inner Mongolia AIC commenced a formal investigation into the companies. Immediately after the investigation commenced, the threecompaniesfiledanapplicationforsuspensionoftheprobeandcommittedtorelevantremedies. On 28 June 2016, the Inner Mongolia AIC decided to suspend the investigation. The Inner Mongolia AIC then asked the Ordos AIC to supervise the three companies and overseefulfilmentoftheircommitments.Furthertoreceivinganapplicationforterminationof the probe from the concerned companies, on 14 December 2016 the Inner Mongolia agency decided to terminate the investigation after ascertaining that the three companies hadfulfilledtheircommitments.On 19 August 2016, China’s Jiangsu Administration for Industry and Commerce (Jiangsu AIC)terminatedaninvestigationagainstalocalpowersupplyfirm,namelyHai’anCountyPower Supply. According to the published notice dated 29 September 2016, in October 2012, the local industry and commerce regulator received some complaints alleging that the power supplier forced non-residential customers to pre-pay a certain amount of fees as deposits, and had stopped supply to customers that refused to comply. In August 2013, upon authorisation from the SAIC, Jiangsu AIC commenced a probe into the company’s alleged abuse of dominance. During the investigation, the company submitted a formal application for suspension of the probe and committed to relevant remedies in August 2014. On 5 September 2014, the Jiangsu AIC decided to suspend the investigation. On 9 January2015,thecompanysubmittedareportonthefulfilmentofthecommitmentsandapplicationforterminationoftheprobe.Afterascertainingthatthecompanyhadfulfilledits commitments, the Jiangsu AIC terminated the investigation.

Concluding remarks

The foregoing analysis suggests that a suspension mechanism exists in China’s antitrust enforcement regime. At the current stage, however, we have not seen any examples of resumed investigations. The three criteria listed by Article 45 of the AML are quite general. The absence of detailed guidelines and published cases makes the potential violators who want to make commitments worry about whether the investigation will be resumed when the antitrust authority deems that the commitments are not implemented properly. To this end, the result after a suspension of an antitrust investigation is not clear: the investigation may be terminated or resumed. The discretion is largely in the hands of the antitrust authority.


Article38oftheAMLprovidesthegeneralprincipleofthird-partycomplaints;namely,“allunits and individuals shall have the right to report to the authority for enforcement of the Anti-monopoly Law against suspected monopolistic conducts and the latter shall keep the informationconfidential.Ifthereportismadeinwritingandrelevantfactsandevidenceareprovided, the authority for enforcement of the Anti-monopoly Law shall conduct necessary investigation”.Withregardtotheproceduresforathirdpartytofileacomplaintwithanantitrustagency,according to Article 5 of the NDRC’s Regulations on Procedures for Enforcement of



Administrative Law on Anti-Price Monopoly, any organisation or individual may report acts allegedly involving price monopoly to the price regulatory authority, and the authority shallkeepthecomplainant’sinformationconfidential.Wherethereportingisinwritingandrelevant facts and evidences are provided, the authority shall conduct necessary preparatory investigation.The items for preparatory investigation shall include:1. whether the complainant has reported the same issue to another administrative agency

orbroughtalawsuitbeforethepeople’scourtforthisissue;2. basicinformationonthereportedperson;3. relatedfactsandevidenceprovidedbythecomplainant;and4. other items that need to be investigated. Article 5 of the SAIC’s Provisions on the Procedures for the Administrative Organs for Industry and Commerce to Investigate Cases Concerning Monopoly Agreements and Abuses of Dominant Market Positions also renders a more detailed instruction:“Wheretheinformantcomesforwardwithinformationinthewrittenform,thefollowingshall be included:1. Basic information of the informant. Wheretheinformantisanindividual,he/sheshallprovidesuchinformationashis/her

name, address and contact information. Where the informant is a business operator, it shall provide such information as its

name, address, contact information, major industry, products or services, etc.2. Basic information of the entity suspected of monopoly. Such information shall include the name, address, major industry, products or services

of the business operator suspected of monopoly.3. Relevant facts with respect to the monopoly. Such facts shall include those with respect to the implementation of the monopoly

conduct by the suspected entity in violation of laws, regulations and rules and the time and place of the said conducts, etc.

4. Relevant evidence. Such evidence shall include documentary evidence, physical evidence, witness

testimonies,visualandaudiomaterials,computerdataandauthentificationconclusions,etc., and the relevant evidence shall be signed by the provider and the source of the evidence shall be indicated.

5. Whetherthesamefactshavebeenreportedtoanotheradministrativeorganoralawsuitwith respect thereto has been lodged with the relevant people’s court.”

The agencies will have to send feedback on what the decision is to the real-name complainant, but there is no clear time requirement for the feedback. In consideration of the rampant anti-competitive behaviour in China and the hard-pressed enforcement capacity, it is inevitable that the authorities will set priorities on the enforcement focus. A variety of factors may come to the function of an enforcement decision, but it appears that, amongothers,thetiestothepeople’sdailylivelihood,thesufficiencyofevidenceandthecoordination with industrial policies, have played important roles.Withregardtotheproceduresforathirdpartytofileacomplaintwithacourt,accordingtoArticle 56 of the Civil Procedure Law, if a third party considers that he has an independent claim to the subject matter of action of both parties, he shall have the right to bring an action.


According to the AML, the enforcement agencies may impose cease and desist orders,



confiscatetheillegalgains,and/orimposefinesbetween1%and10%ofanundertaking’sannual turnover in the preceding year for reaching cartel agreements.On June 17, 2016, the NDRC published the draft illegal gain penalty guidance for monopolies,asaforementioned.Whilethefinalandofficialversionhasyettobereleased,it provided an analytical framework and basic methods for anti-monopoly law enforcement agenciestorecogniseillegalgainsanddeterminetheamountoffineswheninvestigatingandhandling cases under which business operators reach and implement monopoly agreements or abuse market dominance.In China, the key sanctions on horizontal monopolistic behaviours include the following cases: • RMB457m–in2017,afinetotallingRMB457mwasimposedon18PVCmanufacturers

for a price cartel. • RMB0.57m–in2017,afinetotallingRMB0.57mwasimposedonHechiInsurance

Association and nine insurance companies for the conclusion of a horizontal monopoly agreement.

• RMB0.66m–in2016,fivefireworksdistributorswereorderedtodisgorgeRMB0.86minillegalgains,andafineofRMB0.66mwasimposed.

• RMB 0.41m – in 2016, three cipher device suppliers were ordered to disgorge RMB 29.35minillegalgains,andafineofRMB0.41mwasimposed.

• RMB 0.2m – in 2016, a fine of RMB 0.2m was imposed on Insurance IndustryAssociation of Hubei Province for the conclusion of a monopoly agreement.

• RMB2.6m–in2016,afinetotallingRMB2.6mwasimposedonthreepharmaceuticalfirmsforreachingestazolammonopolyagreements.

• RMB407m–in2015,afinetotallingRMB407mwasimposedoneightcompaniesinan ocean shipping cartel investigation.

• RMB 6.88bn – In 2015, a fine totalling RMB 6.88bn was imposed on QualcommIncorporated for abuse of a dominant market position.

• RMB123m–In2015,afinetotallingRMB123mwasimposedonDongfeng-Nissanfor reaching and implementing monopoly agreement on market segmentation.

• RMB407m–In2015,afinetotallingRMB407mwasimposedonNipponYusenco.and seven other companies for implementing price monopoly agreements. RMB 278m – in2014,FAW-VolkswagenandsomeAudidistributorswerefinedRMB278mforconducting a price-related monopoly agreement.

• RMB 114m – In 2014, a fine totalling RMB 114m was imposed on three cementcompanies in Jilin Province for concluding a horizontal monopoly agreement.

• RMB110m–In2014,afinetotallingRMB110mwasimposedonZhejiangInsuranceAssociation and several insurance companies for the conclusion of a horizontal monopoly agreement.

• RMB1.24bn–In2014,afinetotallingRMB1.235bnwasimposedon12Japaneseautoparts manufacturers for colluding over prices of auto parts and bearings.

• RMB 353m – In 2013, six multi-national LCD panel makers were ordered to disgorge RMB172mofillegalgains,andafinewasimposedofRMB353m.

Ingeneral,theinvestigatedpartygetstoknowthelikelyamountoffinewhentheantitrustenforcementagencyissuesthePre-notificationonAdministrativePenalty.Afterreceiptofthepre-notification,theinvestigatedisentitledtosubmitawrittenstatementorapplicationfor a hearing within three days if it does not agree with the potential penalty.In practice, it is possible that the antitrust enforcement agency may cut the level of the fineordisgorgement if thegroundsproposedby the investigatedbefore formal issueof



the administrative penalty prove to be appropriate and reasonable. The auto parts case is a goodexampleofthis,inwhichSumitomoreceivedafinereductionofaroundRMB50mafter presenting a convincing line of reasoning to the authority. In the Insurance Industry Association of Hubei Province case, the Insurance Industry Association of Hubei Province receivedafinereductionofRMB0.3mafterpresentingaconvincinglineofreasoninginawritten statement. In the cipher device suppliers’ cartel case, Sunyard System Engineering Co., Ltd asserted, during the hearing, that the calculation of illegal gains was inappropriate and the illegal gains should be calculated according to the actual sales amount (revenue) basedon330Yuanperdevice. Followingfurtherreviewandstudy,AnhuiAICadoptedSunyardSystemEngineeringCo.,Ltd’assertion.Additionally,thefinewillgenerallynotbe increased by submitting a written statement or application of hearing.


Regarding the administrative decision with penalties and sanctions, theoretically speaking, the investigated can apply for an administrative review or bring an administrative lawsuit beforethecourt,aftertheadministrativepenaltyisofficiallyissued.According to the Administrative Review Law and the Administrative Procedure Law, the subject may apply for administrative review within 60 days from the date when it receives theofficial administrativepenalty, ordirectlybringanadministrative lawsuitbefore thecourtwithinthreemonthsfromthedatewhenitreceivestheofficialadministrativepenalty.In addition, the investigated can bring the administrative lawsuit before the court or apply to the State Council for arbitration where it does not agree with the result of the administrative review. In case of applying to the State Council for review, the State Council shall give a finalrulinginaccordancewiththeprovisionsoftheAdministrativeReviewLaw.Theoretically, in the administrative review and administrative proceeding, both the procedure and the substance of the decision will be reviewed, which is known as a comprehensive review.In practice, however, the investigated party rarely launches an administrative review or lawsuit to challenge the decision of the antitrust enforcement agency in China. There have been administrative lawsuits before – such as that brought by cement manufacturers before a local court. But as reported, the court ended up dismissing the case on the grounds of exceedingthestatuteof limitation. Andsevenaccountingfirmsfileda lawsuit lastyeardemanding that the court order the Shandong SAIC to revoke the penalty decision imposed for reaching and implementing a monopoly agreement on market segmentation. In June 2017, thefinal judgmentdismissed the lawsuiton thegrounds that thepenaltydecisionby the Shandong SAIC had ensured procedural fairness and was based on sound facts and evidence, and correct application of law and regulations. Nevertheless, an investigated partystillhasachanceofsuccess.Forinstance,HenanJuyouNetServiceCompanyfileda lawsuit demanding the court to revoke the penalty decision imposed by the Zhengzhou SAICin2015.WhilethefirstinstancecourtdismissedthecaseonthesamegroundsastheShandong court as previously mentioned, in April 2017, the Zhengzhou Intermediate Court vacated the judgment and ordered the Zhengzhou SAIC to revoke its decision.

Criminal sanctions

Even though there are no criminal sanctions available in respect of antitrust infringements in China, obstruction of law enforcement during the antitrust investigation may result in criminal liability.



Article52oftheAMLprovidesthat,“Where,duringthereviewandinvestigationconductedby the authority for enforcement of the AML, a unit or individual refuses to provide relevant materials and information, or provides false materials and information, or conceals, destroys, transfersevidence,orrefusesandobstructsinvestigationinanyothermanner...;andifacrime is constituted, criminal liability shall be investigated for in accordance with law”.

Cross-border issuesExtraterritorial effect of the AMLArticle 2 of the AML renders a general principle that the law can apply to not only monopoly acts in the domestic market, but also monopoly acts outside China which eliminate or restrict domestic market competition. Accordingly, China’s antitrust regime has adopted an extraterritorial effect doctrine. However, currently, neither China’s legislative department noritsenforcementagencieshavepromulgatedanyspecificregulationsoninterpretationorimplementation methods.More communication and deeper cooperation with counterparts in other jurisdictionsThe NDRC and the SAIC attach importance to the international information exchange and cooperation with agencies of other antitrust regimes. Both of them have, respectively or collectively, come to MOUs with the enforcement powers in the US, EU, UK, South Korea, Russia, Australia, Brazil, etc., and thereby established the institutional frameworks for international cooperation and coordination.Initially, most of the cooperation was focused on general matters, such as the communication of competition policies and the joint organisation of competition-related conferences or forums. In some of the MOUs, since then, such as those with the US and the EU, the agencies have agreed to exchange information and coordinate their enforcement activities directly. So far, this direct exchange of information appears to be fairly effective.Gradually, international cooperation among the agencies is covering more areas and the level of cooperation is going deeper; in 2016, the NDRC established the dialoguemechanism relating to a fair competition review system and the state aid system with the EU, signed MOUs with Russia, Brazil, Mexico and others, and took a more proactive attitude in participating in and attending competition forms worldwide. Also, through academic cooperation, and professional training, particular individual case communication channels and in other ways, the SAIC intends to broaden and enhance international cooperation further.


As mentioned above, the AML also provides a mechanism for individuals and entities to bring antitrust cases before the courts. The most closely watched cases have been focused on abuse of dominant position, such as YingDing v. SINOPEC, Qihoo 360 v. Tencent and Huawei v. IDC. A limited number of cases have involved vertical agreements, such as Beijing Ruibang Yonghe Technology & Trade Co., Ltd. v. Johnson & Johnson, and Rijing Electric v. Panasonic. Cartel-related private litigation is still a developing area. Several follow-up private lawsuits initiated by downstream undertakings and consumers have been reported. For instance, it is reported that one consumer brought a lawsuit against an insurance company which has been punished by the NDRC for implementing cartel behaviours. Another notable case is related to a cartel case investigated by the NDRC involving cathode ray tubes (CRTs). However, according to the press releases, most cases were settled through mutual negotiations.



In regard to the regime of private enforcement against cartels, there are some notable issues. The defendant takes the burden of proofThe Supreme People’s Court provides some explicit interpretations with respect to hearing antitrust private cases in Provisions on Several Issues Relating to Laws Applicable for Trial of Civil Dispute Cases Arising from Monopolies. According to Article 7 of the Provisions, in cartel litigation, the defendant shall bear the burden of proof to show that the alleged agreement does not exclude or restrict competition.However, Article 7 does not means the plaintiff is completely released from its burden of proof. According to Article 64 and 65 of Civil Procedure Law, a party shall provide timely evidence to support their allegations. Furthermore, according to Article 90 of Interpretations of the Supreme People’s Court on the Application of the Civil Procedure Law, “[w]here a party concerned fails to furnish any evidence to prove the facts claimed or where the evidence furnishedisinsufficienttoprovethefactsclaimedbeforeajudgmentispronounced,theparty bearing the burden of proof shall be subject to adverse consequences.” In August 2016, in the Tian Junwei vs. Carrefour Beijing Shuangjing Shop and Abbott Trading Co Ltd (Shanghai)case,thecourtoffirstinstanceandappellatecourtbothdismissedthelawsuiton the grounds that the plaintiff could not prove causality between the damage incurred and the two defendants’ monopoly agreement.Documents submitted in the process of leniency application might not become the potentially crucial evidenceAlthough there is no specific rule in effect onwhether documents submitted as part ofa leniency application may be treated as evidence in private enforcement against cartels, according to the Draft Leniency Guidelines, materials submitted when applying for leniency may not be made public without the consent of the business operators, and may not be accessed by any other agencies, organisations or individuals. Such materials may not be used as evidence in civil proceedings. Therefore, leniency documents may not be made available as potential evidence, provided that this provision is not removed from the guidelines that subsequently come into effect. However, given the guidelines issued by enforcement agencies will not be binding on courts, there still remain uncertainties in this regard.

Reform proposals

The enforcement against cartels in China is developing towards a deeper level and more diverse areas. However, as a young antitrust regime, China is expected to carry out the following reforms:• Enhanced transparency. As mentioned above, both the NDRC and the SAIC are in

charge of enforcement against cartels. The SAIC launched an anti-monopoly case release platform dating back to 29 July, 2013. Previously, the NDRC merely rendered press releases giving limited details and reasoning of the cases. Since September 2014,theauthorityhasstartedtomakepublicaseriesoffinaldecisions−onthe2013insurance cartel cases and the 2014 auto parts cartel cases − which cover the factfindingsandtherationalesunderlyingthefinaldecisions.However,thepublicationofofficialdecisionshasnotbecomethenorm,asthemostrecentdecisionsontheverticalresale price maintenance cases, though made by local DRCs, are not released on the NDRC’s officialwebsite and only partially released on localDRCwebsites.25 The unifiedplatformfordecision releases ishighlyanticipated. Also,given thatArticle44 of the AML stipulates that where the enforcement authority makes a decision that a



suspected conduct constitutes a monopolistic conduct, the said authority may make the matterknowntothepublic,regularandfullpublicationofofficialdecisions,nomattermade by central or local authorities, are highly expected.

• More sufficient, professional, and stable manpower. There are hundreds of staff working in prestigious antitrust agencies such as the US’s DOJ and FTC, the EU’s DG COM, and South Korea’s FTC, and most of them are trained in either law or economics. The reality in China is that the human capital of the authorities is relatively thin compared to their counterparts in advanced antitrust regimes. Thus, the reform of human resources aimedatformingasufficient,professionalandstablehumancapitalisexpected.

• More sectors under the antitrust radar. As competition policy develops towards maturity, more sectors should come under the antitrust radar, with legislative efforts towards both innovative and livelihood-related areas being encouraged, such as the domains of big data, the sharing economy, human resources, etc. Areas that are not officiallyregulatedbutareseeinganti-competitiveeffectshavecometotheattentionof counterparts in the US and EU. Since a similar situation can be seen here in China, proactive action by the Chinese agencies is highly anticipated.

• More specific and clear regulations. The AML is about to enter its 10th year. Compared with the US and EU, China’s antitrust regime is still in its developing phase.Comprehensiveandexplicitrulesandregulationsarethefirststeptowardsthematurity. There is a clear need for the authorities to provide additional details on their enforcement activities and more procedural guidelines.

• Enhance the private enforcement. The Supreme People’s Court issued the Provisions of the Supreme People’s Court on Certain Issues Relating to the Application of Law in Hearing Cases Involving Civil Disputes Arising out of Monopolistic Acts in 2012, in which the 16-article provisions clarify issues such as prosecution, case acceptance, jurisdiction, distribution of the burden of proof, evidence in litigation, civil liability and limitation of actions, judicial interpretation has set up an antitrust litigation framework. It should be recognised that it is necessary to further detail how to calculate damages, and impose a higher liability on cartels. Furthermore, the issue that heavy burdens of proof on the plaintiff and a lack of class action and punitive damages mechanisms may decay the enforcement of antitrust litigation remain to be solved or improved going forward.

* * *

Endnotes1. Under the AML, cartels are named ‘horizontal monopoly agreements’, which are

definedas‘agreements,decisionsandotherconcertedconductsbetweencompetitors’.2. http://fldj.mofcom.gov.cn/article/xxfb/201709/20170902650997.shtml. 3. http://www.ndrc.gov.cn/yjzx/yjzx_add.jsp?SiteId=129. 4. http://www.ndrc.gov.cn/yjzx/yjzx_add.jsp?SiteId=141. 5. http://jjs.ndrc.gov.cn/gzdt/201602/t20160201_774051.html. 6. http://jjs.ndrc.gov.cn/gzdt/201603/t20160302_791697.html. 7. http://jjs.ndrc.gov.cn/gzdt/201603/t20160323_798376.html. 8. http://jjs.ndrc.gov.cn/fjgld/201605/t20160512_801559.html. 9. http://jjs.ndrc.gov.cn/fjgld/201606/t20160617_807541.html. 10. http://www.sdwj.gov.cn/ggfw/jcfx/xzcfgs/01/152404.shtml.11. http://www.ndrc.gov.cn/xwzx/xwfb/201709/t20170927_861737.html.



12. http://www.sxdrc.gov.cn/xxlm/fjgld/201705/t20170510_179132.html.13. http://www.saic.gov.cn/fldyfbzdjz/jzzfgg/201703/t20170309_232285.html.14. http://www.saic.gov.cn/fldyfbzdjz/jzzfgg/201703/t20170309_232288.html.15. http://www.saic.gov.cn/fldyfbzdjz/jzzfgg/201703/t20170309_232295.html.16. http://www.saic.gov.cn/fldyfbzdjz/jzzfgg/201704/t20170407_261351.html.17. http://zys.ndrc.gov.cn/xwfb/201707/t20170710_854192.html.18. http://www.ndrc.gov.cn/xwzx/xwfb/201709/t20170927_861737.html.19. Article 31 of the Administrative Punishment Law.20. Article 32 of the Administrative Punishment Law.21. Article 42 of the Administrative Punishment Law provides that public hearings are to

be organised according to the following procedure: 1) if a public hearing is requested by the parties concerned, the request shall be submitted within three days after the parties concerned are notified by the administrative organ in charge; 2) the administrativeenforcer(s) shall notify the parties concerned of the time and venue of the hearing seven daysbeforeitisheld;3)withtheexceptionofcasesinvolvingstatesecrets,businesssecretsorindividualprivacy,hearingsshallbeheldinpublic;4)publichearingsaretobe chaired by a person appointed by the administrative enforcer(s) in charge and who is not one of the investigators of the case in question, if the parties concerned deem that the person chairing the hearing has a straight connection to the case, they have the right tosubmitarequestforwithdrawal;5)thepartiesconcernedmaypersonallyattendthehearingormayaskonetotwopersonstorepresentthem;6)atthehearingsinvestigatorspresent the facts and evidence of violation of law by the parties concerned, and suggest administrativepunishments;thepartiesconcerneddefendthemselvesandconfronttheinvestigators;and7)atranscriptonthepublichearingshallbemade,checkedbythepartiesconcerned,andsignedbythemoraffixedwiththeirseals.

22. Article 39 of the Administrative Punishment Law.23. Article 42 of the AML and Article 37 of the Administrative Punishment Law.24.SeeF.Yao,“ThefirstAMLcaseenforcedby theSAIChasbeensealed: themarket

segmentationagreementofLianYungang’sassociation”,LegalDaily,02/03/2011,lastvisited on December 9, 2014.

25. The Shanghai Municipal Development and Reform Commission has publicised all decisions regarding the Chrysler resale price maintenance case, but on the Hubei Price Bureau’s website, there is only a press release.


AnJie Law Firm19/F,TowerD1,LiangmaqiaoDiplomaticOfficeBuilding,No.19Dongfangdonglu,ChaoyangDistrict

Beijing 100600, P.R.China. Tel: +86 10 8567 5988 / Fax: +86 10 8567 5999 / URL: www.anjielaw.com

Dr. Zhan HaoTel: +86 10 8567 5966 / Email: [email protected]. Zhan Hao is the managing partner of AnJie Law Firm. He received his doctorate degree in law from Peking University and completed post-doctoral research on microeconomics. Dr. Zhan has extensive experience in representing companies against the public investigation of cartels and abuse of dominance. He has represented domestic and foreign enterprises in the NDRC and the SAIC’s antitrust investigation in multiple sectors including aviation, telecommunication, insurance, baby formula, LCD, and auto parts. Dr. Zhan has successfully defended clients in antitrust litigation in Chinese courts and has also offered competition law training and conducted antitrust analysis for numerous companies, including Fortune 500 companies, listed companies and SOEs.


Song YingTel: +86 10 8567 5979 / Email: [email protected] a partner ofAnJie, SongYing specialises in antitrust and anti-unfaircompetition law. She provides a wide range of services, including defence for the investigation, private competition litigation, merger filings andcompetition compliance. Shehas ledandhandledanumberofhigh-profilecases.For instance, sheprovided legal service to SINOPEC, and also represented Panasonic in an antitrust private litigation brought by its distributor. Currently, she is also representing a few antitrust litigations related to other complicated issues, such asSEP.Sheisaveteranattorneyinmergerfilingsaswellasdefendingagainstantitrustinvestigations.Forexample,shefiledtheconcentrationnotificationfor ChemChina/Syngenta deal with MOFCOM, which is the biggest deal of SOEs in 2016, and successfully obtained the unconditional clearance for the clients.Shealsohandledanumberofhigh-profileinvestigationcases,suchas the LCD case, telecom case, milk powder case, auto parts case, PVC case and the port cases. Stephanie (Yuanyuan) WuTel: +86 10 8567 5988 / Email: [email protected]’sShanghaiOffice.Stephaniespecialises in antitrust and competition law, and advises on all aspects and phases of anti-monopoly law, including compliance, investigations, merger notification,antitrustprivatelitigation,andfaircompetitionreview.Stephanie has extensive experience in advising both multi-nationals and Chinese companies on anti-monopoly law issues pertaining to the compliance of companies’ daily operations and business practices in China, in particular issues relating to the supply and distribution, horizontal cooperation, information exchange, sales and marketing, after-sales, etc. Stephanie has also advised clients on the formation of tailor-made anti-monopoly law compliance systems, the formulating of responses to investigations and complaints, as well as provided trainings and performed internal audits for clients.


DenmarkOlaf Koktvedgaard, Frederik André Bork & Søren Zinck

Bruun & Hjejle Advokatpartnerselskab


Danish competition law is to a large extent equivalent to EU competition law. Sections 6 to 8 of the Danish Competition Act correspond to Article 101 TFEU and are interpreted in accordance with practice from the European Commission and the European Court of Justice. Non-authoritative versions of the Act and the most relevant Executive Orders issued pursuant to the Act have been made available by the Danish competition authorities in English on www.kfst.dk (it must be noted that the translations do not always include the latest legislative amendments). The main sanctions for infringement of competition law are criminal sanctions under Danish law, and the sanctioning procedure is thus largely governed by the Danish rules on criminal procedure.The Danish competition authorities consist of: (i) the Danish Competition and Consumer Authority (“theDCCA”); (ii) theDanishCompetitionCouncil (“theCouncil”);and (iii)the Danish Competition Appeals Tribunal (“the Appeals Tribunal”). In general, the DCCA investigates and prepares competition cases for the Council, which decides competition cases in thefirst instance. Decisions from theCouncilmaybeappealed to theAppealsTribunal, and in turn to the ordinary courts.The Danish competition authorities have the power to decide whether agreements and concerted practices are in breach of competition law, and they may order undertakings to end practices found to be contrary to competition law. The competition authorities do not have the power to impose criminal sanctions or to fine undertakings or individualsadministratively, but may offer – with the acceptance of the State Prosecutor for Serious Economic and International Crime (“the State Prosecutor”) – undertakings and individuals afinein lieu of prosecution.If the Danish competition authorities find that competition law has been breachedintentionally or grossly negligently, and if the case cannot be closedwith afine in lieu of prosecution, the authorities may report it to the State Prosecutor who may charge the undertaking and/or the responsible individual formally and bring the case to court.The Danish authorities increasingly bring charges against involved management members, and more senior employees where possible. In recent years, management members have beenfinedinapproximatelyhalfofthecaseswhereundertakingshavebeensanctioned.All caseswhere sanctions are imposed are published on thewebsite of theDCCA; thenames of any individual(s) being omitted.In 2012, an extensive amendment of the Danish Competition Act implying stricter sanctioningwasadopted.Effectiveasof1March2013,theleveloffineswasthusraised


Bruun & Hjejle Advokatpartnerselskab Denmark

dramatically, and custodial sentences for cartel activities (or attempted cartel activities) of up to one-and-a-half years of imprisonment (and up to six years of imprisonment for particularly serious cartels) were introduced. Custodial sentences for cartel offences can onlybe imposed if thenecessary specific intent canbeprovenand theother conditionsforimposingacriminalsanctionunderDanishlawaresatisfied.Custodialsentencesareexpected to be used primarily against members of the board and members of the management.

Overview of investigative powers in Denmark

In most Danish cartel investigations, the DCCA conducts a dawn raid to secure evidence. The DCCA is entitled to conduct dawn raids at the premises of undertakings (or associations of undertakings), including making a forensic copy of a company’s IT system, upon presenting a court order containing information on the subject-matter and purpose of the inspection. Further, the authority may request employees to present the contents of their pockets and briefcases and may access company vehicles.However, contrary to dawn raids conducted under EU law in accordance with Regulation 1/2003, the DCCA has no access to private homes or private cars when conducting dawn raids under Danish law.The DCCA can demand that the company’s employees answer questions of a factual nature, e.g.wherespecificdocumentsarestored.TheDCCAmayalsorequestoralstatementsfromthe employees. However, no-one is obliged to answer questions involving any acceptance of guilt. The DCCA may report a suspected cartel to the State Prosecutor. The State Prosecutor may choose – subject to court approval – to conduct searches, including at private homes, pursuant to the Danish rules on criminal procedure. This has happened in several cases where the DCCA has previously conducted a dawn raid to investigate the same alleged offence.As an important corollary to the introduction of custodial sentences for cartel offences, the State Prosecutor was in 2013 given new and more invasive powers of investigation. Subjecttocourtorders,thesepowersincludethepossibilityofwiretapping;searchesatthepremises of individuals not suspectedof participating in a cartel;monitoring (includingfilmingpersonsatnon-publiclocationsandregistrationofindividuals’locationsbasedonmobilephones);andtheinstallationof“snifferprograms”oncomputers.Thereisnopublicinformation on whether these new measures have been used.


During the last 12 months, the following decisions on horizontal agreements have been published by the Danish competition authorities. On 29 November 2016, the State Prosecutor dismissed all charges against the last participant inthemajorDanish‘constructioncartel’duetothecompany’sleniencyapplication.Withthis decision, the State Prosecutor has after almost three years put an end to the legal proceedings arising out of one of the largest cartel cases in Denmark. The case concerned bid rigging on both private and public construction projects with a total value of DKK 400–500 million (approx. EUR 54–67 million). Since the commencement of the legal proceedings,theStateProsecutorhasissuedfinenoticesto25companiesand21managingemployees. Among these, only one company and one managing employee were acquitted incourt.Combined,thefinesissuedamounttoalmostDKK31million(approx.EUR4.16million),thelargestfineamountingtoDKK10million(approx.EUR1.35million). As



thedecisionsarebasedontheoldpenaltyregime,finesforsimilarinfringementscanbe expectedtobesignificantlylargertoday.On 31 May 2017, the Council decided that four players on the Danish market for roof felt and roof foil had illegally restricted competition by entering into an agreement and/or a concerted practice with the purpose of foreclosing competitors and limiting product supply. The Council ordered the parties to terminate the restrictive agreement and/or concerted practice and to cease the limitation of product supply. The Council announced that the case would be referred to the State Prosecutor for criminal prosecution. However, as all four players appealed, the criminal case is currently awaiting the outcome of the appeal case. On 31 May 2017, the Council decided that the Danish Camping Board (in Danish: Campingrådet) had illegally restricted competition by adopting that camping sites should require their guests to buy – at a fixed price – a “camping pass” issued by theDanishCamping Board. The illegal practice comprised almost 90 per cent of the Danish camping sites. The Council ordered the Danish Camping Board to terminate the restrictive practice. No information on a potential criminal case has been made public. On 13 July 2017, the Appeals Tribunal upheld a Council decision establishing that HMN Naturgas I/S (“HMN”), Gastech-Energi A/S, Kiertner ApS and the energy industry association DEBRA – Energibranchen had coordinated prices for gas furnace maintenance subscription for end users in 2014. The Appeals Tribunal found that HMN, Gastech-Energi A/S and Kiertner ApS had agreed that the subscription fees for HMN’s end users should not become too high, and that the parties were competitors. As the Appeals Tribunal found the agreement to be a restriction of competition by object, it did not examine whether the agreement had had any negative consequences on the relevant market. Consequently, thefactthatthepriceswereactuallyreducedwasnotinitselfsufficienttoprovethattheagreement did not restrict competition.On 20 July 2017, the Danish plumbing company Fredensborg VVS-Teknik A/S (“Fredensborg”) agreed to pay a fine of DKK 1 million (approx. EUR 135,000) in asettlement with the State Prosecutor. According to the DCCA, Fredensborg had illegally restricted competition by exchanging and coordinating information on prices and other termswithanunnamedcompetitorinrelationtofivebidsforconstructionprojects.Thecaseisinterestingastwooutofthefivecasesofbidriggingextendedbeyond1March2013,andthecaseisthusoneofthefirstbasedonthenewDanishpenaltyregime.Furthermore,Fredensborg’s ability to pay was taken into consideration, which under Danish law may leadtoadownwardadjustmentofthesizeofafine,mainlybasedonacompany’sfinancialsolidity. A case against the unnamed competitor of Fredensborg is still pending.On 30 August 2017, the Council found that Mediacenter Danmark A/S (MCD) and MPE Distribution ApS (MPE) had violated Danish competition law in 2013 and 2014 by agreeing that MPE should not pursue MCD’s customers on the market for the purchase and sale of distribution of unaddressed mail to end customers (advertisers). In January 2015, MPE had contacted the Council with information on potential anti-competitive infringements, following which the DCCA conducted dawn raids at the premises of six suspected media agencies in August 2015. However, during these dawn raids, the DCCA only found evidence of an agreement between MCD and MPE. According to the Council, the investigation showed that MCD and MPE had entered into a customer-sharing agreement on the Danish market for the purchase and sale of unaddressed mail to end customers. The Council found that the agreement constituted a restriction of competition by object and that customers would have less choice on the market, which could lead to a decrease in service and/or increase in price. The Council decided to report the case to the State Prosecutor for criminal prosecution.




Given the low number of published decisions by the DCCA on cartel enforcement, it is difficulttopointtokeyissuesinrelationtoenforcementpolicy.However,theDCCAhasfor several years focused on trade associations. In 2014, the DCCA published a set of guidelines on information activities in trade associations in order to provide an overview of the most important criteria for the DCCA’s assessment of the exchange of information within trade associations. The guidelines state that when assessing the exchange of information, it is relevant whether the information provided to the members is aggregated, orwhetherdataonindividualcompetitorscanbeidentified.Collusionwillbelesslikelyifonly aggregated data is provided. Information of a less recent date is also less likely to have an impact on competition than information of a more recent date. Finally, the availability of the information is taken into account, and the sharing of publicly available information is thus less likely to violate competition rules.Further, in September 2015, the DCCA started an investigation into the competition between medicine wholesalers in Denmark, which should be seen in connection with the DCCA’s focus in recent years on the pharmaceutical industry. The DCCA has also recently looked into the competition between medical specialists in private practice and possible anti-competitive conduct through their trade association. In recent years, the DCCA has displayed an increased focus on consortia and the distinction between a legal consortium and an illegal cartel. In 2014, the DCCA issued guidelines on consortia,whichwerefollowedupbyspecificcasesin2015.Followingrequestsfromtradeassociations for guidelines providing more legal certainty, the DCCA has sent a draft update of the guidelines out for public consultation in June 2017.Finally,theDCCAregularlycarriesoutsectorinquiriesandpublishestheirfindingsinanarticle or a full report. The main purpose of the sector inquiries is to provide the DCCA with a better understanding of a given market and to examine whether competition on that market is working as it should. As such, a sector inquiry may indicate the current enforcement focus of the DCCA. Recent sector inquiries have looked into (i) competition on the Danish mortgage market, (ii) the potential for increased competition and savings on the Danish market for dental services, and (iii) the effect of minority shareholdings on competition.


As also provided by the EU rules on legal privilege, the DCCA does not have the right to review correspondence with an undertaking’s external legal counsel regarding the undertaking’s compliance with competition rules. The same applies to documents that summarise or pass on such information. Though the exact delimitation of the legal privilege underDanishlawmayinspecificcasesgiverisetodiscussionswiththeDCCA,thelimitshave not been tested on appeal yet.During searches by the State Prosecutor in a criminal case, the State Prosecutor does not have access to any correspondence between the company and the company’s defence counsel. It has, however, not been settled in case law whether the State Prosecutor will have access to prior correspondence with the company’s external counsel concerning the company’s compliance with competition law (as covered by legal privilege). As regards the proposed Directive to empower the competition authorities of the Member States to be more effective enforcers and to ensure the proper functioning of the internal market, Danish law is already in line with the Directive in a number of areas. However,



some changes to the Danish investigation and decision-making procedures will have to be made if the Directive is passed in its current form. This will, inter alia, include changes regarding (i) investigations in private homes, which the DCCA is currently not allowed to conduct, and (ii) increased assistance from and to other competition authorities.


A leniency regime much like the EU leniency regime was introduced in Denmark in 2007. However, until now, the Danish leniency regime has only been used to a limited extent.According to a government report from 2012, the Danish competition authorities and the State Prosecutor had received, during the period from the introduction of the leniency regime in2007untiltheendof2011,only11leniencyapplications,ofwhichfiveweresummaryapplications in cases where the applicants had originally applied for leniency to the European Commission.Wehaveseennostatisticsonthedevelopmentsubsequentto2012.UndertheDanishleniencyregime,thefirstleniencyapplicantmayobtaintotalimmunityfromfines,whereassubsequentapplicantsmayonlyhavetheirfinesreducedprovidedtheysubmit new, relevant information. There is currently no “marker” system under Danish law;onlya “full” leniencyapplicationcounts to establishpriority. However, followinga recommendation from the OECD, a draft bill amending the Danish Competition Act has been introduced, which, if passed, will adopt a “marker” system under Danish law (effective as of 1 January 2018).Leniency from custodial sentences is possible, but full immunity can only be obtained by thefirstapplicant.Anysubsequentapplicantmayonlyreceiveareductionofthepenalty.Plea bargaining as such does not exist under Danish law, thus any reduction in custodial sentencestothosewhoreportacartelsubsequenttothefirstreportwillbedecidedbythecourts.


Undertakings and individualsmay accept a fine in lieu of prosecution before either the StateProsecutorortheDCCA,andtherebyavoidcriminaltrialinopencourt(fixedpenaltynotices issued by the DCCA are subject to approval by the State Prosecutor). Undertakings thatcontacttheDCCAinordertosettlewillgenerallybegrantedareductionofthefine.


The Council may initiate cartel investigations on its own initiative or based on complaints from, inter alia, third parties. In 2013, the DCCA introduced a new feature on its website, which makes it possible for employees – or others who may have knowledge of a cartel – to inform the DCCA anonymously. An IT system operated by a third party enables the submission of evidence and two-way communication without revealing the identity of the whistle-blower. The DCCA has not published information on the actual use of the system.In practice, the Council’s investigations are conducted by the DCCA. Decisions from the Council on the initiation or closing of an investigation cannot be appealed to the Appeals Tribunal.


Civil or administrative penalties do not exist under Danish competition law, but criminal sanctions may be imposed on both undertakings and individuals for intentional or grossly negligent breaches of competition law.



The DCCA may report cartels to the State Prosecutor at any time.Asubstantialincreaseintheleveloffinesandanintroductionofcustodialsentencesforcartel offences were introduced with effect for infringements committed after (or, as regards continuous crimes, extending beyond) 1 March 2013.


Cartelinfringementdecisionscanbemadeeitherby:theCouncil;basedoninvestigationsbytheDCCA;ordirectlybythecourtsinacriminaltrial.The Council’s decisions may be appealed to the Appeals Tribunal, which conducts a full and thorough review and may substitute/change the Council’s decision.Decisions from the Appeals Tribunal may, under strict time limits, be challenged before the courts. The courts seem to be moving towards a more rigorous review and seem more willingtosubstitutetheauthorities’decisions,ifthecourtsfinditnecessary.Concurrently, the Director General of the DCCA has the authority to report a cartel to the State Prosecutor. This will in practice either be done at an early stage or, in more complicated matters, upon a decision from the Council (with possible appeals to the Appeals Tribunal and on to courts) on the substantive competition law issues. Such decisions are not formally binding on the court in a criminal trial, but they will have a substantive persuasive effect.In relation to subsequent actions for damages, a finalDanish decision on the existenceof a cartel from either the competition authorities or a court is deemed to be irrefutably established for the purposes of the action for damages and will generally be considered evidence that the participating undertakings have acted negligently, and it thus constitutes a basis of liability.

Criminal sanctions

In 2012, the Danish Parliament passed a new Act on sanctions for competition law violations. The object of the newAct was to increase the fines for undertakings andindividuals and to introduce custodial sentences in cartel cases.Thechange entered into forceon1March2013; the rules applyboth to incidents after1 March 2013 and to incidents commenced before 1 March 2013 and continuing after this date. Many of the incidents recently investigated by the DCCA, including the major construction cartel, relate to events prior to 1 March 2013. IncreasedfinesWith regard to the increased fines, the following table shows the changes in the basicamounts from 1 March 2013:

Gravity Examples Previous indicative level

New indicative level

Indicative level of fines for individuals

Less grave Exclusive purchase obligations lasting more than five years.

Up to DKK 400,000(approx. EUR 54,000).

Up to DKK 4 million(approx. EUR 540,000).

Minimum DKK 50,000(approx. EUR 6,700).



Gravity Examples Previous indicative level

New indicative level

Indicative level of fines for individuals

Grave Resale price maintenance.Non-compete clauses in joint production agreements.

DKK 400,000 to 15 million.(approx. EUR 54,000 – 2m).

DKK 4 million to 20 million.(approx. EUR 540,000 – 2.7m).

Minimum DKK 100,000.(approx. EUR 13,400).

Very grave Coordination of prices, production, customers or bids. Certain types of abuse of dominance.

More than DKK 15m.(approx. more than EUR 2m).

More than DKK 20m.(approx. EUR 2.7m).

Minimum DKK 200,000.(approx. EUR 26,900).

The above-listed basic amounts may be adjusted depending on (i) the duration of the infringement, and, for legal entities, (ii) the worldwide turnover of the legal entity. AccordingtotheexplanatorynotestotheDanishCompetitionAct,afineissuedtoalegalentity should generally not exceed 10 per cent of the entity’s worldwide turnover. ImprisonmentInadditiontoincreasedfines,custodialsentencesincartelcaseswereintroduced.Cartelagreements (or attempts to enter into such agreements) are punishable by imprisonment if the participation in the cartel was deliberate, and if the offence is grave due to its scale and the adverse effects it is capable of causing. The maximum sentence is one-and-a-half years of imprisonment or, in case of aggravating circumstances, up to six years of imprisonment.The custodial sentence is expected primarily to be directed towards involved members of the managementandmembersoftheboard.TheStateProsecutorhasunofficiallystatedthatitwill, in general, ask for unconditional imprisonment in cartel cases. In the State Prosecutor’s view, the custodial sentence of up to one-and-a-half years applies if the estimated total value of thecrime(e.g.aprice-fixingcartel) ismore thanDKK10,000, (approx.EUR1,300)whereas the custodial sentence of up to six years applies if the estimated value of the crime is more than DKK 500,000 (approx. EUR 67,000). However, it yet remains to be seen what levelofsanctions theStateProsecutorwillaskfor in thespecificcasesandwhether thecourts will follow the views of the State Prosecutor.

Cross-border issues

The Danish competition authorities generally investigate cartel behaviour taking place in or outside Denmark to the extent that such behaviour affects the Danish market. Further, Denmark is part of the European Competition Network (ECN) and thus participates in the cross-border cooperation between the national competition authorities of other Member States and the European Commission. Additionally, the DCCA participates in the informal cooperation of the European Competition Authorities.On a Nordic level, the Danish competition authorities cooperate with Norway, Sweden, Finland, Iceland, Greenland and the Faroe Islands with the main purpose of exchanging legislative experience and discussing cases and subjects of common interest. In this context, an annual meeting between the national authorities of each nation is held.



Furthermore, a formal agreement on the exchange of confidential information betweenDenmark and the national competition authorities in Sweden, Norway and Iceland has been entered into.


On 27 December 2016, the Danish Act on Actions for Damages for Infringements of Competition Law (“the Damages Act”) implementing the Damages Directive (Directive 2014/104/EU) entered into force. The Danish Parliament has chosen to maintain consistency between Danish competition law and EU competition law, and the rules thus apply to infringements of the Danish Competition Act as well as Articles 101 and 102 TFEU. Following the entry into force of the Damages Act, the right to claim damages for competition law infringements in Denmark will generally be subject to (i) the Damages Act, and (ii) the general principles of the law of liability under Danish law where a matter is not regulated by the Damages Act (e.g. the basis of liability, causation and proximate cause). The Act entails a number of changes to Danish law, including (i) an extension of the limitation period to fiveyears,whereasthegeneralstatuteoflimitationfordamagesinDenmarkisonlythreeyears, (ii) the burden of proof is reversed as cartel infringements are now presumed to result in harm, (iii) reduction of the joint and several liability for small and medium-sized companies, and (iv) reduction of the joint and several liability for immunity recipients. The substantive provisions of the Act do not apply to actions for damages for competition law infringements committed before 27 December 2016. However, the substantive provisions will apply to competition law infringements commenced before 27 December 2016 and continuing after this date (continuous crimes). The procedural provisions of the Act apply to actions for damages brought before a court after 25 December 2014.In general, our view is that the awareness of the possibilities as regards compensation is rising in Denmark. This development has only been further enhanced by case law at the EU level such as the Kone judgment (C-557/12), which prohibits Member States from rejecting compensation claims based on umbrella pricing argumentation, and the recent implementation of the Damages Directive.

Reform proposals

A draft bill amending the Danish Competition Act has been introduced, which, inter alia, concerns the following matters: (i) a change in the Danish de minimis thresholds from being turnover-based to beingmarket share-based; (ii) the addition of a rule permitting preliminaryleniencyapplications;and(iii) limitation of the right to “own access” (the right toobtainaccesstofilesincasesmentioninganindividual’soranundertaking’sname)intheDCCA’s cases. If passed in its current form, the Act will enter into force on 1 January 2018.Furthermore, if the abovementioned proposed Directive on empowering national competition authorities is adopted in its current form, a number of changes to Danish competition law will be required. The gravity of the required changes will to some extent depend on whether the Danish Parliament will choose to maintain consistency between Danish competition law and EU competition law. The required changes will include changes to (i) the competition authorities’ access to private homes, (ii) parent company liability, (iii) the right for the DCCAtoparticipateinthehearingofappealcasesbeforethecivilcourts,andfinallythechanges will mean (iv)thatcompaniesmaybefinediftheynegligentlyinfringecompetitionlaw(currentlyonlygrossnegligencemayresultinfines).


Bruun&HjejleAdvokatpartnerselskabNørregade 21, 1165 Copenhagen, Denmark

Tel: +45 33 34 50 00 / URL: www.bruunhjejle.dk

Frederik André BorkTel: +45 29 90 15 03 / Email: [email protected] Frederik André Bork provides specialist advice on all aspects of EU andDanishcompetitionlaw.Hisexperienceincludesmergerfilings,majorabuse cases and several very large and multijurisdictional follow-on damages cases. He is a former Head of Division at the Danish Competition Authority and has a comprehensive insight into the authorities’ administrative and business procedures.

Søren ZinckTel: +45 51 21 19 34 / Email: [email protected] Søren Zinck renders specialist advice within all aspects of competition law.Hisexperienceincludesmergerfilings,someofthemostwell-knownabuse cases in EU and state aid issues. He regularly litigates before the European Court of Justice and the Danish courts, and during recent years he has litigated several of the major leading Danish competition cases.


Olaf KoktvedgaardTel: +45 30 18 87 24 / Email: [email protected] PartnerandcompetitionpracticeheadatBruun&Hjejle,OlafKoktvedgaardadvises on a wide range of issues under EU and competition law. He has extensive experience in merger issues, dominance issues, state aid and cartel investigations and follow-on damages litigation. He is admitted to the Danish Supreme Court and regularly acts before the Danish competition authorities, Danish courts, the European Commission and the European Courts in Luxembourg.


European UnionEuan Burrows, Irene Antypas & Laura Carter

Ashurst LLP


Article 101(1) of the Treaty on the Functioning of the European Union (“TFEU”) prohibits any agreement or concerted practice between undertakings, or decision of an association of undertakings, which has as its object or effect the prevention, restriction or distortion of competition, and which has an effect on trade between EU Member States. This prohibition applies across the 28 Member States (including the UK, until it formally leaves the EU) and may also apply to anti-competitive activity taking place outside the EU if it has an impact within the EU (which is not uncommon, for example, in relation to international cartels).Article 101(1) TFEU may be engaged by a range of horizontal or vertical arrangements, but cartel activity is considered to be confined to themost serious forms of horizontalinfringement. It is illegal simply to enter into a cartel, regardless of its subsequent “success” or even its implementation. Although a prima facie anti-competitive agreement may theoretically still benefit from an exemption where the cumulative conditions inArticle101(3)TFEUaremet(i.e.theefficienciesgeneratedbytheagreementoutweightherestriction of competition), in practice, it is extremely rare for cartel-type arrangements to bejustifiableandfulfiltheexemptionconditions.The key legislation governing the powers of the European Commission (“Commission”) to enforce Article 101 is Council Regulation (EC) No 1/2003 (OJ (2003) L1/1) (“Regulation 1/2003”). The Commission has wide-ranging powers to investigate suspected cartels and other competition law infringements, to order that the illegal agreement be brought to an end.Italsohaspowerstofineaninfringingbusinessupto10%ofitsaggregateworldwidegroup turnover.Jurisdiction to enforce Article 101 TFEU is shared between the Commission and the national competition authorities as well as the courts of the Member States. In broad terms,theCommissiontendstohandlecartelswithasignificantcross-borderelementandinternational cartels stretching beyond the EU borders, leaving cartels with a narrower geographic reach to national competition authorities (“NCAs”).

Overview of investigative powers in this jurisdiction

The Commission’s investigative powers are set out in Regulation 1/2003 and include:• Requests for information: The Commission may request information either by formal

decision or (more commonly) by an informal request. Requests for information may be directed at businesses which are suspected of an infringement and also third parties. The Commission’s powers to request information extend to “all necessary information” for the purposes of enforcing the prohibition contained in Article 101.


Ashurst LLP European Union

• Unannounced inspection of business premises – “dawn raids”: The Commission has wide powers to “conduct all necessary inspections of undertakings and associations of undertakings”. These include the power to:• enteranypremises,landandmeansoftransportusedforthebusiness;• examinebusinessbooksandrecords;• take or obtain copies or extracts of such books or records (whether hard copy or

electronic), including forensic copies of entire hard drives for subsequent review. The inspectors are accompanied by forensic IT experts and bring forensic IT tools (softwareorhardware)tocollect,searchandcopyrelevantdata;

• seal business premises and books or records where the dawn raid lasts more than oneday;and

• ask a person for explanations of facts or documents relating to the inspection, and record the answers.

The Commission may conduct inspections empowered either by an authorisation, or a formal Commission decision. A person may refuse to submit to an inspection on the basis of an authorisation, but not to an inspection based on a formal decision. The Commission is usuallyassistedbyofficialsfromthenationalcompetitionauthorityoftheMemberStateinwhich the raid is taking place, who will often obtain a warrant or other judicial authorisation permitting the Commission to enter and search premises by force if necessary. • Inspection of non-business premises: The Commission may be authorised by formal

decision to inspect any other premises, land or means of transport, including the homes of directors, managers and other members of staff, where there is a “reasonable suspicion” of a “serious violation” of Article 101. However, these powers cannot be exercised without prior authorisation from the judicial authority of the relevant Member State (e.g. via the issue of a warrant).

• Asking questions and interviews: The Commission can ask questions or seek explanations about documents, but this is a limited power which arguably does not permit the Commission to ask questions that go beyond the contents of the document concerned.Wherethepersonconsents,theCommissionhasafurtherpowertotakeastatement by voluntary interview from a natural or legal person about the subject matter of the investigation. The statement must be recorded and the person being interviewed given an opportunity to correct or approve the record of the statement.

The Commission’s investigative powers are subject to three overarching limits. First, the Commission has no power to seek or access any information which is not relevant to the subject matter of its investigation, as set out in its authorisation document or decision, in termsofproduct/service,geographicareaandtimeframe.Thisisasignificantprotectionfor businesses in practice, as it prevents “fishing expeditions” beyond the scope of theCommission’s existing evidence. However, as discussed further below, inspection decisions will usually be drafted very broadly, and this approach has been accepted by the EU courts. Secondly, legal professional privilege will apply to the investigation. The EU rules of privilege (which apply when the powers under Regulation 1/2003 are being exercised, regardless of the Member State territory in which the raid is taking place), protect written communications (including emails) between a client and an independent EUqualifiedlawyer,providedthatitiscloselylinkedtothesubjectmatterofinvestigation.Communications between a business person and in-house counsel are not protected as the in-house lawyer is not considered to be independent, given his contractual obligations to thebusinessasanemployee.Advicefromanexternallawyerwhoisnotqualifiedinone



of the EU Member States will also not be protected under the EU privilege rules, although in practice the Commission does not generally insist that privileged advice from external lawyers established outside the EU should be disclosed. Thirdly, individuals and legal personssubject to the investigationbenefit fromtheprivilegeagainst self-incrimination,under which the Commission cannot require an answer which constitutes acknowledgment of participation in illegal activity. This privilege does not, however, extend to pre-existing incriminating documents.Itshouldbenotedinthiscontextthatconfidentialitydoesnotprovidegroundsforrefusingto disclose information to theCommission. Confidential informationmay be reviewedand copied by the Commission inspectors, and must be provided in response to a formal information request. However, the Commission is generally prevented from disclosing such information to third parties pursuant to the duty of professional secrecy, subject to certain exceptions, as discussed further below.Failure to comply with a formal Commission decision requesting information, the supply of incorrect, incomplete or misleading information, or failure to respond within the required timelimitmaybepunishedwithfinancialpenaltiesofupto1%ofworldwideaggregategroup turnover, as can breaches of procedural requirements during dawn raids (discussed further below). In addition, the Commission can choose to treat interference, resistance or non-co-operationasanaggravatingfactorwhenitiscalculatingthefinetobeimposedforthesubstantiveinfringement,increasingthefineaccordingly.Further details about the law, procedure and policies applied by the Commission to cartel enforcement are set out in the sister volume to this book, the International Comparative Legal Guide to Cartels and Leniency 2017, at chapter 8.


Number of dawn raids: The Commission does not publish statistics on the number of dawn raids undertaken, but press releases indicate that unannounced dawn raids took place in relation to at least six cases involving suspected cartel activity in 2017 (multiple dawn raids are often carried out simultaneously on various parties in respect of the same case, so many more than six businesses will have been raided). Number of ongoing investigations: Publicly available information indicates that, as at 15 December 2017, there are at least 19 ongoing Commission investigations into alleged cartel activity, ofwhich sixwere initiated in 2017. Thisfiguremayomit newer caseswhich are not yet in the public domain. Number of final cartel decisions and total value of fines imposed: As at 15 December 2017,sevencarteldecisionshavebeenissuedbytheCommissionin2017,withtotalfinesof€1,946m(closetohalfofthetotalfor2016).In2016,sixcarteldecisionswereissuedand totalfinesof€3,727m(a tenfold increaseon the total for2015)were imposed. In2015,fivecarteldecisionswereissuedandtotalfinesof€365mwereimposed.In2014,10carteldecisionswereissuedandtotalfinesof€1,685mwereimposed.Level of individual fines imposed: As at 15 December 2017, the highest individual cartel fineimposedsofarin2017wasafineof€880.5mimposedonScaniaforitsinvolvementinthe Truckscartel.In2016,thehighestindividualcartelfinewasafineof€1,008.8mimposedon Daimler for its involvement in the same cartel case. In 2015, the highest individual cartelfinewasafineof€68.2mimposedonEberspächerforitsinvolvementintheParking Heaterscartel.In2014,thehighestindividualfinewasafineof€370.5monSchaefflerforits participation in the Automotive Bearingscartel.The2016fineof€1,008.8monDaimleris now thehighestfineever imposedbytheCommission,withthesecondhighestbeing



€880.5m imposed onScania and the third highest being €752.7m imposed onDAF, allresulting from the Truckscartel.Previously,thehighestfinewas€715m,imposedonSaintGobain in 2008 for its part in the Car Glasscartel(reducedfrom€880monappealin2014).


Most of the key issues which have arisen recently regarding cartel enforcement in the EU relate to investigation and decision-making procedures and fining policy, as discussedin other sections of this chapter. However, there are a few wider “policy” issues which practitioners should be aware of.Proposals to enhance enforcement powers of NCAsAsdiscussedindetailinthefiftheditionofGlobal Legal Insights – Cartels, in 2015, the European Commission conducted a consultation on whether NCAs in EU Member States should be given additional powers to enforce EU competition law. The 2015 consultation considered whether and how the powers of NCAs should be enhanced to ensure that NCAs:• can act independently when enforcing EU competition rules and have the staff and

resourcesrequiredtodotheirwork;• haveanadequate“competitiontoolbox”todetectandtackleinfringements;• canimposeeffectivefinesoncompanieswhichbreaktherules;and• have leniency programmes that work effectively across Europe.In May 2016, the Commission published a summary of the replies received, in which a strong majority of respondents considered that action should be taken, at both EU and national level, to boost enforcement at national level.Following the consultation, in March 2017, the Commission published a proposal for a new Directive designed to empower Member States’ competition authorities to be more effective enforcers. The proposal aims to ensure that, when NCAs are applying EU antitrust rules, they have the appropriate enforcement tools in order to contribute to a genuine Single Market and common competition enforcement area. To that end, the proposal provides for a set of minimum standards with which Member States must ensure their national legislation complies, including the following powers and guarantees:• NCA’s powers must be subject to appropriate safeguards, including respect of

undertakings̕rightsofdefenceandtherighttoaneffectiveremedybeforeatribunal;• guarantees of independence of NCA, including protecting NCA staff against external

influenceandensuringthatNCAshavethenecessaryresourcestoapplyEUantitrustrules;• minimum effective powers to investigate (comprising powers to inspect business

and non-business premises and to issue requests for information); to take decisions(comprising powers to adopt prohibition decisions and commitment decisions, and to impose structural and behavioural remedies and interim measures) and to impose effectivesanctionsfornon-compliance;

• powersforNCAstoadoptfiningdecisionsdirectlyorforsuchdecisionstobetakenbyacourtinnon-criminaljudicialproceedings;

• when calculating antitrust fines, a common legalmaximumof no less than 10%ofworldwide turnover and a requirement for NCAs to have regard to the gravity and durationoftheinfringementwhensettingthefine;

• powers to imposefines on parent companies and legal and economic successors ofundertakings;

• powersforNCAstograntimmunityfromorreductionoffinesandacceptsummary applications under the same conditions, and protection from individual sanctions for co-operatingemployeesanddirectorsofcompaniesfilingforimmunity;



• improved arrangements for effective co-operation and mutual assistance between NCAs;

• suspension of NCA limitation periods for the duration of proceedings before another NCA or the Commission, to ensure that NCAs are not prevented from subsequently actingasaresultoftheirproceedingsbeingtime-barred;and

• limitations on the use of information collected in the course of investigations, including leniency statements and settlement submissions.

The proposal is currently under review by the European Parliament and the Council. If and when it is adopted as a Directive, it will be for Member States to issue new legislation or amend existing legislation in order to comply with its requirements.Focus on enforcement in the automotive and e-commerce sectorsIntheautomotivesector,followingtherecordbreakingfinesimposedfortheTruckscartelas well as an alternators and starters cartels in 2016, the Commission’s interest in the automotive sector has continued in 2017: • in February 2017, the Commission fined four car battery recycling companies €68

millionforacartelinvolvingthefixingofpurchasepricesforscrapbatteries.Unlikemost cartels which involve an agreement to increase sales prices, this case is unusual because the companies colluded to reduce the purchasepricepaidtoscrapdealers;

• theCommissionimposedfinesof€155millioninMarch2017inrespectoffourcarairconditioningandenginecoolingcomponentscartels,and€27millioninJune2017foracarlightingcartel;

• inNovember2017, theCommission imposedfinesof €34million in settlements inrespectoffourseatbelts,airbagsandsteeringwheelscartels;and

• in October 2017, the Commission confirmed it had carried out inspections at thepremises of German car manufacturers.

In relation to e-commerce, in a speech in March 2017, Commissioner Vestager highlighted the problem of algorithms that are used to automatically adjust online pricing, which could be used to implement, or enforce, price-fixing agreements. She warned that “pricing algorithms need to be built in a way that doesn’t allow them to collude” in order to “ensure antitrust compliance by design”;andthat,whenbusinessesuseanautomatedsystem,they“will be held responsible for what it does”. Also during 2017, the Commission published itsfinalreportinthee-commercesectorinquiry,imposeda€2.42billionfineonGoogleforabusing its dominance in the Google comparison shopping case, accepted commitments in the Amazon e-books case, and opened a number of antitrust investigations aimed at tackling potential barriers to online and cross-border trade, including:• three separate investigations were launched in February 2017 into restrictions on

onlineretailers’abilitytosetpricesforconsumerelectronicsproducts;suspectedgeo-blockingpracticesinrespectofPCvideogamespublishedontheSteamplatform;andagreements between hotels and tour operators that restricted customers’ access to full hotelavailabilityorbestpricesbasedontheirnationalityorresidence;and

• four separate investigations were launched in June 2017 into whether certain licensing and distribution practices of Guess, Nike, Sanrio and Universal Studios illegally restrict traders from selling licensed merchandise cross-border and online.

Close co-operation with other regulatorsMany cartels are now cross-border in nature, which means that effective enforcement increasingly requires co-operation between regulators around the world. The European Competition Network (“ECN”) provides a very useful forum for the exchange of information



between the Commission and NCAs of EU Member States. During 2017, the ECN has carried out a monitoring exercise in relation to the online hotel booking sector, which examinedhoteliers’awarenessofparityclauses inagreementswithonline travelagents;and established a new digital working group to examine algorithms and other challenges in the digital markets.The Commission also actively co-operates with regulators outside the EU, through bilateral co-operation agreements, memoranda of understanding, and also more informal co-operation. There is a clear policy at EU level to promote international co-operation between regulators, and it is anticipated that the level of co-operation, in particular information sharing, will continue to expand in the years to come. During 2017, the Commission entered into a memorandum of understanding with China in relation to State aid and the Fair Competition Review System, and began negotiations with Japan for a second generation co-operation agreementinthefieldofcompetition,whichwillpermittheEUandJapanesecompetitionauthoritiestoexchangeconfidentialinformationobtainedduringinvestigationswithouttheneed to obtain a waiver from the source of the information, as is currently the case.

Key issues in relation to investigation and decision-making procedures Scope of Commission’s information gathering powersThe scope of the Commission’s information-gathering powers under Regulation 1/2003 has been the subject of a number of challenges before the EU courts, as discussed in previous editions of Global Legal Insights – Cartels.The key current issues are: • thelegalityofbroadlydraftedrequestsforinformation;• thelegalityofbroadlydraftedinspectiondecisions;• the legality of dawn raids carried out on the basis of information obtained by the

Commission in the course of carrying out an earlier dawn raid, in the context of a very broadinquiry;

• whether the powers of the Commission extend to taking away forensic copies of entire computerharddrivesforsubsequentreviewattheCommission’spremises;and

• at what stage an undertaking may challenge the Commission’s actions in connection withadawnraid;and

• the Commission’s ability to rely on evidence transmitted by national authorities, including non-competition authorities.

Each of these is discussed further below. • Legality of broadly drafted requests for informationWhenmaking awritten request for information (“RFI”), the Commission must set out the legal basis and purpose of the request, what information is required, and the time limit within which it is to be provided. This is important in order to show that the request for information is justifiedbutalso toenablecompanies to judge the scopeof theirduty toco-operate and their rights of defence. In, inter alia, Case C-247/14 P HeidelbergCement and others v Commission (EU:C:2016:149), the European Court of Justice (“ECJ”) assessed the adequacy of the Commission’s statement of reasons in its decision to issue formal RFIs in an investigation into a possible cartel in the cement industry. The ECJ found that the Commission’s RFIs (which were over 100 pages in length and requested the provision within 12 weeks of detailed data covering a 10-year period) did not, clearly andunequivocallysetoutthesuspicionswhichjustifiedtheiradoption,anddidnotmakeitpossible to determine whether the requested information was necessary for the purposes of the investigation.



The level of detail required in a statement of reasons will depend on the stage of the investigation at which the RFI is sent. At an early stage, it is not essential for an RFI to set outaprecisemarketdefinition,ortheexactlegalnature,orperiodof,theinfringement,asthis information may not yet be available to the Commission. However, if, as in the cement cases, the investigation has been open for several months, or the Commission has already gathered information through previous RFIs and inspections, a succinct, vague and generic statement of reasons is unlikely to meet the requisite legal standard.• Legality of broadly drafted inspection decisionsThe Commission is required to restrict its searches during a dawn raid to activities relating to the matters covered in the inspection decision: if it locates documents not relevant to these matters, as a general rule it cannot review or copy these. The Commission is not entitled to goona“fishingexpedition”,andthescopeofthesuspectedcartelindicatedintheinspectiondecisionmustbelimitedtowhatissupportedbytheCommission’scasefileatthetimeofthe inspections. (Case C-583/13 P Deutsche Bahn AG v Commission (EU:C:2015:404)). In the 2012 Nexans judgment (T-135/09 Nexans v Commission (EU:T:2012:596)), the General Court (“GC”) ruled that the Commission only had information indicating a potential infringement in respect of high voltage underwater and underground cables, so the Commission’s decision to conduct dawn raids in relation to electric cables more generally was illegal.The Czech national rail operator’s ongoing appeals against two Commission’s inspection decisions (Cases T-325/16 and T-621/16 České dráhy v Commission) claim, inter alia, thattheCommission’sfirstdawnraiddecisionsetoutinsufficientreasons,anddefinedthesubject-matter and purpose of the inspection too broadly in breach of the rail operator’s rights of defence. In April 2017, several French retailers lodged appeals against the Commission’s inspection decisions, and its refusal to provide access to the underlying documents on which it based its decision to conduct those inspections (Cases T-249/17 Casino, Guichard-Perrachon and EMC Distribution;T-254/17 Intermarché Casino Achats;T-255/17Les Mousquetaires and ITM Entreprises). Judgment is awaited in these cases.• Legality of using information obtained in one dawn raid to justify further dawn raidsThereisanexceptiontothegeneralruleagainst“fishingexpeditions”,inthatCommissioninspectors are not required to be blind to evidence of a previously unsuspected violation if they “happen to obtain” such evidence during a dawn raid (and may use any such evidence to start an investigation into the new matter) (Case 85/87 Dow Benelux (EU:C:1989:379)). However, the ECJ confirmed inDeutsche Bahn that this exception must be narrowly interpreted and is only applicable in cases of genuine coincidence. The Czech national rail operator’s appeal against the Commission’s second inspection decision (Case T-621/16, České dráhy v Commission, referred to above) asserts, inter alia, that the decision to carry out an inspection was based on materials obtained during a previous, allegedly illegal inspection, which the Commission was not entitled to use.• Powers to take forensic copies of entire computer hard drivesAs discussed in more detail in the second edition of Global Legal Insights – Cartels, it is (in the authors’ view) highly debatable that the Commission’s dawn raid powers extend to removing and copying entire computer hard drives for subsequent review at the Commission’s premises, given the breadth of scope of information which any PC or laptop will typically contain, including personal data, human resources and internal management



documents, information about commercial activities and possibly privileged external legal advice. However, this practice continues to be envisaged in the Commission’s Explanatory Note on its dawn raid procedures (paragraphs 12 and 14), and is regularly applied by the Commission in cases where it is not possible to complete the dawn raid at the undertaking’s premises within a few days. The European Courts now at least have an opportunity to examine this practice in Case T-449/14, Nexans v Commission. Havinghad itsfirstchallengeon thispointdeclaredinadmissible(seeabove),NexanshasappealedtheCommission’sfinalinfringementfindingin respect of the power cables cartel on grounds, inter alia, that the dawn raid of its premises conducted by the Commission was illegal. In particular, Nexans claims that the Commission acted outside its powers when it copied and removed to Brussels the entire, unexamined hard drive of a laptop during its inspection. Later, the laptop’s contents were reviewed by CommissionofficialsinthepresenceofNexans’lawyers,andrelevantevidencewasaddedtothecasefile.Judgmentisawaitedinthiscase.In this regard, the draft Directive to empower Member States’ competition authorities to be more effective enforcers (discussed above) also envisages powers for NCAs to “examine the books and other records related to the business irrespective of the medium on which they are stored…” and “to take or obtain in any form copies or extracts from such books or records and where they consider it necessary to continue making searches of these copies or extracts at their premises or other designated premises”. • Timing of a challenge to a dawn raid decisionAn undertaking can challenge the legality of an inspection decision as soon as it had been notifiedofit.However,theCommission’sconductduringtheinspection(suchasthecopyingof hard drives, or the questioning of individuals) does not itself constitute a reviewable act where it does not cause a change in the undertaking’s legal position (Cases T-135/09 Nexans v Commission, discussed above). A challenge to such measures may only be broughtaspartofanappealagainstthefinalinfringementdecision.Alternatively,theGChas (somewhat audaciously) suggested, an undertaking could obstruct the Commission’s inspection, thereby prompting the Commission to issue a penalty decision, which would then be open to an immediate appeal. • The Commission’s ability to rely on evidence transmitted by national authoritiesArticle 12 of Regulation 1/2003 provides that the Commission and NCAs may share information for the purposes of applying Article 101 and 102 TFEU and national competition law. A recent judgment of the ECJ (Case C-469/15 P FSL Holdings v Commission (EU:C:2017:308)) demonstrates that the Commission may also rely on evidence transmitted to it by national authorities other than competition authorities, such as the Italian customs andfinancepolice.Thisisthecaseeveniftheinformationwasobtainedbythatnationalauthority for another purpose, as long as the transmission has not been ruled unlawful under the relevant national law.AccesstothefileandprotectionofconfidentialbusinessinformationAccess to theCommission’s administrative case file is granted to the parties (and theirlawyers) as part of their rights of defence, prior to responding to the Commission’s statement of objections (“SO”), pursuant to Article 27(2) of Regulation 1/2003 and Articles 15 and 16 of Regulation 773/2004. The framework for the exercise of this right issetoutintheCommission’sAccesstoFileNotice.Accesstothefilegenerallyincludesaccess to all documents which the Commission has obtained or produced in the course of



its investigation, except for internal working documents, communications about the case between the Commission and any NCAs, corporate statements from leniency applicants andsettlementsubmissionsincartelcases.However,accesstothefilemayberestrictedwhere documents contained in the file contain business secrets or other confidentialbusiness information (“CBI”) which the Commission is required to protect under its duty of professional secrecy (Article 339 TFEU). In such circumstances, access will usually onlybegiventonon-confidentialversionsoftherelevantdocuments.Alternatively,adataroommaybesetuptoprovidelimitedaccesstotheconfidentialinformationtoarestrictedgroup (usually external counsel or the economic advisers of the party being granted access). • Rights of third partiesThirdpartiesdonotbenefitfromrightsofdefenceinthiscontext(seetheECJjudgmentof 16 June 2016 in Case C-154/14 SKW v Commission (EU:C:2016:445)). Therefore, thirdpartiesarenotentitledtoaccessthecasefileunderthesamerulesasaddresseesofthe statement of objections, although they may be involved in competition investigations, usually on a consensual basis, for example, through written submissions and/or attendance at oral hearings. However,thirdpartiesmayrequestaccesstotheCommission’scasefileunderthegeneralEU legal framework on access to documents held by EU institutions, which is set out in Regulation 1049/2001 (the “Transparency Regulation”). The Transparency Regulation provides that, as a general starting point, the widest possible public access should be given to documents held by EU institutions. However, this is subject to certain limitations designed to protect public or private interests (in particular, to protect CBI of the parties involved). In this regard, the Commission is entitled to rely on general presumptions relating to the protection of the commercial interests of the undertakings involved in the investigation and the protection of the purpose of the investigations relating to the proceedings, in order to deny requestsfromthirdpartiesforaccesstothefile(confirmedbytheECJinCaseC-365/12PCommission v EnBW (EU:C:2014:112)). This is evident from the GC’s recent rejection of Deutsche Telekom’s appeal under the Transparency Regulation against the Commission’s refusal togrant itaccess to thirdpartyand internaldocumentson theadministrativefile(Case T-210/15 Deutsche Telekom v Commission (EU:T:2017:224)). The Commission had conducted dawn raids of Deutsche Telekom’s premises in connection with a suspected infringement of Article 102, but subsequently closed its investigation without issuing an SO. The GC found that the Commission was entitled to refuse Deutsche Telekom access to the entire set of documents, based on a general presumption that disclosure would be likely to undermine both the commercial interests of the undertakings involved and the purpose of inspections, investigationsandaudits; theCommissionwasnotrequired toassess thedocuments individually.Another possible route for complaints regarding access to the Commission’s file incartel cases may be through the European Ombudsman, which investigates complaints about maladministration by EU institutions, including the Commission (see European Ombudsman Case 520/2014/PMC,discussedinmoredetailinthefiftheditionofGlobal Legal Insights – Cartels).The Damages Directive (discussed later in this chapter) also seeks to facilitate damages claimants’ access to evidence by ensuring national courts have powers to require disclosure of CommissioninfringementdecisionsandotherinformationfromtheCommission’scasefile.• Protection of confidential business informationArticle8ofDecision2011/695onthefunctionsandtermsofreferenceoftheHearingOfficerin competition proceedings provides that where an undertaking objects to the disclosure



of information which it considers constitutes CBI, it may refer the matter to the Hearing Officerwhowilldeterminewhether the informationconstitutesCBIand, if so,whetherthere is an overriding interest in disclosing it. TheHearingOfficermust examine anyobjectiontodisclosurebasedontherulesofEUlawconcerningtheprotectionofconfidentialinformation and professional secrecy, as well as EU principles of broader application such as the protection of legitimate expectations and equal treatment (Case C-162/15 P Evonik Degussa v Commission (EU:C:2017:205)). Nexans, whose pending appeal against the power cables cartel decision is discussed above (Case T-449/14), is separately appealing a decisionoftheHearingOfficerrejectingitsconfidentialityclaimsinrespectofmaterialthatit claims was obtained illegally by the Commission pursuant to a dawn raid (Case T-423/17 Nexans v Commission, judgment awaited).Co-operation between the Commission and NCAs and access to their communicationsThe Commission and Member State NCAs have parallel powers for the purpose of the application of EU competition rules. A system of close co-operation has been laid down in Regulation 1/2003 and further detailed in the Commission Notice on co-operation within the Network of Competition Authorities (the “Network Notice” (OJ C 101, 27.04.2004)). The objective is to have an effective network of competition authorities in the EU (the ECN) to ensure an optimal attribution of cases and ultimately an effective application of EU competition rules.The Commission and Member State NCAs enjoy considerable discretion as to how they deal with complaints relating to alleged competition law infringements and, subject to national procedural rules, may reject complaints on policy/prioritisation grounds. Neither Regulation 1/2003 nor the Network Notice create rights or expectations for an undertaking tohave its casedealtwithby a specific competition authority. Given thebroaddegreeof discretion, review by the courts is necessarily only marginal, i.e. limited to verifying whether the decision is based on materially incorrect facts or is vitiated by an error of law, a manifest error of appraisal or misuse of powers. The EU Courts are competent to review the legality of decisions taken by the Commission, whereas the review of NCA decisions is a matter for national courts alone.Developmentsinrelationtolegalclassificationofinfringementsincartelcases• Developments in relation to object infringementsArticle 101(1) TFEU can apply to agreements on two different bases, namely where either their “object” or “effect” is anti-competitive. These two possibilities are alternatives and notcumulative.Oneofthesignificantadvantagesfromacompetitionauthority’spointofview of an “object” analysis is that there is no requirement to undertake a detailed economic analysisoftheeffectsoftheallegedrestrictiononcompetition.Importantclarificationofthe legal concept of an “object” infringement and how it must be established was provided by the ECJ in its judgment of September 2014 in Case C-67/13 Cartes Bancaires v Commission (EU:C:2014:2204).As discussed in more detail in the third edition of Global Legal Insights – Cartels, the ECJ made clear in its Cartes Bancaires judgment that the restriction must reveal “a sufficient degree of harm” for it to constitute a by-object infringement so that there is no need to examineitseffects.Theexpectationofasufficientdegreeofharmshouldbeclearfromtherestriction itself (and essentially experience showing that such behaviour harms consumers), but seen also in “the economic and legal context of which it forms part”. An effects analysis is thus requiredonlywhereanalysisof theconductdoesnot in itself reveal a sufficientdegree of harm to competition. Importantly,theECJalsoconfirmedthattheconceptofarestriction by object should be interpreted restrictively.



The recent GC judgment in Case T-180/15 ICAP v Commission (EU:T:2017:795) serves as a reminder that an exchange of information which is capable of removing uncertainty between participants regarding their conduct on the market, even where there is no direct link between that practice and consumer prices, will have an anti-competitive object. The GCfoundthatboth(i)thecoordinationoftheJPYLIBORpanelsubmissions(whichwasintendedtoinfluencetheextentofthepaymentsdueby,orto,thebanksconcerned),and(ii) the exchange of confidential information regarding panel banks’ future JPYLIBORsubmissions (which gave the banks concerned a competitive advantage on the JPYderivatives market) constituted object restrictions.• Developments in relation to the notion of concerted practiceIn Case C-74/14 Eturas and others v Lithuanian Competition Authority (EU:C:2016:42), the ECJ delivered a preliminary ruling on a question from the Lithuanian court of whether the imposition of a restriction on discounts through a common online booking system used by a number of travel agents constitutes a concerted practice for the purposes of Article 101 TFEU. This is a rare example of the ECJ being asked to clarify the concept of a concerted practice. The ECJ held that Article 101(1) TFEU must be interpreted as meaning that travel agents who had been sent a message within the online system about the automatic discount cap may, if they were aware of that message, be presumed to have participated in a concerted practice, unless they publicly distanced themselves from that practice, reported it to the administrative authorities or adduced other evidence to rebut that presumption, such as evidence of the systematic application of a discount exceeding the cap. However, it is a matter for the national court to examine, on the basis of the national rules governing the assessment of evidence and the standard of proof (subject to the European law principles of equivalence and effectiveness), whether, in view of all the circumstances before it, the dispatch of amessagemay constitute sufficient evidence to establish thatthe addressees of that message were aware of its content. The presumption of innocence, enshrined in Article 48(1) of the Charter of Fundamental Rights of the European Union (“Charter”), precludes a national court from considering that the mere dispatch of that messageconstitutessufficientevidencetoestablishthatitsaddresseesoughttohavebeenaware of its content. However, in light of other objective and consistent indicia, the dispatch of the message may justify a presumption that the travel agencies were aware of the content of that message from the date of its dispatch, provided that those agencies still have the opportunity to rebut that presumption.• Developments in relation to the concept of a cartel facilitatorThere is no requirement under Article 101(1) TFEU that cartelists must be active on the same market, or that an undertaking’s contribution to a restriction of competition must take place on the same market on which the restriction occurs. Liability for cartel facilitators was confirmedinCaseC-194/14PAC Treuhand v Commission (EU:C:2015:717), in which the ECJ set out two requirements: (i) that the undertaking concerned intended to contribute byitsownconducttothecommonobjectivespursuedbyallthecartelparticipants;and(ii)that it was aware of the actual conduct planned or put into effect by other undertakings in pursuit of the same objectives or that it could reasonably have foreseen it and that it was prepared to take the risk.In the recent ICAP case (Case T-180/15, discussed above), the GC restated this test and confirmed that, incircumstanceswhere: (i) ICAPknewabout theexistenceofcollusionbetweentwobanks;and(ii)therewasacomplementaryrelationshipbetweentheconductof the two banks concerned (i.e. manipulation of their own JPY LIBOR submissions)



andICAP’sconduct(i.e.attemptstomanipulatethesubmissionsofotherpanelbanks);itfollowed that ICAP intended to contribute to the achievement of their common objective. However,theGCannulledtheCommission’sfindinginrespectofICAP’sparticipationinone cartel, because the Commission had not proved, to the requisite legal standard, that ICAP was aware or could reasonably have foreseen that certain conduct was the result of collusion between banks. • Developments in relation to the concept of “single and continuous infringement”The concept of “single and continuous infringement” is used by the European Commission to treat a series of illegal actions as a single cartel, rather than as a series of separate cartels. Thus a cartel which operates continuously on the same basis for many years is clearly a single and continuous infringement, but so also is a series of related actions where the cartel arrangements change and evolve over time, but have a common anti-competitive objective and there is a link of complementarity between the various actions, meaning that they all contribute to the common objective.Theconcepthas significant ramifications for liability, sinceaparty tooneaspectof thecartel during one period of its duration can be treated as liable for the whole cartel. Also, it impactsonthedefinitionofthecartelsinceitallows,forexample,morethanoneproducttobecoveredbythecartel.Italsoimpactsonthecalculationofthefinebecauseitdrivesthe duration of the cartel.In particular, the concept permits the Commission to overcome a gap in conduct or an absence of evidence in relation to certain time periods provided that the overall plan continued. However, it does not permit the Commission to ignore a period in which an undertaking’s participation in the cartel was interrupted: in such cases, an undertaking may be liable for a “single repeated infringement” instead. In the recent ICAP case (Case T-180/15, discussed above), the GC made clear that, where there is a gap in the evidence for the participation of acartelmember,theCommissionmustadduceevidenceoffacts“sufficientlyproximate”in time to the evidential gap for it to be reasonable to consider that infringement continued uninterruptedly. “Sufficient proximity” will depend on the operation of the particularcartel:asICAP’sparticipationrelatedtothemanipulationoftheJPYLIBORrates,whichwere set on a daily basis, the GC found that an absence of evidence of intervention by ICAP for a seven-week period should have indicated an interruption in its participation. This is important, as the Commission cannot include the period of interruption in the duration of a “singlerepeatedinfringement”initscalculationoffines.The presumption of innocence in hybrid settlements“Hybrid settlements” are cases where not all the cartel participants decide to settle, leading to the Commission adopting a settlement decision against the certain parties (based on a simplified procedure) and a full infringement decision against the non-settling parties(based on the standard procedure). In “staggered” hybrid cases, the Commission will breach the presumption of innocence (discussed above) in favour of a non-settling party where an earlier settlement decision sets out the Commission’s views on the legality of that non-settling party’s conduct (Case T-180/15 ICAP v Commission, discussed above). Therefore,despite the likelyspeedandefficiencybenefitsconnectedwith thesettlementprocedure, in hybrid cases, the Commission may be required to delay its settlement decision until it is ready to take a decision against the non-settling party (as it did in the Animal feed phosphates case). However, a breach of the presumption of innocence will usually not lead to annulment of the Commission’s decision unless it can be shown that, but for the Commission’s bias, the decision would have been substantively different.



Thoroughness of judicial review in cartel casesThe EU judicature has a jurisdiction that empowers it to substitute its own appraisal for the Commission’sand,consequently,tocancel,reduceorincreaseanyfineorperiodicpenaltypayment imposed by the Commission for infringement of the EU competition rules. An effective system of judicial review is particularly important where competition law enforcement is in the hands of the Commission, which acts simultaneously as investigator, prosecutor, jury and final decision-maker, and which has the power to impose severefinancialpenalties.Thisstructureraisesimportantquestionsaboutanundertakings’rightto a fair trial under Article 6 of the European Convention on Human Rights (“ECHR”), incorporated into EU law by the Charter.As discussed in more detail in the third and fifth editions ofGlobal Legal Insights –Cartels, recent key judgments of the EU Courts have advocated a more intensive review of Commission infringement decisions (Case T-442/08 CISAC v Commission (EU:T:2013:188), Case C-67/13 P Groupement des Cartes Bancaires v Commission (EU:C:2014:2204) and Case T-9/11 Air Canada v Commission (EU:T:2015:994)):• In the CISAC case, the GC considered that the Commission had failed to demonstrate an

infringement to the required standard of proof. The GC closely examined the evidence usedbytheCommissioninsupportofitsinfringementfindingandfounditinadequateto render implausible the defendants’ alternative explanation for the parallel conduct.

• In the Cartes Bancaires case, the ECJ criticised the GC for failing to conduct a sufficientlyintensivereviewoftheCommissionfindings,referringtotheprincipleofeffective judicial protection enshrined in Article 47 of the Charter. The ECJ emphasised that, in light of this principle, when examining whether the legality of an infringement findingunderArticle101TFEUismadeout,theGCmustundertake:“on the basis of the evidence adduced by the applicant in support of the pleas in law put forward, a full review of whether or not the conditions for applying that provision are met” (paragraph 44 of the judgment).

• In the Air Canada case, the GC annulled the Commission decision because the Commission had failed to clearly and precisely state in the operative part of the decision the infringement attributed to each company, which is a requirement to protect undertakings’ rights of defence.

The trend towards a more intensive review of Commission infringement decisions continues. In 2017, the GC partially annulled the Commission’s infringement decision againstICAP,stressingtheneedfortheCommissiontoputforwardsufficientevidenceofall aspects of an infringement (Case T-180/15, discussed above). The GC itself carried out a “comprehensive review” of the Commission’s assessment of the evidence, which led it to confirmtheCommission’sfindingsinrespectofthreeinfringements,butquashitsfindingsinrespectofafourth(seefurtherabove).TheGCalsoquashedICAP’s€15millionfinebecausetheCommissionhadfailedtoexplainwhyithaddepartedfromitsfiningguidelines.


Accesstothefile/inclusionofinformationprovidedinleniencyapplications in infringement decisionsThe ability of damages claimants to obtain copies of leniency applications or related information has been a major “hot topic” in EU competition law, raising tensions between the push to encourage private enforcement and the need to ensure that leniency regimes remain an effective way for competition authorities such as the Commission to detect cartels. In particular, there have been a number of challenges before the EU courts relating



totheinclusionofinformationinnon-confidentialversionsofCommissioninfringementdecisions which was originally obtained from a leniency applicant. This is considered further below, in the context of developments in private enforcement of antitrust laws.Application of the Leniency Notice: adding “significant value” to the Commission’sinvestigationThe Commission has emphasised (for example, in a speech on cartel enforcement given to the 7th Annual Chicago Forum on International Antitrust Issues in June 2016) that a company is not entitled to a reduction simply because it provides evidence at a certain point in time in the order of those confessing their involvement, or because it uses its best endeavours to co-operate. A leniency applicant must provide the Commission with evidence which offers significantaddedprobativevaluerelative to the informationwhich italreadyhasat thattimeonitsfile.Whethertheinformationofferedbyabusinessisofsignificantvaluetotheinvestigation is therefore treated as a relative concept, and is judged by reference to what the Commission has already received. The relativity of the value of new evidence to evidence already collected was highlighted in the Gas Insulated Switchgear cartel appeal, where the General Court observed that “the added value of the contribution from an undertaking that decides to co-operate with the Commission, and therefore its reward, will always be dependent on what knowledge the Commission already has of the cartel(s) at issue” (Case T-251/12 EGL Inc v Commission (EU:T:2016:114) at para 182).Co-operation between the European Commission and NCAs in relation to leniency applicationsThe Commission co-operates with NCAs in relation to leniency applications, through the “summary application” procedure, which is provided for under the Model Leniency programme, issued by the ECN. Summary applications are short form leniency applications submitted to NCAs at the same time as a full leniency application to the Commission, in order to protect an applicant’s place in a national leniency queue if the Commission subsequently decides not to pursue the case. The Commission’s draft Directive to empower Member States’ competition authorities to be more effective enforcers (referred to above) includes provisions that:• require Members States to put in place leniency programmes and to ensure that leniency

and immunity can only be granted by NCAs if the applicant complies with certain generalconditionswhichreflecttheconditionsappliedatEUlevel;

• require NCAs to permit companies to apply for a “marker”, granting the applicant a placeintheleniencyqueue;

• ensure that companies that have applied to the Commission for leniency can filesummaryapplicationswithNCAsinrelationtothesamecartel;and

• require Member States to protect co-operating employees and directors of immunity applicants from criminal and administrative sanctions in respect of their involvement in the cartel.

Note also that in March 2017, the Commission launched a new anonymous whistleblower tool to make it easier for individuals to alert the Commission to potential infringements. The tool uses an encrypted messaging system designed to preserve the anonymity of the whistleblower, which also permits the Commission to ask follow-up questions.


Under theCommission’s 2008 SettlementNotice, cartelistsmay benefit from amodest10% reduction in fines in return for conceding guilt,waiving certain rights of defence,and accepting the Commission’s summary outline of the key elements of the infringement.



ThisenablestheCommissiontoadoptsuccinctdecisionsunderasimplifiedandshortenedprocedure. A settlement does not protect cartel members against follow-on damages claims brought before national courts by companies harmed by the cartel (e.g. customers and suppliers).Since its introduction in June 2008, the number of cartel settlement cases has been steadily growing with a total of 25 settlement decisions adopted to date. In 2016, the Commission settledwithfiveleadingEuropeantruckmanufacturersandimposedarecordfineof€2.9billion (Case AT.39824 – Trucks). The standard cartel procedure continued against Scania, theonlytruckmanufacturerthatdecidednottosettle.Thisresultedinafineof€880millionforScaniain2017(thesecondhighestcartelfineeverimposedonasingleundertaking).Scania’s appeal against this decision is currently pending before the General Court (Case T-799/17 Scania and Others v Commission). In 2017, the Commission settled four cartel cases. A settlementwas reachedwith four car battery recyclers for €68million (CaseAT.40018 – Car battery recycling). Six car air conditioning and engine cooling suppliers agreedtosettleforatotalcartelfineof€155million(CaseAT.39960–Thermal systems). FourcarlightingsystemproducerssettledwiththeCommissionandwerefined€27million(Case AT.40013 – Lighting systems).Lastly,asettlementwasreachedwithfivecarsafetyequipmentmakersforatotalof€34million(CaseAT.39881–Occupant Safety Systems). The Commission enjoys a broad discretion in determining whether a cartel case is suitable for settlement. In other words, companies cannot claim a right to settle. The Commission generally seeks to agree settlement with all parties, and avoid so-called “hybrid” cases, wheresomebutnotallofthepartieschoosetosettle.SuchcasessignificantlyreducethebenefitofsettlementfromtheCommission’sperspectivesince,ratherthanconductingonepared-back procedure, the Commission team still has to run a full procedure respecting the rights of the defence for the non-settling addressees. Although the Commission tries to avoid settlement discussions in cases where it appears unlikely that all parties are prepared to co-operate, this has not prevented cases where one or more parties decided to opt out of settlement at a late stage. Seven “hybrid” settlement cases exist to date: Animal Feed Phosphates (CaseAT.38866);Yen Interest Rate Derivatives (CaseAT.39861); Euro Interest Rate Derivatives (CaseAT.39114);Steel Abrasives (CaseAT.39792);Canned Mushrooms (CaseAT.39965);Trucks (CaseAT.39824); andAlternators and Starters (Case AT.40028).A persistent issue in “hybrid” settlement cases is the Commission’s degree of impartiality in its standard cartel investigation into the non-settling parties after settling with the other parties. The fourth edition of Global Legal Insights – Cartels reported on the General Court’sjudgmentupholdingthenearly€60millionfineimposedonTimab,whichwithdrewfrom settlement negotiations in theCommission’s first “hybrid” cartel settlement (CaseT-456/10 Timab Industries and CFPR v Commission (EU:T:2015:296)). The Court held that the estimate of the likely ranges of fines communicated by theCommission in thecontext of settlement discussions do not generate any ‘legitimate expectations’ as to the final amount imposedby theCommissionon thenon-settling company. This judgmentwas upheld earlier this year by the European Court of Justice on appeal (Case C-411/15 P Timab Industries and CFPR v Commission (ECLI:EU:C:2017:11)). Settlement decisions are subject to judicial review by the EU Courts. In December 2016, theGeneralCourtissuedajudgmentforthefirsttimeannullingaCommissionsettlementdecision. The Court annulled the settlement decision adopted in December 2014 against Printeos in the paper envelope cartel for the failure to state adequate reasons which, the Court



recalls, constitutes an essential procedural requirement (Case T-95/15 Printeos and others v Commission (EU:T:2016:722)). Following the judgment, the Commission issued a new decision in June2017 re-imposing theoriginalfineonPrinteos. TheCourtemphasisedin the Printeos judgment that, although the settlement procedure allows the adoption of simplifieddecisions,theCommissionstillhasthedutytostatethereasonsforitsdecisionsimposingfinesand,inparticular,toexplaintheweightingandassessmentofthevariousfactorstakenintoaccountindeterminingtheamountoffines.TheCommissionshouldalsoexplainwhetheranyequalordifferenttreatmentofundertakingsisobjectivelyjustified(e.g.applicationofdifferentfinereductionrates).Aproperreasoningisparticularlyimportantin view of the Commission’s broad discretion and enables the undertakings concerned to ascertain the reasons for the measure and to enable the competent court to exercise its power of review.


TheCommission’sextensivefiningpowersFines remain the most important tool in the Commission’s “enforcement toolbox” to sanction cartel conduct. The EU Courts have consistently held that the Commission enjoys considerable discretion in setting cartel fines, although the exercise of that discretion islimitedbythegeneralfiningmethodologysetout inthe2006Guidelinesonthemethodof settingfines (OJ (2006)C 210/2). Where theseGuidelines leave theCommission aparticularly broad discretion (e.g. paragraph 37 allows the Commission to make an ‘exceptionaladjustment’ofthebasicamountofthefine),theCommission’sdutytostatereasons is of even more fundamental importance (Case T-95/15 Printeos and others v Commission (EU:T:2016:722)).Alsoin2017,Commissioncartelfinesweresuccessfullychallengedincourt:• TheGeneralCourtreducedthefineimposedonLaufenAustriainthebathroomfixtures

andfittingscartelby€10millionfollowingtheCourtofJusticerulingonthecorrectapplication of the 10% ceiling (see below) (Case T-411/10 RENV Laufen Austria v Commission (ECLI:EU:T:2017:598)).

• TheGeneralCourtpartiallyannulledtheCommissiondecisionof4February2015finingICAPnearly€15millionforfacilitatingcartelsinrelationtoYeninterestratederivatives(YIRD) (Case T-180/15 Icap and Others v Commission (ECLI:EU:T:2017:795). TheannulmentisduetoproceduralgroundsincludingtheCommission’sinsufficientreasoningforthefinecalculation.

• TheCourtofJusticesetasidefiveGeneralCourtjudgmentsforanumberofproceduralfailings and accordingly annulled the Commission fines imposed on Italian steelmanufacturers for their participation in the reinforcing steel bars cartel investigation (Cases C-85/15 to C-89/15 P Feralpi v Commission (ECLI:EU:C:2017:709)).

• TheCourt of Justice confirmed that,when theCommission imposes a fine, defaultinterestonitcontinuestoaccrue,regardlessofwhetherthefineisreducedafterappeal(Case C-364/16 Trioplast Industrier v Commission (EU:C:2017:1008)).

Parent liabilityA parent company can be held jointly and severally liable for the cartel conduct of its subsidiary where it can be demonstrated that, at the time of the infringement, the parent could in fact exercise decisive influence over its subsidiary (or joint venture). As a consequence, theCommission can hold the parent jointly andseverallyliableforpaymentofthefineimposedonthesubsidiary,inwhichcasethe10%upperfinelimitiscalculatedusingtheparent’sturnover.



In line with settled EU case law, the Commission systematically establishes parent liability on the basis of a rebuttable presumption of actual exercise of decisive influencewherethe parent owns (nearly) 100% of the subsidiary’s share capital (Case 97/08 Akzo Nobel v Commission (EU:C:2009:536)). The presumption has proven virtually impossible to rebut in practice since it requires proof that the subsidiary acted independently at the material time. This requires evidence on the organisational, economic and legal links between parent and subsidiary showing that they do not form a single economic entity. The Commission must, however, provide sufficient reasoning to support thefinding that thefactualandlegalarguments invokedbythecompaniesconcerneddonotsufficetorebutthe presumption (Case 457/16 P Global Steel Wire v Commission (EU:C:2017:819)). Beyond the presumption, the Commission can invoke other elements to prove the fact that theparenthasexerciseddecisiveinfluenceoveritssubsidiary.In the Evonik Degussa judgment,theECJclarifiedthatthepresumptioncannotberebuttedonly by showing that the subsidiary acted against its parent’s instruction (including the explicitinstructionnottoengageinanti-competitiveconduct).Thisconfirmspreviouscaselawaccordingtowhichdecisiveinfluencedoesnotrequirethesubsidiarytocarryoutallthe parent’s instructions, as long as the failure to carry out instructions is not the norm (Case C-155/14 P Evonik Degussa and AlzChem v Commission (EU:C:2016:446)). EUCourtshaveclarifiedinrecentyearsthataparent’sfinancialexposure,whereitsliabilityis based exclusively on the subsidiary’s conduct, can in principle not exceed that of its subsidiary. Accordingly, the General Court held in its UTi Worldwide judgment that it waswrongfortheCommissiontoimposeafineonUTiWorldwide,asparentcompany,which was higher than the sum of the amounts for which its subsidiaries were liable (the difference was due to the rounding down of the duration of the subsidiaries’ participation resultinginareductionofaboutonemonth)andonthisbasisreducedthefinefortheparent(Case T-264/12 UTi Worldwide and Others v Commission (EU:T:2016:112)). The ECJ, however, clarified in 2017 that in certain situations the liability of the parent companymay exceed that of its subsidiaries even where its liability is purely derivative of that of its subsidiaries. The ECJ dismissed the appeal brought by Akzo Nobel disputing its liability for thecartelconductof itssubsidiariesduringafirst infringementperiod. AkzoNobelarguedunsuccessfullythattheCommission’spowertoimposefinesonitssubsidiarieswastime-barred for that period and that therefore it could, as a parent company, not be held liable for that period of the infringement. The ECJ disagreed ruling that Akzo Nobel could beheldliablefortheinfringementduringthefirstinfringementperiodonthebasisthatithad continued its participation in the single and continuous infringement beyond that initial period (Case C-516/15 P Akzo Nobel v Commission (EU:C:2017:314)).Successor liabilityA parent company can be held liable only for conduct committed when it controlled the subsidiary. Successive parent companies thus cannot themselves be held jointly and severally liable for cartel conduct pre-dating their acquisition of the subsidiary. The former parent company may remain jointly and severally liable for the conduct of its subsidiary whilstunderitsownership,evenif,whenthedecisionfindingtheinfringementisadopted,another person has subsequently assumed responsibility for operating the company. In a 2017 judgment, the ECJ recalled that where the infringing undertaking is acquired by another undertaking, theCommissionmust take account of the specific turnover of theinfringing subsidiary for the period prior to the acquisition in order to apply the 10% ceiling for fines (CaseC-637/13 PLaufen Austria v Commission (EU:C:2017:51)). In other



words, the ceiling must be applied solely in respect of the turnover of the subsidiary, in respectofthefinewhichisimposedexclusivelyonit,inrelationtotheperiodpriortoitsacquisition by the parent company.According to the principle of personal liability, liability for cartel conduct in principle follows the entity that actually committed the infringement. On the basis of this principle, the EU courts have taken the view that, as a rule, the infringing undertaking is liable as longasitremainsinexistenceandhassignificanteconomicactivities.However,theneedto ensure an effective enforcement of competition law may sometimes justify a derogation from this general principle, in particular in the case of intra-group restructuring. If, as a result of internal reorganisations, the infringing business unit disappears as a legal entity, its legal successor will normally be held liable. If the latter ceases to exist (e.g. in case of liquidation), its economic successor (i.e. the company of the group taking over its activities) will normally be held liable in application of the principle of economic continuity.

Criminal sanctions

The Commission has no jurisdiction to impose criminal sanctions on individuals or businesses. However, fines imposed for competition law infringements have beencharacterised by the European Court of Human Rights as “quasi-criminal”, and the requirement of a full review by an independent court under Article 6 of the ECHR must be respected. Many Member States have criminal sanctions for competition law infringements, but it is not common for a national criminal prosecution to follow on from civil infringement proceedings at EU level. This may be because the national rules of evidence for a criminal prosecution are stricter than the procedures followed by the Commission. However, cross-border investigations, particularly those involving the US authorities, will often collect evidence to the criminal standard from the outset. In such cases it is not uncommon for criminal charges to be brought against European individuals in the US courts, and European citizens have served time in US jails for their part in international cartel activities. In the Marine Hose case, three individuals were sentenced in the UK as criminal cartelists, following on from their prosecution and conviction in the US.Six former Deutsche Bank and Barclays traders are due to be tried in the UK courts in 2018 in connection with the rigging of the Euribor interest rate benchmark. The rigging of Euribor was also the subject of a Commission Article 101 investigation, which resulted ina€1.04billionsettlementwithBarclays,DeutscheBank,RBSandSociétéGénéralein2013,andafurther€485millionoffinesimposedonnon-settlingpartiesinDecember2016.However, the six individuals are charged with conspiracy to defraud rather than the criminal cartel offence. The Commission’s ongoing investigation into manipulation of the foreign exchange market is also being conducted in parallel with a criminal investigation by the US Department of Justice.


As discussed in the previous editions of Global Legal Insights – Cartels, there is a policy at both EU and Member State levels to promote the private enforcement of competition law and encourage individuals who have suffered harm as a consequence of a competition law infringement to take direct action before national courts to enforce their rights before the national courts by way of a declaration of illegality, an action seeking injunctive relief, or an action seeking damages for loss suffered.



Against this background, key issues at EU level in relation to private enforcement of competition law in 2016 have related to:• disclosure(inparticular,disclosureofleniencyinformation);• requestsbydamagesclaimantsforaccesstotheCommission’scasefile;and• requestsforconfidentialtreatmentofleniencyinformationininfringementdecisions.DisclosureThe extent to which incriminating documents provided to the Commission to obtain leniency should be disclosed to damages claimants in proceedings before national courts falls within the scope of the Damages Directive (discussed in detail in the third and fourth editions of Global Legal Insights – Cartels). Thus, Member States are required to ensure that under national law, corporate leniency statements and settlement submissions are immune from disclosure (both directly from the addressee and the Commission), and that a grey list of other documents prepared for and submitted during the administrative procedure should also be required to be held back, subject to assessment of the appropriateness and proportionality of disclosure. Member States were required to implement the Damages Directive by 27 December 2016. Quite how these protections will be deployed in practice at the national level remains to be seen. In many jurisdictions the provisions of the Damages Directive will not take effect on cartels subject to existing infringement decisions, so there is likely to be considerable delay before the new procedures take effect. Moreover, in practice, the corporate leniency statementisnotrequiredtobringasuccessfuldamagesaction:forexample,inEngland&Wales,thecourtsnowregularlyrequirearedactedversionoftheCommissioninfringementdecision and other “non-leniency” documents from the Commission’s case file (in thepossessionof theaddressees) tobedisclosed intoa confidentiality ring (which includeslegalrepresentativesoftheclaimantsandaddressees).Thisprocessappearstobesufficientto permit such actions to proceed and, in the main, settle.The issue of disclosure of documents to damages claimants also arises in the context of proceeding before courts outside the EU, in particular, class actions brought in the US (where the disclosure process is known as “discovery”). Many international cartels investigated by the Commission are active in the US as well as in the EU, and civil class actions will often befiledintheUSwhilstaninvestigationbytheCommissionisstillongoing.RequestsforaccesstothefileAs noted above, third parties are increasingly seeking to rely on the Transparency Regulation toobtainaccess todocumentscontained in theCommission’scasefile toassist them inbringing damages actions. Such requests are generally rejected by the Commission on the basis of the general presumptions relating to the protection of the commercial interests of the undertakings involved in the investigation and the protection of the purpose of the investigations relating to the proceedings.


Ashurst LLPBroadwalk House, 5 Appold Street, London EC2A 2HA, United KingdomTel: +44 20 7638 1111 / Fax: +44 20 7638 1112 / URL: www.ashurst.com

Euan BurrowsTel: +44 207 859 2919 / Email: euan.burrows@ashurst.comEuanBurrowsisapartnerandHeadoftheAshurstEMEACompetition&EUlaw department, based in London and Brussels. He specialises in all aspects of EU and UK competition litigation and competition law. He has considerable experience in dealing with the English Courts, European Commission and national competition authorities. He has acted on a number of high-profile cartel cases before the European Commission, including leniencyand settlement cases. Euan is Vice Chairman of the UK Competition Law Association and also sits as a member of the Competition Appeal Tribunal User Group Advisory Panel.

Irene AntypasTel: +32 2 641 9966 / Email: [email protected]’sCompetition&EUlawdepartment,based in Brussels. She has extensive knowledge and experience advising on EU competition and regulatory matters, and acts for major companies in a variety of sectors, including agrochemicals, pharmaceuticals and consumer goods. Litigation before national and EU Courts forms an integral part of Irene’s work.


Laura CarterTel: +44 207 859 2885 / Email: [email protected]’sEU&CompetitionteambasedinLondon. She advises on all aspects of EU and UK competition law including antitrust investigations, merger control, competition compliance and regulatory matters. Her experience includes advising on matters before the European Commission, UK Competition and Markets Authority, Financial Conduct Authority and Ofcom.


FinlandIlkka Aalto-Setälä & Henrik Koivuniemi

Borenius Attorneys Ltd


LegislationCartel prohibition is based on both national statutory law and EU law. At the national level, cartels are prohibited in the Competition Act (Kilpailulaki 948/2011). At the EU level, Article 101 of the TFEU prohibits cartels. The cartel prohibition in the Finnish Competition Act is of an administrative nature and the law does not prescribe any criminal sanctions to undertakings or individuals. There have been some major changes in Finnish competition legislation in the past 10 years. In 2004, the Finnish competition legislation of the time was harmonised with EU legislation (current Articles 101 and 102 of the TFEU). In 2011, the former Competition Act, the Act on Competition Restrictions (Laki kilpailunrajoituksista 480/1992) was repealed and the current Competition Act entered into force. The purpose of the Competition Act is to protect sound and effective economic competition from harmful restrictive practices. Section 5 of the Competition Act provides that “[a]ll agreements between business undertakings, decisions by associations of business undertakings and concerted practices bybusinessundertakingswhichhaveastheirobjectthesignificantprevention,restrictionor distortion of competition or which result in the prevention, restriction or distortion of competition shall be prohibited”. In addition to the general prohibition on anti-competitive contracts, an example list of agreements, decisions and practices that are always deemed to be especially anti-competitive is provided. The example list is in line with Article 101 of theTFEUandprohibits, for instance,directand indirectpricefixing,and limitingorcontrolling production, markets, technical development or investment.In Sections 8–11 of the Competition Act, the Finnish Competition and Consumer Authority (“the FCCA”, Kilpailu- ja kuluttajavirasto) has been given jurisdiction to: 1) prohibit theimplementationofarestraintoncompetition;2)orderacompetitionrestrictiontobeterminated and obligate an undertaking to deliver a product to another with non-discriminatory conditions;3)imposecommitmentstobebindingonundertakingsorassociations;and4)withdraw the application of a block exemption regarding an undertaking. A new act 1077/2016 governing actions for damages for infringements of the competition law entered into force on 26 December 2016 (“Damages Act”). The Damages Act is based on the “Damages Directive” (2014/104/EU) and it does not have retroactive effect. The Damages Act will be applied to actions based on infringements of national and EU competition law. It aims to, inter alia, clarify and ease the prosecution of actions for damages and to ensure full compensation for the harm suffered. Actions for cartel-based damages are brought before civil courts. In practice, the existence of a cartel is firstly


Borenius Attorneys Ltd Finland

evaluatedinanadministrativeprocessbytheFCCA;itisfollowedbycourtprocessesinthe Market Court and possibly in the Supreme Administrative Court, and the damages are thereafter evaluated in a separate civil court process. In general, the right to claim damages expires within 10 years of the date on which the violation ended. There may also be other grounds for compensating damages than those provided in the Competition Act.Main bodies responsible for investigation, prosecution, decision-making and imposing sanctionsThe FCCA is the main investigative authority regarding cartels in Finland. Section 41 of the Competition Act provides that, in addition to the FCCA, the Regional State Administrative Agencies (Aluehallintovirasto) shall investigate competitive conditions and restraints on competition, and with the FCCA’s authorisation, take other measures to promote competition within their region. The role of the Regional Administrative Agencies hasbeeninsignificantincompetitionlaw-relatedinvestigationsandithasbeenlimitedtoconducting some minor measures regionally. The FCCA does not have the power to impose competition infringement-related sanctions on undertakings. The FCCA is, however, the only authority that has the right to propose a penalty payment to be imposed on an undertaking. The Market Court renders the actual decision on a penalty payment, and the payment is made to the Finnish State. Regardless of the important role of the FCCA as an investigative authority, the Market Court is not bound by the FCCA’s proposals and considers competition matters independently.A judgment of the Market Court can be appealed to the Supreme Administrative Court, as enacted in the Administrative Judicial Procedure Act. The Supreme Administrative Court’s judgment is thefinaldecisiononthematter. As thereareonlyafewcartelcases in thehistory of Finnish competition law, cartel cases are usually appealed to every instance.Damageclaimsarehandled incivilcourts; suchclaimscould, thus,behandled in threeinstances, as infringement claims are handled in only two instances. The process of handling damage claims is a separate legal process from the administrative process. In the civil process the courts shall, inter alia, rule on a cartel victim’s right to claim damages, and the possible and proper amount of damages to be paid by the undertakings that have been involved in a cartel. SanctionsThe Market Court may impose, on the proposal of the FCCA, a penalty payment for an undertaking or association of undertakings infringing provisions of Sections 5 or 7 of the Competition Act or Article 101 or 102 of the TFEU. The maximum amount of a penalty payment is 10% of an infringing undertaking’s or association of undertaking’s annual turnover. The Market Court may also impose, either on the proposal of the FCCA or on its own proposal, a periodic penalty payment to an undertaking or association of undertakings to enforce a condition set, or an order, prohibition, or obligation issued by the FCCA. The amount of a periodic penalty payment is not enacted in the Competition Act. A periodic penalty payment may not be imposed on a natural person.

Overview of investigative powers in Finland

The FCCA can investigate competition restrictions either on its own initiative or in response to a request for action. A competitor or any other legal or natural person can make a request for action on the FCCA’s website or through other means. Over the past few years, the



initiative to cartel investigations has generally been triggered through tip-offs, but also the FCCA’s own operation reveals anticompetitive behaviour. The FCCA can obtain information on the alleged anti-competitive behaviour through inspections (usually referred to as dawn raids). Inspections on all premises are carried out byofficialsoftheFCCAorbytheRegionalStateAdministrativeAgencies.Officialscanalso authorise other persons to participate in the inspections. If needed, the police may provide executive assistance during the inspections. Inspections can also be carried out by the European Commission. The inspections in business premises are subject to an authorisation from the head of the FCCA and, for inspections elsewhere than in business premises, the FCCA and Regional State Administrative Agencies must have an authorisation from the Market Court.Dawn raids can be targeted to business premises, storage facilities, land and means of transport controlledbyanundertaking.TheofficialsoftheFCCAandtheRegionalAdministrativeAgencies may also gain access to other premises (e.g. homes of the management of a company)ifthereisajustifiedreasontosuspectthat,forexample,bookkeepingorotherdocuments related to the business are held in such premises and the documents are of material relevance to the investigation of the alleged competition infringement. During inspections, the officials of the FCCA must be permitted to assess businesscorrespondence,bookkeeping, computerfiles andother relevantdata and to take copiesof documents under investigation. The FCCA may also utilise special search software to investigate the content of computers. Since 2015, the FCCA has had the right to obtain information from outsourced services, such as business information stored on external service providers’ servers and cloud services.The FCCA may seal business premises or data if it is necessary to secure the execution of the inspection. The personnel can also be interviewed during inspections and the authorities are allowed to record the interviews. Whenconductinganinspectioninpremisesotherthanbusinesspremises,theFCCAcanenter the premises, examine materials and take copies. In non-business premises, the FCCA is not allowed to seal the premises or request explanations or make records during inspection. The undertaking under investigation has the right to have a legal representative present during an investigation but the presence of the representative is not a precondition for the execution of an investigation.An undertaking or association of undertakings is obliged to submit, on request of the FCCA, all the relevant information and documentation needed for the investigation of a competition restraint to the FCCA or to the Regional Administrative Agencies. The FCCA has the right to hear a representative of an undertaking or association of undertakings or anotherpersonifthereisajustifiedreasontosuspectthatarepresentativeorapersonhasbeen involved in the execution of a cartel. The hearings are generally recorded.


During2017,theFCCAconducted/finalisedcartelinvestigationsinrelationto,inter alia, the sale of electric energy, mobile payment services and housing management services. In addition, the Market Court gave a decision on the so-called bus cartel, whereby the originalpenaltypaymentproposaloftheFCCAwassignificantlyreducedbytheCourt.In relation to cartel damages claims, the Finnish Supreme Court has made a landmark request



for a preliminary ruling to the European Court of Justice on the issue of the applicability of the doctrine of economic succession in antitrust damages cases.


The FCCA prioritises cases brought to its attention and it does not have a legal duty to act on every request for action. A case will not be investigated if it is likely that no restriction of competition has taken place, competition in the relevant market is considered functional even though a restriction of competition has taken place, or the request for action is manifestlyunjustified.TheFCCAhasheldthattheprioritisationnormhasbeensuccessfuland has enabled the FCCA to intervene with hard-core restraints of competition.The FCCA’s strategic focus is to intervene when there is harmful market behaviour, which can relate to, inter alia, cartels, abuse of dominant position and concentrations. As cartels usually endanger effective competition in the market, it is improbable that the FCCA would deprioritise a cartel investigation in Finland. As the case law illustrates, the FCCA usually intervenes with cartels even when they are small in scope.The FCCAhas not concentrated its investigativemeasures on any specific key sectors.Therecentcartelenforcementjudgmentshavebeeninthefieldofindustry,forinstance,the raw wood cartel, the asphalt cartel and the alleged power line manufacturing cartel. Recent investigations of the FCCA shows that also alleged smaller scale infringements, which include hard-core restrictions like cartels, are monitored and intervened.


Investigation procedureAn undertaking or association of undertakings is obliged to provide all the relevant information on request to the FCCA. An undertaking has a duty to give all such information and documents as are needed to investigate the content, purpose and impact of a competition restraint, and to assess a concentration. An undertaking under inspection has the right to defence and to be heard. An undertaking is to be informed of its position in the investigation and the inspected infringement. In practice, an undertaking is to be informed at the earliest possible stage on what infringement it is accused of and what its status is in the investigation. An undertaking has the right to receive information from the documents concerning the investigation and on the phase of the proceedings insofar as it cannot harm the investigation in the matter. The information the FCCA has obtained during its investigation can be utilised only for the purposes for which it has been gathered (unless the FCCA has initiated another investigation). The FCCA cannot force an undertaking or association of undertakings to confess to an infringement violating the Competition Act.An undertaking under investigation has the right to keep legally privileged documents (confidential correspondence between an external legal consultant and the undertaking)confidential.An undertaking under investigation has the right to be heard before a proposal on penalty payment is submitted to the Market Court. The “statement of objections” procedure was introduced in 2011. In practice it is unlikely that an undertaking’s comments on the FCCA’s proposalhaveasignificantinfluenceontheFCCA’sevaluationbutatleasttheundertakingshave the possibility to correct possible misleading information and to safeguard their business secrets.



Decision-making procedureWhendecidingwhetheranundertakingorassociationofundertakingshasbeeninvolvedina cartel, the FCCA analyses evidence gathered during inspections. The evidence could be, forinstance,financialstatements,bookkeeping,ITdevices,otherdocumentsanddatathatcould be of particular relevance in showing that a cartel has taken place. The FCCA may also hear representatives of an undertaking under investigation. The FCCA also utilises information and documentation provided by leniency applicants in its decision-making. The Competition Act does not provide any time frames during which a cartel investigation or a proposal for penalty payment must be made. The procedures are generally long (several years in duration) but the FCCA has been focusing on shortening its processing times. Even though the FCCA is the main investigative authority with respect to anti-competitive behaviour, it is not entitled to impose any sanctions on undertakings or associations of undertakings. Only the Market Court and the Supreme Administrative Court have jurisdiction to impose penalty payments and periodic penalty payments regarding cartels and other competition infringements. On the other hand, the Market Court may impose a penalty payment only on the basis of the FCCA’s penalty payment proposal.The right to appeal is stipulated in Section 44 of the Competition Act. Only the undertakings to whom the decision is addressed or whose rights, obligations or interests are directly affected by the decision, can appeal. In general, a competitor is not able to appeal the FCCA’scarteldecision,because thedecision isnotaddressed to it. Also,only thefinaldecisions of the FCCA are subject to appeal. The Act on Openness of Government Activities (julkisuuslaki, 621/1999) applies to the documentation utilised in the FCCA’s investigation and the written statements of the parties during court proceedings. The documentation shall, however, not be publicised before the investigationhasofficiallyendedandforaslongasitcouldjeopardisetheinvestigationorthehandlingofthecase.Inaddition,businesssecretsareheldconfidentialthroughouttheFCCA’s investigation, the court proceedings and even afterwards as long as the information isrelevant(e.g.pricinginformationoftheyear2014canbeheldconfidentialduringthatyear and possibly also the next, but the information can no longer be relevant from the point of view of an undertaking’s business secrets in 2020). The penalty paymentA penalty payment can amount to a maximum of 10% of an undertaking’s or association of undertakings’ annual turnover. Under the FCCA’s guidelines, penalty payments have two aims. Firstly, a penalty payment is of punitive nature, i.e. punishing undertakings which have breached the competition norms. Secondly, the possibility if imposing a penalty payment should prevent an undertaking’s or association of undertakings’ potential cartel participation, or renewal of any anti-competitive behaviour on the market. Therefore, penalty payments are regarded as having a general preventive purpose as well as an individual preventive purpose.WhentheFCCAassessestheproperamountofthepenaltypayment,ittakesintoaccountall the relevant aspects on the subject matter. The nature, extent, degree of gravity, degree of participation, renewal and measures to end the infringement are taken into consideration when the FCCA makes its proposal to the Market Court on the right amount of the penalty payment. The FCCA may mitigate and adjust the amount of the penalty payment in cartel and in other competition restriction cases via a case-by-case analysis. In practice, the Market Court has a wide discretion in assessing the amount. In certain circumstances, the Market Court may also decide not to impose a penalty payment even if an undertaking was found



to have infringed competition laws. Under the Administrative Judicial Procedure Act, the Market Court is entitled to reduce or even withdraw a penalty payment if the administrative and investigation process of the FCCA has been delayed and an undertaking’s right to access to justice has been infringed. A penalty payment may also be imposed on an undertaking or association of undertakings to whom a business activity involved in the infringement has been transferred due to a transaction.

Leniency regime

The leniencyprocedure enables thefirst undertakingor association to reveal a cartel toobtain full immunity from the penalty payment. Granting full leniency requires that an undertaking submits an application for leniency to the FCCA and provides the FCCA new informationonthecartel. Informationprovidedbytheapplicantmustpresentsufficientgrounds for the FCCA to conduct a dawn raid or, after an executed dawn raid, present such evidence as enables the FCCA to state that a cartel has taken place. Regardless of granted leniency, the undertaking subject to leniency may later be held liable to compensate for damages caused by the cartel.In addition to the criteria relating to the quality of information, certain behavioural commitments may be demanded from a leniency applicant. In order to obtain leniency, the applicant must immediately end its participation in the cartel. It must also co-operate with the FCCA through the whole investigation and provide additional information when necessary. The applicant must not destroy any evidence before or after the delivery of its leniency application. Finally, the applicant must keep the submission of its leniency applicationconfidential.TheFCCAgrantsconditional leniencytoanapplicantuntil the investigation isfinished.Thefinaldecisiononfullorconditionalleniencyisconcludedattheendoftheinvestigation.Leniency canbe either full or partial. Thefirst leniency applicant toprovide sufficientinformation to the FCCA obtains full immunity. Any possible succeeding applicants with new information may be granted partial leniency. The second, third and fourth undertakings or associations to unveil a cartel may obtain rebates amounting to 30–50% (to the second applicant), 20–30% (to the third applicant) and a maximum of 20% of a penalty payment to the fourth applicant. The criteria to submit information and other behavioural obligations apply to both partial and full leniency. Consequently, the Finnish leniency policy is in line with that of the European Commission.Thereisnodefinedformforanapplicationforleniency.However,itisessentialthatthemoment of the provision of information to the FCCA can be determined in order for it todefine theorderofpriority ingranting leniency. Therefore,anapplicationshouldbedelivered either in person (by a representative of the undertaking or an external counsel) or electronically to the FCCA.The leniency regime is applied occasionally in Finland. In 2014, Empower Ltd revealed a cartel in the power line market and was granted immunity from the penalty payment. In the spare part cartel of 2009, Arwidson Ltd acted as a whistle-blower and a penalty payment was not proposed by the FCCA. One of the biggest Finnish cartels, the asphalt cartel, was revealed without any of the cartel members coming forward. The FCCA initiated investigations based on tip-offs.




The Competition Act does not entitle the FCCA to enter into a settlement with an undertaking. According to the preparatory works of the Competition Act, such procedures wouldnotoffersubstantialbenefitsforhandlinginfringementcasesandwouldnotfitwellinto the existing legal framework or the Finnish legal tradition.


In addition to leniency applications, third parties may also reveal a cartel to the FCCA. Inprinciple,anyonecanmakearequestforactiontotheFCCAorunofficiallytipofftheFCCA.Aprivatepersonwould,however,notbenefitdirectlyfrommakingarequestforaction as there is no threat of competition law sanctions for private individuals. Moreover, anofficialtip-offdoesnotnecessarilyleadtotheinitiationofaninvestigation,asitisattheFCCA’sdiscretiontodecidewhetherornottoopenanofficialinvestigation.


The main penalty for breaching the Competition Act is the administrative sanction of penalty payment imposed by the Market Court. Apart from penalty payments and despite granting leniency, a member of a cartel may be held liable to pay damages to cartel victims. The only sanction that may be passed in civil process is the duty to pay damages to cartel victims. The Finnish legal system differs from some other jurisdictions in which a criminal sentence is also possible as a result of a competition law infringement. The damage claims are brought before civil courts and usually handled after the administrative process has ended. The district courts are reluctant to evaluate whether a cartel has taken place as they are not specialists in competition law matters. If a damages claimisexceptionallyfiledinadistrictcourtbeforetheadministrativeinvestigationonthematterhasbeenfinalised,itislikelythatthecourtwilldelayitsrulinguntiltheFCCAhasconducted its investigations and (at least) the Market Court has ruled on the case. Under the Damages Act, any natural or legal person who has suffered harm caused by an infringement of competition law is entitled to claim and obtain full compensation for the harm. Full compensation covers the right to compensation for actual loss as well as for loss ofprofit,includinginterest.UndertheDamagesAct,aninfringementofcompetitionlawfoundinafinaldecisionbyanational competition authority (the FCCA) or by a review court is deemed to be irrefutably established for the purposes of an action for damages brought before their national courts underArticle101or102oftheTFEUorundernationalcompetitionlaw.Whereafinaldecision is taken in another Member State, it should be presented before their national courts, at least as evidence that an infringement of competition law has taken place.Thereisanewsectionaboutthequalificationofharm.UndertheDamagesAct,itshallbe presumed that cartel infringements cause harm. The infringer shall have the right to rebut the presumption. It shall also be ensured that neither the burden, nor the standard of proofrequiredforthequantificationofharm,rendertheexerciseoftherighttodamagespracticallyimpossibleorexcessivelydifficult.Joint and several liability is also a new feature. It means that undertakings which have infringed competition law through joint behaviour are jointly and severally liable for the harmcausedby the infringement of competition law;with the effect that eachof thoseundertakings is bound to compensate for the harm in full, and the injured party has the right



to require full compensation from any of them until he has been fully compensated. There are some exceptions for small or medium-sized enterprises.An infringer may recover a contribution from any other infringer, the amount of which shall be determined in the light of their relative responsibility for the harm caused by the competition infringement. The amount of contribution of an infringer which has been grantedimmunityfromfinesunderaleniencyprogrammeshallnotexceedtheamountofthe harm it caused to its own direct or indirect purchasers or providers.The passing-on of overcharges means that ensuring the full effectiveness of the right to full compensation, compensation of harm can be claimed by anyone who suffered it, irrespective of whether they are direct or indirect purchasers from an infringer, and that compensation of harm exceeding that caused by the infringement of competition law to the claimant, as well as the absence of liability of the infringer, are avoided. The burden of proving that the overcharge was passed on is on the defendant.


As damages claims are brought before civil courts, they can ultimately be handled in three instances,first inadistrictcourt,andthereafterappealedtotheCourtofAppealandtheSupreme Court. Usually the administrative process takes place before the damage claim process, which means that cartel-related proceedings can take up to several years.

Criminal sanctions

Cartels are currently not criminalised in Finland. There has, however, been discussion on the criminalisation of cartels, and two reports on the issue were published in spring 2014.

Cross-border issues

The ECN (the European Competition Network) consists of the European Commission and the competition authorities in the Member States. The FCCA, as the national competition authority, is part of the ECN. The FCCA also co-operates actively with the other competition authorities in the Nordic countries and the OECD (Organization for Economic Cooperation and Development). Participating in international co-operation enables the FCCA to provide and receive executive assistance in relation to competition restriction investigations. According to the FCCA’s website, the FCCA handles annually several competition matters that have a cross-border element. In addition, it participates in ca. 50 international working groups’ activities.


Therearethreesignificant,legallyvalidcarteldecisionsgivenbyeithertheMarketCourtortheSupremeAdministrativeCourtinthepastyears:therawwoodcarteljudgment;theasphaltcarteljudgment;andthesparepartcarteljudgment.Inaddition,theMarketCourtfound in December 2017 that a bus cartel had existed in Finland since 2008. In the asphalt cartel case, the Helsinki District Court’s judgment covered over 140 damages claims. The Court ruled that most of the claimants were entitled to claim damages but dismissed, for instance, the damage claims of the State as it was considered to have been aware of the cartel. The Court developed important interpretations on the applicable compensation norms, the general statutory limitation norms and the distribution of liability of undertakings which have ceased their operations. The Supreme Court made a landmark



request in the case for a preliminary ruling to the European Court of Justice on the issue of the applicability of the doctrine of economic succession in antitrust damages cases in December 2017.Intherawwoodcartelcase,over600cartelvictimshavefiledclaimsfordamages.Thedistrictcourt,asthecourtoffirstinstance,dismissedintotal13damageclaimsinMarch2014 as they were considered to fall under the statute of limitations. In November 2014, the Helsinki Court of Appeal held that the cartel victim’s right for compensation had, in fact, not expired. The Helsinki Court of Appeal stated in its decision that the statute of limitations period had begun only after the Market Court’s cartel judgment had become legally valid on 4 January 2010, whereas the Helsinki District Court had interpreted that the statute of limitations period had commenced when the FCCA published its news release on 25 May 2004. The matter was returned to the Helsinki District Court, which subsequently dismissed most of the forest owners’ claims for damages in August 2017.In the bus cartel case, the Market Court held in December 2017 that the bus companies and the association of bus companies had sought to restrict competition by excluding competitors from certain travel services, such as information and ticketing services, and by not granting cargo rights. However, the Market Court also dismissed many of the FCCA’s claims, as well as drastically reducing the Authority’s original proposal for a 38 million euro penalty payment. The FCCA has appealed the decision to the Supreme Administrative Court.

Reform proposals

The Ministry of Employment and the Economy has appointed a working group to investigate a reform of the Finnish Competition Act, as a result of which a government proposal on amending the Competition Act has recently been presented. The proposal sets forth, inter alia, amendments which would enable the FCCA to continue inspections of digital evidence at the FCCA’s premises.


Borenius Attorneys LtdEteläesplanadi2,FI-00130Helsinki,Finland

Tel: +358 20 713 33 / URL: www.borenius.com

Ilkka Aalto-SetäläTel: +358 20 713 3545 / Email: [email protected] has worked over 20 years with antitrust and merger control matters. Ilkka advises companies and governmental agencies on competition and marketing law issues at national and EU level, including merger control, abuse of dominant position, cartels, state aid and public procurement. Prior to joiningBorenius,hewasaLocalPartnerat theHelsinkiofficeofan international law firm and worked as the head of its competition lawpractice. Ilkka has also worked for the Merger Task Force of the European Commission. Ilkka is the chairman of the Competition Law Expert Group of the Finnish Bar Association. He is currently also a member of the working group investigating changes to the current Competition Act.

Henrik KoivuniemiTel: +358 20 713 3269 / Email: [email protected] advises clients on questions related to competition law and public procurement.Henrik joined Borenius in 2017, and before that he worked as a Research Officer at the Finnish Competition and Consumer Authority. Beforegraduating, Henrik has also worked as an associate trainee at Hannes Snellman and as a legal trainee at the Finnish Competition and Consumer Authority.



FranceBastien Thomas & Cécile Mennétrier

Racine

Brief overview of the law and enforcement regime relating to cartels

Article L 420-1 of the French Commercial Code (the “FCC”) is the French equivalent to Article 101 of the Treaty on the Functioning of the European Union (the “TFEU”). It prohibits “concerted actions” or “agreements or coalitions”, whether “express or tacit”, implemented by undertakings or associations of undertakings, that have as their object or effect to prevent, restrict or distort competition. ArticleL420-1FCCappliestobothverticalandhorizontalagreements.Whentheinternalmarket is affected by a practice, i.e. when trade between Member States of the European Union (“EU”) is affected, Article 101 TFEU can apply cumulatively.Several entities are in charge of enforcing competition law in France.The French Competition AuthorityThe French Competition Authority (“FCA”) is an independent administrative body that has jurisdiction, pursuant to Article L 462-5 FCC, to enforce EU and French competition law. Its decisions are adopted by a college (the “Collège”) headed by a president.As an administrative body, the FCA is entitled to impose fines on companies violatingnational and/or EU competition law and to issue orders or interim measures either to end or modify the anti-competitive behaviour. However, the FCA is not in charge of granting damages to the victims of anti-competitive practices.The FCA also has an advisory role. Its opinion can be requested by national courts on a pending case1 (known as the “amicus curiae” procedure), by other administrative bodies,2 by the Government or by professional associations. The FCA can also issue ex officio opinions on certain issues relating to competition law.3 It has used this tool once in 2017,4 in the healthcare sector (investigations are pending).National courtsFrench courts are also in charge of enforcing EU and national competition rules.Appeals against FCA cartel decisions must be brought before the Paris Court of Appeal (the “Court of Appeal”). Appeals against decisions of the Court of Appeal must be brought before the Supreme Court (the “Cour de cassation”).Commercial or civil courts that have special jurisdiction over competition matters may award damages to victims of anti-competitive practices. Administrative courts may also award damages insofar as public contracts have been impacted by anti-competitive practices (this applies mostly to bid-rigging practices).5 The Minister for the EconomySince 2009, the Minister for the Economy has only had residual powers to enforce competition law rules.


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Its Directorate General for Competition, Consumer Affairs and Prevention of Fraud (the “DGCCRF”) is entitled, pursuant toArticle L 464-9 FCC, to investigate and fine anti-competitive practices, when the following conditions are met:• the market affected by the practice has a “local dimension”;and• theturnoverofeachoftheundertakingsconcerneddoesnotexceed€50minFranceand

theiraggregateturnoverdoesnotexceed€200m.The FCA has the possibility to dismiss an action brought before it if the conditions for the case to be dealt with by the Minister for the Economy are met (Article L 462-8 FCC introduced by the Law for Economic Growth, Economic Activity and Equality of Economic Chances of 6 August 2015, so-called “Macron Law”). The FCA has used this possibilityin2017forthefirsttime.6 In addition, the Minister for the Economy can bring cases and submit observations in any procedure before the FCA, in particular, in cartel cases. The Minister for the Economy may also appeal FCA decisions before the Court of Appeal. In practice, since 2009, the Minister for the Economy has only appealed a cartel decision of the FCA once, in the case relating to school buses in the east region of France, along with six other appellants.7

Overview of investigative powers in France

Under Article L 450-1 FCC, competition law investigations can be carried out either by theinvestigationteamoftheFCA,orbyofficialsoftheDGCCRF.Theirinvestigativepowers, set out in Articles L 450-1 to L 450-8 FCC, vary in accordance with the type of investigation conducted.Ordinary investigationsOrdinary investigations carried out on the basis of Article L 450-3 FCC do not require a prior judicial authorisation.These investigations can be undertaken in any professional premises or means of transport from 8.00 am to 8.00 pm, or during public opening time, production, manufacture, transformation, packaging, transport or marketing activity periods.The powers of the investigators have been increased in 2014 (“Hamon Law” of 17 March 2014) and 2015 (Macron Law). They can now require, from anyone who may hold it, the provision of any information – including any professional document such as books, invoices, professional agendas, meeting reports, etc., but also any software, stored data and information in intelligible form – that may help them in completing their investigation. It means that not only investigators may take copies of such documents, but they may also organise hearings with the personnel on the basis of this article. This provision (paragraph 4 of Article L 450-3 FCC) has been declared compliant with the French Constitution by the Conseil Constitutionnel in 2016.8

In practice, investigators may inform the targeted company of their coming and communicate a list of the documents they will request.There is no specific procedure for challenging ordinary investigation operations orminutes of a hearing. They can only be challenged during the procedure before the FCA or later on appeal. Dawn raidsArticle L 450-4 FCC grants the FCA and the DGCCRF the power to carry out dawn raids under judicial authorisation given by a special judge in charge of liberties and custody (“juge des libertés et de la détention”).


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These investigations can be carried out from 6.00 am in any premises (including means of transport), whether professional or personal (investigators can visit executives’ or employees’ domiciles). Investigators, assisted by police officers (contrary to EuropeanCommissiondawnraidswherenopoliceofficerattends),cansearchthepremises,placeseals and seize original documents (unlike the European Commission which can only take copies). They may seize any document or any information support in connection with the alleged practices. Concerning the seizure of electronic data, investigators take away either the original physicalmediumoracopyofthedata.Whenthephysicalsupportisseized,whichisratherrare, a copy of the data contained must be given to the company. The French Supreme Court has validated the global seizure of electronic data, considering that the data contained in a mailbox or a hard drive is indivisible. Therefore, restitution of some electronic data (in particular, data that is irrelevant to the investigation or legally privileged) can only be claimed ex post (i.e. after the dawn raid).As for the process of selection of electronic documents that investigators are interested in seizing, a list of key words is used. The French Supreme Court held that this list does not have to be communicated to the company.Investigators may hear the premises’ occupant or his/her representative(s) on site in order to collect useful information for their investigation. Based on press releases published by the FCA, it seems that two dawn raids were carried out by the FCA in 2017: in the supply and distribution of consumer goods sector on the Island of Réunion9;andintheprocessingofanimal remains sector.10 However, the FCA does not systematically publish press releases in the case of dawn raids.AccordingtoArticleL450-8FCC,obstructinganinvestigationcanleadtoa€300,000fineand a two-year term of imprisonment. To date, there has been an extremely limited number of cases where these measures were enforced. In addition, Article L 464-2 V FCC provides specificfinesforcompaniesobstructinganinvestigation(cf.infra).

An overview of cartel enforcement activity during the last 12 months

In2017,theFCAadoptedonlyonedecisionconcerningpracticesthatmaybequalifiedascartel.Thetotalfineforthiscartelwas€302.3m–muchmorethanthetotalamountoffinesof2016(€17m).Floor-covering sector11

TheFCA imposed afine of €302.3magainst the three leadingPVCand linoleumfloorcoveringmanufacturersinFrance(Forbo,GerflorandTarkett)togetherwiththeirrelevantprofessional association, the SFEC (Syndicat Français des Enducteurs Calandreurs et Fabricants de Revêtements de Sols et Murs), for pricefixing. The case startedwithinformation provided by the DGCCRF to the FCA that led to dawn raids at the premises of the above-mentioned entities. Further to these dawn raids, two of the investigated companies applied for leniency. The investigations revealed three practices: • a wide-ranging cartel between the three manufacturers, covering numerous aspects

of sales policy, including prices, with the aim of drastically reducing or eliminating competitionintheproductionandmarketingofPVCandlinoleumfloorcoveringsandstabilising their respective situations on the market. These companies were using nine dedicatedtelephonelinestoholdconfidentialdiscussions;eachcartelparticipanthadtwo phones, one from its own company and one with a package contracted by another participant. Thus, the conversations always took place between two phones from the samecompany;


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• exchanges, within the SFEC, of specific confidential information relating to theiractivities,enablingsalespoliciestobeadjustedaccordingly;and

• the signing of a non-competition agreement, entered into with the consent of the SFEC, concerning the communication on the environmental performance of their products. Manufacturers were only allowed to communicate on the environmental performance of their product through joint data sheets issued by the trade association.

Thepricefixingpracticeshadlastedupfromnineto23years(dependingonthepractices).Thepartieschosetosettleandbenefitedfromafinereduction.TheAuthority,however,refused to reduce the penalties on the basis of compliance programmes (see below). This was the message that the FCA had decided to align itself with the European Commission’s approach on this issue.No appeal was lodged.It is worth mentioning that the FCA has rejected one claim of cartel in the car rental sector, even though a statement of objections had been issued,12 which is in practice very rare. Indeed, the FCA eventually considered that the exchange, between six car rental companies and12Frenchairports,ofconfidential, individualandprecise informationrelating to thecar rental activity, did not reduce the commercial autonomy of the companies and did lead toadisclosureoftheircommercialstrategy.Duetothespecificfeaturesofthissector,thisinformation was not considered as strategic. In addition, a second objection (the application of a surcharge for rental in railway stations) was eventually considered not established. The case was entirely dismissed by the FCA.The Court of Appeal issued six decisions regarding cartels in 2017.In the modelling case,13 the Court of Appeal overturned the 2016 FCA’s decision14 regarding theamountofthefinesoftwocompanies.TheCourtofAppealtookintoaccounttheactualturnoverachievedbythefirstonetoreducethefinefrom€600,000to€300,000.Forthesecondcompany, theCourtofAppealalsoreducedthefinebyhalf,consideringthat thecompany’s participation was limited since it had not taken part in several meetings, during which the 2010 tariff grids had been adopted.In the commodity chemicals case,15 the Court of Appeal partially overturned the 2013 FCA’s decision,16 finding that the rights of the defence of several companiesfined, belongingto Brenntag Group, had not been respected, and re-opened the debate on the objections notifiedtothem.ApendingappealhasbeenlodgedbeforetheSupremeCourtagainstthisdecision. In the fresh dairy products case,17regardingacartelaimedatfixingpricesandallocatingvolumes between the dairy companies involved from 2006 to 2012, the Court of Appeal overturned the 2015 FCA’s decision.18First,theCourtofAppealconfirmedtheFCA’smainfindingsontherealityoftheinfringement,thenpartiallyoverturnedtheFCA’sdecisiononthe ground that several companies’ rights of defence had not been respected at the stage of calculatingtheirfines(violationofadversarialprincipleproceedingsduetofailurebytheFCA to exchange some documents between the parties), and by taking into account the lower intensity of some companies’ participation in the practice. Consequently, the Court ofAppealreducedthefinesofnineoutof10companies.In the property management case,19 in which two companies had exchanged information onpricesintheframeworkofpubliccallsfortender, theCourtofAppealconfirmedtheamountofthefines.20 In the banking sector case, the Court of Appeal,21aftertheoverturningofitsfirstdecisionbythe Supreme Court,22 upheld almost entirely the FCA’s initial decision.23 In this case, several


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bankshadbeenfinedby theFCAforhavingcharged, inacollusivemanner,unjustifiedfees during the transition towards the new digital system for processing checks and for having implemented two additional fees for related services. The Court of Appeal partially overturned theFCA’sdecision,only regarding the10%increaseof thefine,consideringthat the FCA had not demonstrated the banks’ active persuasive role persuasion with their partners. In the school buses case24 in which four competitors had implemented bid-rigging practices in the school bus sector in Eastern France during three years, the Court of Appeal entirely confirmedtheFCA’sdecision.25

TheSupremeCourtissuedfivedecisionsconcerningcartelsin2017,threeofwhichwereappeal dismissals.26 In October 2017,27 it repealed its own decision of 8 November 2016 on the basis of a procedural error due to its negligence (“arrêt de rabat”) and overturned the decision of the Court of Appeal28thathaditselfoverturneda2012finingdecisionoftheFCAconcerning the French-German flour cartel.29 The Supreme Court ruled that some of the undertakingshadnottakenpartinthecartelaimingatfixingpricesforpackagedflour.TheSupreme Court upheld the FCA’s decision concerning the French-German cartel (but only for one company).In the wallpapers case,30 in which several companies had exchanged information concerning their commercial conditions, market forecasts and the evolution of their turnover, the Supreme Court overturned a decision of the Court of Appeal that had itself overturned the 2014finingdecisionoftheFCA.31 The Supreme Court ruled that the Court of Appeal had erredtakingintoaccount,inthecalculationoffine,salesvaluesunrelatedtotheinfringementand referred the case to the Paris Court of Appeal.32

It is worth mentioning that, in the landmark endives case, the European Court of Justice ruled, after the Supreme Court’s reference for a preliminary ruling,33 that practices established between several producer organisations or associations of producer organisations and, even more, practices involving not only such producer organisations or associations of producer organisations but also entities not recognised by a Member State in the context of the implementation of the Common Agricultural Policy in the sector concerned, could not escape the prohibition of agreements, decisions and concerted practices.34

Key issues in relation to enforcement policy generally

The new president of the FCA since 15 October 2016, Isabelle De Silva, has announced that her enforcement priorities would focus on the digital economy. A sector inquiry into online advertising and data is ongoing, the results of which will be available shortly35 and will be an opportunity to question the role of Google and Facebook on the online advertising market. ThepresidentoftheFCAhasalsoinitiatedareflectionontheadaptationofcompetitiontoolsto algorithms and digital platforms. The pharmaceutical sector36 is also part of the FCA’s current priorities as the authority FCA has opened an investigation ex officio on potential excessive prices imposed by pharmaceutical companies, as well as on the Government’s actions to determine drug prices (cf. supra). In addition, other sectors may be investigated, depending on the complaints. Indeed, the FCA,unlikeotherEuropeancompetitionauthorities,doesnotbenefitfromadiscretionaryprosecution system that would enable it to decide whether to initiate proceedings over a case or not. Once a complaint has been brought before the FCA, it is compelled to investigate into the case and to issue a decision on the merits. Nevertheless, the FCA may, on its own initiative, open an investigation on a particular suspected anti-competitive practice. In


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practice, it is the head of the investigation team (the “Rapporteur General”) who suggests opening an investigation. He/she may also decide to open a case when prior investigations have been undertaken by the DGCCRF.


The settlement procedure coming from the above-mentioned “Macron” Law of 6 August 2015 has replaced the previous system which existed for companies in accepting to not challenge theobjections raised in exchange for a reductionof thefine incurred– thisreduction being higher in case they also entered into commitments. Under the new regime, after the issuance of the statement of objections, the companies will be offered the possibilitytodiscussapotentialfinerangewiththeinvestigationteamoftheFCA.ThelevelofthisfinewillultimatelybedecidedbytheCollegeoftheFCAonthebasisoftheproposalofafinerangeagreedonbythecompanyandtheheadoftheinvestigationteam.The FCA applied this text by anticipation in a case concerning an abuse of dominance implemented by Orange in 2015.37

In2017,fivecasesweresettledunderthisprovision:onerelatingtoaverticalagreement;38 one relating to exclusive imports in the French overseas territories (prohibited by Article L420-2-1FCC);39 two relating toabusesofadominantposition;40 while the last case concerned a cartel.41 ThefinesimposedbytheFCAinsettlementcasesarerelativelylow,exceptintwocases(in the energy sector42andthefloor-coveringsector).43 In a notice published on 19 October 2017, the FCA removed the possibility for companies tobenefitfromareductionofthefineinexchangeoftheiragreementtosetupacomplianceprogramme. Accordingly, the framework-document of 10 February 2012 on antitrust compliance programmes was withdrawn.The issuance of a notice detailing this new settlement procedure has been announced by the FCA.44

Itisworthmentioningthatforthefirsttime,acompany,Brenntag,hasbeenfined€30mforobstructing the investigation, which is prohibited by Article L 464-2 V FCC.45 Brenntag provided incomplete, imprecise and out of delay information before refusing to provide information and material element. The extent to which information was withheld by Brenntag prevented the investigation services from understanding the market functioning and assessing the complaint. The FCA has considered this infringement as particularly serious since it prevented the FCA from gathering all the information needed. Thus, the FCA was able to identify the nature of the practices complained of.


In France, the Leniency Program was introduced in 2001 by the Law on New Economic Regulations. So far, the FCA has issued 12 decisions based on leniency applications. In recent years, leniency cases have remained quite rare. Indeed, only one decision based on leniency was issued in 2017,46 and none in 2016. To enhance the attractiveness of this proceeding, the FCA published a revised procedural notice on leniency on 3 April 2015, describing in detail how the French programme worked andunderwhichconditionscompaniescouldbenefitfromit.

Administrative settlement of cases and plea bargaining

French law provides for two distinct settlement procedures.


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Classic settlementAs mentioned above, a new settlement procedure has been introduced in France by the “Macron” Law. It replaces the former procedure allowing companies which did not challenge the statementofobjections tobenefit froma reductionof thefineup to25%. The new procedure introduced at Article L 464-2 III FCC still enables companies to benefit from a fine reduction, but under different conditionswhich are intended toencourage them to engage more in settlement procedures (see above). Commitments procedureUnder Article L 464-2 FCC, companies suspected of anti-competitive behaviour can propose to the FCA, prior to the issuance of a statement of objections, to enter into commitments that are likely to put an end to the practices at issue. However, the FCA stated in its 2009 notice on commitments that it would not apply this procedure to cases where damage to the economicpublicorderrequiredimposingafine.Thus,cartelsarea priori excluded.

Procedure for third-party complaints

Companiescanfileacomplaintbefore theFCA,but individualscannot. Theycanonlydraw the FCA’s attention on an alleged anti-competitive behaviour, potentially leading the FCA to open an investigation ex officio.As mentioned above, the FCA has no discretionary prosecution power. It has the obligation to consider any complaint that it receives, as long as it is sufficientlydetailed and fallswithin the scope of its jurisdiction. Nevertheless, the FCA is free to organise its schedule and prioritise the cases depending on their level of harmfulness.Complainants can appeal the FCA’s decisions before the Court of Appeal.

Latest developments and key current issues in relation to civil penalties and sanctions

PursuanttoArticleL464-2FCC,calculationofthefineisbasedonthefollowingcriteria:• theseriousnessofthefacts;• thegravityofthedamagetotheeconomy;• thesituationofthecompanyorthegroupthatholdsit;and• the possible reiteration, if any, of anti-competitive practices.Inorder tobringmore transparency to the calculationof itsfines, theFCApublishedaproceduralnoticeonthemethodofcalculationoffineson16May2011.Initsnotice,theFCAdetailsthestepsleadingtothedeterminationofthefinalamountofthefine:• First,theFCAdeterminesthebasicamountofthefineforeachcompany,takinginto

consideration the seriousness of the facts and the gravity of the damage to the economy. In order to do so, the FCA generally takes into consideration a certain percentage (up to 30%incartelcases)oftheturnoverofthelastendedfinancialyearofparticipationinthe anti-competitive practice achieved by the company through the sale of the products or services in relation to the practice at issue (specific rules apply for bid-rigging,however). To date, the maximum rate applied in cartel cases has been 20%.47

Thisbasicamountisthenmodulatedtotakeintoconsiderationelementsthatarespecificto the behaviour and the individual situation of each company (reiteration is, however, considered as an autonomous criterion). Thus, if a company has had a leading role in the implementation of an anti-competitive practice, this will be considered by the FCA as an aggravating circumstance justifying increasing thefine. Belonging to a large


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groupcanalsoleadtoanincreaseinthefine.Bycontrast,ifacompany’srolehasbeenlimited,theamountofitsfinecanbedecreased.Moreover,theFCAcanreducethefinefor a single-product company.

• In case of reiteration, the amount can be increased up to 50%, the exact percentage depending on the time elapsed between the previous infringement and the beginning of thepracticeatissue,andonthenatureoftheinfringementsatissue.Whenthelatestinfringement dates back to more than 15 years, the FCA does not take reiteration into account.

• The result is compared to the legal maximum which is, for each company, 10% of thehighest tax-freeglobal turnoveroveroneof theendedfinancialyearsprecedingthefinancial year duringwhich the anti-competitive practice occurred. Finally, thecompanycanbenefit froma full immunityora reductionof thefine if the leniencyprogramme is applicable, and the amount may be adjusted according to the company’s ability to pay.

ItisworthmentioningthattheFCAcandepartfromthismethodinspecificcases,especiallyin the case of classic settlement.48 Under Article L 464-5-1 FCC, (introduced by Article 82 of the Law against organised crime,terrorismandaimingatreinforcingtheefficiencyoftheFrenchcriminalprocedureof3June2016),allthefinesallocatedbytheFCAcanpotentiallybeincreasedupto10%,to fund victims’ assistance. To date, however, this provision has never been applied.

Right of appeal against civil liability and penalties in a cartel infringement decision

Cartel infringement decisions of the FCA can be appealed before the Court of Appeal.The one cartel decision issued by the FCA in 2017 was not appealed.The Court of Appeal can always lower the amounts of sanctions imposed by the FCA. Accordingtotheprincipleofnon-aggravationofthefine,theCourtofAppealcannotraisetheamountofthefine,exceptiftheMinisterfortheEconomyappealsthedecisionandasks the Court to do so (which is extremely rare, only one case in 2017).The table below shows the number of appeals against cartel decisions of the FCA since 2011:

Year Cartel decisionsAppeals before the Court of Appeal Appeals

dismissedNumber %2011 549 3 60% 1

2012 350 2 66.7% 0

2013 351 2 66.7% 052

2014 353 3 100% 154

2015 4 3 75% 1

2016 9 4 44.4% 155

2017 1 0 - -


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The table below shows the percentage of success of appeals against cartel decisions of the FCA(intermsofaggregatedleveloffines)since2011:

Year

Aggregated level of fines ordered by the

FCA in decisions subject to appeal

Aggregated level of fines after appeal

% of aggregated fine reduction

2011 €387,105,690 €378,445,605 3%

2012 €246,392,590 €139,412,000 43%

2013 €84,576,493 €25,511,472 30%

2014 €961,711,840 €869,853,183 10%

2015 €881,338,000 €816,988,000 7%

2016 €12,130,000 €11,825,000 2%

2017 - - N/A

Criminal sanctions in respect of cartel infringements

Article L 420-6 FCC provides criminal sanctions (i.e. up to four years’ imprisonment and a€75,000fine)incaseswhereanaturalpersonfraudulentlytakesapersonalanddecisivepart in the “conception, organisation or implementation” of a cartel. The FCA has no power to enforce such criminal rules and only criminal courts can. However, there are only an extremely limited number of cases each year, mainly related to bid-rigging. In addition, the FCA has committed not to refer to criminal courts any case in which a company has applied for leniency, thus aiming at securing this proceeding by avoiding criminal sanctions against employees.

Cross-border issues

As long as a practice has generated anti-competitive effects on French territory, Article L 420-1 FCC applies, even if the practice has been implemented outside the jurisdiction of the FCA. The FCA considers that it also has jurisdiction over practices in connection with export activities, provided that they have been implemented on French territory and that the FCA’s grounds for proceedings are based on pieces of evidence collected in France.Pursuant to Article L 462-9 FCC, the FCA may refer information or documents to the European Commission or to national competition authorities of other states. Conversely, the FCA is allowed to use information or documents transmitted by the European Commission or by other national competition authorities.The FCA regularly cooperates with foreign courts or competition authorities, more particularly inside the European Competition Network. As an example of cooperation within the European Competition Network, the flour case56 of 2012shouldberecalled.TheFCAfinedaFrench-Germancartel,inparticularonthebasisof pieces of evidence seized by the German competition authority (the “Bundeskartellamt”) at the premises of German millers. The FCA and the Bundeskartellamt also published an inquiry on competition law and data.57 In 2015, in the Booking.com case(caseofabuseofdominantposition),forthefirsttime,three national competition authorities reached a decision regarding the hotel booking platform’s pricing clauses. Despite the deal’s subsequent breakdown in many EU countries, this cooperation has been considered by Isabelle De Silva as a “new way to interact”. In


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2017,theFCAhasconductedaninitialintermediaryassessmentofthefirstcommitments.58 In this context, the FCA has not ruled out the possibility of issuing an opinion ex officio if the change in the state of competition so requires. The FCA is actively contributing to all the actions taken at national and European levels to oversee more effectively digital platforms’ behaviour.

Developments in private enforcement of antitrust laws against cartels

Since the entry into force of the “Hamon” Law of 17 March 2014, consumers’ associations thatarecertifiedonanationallevelmaybringaclassactionagainstcompaniesthathaveinfringed competition law in order to indemnify affected consumers. The law provides for an opt-in mechanism. The action may be brought only after companies in breach of competition lawhavebeenconvicted,provided that thedecisionhasbecomefinal. Theactionmustbebroughtwithinfiveyearsfromtherenderingofthedecisionofconviction.To date, no such action has been brought before courts regarding cartels nor, more generally, competition-related cases.Directive 2014/104 of 26 November 2014 on rules governing actions for damages under national law for infringements of competition law has been transposed into French legislation onthegroundsofthe9December2016lawontransparency,fightagainstcorruptionandfor modernisation of economic life, so called “Sapin II” law and especially its Article 148, by virtue of which the French Government was entitled to transpose this Directive by means of order.Hence, Order 2017-303 and Decree 2017-305 of 9 March 2017 set out rules allowing any person who has suffered harm caused by an infringement of competition law to effectively exercise the right to claim full compensation for the prejudice. Pursuant to the new Article L481-2FCC,ananti-competitivepracticeestablishedbytheFCAinitsfinaldecisionsetsan irrebuttable presumption of civil fault. Pursuant to the new Article L 481-3 FCC, the harmsufferedincludesloss,lostprofit,lossofopportunityandnon-materialdamage.To date, no such action based on this provision has been brought before courts regarding cartels. It will probably take several years for a decision to be issued based on these provisions since the anti-competitive practices must have occurred after the coming into force of the order on 11 March 2017.

Reform proposals

As announced by the FCA, a document relating to the conditions for implementing the new classic settlement procedure will be published.59

* * *

Endnotes1. See, for example, Opinion 14-A-18 of 16 December 2014, requested by the Paris Court of

Appeal in relation to a dispute between Bottin Cartographes SAS and Google Inc./Google France. Paris, Court of Appeal, 25 November 2015, n°12/0931.

2. See, for example, Opinion 15-A-14 of 21 October 2015, television, requested by the CSA (French Broadcasting Regulator).

3. See, for example, Opinion 16-SOA-2 of 23 May 2016, online publicity.4. See the Opinion 17-SOA-01 of 20 November 2017, pharmaceutical sector.5. SeethedecisionoftheFrenchTribunaldesConflitsof16November2015,Ile-de-France

region.


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6. Decision 17-D-22 of 29 November 2017, museums and monuments, http://www.autoritedelaconcurrence.fr/user/avisdec.php?lang=fr&numero=17-D-22.

7. Decision of the Court of Appeal of 21 December 2017, school buses.8. Decision of the Conseil Constitutionnel of 8 July 2016, 2016-552 QPC.9. Press release of 2 February 2017, supply and distribution of consumer goods sector on

the Island of Réunion.10. Press release of 31 May 2017, processing of animal remains.11. Decision17-D-20of18October2017,floor-coveringsector.12. Decision 17-D-03 of 27 February 2017, car rental.13. Decision of the Court of Appeal of 6 July 2017, modelling sector.14. Decision 16-D-20 of 29 September 2016, modelling sector.15. Decision of Court of Appeal of 2 February 2017, commodity chemicals.16. Decision 13-D-12 of 28 May 2013, commodity chemicals.17. Decision of the Court of Appeal of 23 May 2017, fresh dairy products.18. Decision 15-D-03 of 12 March 2015, fresh dairy products.19. Decision of the Court of Appeal of 26 October 2017, property management sector.20. Decision 16-D-28 of 6 December 2016, property management sector.21. Court of the Court of Appeal of 21 December 2017, banking sector.22. DecisionoftheSupremeCourtof14April2015;DecisionoftheCourtofAppealof

23 February 2012.23. Decision 10-D-28 of 20 September 2010, banking sector.24. Decision of the Court of Appeal of 21 December 2017, school buses.25. Decision 16-D-02 of 27 January 2016, school buses.26. Decisionsof theSupremeCourtof11January2017,buprenorphine;28September

2017,electricworks;18October2017,MartiniqueIsland.27. DecisionoftheSupremeCourtof4October2017,flour.28. DecisionoftheCourtofAppealof24November2014,flour.29. Decision12-D-09of13March2012,flour.30. Decision of the Court of Appeal of 14 April 2016, wallpapers.31. Decision 14-D-20 of 22 December 2014, wallpapers.32. Decision of the Supreme Court of 8 November 2017, wallpapers.33. Decision of the Supreme Court of 8 December 2015, endives case.34. Decision of the CJEU of 14 November 2017, endives case, C-371/15.35. Opinion 16-SOA-02 of 23 May 2016, online publicity.36. Opinion 17-SOA-01 of 20 November 2017, pharmaceutical sector.37. Decision 15-D-20 of 17 December 2015, electronic communication sector.38. Decision 17-D-01 of 26 January 2017, tableware and kitchen sector.39. Decision 17-D-14 of 27 July 2017, consumer goods in Overseas Territory.40. Decision17-D-02of10February2017,petanqueballs;17-D-06of21March2017,

energy sector. 41. Decision17-D-20of18October2017,floor-coveringsector.42. Decision 17-D-06 of 21 March 2017, energy sector.43. Decision17-D-20of18October2017,floor-coveringsector.44. Notice of 19 October 2017 on the settlement and compliance programme.45. Decision 17-D-27 of 21 December 2017, chemical products sector.46. Decision17-D-20of18October2017,floorcoveringssector.47. Decision 11-D-17 of 8 December 2011, laundry detergent.48. Forexample,Decision17-D-20of18October2017,floor-coveringsector.


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49. Decision 11-D-13 of 5 October 2011, Midi-Pyrénées, Languedoc-Roussillon, Auvergne;decision11-D-07of24February2011,paintingwork;decision11-D-02of26January2011,historicsites;decision11-D-01of18January2011,cargohandling;decision 11-D-17 of 8 December 2011, laundry.

50. Decision12-D-09of13March2012,flour;decision12-D-27of20December2012,showtickets;decision12-D-08of6March2012,endives.

51. Decision13-D-12of28May2013,chemicalproducts;decision13-D-09of17April2013,publicworks;decision13-D-03of13February2013,pigs.

52. The case 13-D-12 is currently pending before the Supreme Court.53. Decision 14-D-19 of 18December 2014, hygiene and cleaning products; decision

14-D-16of18November2014,MartiniqueIsland;decision14-D-20of22December2014, wallpapers.

54. CourtofAppealof19May2016,MartiniqueIsland,confirmedbytheSupremeCourt(18 October 2017).

55. An appeal of Decision 16-D-26 is pending.56. Decision12-D-09of13March2012,flour.57. Joint paper from Bundeskartellamt and FCA, Competition Law and Data, 10 May

2016.58. Press release of 9 February 2017, Booking.com.59. Notice of 19 October 2017 on the settlement and compliance programme.


Racine40 rue de Courcelles, 75008 Paris, France

Tel: +33 1 44 82 43 00 / URL: www.racine.eu

Bastien ThomasTel: +33 1 44 82 44 40 / Email: [email protected] is a Partner in charge of the competition department, with over 10 years of experience in merger control and antitrust law. A graduate from Essec (2003) and University Paris Panthéon-Assas (LL.M., 2004), he practisedinaninternationallawfirmbeforejoiningRacineasaPartner.Hishighly specialised expertise in French and EU competition law has allowed him to be selected as counsel of several international companies on complex and challenging antitrust issues. Bastien regularly lectures on competition law, especially merger control, and is co-responsible for the column, “Review of the reviews”, in the quarterly review, Concurrences.

Cécile MennétrierTel: +33 1 44 82 43 00 / Email: [email protected]écile is an Associate in the competition department of Racine. She graduated from University Paris Panthéon-Assas (Master’s Degree in Law andEconomics)andfromUniversityofMontpellier(DJCEwithcertificationin Economic Law). Cécile specialises in French and European antitrust law. She assists clients before the French Competition Authority and the European Commission.

Racine France


GermanyProf. Dr. Ulrich Schnelle & Dr. Volker Soyez

Haver & Mailänder Rechtsanwälte Partnerschaft mbB


Germany has a long tradition of rigorously and effectively enforcing the prohibition of cartels. In2017, theGermanFederalCartelOffice (FCO)uncoveredand investigatedalarge number of different competition law infringements in many different industries. The totalfines imposed in2017havebeen relatively lowcompared topreviousyears. This,however, does by no means indicate that public enforcement is declining in Germany. Quite the contrary: the FCO repeatedly announced that cartel enforcement will continue to be a top priority on its enforcement agenda. The competition act in Germany is the Gesetz gegen Wettbewerbsbeschränkungen (Act against Restraints of Competition (ARC)), in its current version of 5 June 2017. The prohibition of cartels is contained in section 1 et seq. ARC, which prohibits all agreements, concerted practices or decisions by associations of undertakings which have as their object or effect a restriction of competition. Since 2005, section 1 et seq. ARC has been largely aligned with article 101 TFEU. Cartels are not criminalised under German law. Rather, cartels generally qualify as an administrative offence, with one important exception: bid rigging constitutes a criminal offence under section 298 of the German Criminal Code and canbesanctionedwithuptofiveyearsinprison.The FCO has published the following guidelines in respect of important aspects of public cartel enforcement, which are available on the FCO’s website (www.FCO.de) and are also available in the English language:• Leniency Programme (Bonusregelung) – Notice No. 9/2006 which entered into force

on 15 March 2006.• Fining guidelines (Bußgeldleitlinien) which entered into force on 25 June 2013.• De minimis guidelines (Bagatellbekanntmachung), Notice No. 18/2006 which

entered into force on 13 March 2007. It should be noted insofar that the FCO’s de minimisguidelinesdonotapplytohardcorerestrictions;however,otherthantheEUCommission the FCO has not (yet) amended its de minimis guidelines following the ECJ’s Expedia judgment of 13 December 2012 in order to explicitly clarify that “by object” restrictions are not caught by the FCO’s de minimis guidelines.

The prohibitions laid down in the ARC are mainly enforced by the FCO, an independent higher federal authority assigned to the Federal Ministry of Economics and Technology. The FCO is organised into 12 operative units, the so-called “decision divisions”. Nine of these decision divisions are responsible for the application of general antitrust rules and mergercontrolprovisionsinspecificindustriesandsectors.Threedecisiondivisionsdealexclusively with the cross-sector prosecution of cartels and hardcore restrictions. The


Haver & Mailänder Rechtsanwälte Partnerschaft mbB Germany

decision divisions are independent bodies that take their decisions without any instructions from above. The three cartel enforcement decision divisions are supported by a special unit for combatting cartels, the main purpose of which is to assist during the investigative phase, in particular in preparing and executing dawn raids. TheFCOmayimposemonetaryfinesonundertakingsorindividualsforwilfulornegligentinfringements of the prohibition to restrict competition, pursuant to section 1 ARC. Fines leviedonindividualsforwilfulparticipationinacartelmaynotexceed€1m.Incasesofnegligentinfringements,themaximumfineis€500,000.Notallindividualsmaybefined,onlydirectors,officersandcertainsenioremployees.However,iflower-rankingemployeeshave committed the cartel offence and cannot be held responsible, directors or officerscanbesanctionedwithafineforbreachingtheirdutytosupervise.TheFCOmayimposefinesonundertakingsofupto10%oftheworldwide(group)turnoverinthemostrecentfiscalyear. Thereareasyetnocriminalsanctionsagainst individuals,norarethereanydisqualificationsofdirectorsresultingfromsanctionsforparticipatingincartels.In2013,theFCOpublishednewfiningguidelines.Underthenewguidelines,thegroup-wide annual turnover of the company, as well as the turnover which it achieved in the cartelisedmarket during the infringement period, is taken into consideration in thefinecalculation. Hence, the size of the company and the affected “volume of commerce”, as well as the seriousness and duration of the infringement, will be crucial factors in setting the leveloffine.Itshouldbenotedinthisrespectthatthefiningguidelinesarenotbindingandthat judges of the German Federal Supreme Court have publicly questioned the adequacy andlegalityofthenewfiningguidelines,inthattheydonotsufficientlylinkthelevelofthefinetotheguiltoftheundertakingconcerned.Itisalsostillpossibletowaiveorreduceafineifacompanythatparticipatedintheinfringementsubmitsanapplicationforleniency.Areductionof10%ofthefinecanbegrantedforanagreementtohavetheproceedingsterminated by settlement. When setting the fine, the FCO also takes into account theundertaking’sfinancialcapacity.Providedthattheundertakingprovidessufficientevidencethatitisunabletopaythefineintheshortormediumterm,theFCOusuallyoffersthatthefinemaybepaidininstalments.Infringementsofsection1ARCbecometime-barredafterfiveyears.Theopeningofaninvestigation by the FCO, the EU Commission or a competition authority of another EU Member State, suspends this limitation period.On 9 March 2017, the German Parliament adopted the 9th amendment of ARC. It introduces a number of changes in different areas of competition law. The majority of new provisions implement Directive 2014/104/EU through certain rules concerning private enforcement of cartel damages claims under national law (for details see below). In addition, the 9th amendment to the ARC introduces new rules on corporate liability. First, the reform establishesliabilityforfinesforanycompanythathad“decisiveinfluence”overacompanyfound guilty of a cartel infringement. This is likely to capture parent companies in most cases. Second, the liability of successor companies has been extended. This means that the legal successorof an addresseeof afine can in all cases alsobeheld liable for theaddressee’s conduct. In addition, the economic successor of the infringing entity shall be liablefortheconduct.Theprovisiononeconomicsuccessorsspecificallyaimstoaddressrestructuring cases in which the infringing business is transferred by way of an asset deal and the acquirer continues the business following the transaction. Thus, a loophole that was commonly referred to as the “sausage gap” is now closed. This loophole became part of thepoliticalagendaafterasausageproducersuccessfullyescapedafineliabilitythroughan internal corporate restructuring.



Overview of investigative powers in Germany

In order to fully investigate a suspected infringement, the FCO may use all the evidence that is generally available in criminal proceedings. In particular, the FCO may take testimonies from witnesses and accused suspects, and it may address information requests to undertakings. However, witnesses can refuse to testify to the extent that they might incriminate themselves. Accused suspects generally have the right to remain silent on the allegations that form the subject matter of the investigation, and do not have to provide any assistance or information whatsoever to the FCO. In case they do agree to be heard, they are not obliged to make accurate or complete statements. Interrogated witnesses and accused suspects must generally be instructed about their rights to remain silent/not to incriminate themselves. TheFCOmayfurthermoredawnraidofficesandsearchprivatepremisesandobjects.Asageneral rule, any such searches have to be ordered by a judge. Only in exigent circumstances may the FCO conduct these searches without a judicial warrant. In addition, the FCO may seize objects which could be of importance as evidence in the investigation, and make copies of any relevant documents. Again, a seizure order by a court is required if the material is not handed over voluntarily, and only in cases of exigent circumstances may the FCO itself order the seizure of objects or documents. The investigative powers in respect of search and seizure also apply to material in electronic form. Computers and company serversmaybesearchedandrelevantfilesmaybecopied.Alsoprivatelocations,suchasresidences, automobiles, briefcases and persons can be searched. If necessary, the FCO may use the coercive force as laid down in the Code of Criminal Procedure in order to enforce its investigative powers. Accused undertakings and natural persons have a right to be heard, which comprises in particular the possibility to submit statements to the FCO. The right to be heard also encompasses a right of access to documents in the possession of the FCO. Such access to documents is, however, only granted to the lawyer of the accused suspect, not to the suspect itself. Access to the documents can be denied if the investigation has not been formally completed and if full access would endanger the objective of the investigation. Thepartieshavearighttolegalrepresentationthroughouttheentireproceedings.Whilstintheory, when conducting dawn raids, the investigators of the FCO do not have to await the arrival of the defence counsel, in practice they normally do consent to wait up to one hour.


On 27 June 2017, the FCO imposed fines totalling approximately 28million euros ontwo manufacturers of industrial batteries and their representatives for agreeing between them to levy the so-called “lead surcharge” as a key price component of lead batteries. The proceeding was initiated with a sector-wide dawn raid in April 2014 following an applicationforleniencybyathirdcompanyuponwhichnofinewasimposedinaccordancewith the FCO’s leniency programme. In the light of rising lead prices, representatives of the involved companies had agreed to generally re-apply the lead surcharge as introduced in the 1970s in the domestic sale of network power batteries, (e.g. used for emergency power supply). The level of the lead surcharge is linked to the lead prices quoted on the London Metal Exchange. Changes in the price of lead which is the commodity for electrodes can thus be passed on directly and consistently to customers. Until the FCO’s dawn raid, this agreement to pass on lead costs in the form of a lead surcharge had regularly been confirmedbythecompaniesinquestionatassociationmeetings.Noagreementsweremade



on how this was to be done (method of calculation) and the level of the lead surcharge. The companies also agreed to pass on to customers in Germany the increased costs for lead and in particular for lead alloys via the lead surcharge which had been applied for some years. The proceedings against three other manufacturers of industrial batteries participating in the agreements were terminated because of the considerably lower level of participation in the violation and lower market importance. The proceeding against the association was also not continued, in particular because the main share of the agreements were reached outside association meetings. On 13 July 2017, the FCOs imposed fines amounting to 9.6 million euros on threemanufacturersofheatshieldsandtheirrepresentatives.Nofinewasimposedonafourthcompany which also participated in the illegal agreements because by cooperating with the authority it had helped to uncover and provide evidence of the cartel. The companies areaccusedofconspiringtopassonincreasedmaterialcoststotheircustomerVW.Heatshields are aluminium plates which in a vehicle primarily shield radiated heat emitted from the engine room and exhaust tract from other areas (passenger compartment, fuel tank, etc.). Thealuminiumsheetsareboughtasasemi-finishedproductintheformofcoilsandthenrolledintotheshaperequired.Whencalculatingthefines,theFCOtookintoaccountasa mitigating factor the market power and the behaviour of the demand side. A settlement agreement was reached with all three companies.In addition to the continued investigation and sanctioning of horizontal restrictions of competition, the FCO has put a particular focus on the enforcement of the competition rules in cases of vertical restrictions. On 15 December 2016, the FCO concluded its last three pending proceedings concerning verticalpricefixing in the food retail sector. Theauthority imposedfines totalling18.3millioneuros.TheFCO’sfindingsshowedthatbetween2006and2009thetworegionalretailers were involved in price fixing agreements concerning the shop prices for beerproducts.Withtheselastfines,atotalofapproximately112millioneuroshasbeenimposedon11companiesonaccountofpricefixingagreementsregardingtheretailpricesforbeer.Theseriesofproceedingsonverticalpricefixinginthefoodretailsectorwasoneofthemost extensive in theFCO’s casepractice. In a vast numberoffineproceedings, foodmanufacturersandretailerswereinvestigatedforverticalpricefixing.Thenationwidedawnraids carried out in January 2010 focused on the product categories confectionery, coffee and pet food. The area of investigation was extended to beer, body care products, baby food and baby cosmetics, after information provided by companies willing to cooperate with the authorityandchancefindshadyieldedadditionalevidence.Allinall,38individualfineswereimposedon27companies.Thetotalamountofthefinesimposedwas260.5millioneuros.Mostofthefinesimposedintheproceedingsconcernedinfringementsrelatingtoconfectionery, coffee and beer. In these cases, the infringements were particularly anti-competitive and anti-consumer, because horizontal agreements between the manufacturers, whichwerealsosanctionedbytheFCO,wereaccompaniedbyverticalpricefixingmeasuresinwhichmajorretailersparticipated.Theindividualfinesdifferedconsiderablydependingon the gravity of the individual infringements and the involvement of the individual companies. The proceedings against some of the companies were terminated, partly for discretionary reasons, partly for lack of evidence.On 12 January 2017, the FCO concluded its investigation of resale price maintenance in the furniture industry. Fines totalling 4.43 million euros were imposed on the fivefurniture manufacturers. The proceedings were initiated through complaints by retailers.



In June 2014 and July 2015, the FCO had carried out dawn raids at the premises of the manufacturers. The manufacturers had applied inadmissible pressure on lower-price retailers in order to maintain/increase shop prices, in particular by threatening to refuse to supply to them and in some cases by carrying out those threats. To some degree, competing retailers had also helped to monitor compliance with the minimum sales prices set by reporting to the manufacturers those retailers that had deviated from the set price and asking the manufacturers to ensure that the price level was maintained. The FCO decided not to imposefinesontheseretailersfordiscretionaryreasons,butcouldhaveverywelldoneso.On14February2017,theFCOtookafinaldecisioninitsproceedingsonabusivepricingagainst a number of German district heating suppliers. In March 2013, the FCO had initiated proceedings against seven companies or company groups. Following the termination of the firsttwoproceedingsin2015,theremainingproceedingshavenowbeenconcludedafterthe suppliers under investigation offered commitments in response to the FCO’s concerns about excessive price increases between 2010 and 2012. As part of the commitments, the suppliers are obliged to reimburse customers a total of approximately 55 million euros by means of future discounts. On 25 July 2017, the FCO imposed fines totalling around 10.9 million euros on twocompanies in the clothing industry on account of resale price maintenance. The companies involvedaretheclothingmanufacturerWellensteynInternationalGmbH&Co.KGandtheretailerPeek&CloppenburgKG.Theproceedingswereinitiatedwithadawnraidon26March2013followingcomplaintstotheFCOaboutthecompanies’practices.Wellensteynset its retailers minimum sales prices and prohibited them from reducing prices and selling goods online. Any retailer found deviating from this strategy was threatened with a refusal tosupply,whichwasalsoimplementedinseveralcases.P&CacceptedtheseconditionsandevenaskedWellensteyntotakemeasuresagainstpriceundercuttingbyotherretailers.In addition to the prosecution of individual companies, in December 2016 the FCO has launched an inquiry into the household waste collection sector. The sector inquiry will focus on the competition conditions on the regional markets for the collection and transport of household waste. The initiative goes back to the FCO’s observation of an increased concentration on the waste disposal markets and a declining participation in tenders for waste collection and disposal contracts in many regions. Small and medium-sized enterprises in particular seem to be more and more reluctant to participate in such tenders. The sector inquiry will in particular investigate the competition conditions in tenders issued by compliance schemes and by municipalities.


There does not seem to exist any particular enforcement priorities for the FCO. Rather, the FCO’smostrecentactivitiesseemtoreflectanoverallbalancedapproachwhichequallytackles different types of infringements. The FCO has sanctioned various types of horizontal anti-competitive arrangements including pricefixingcartels,customer/marketallocationschemes,bidrigging,andtheexchangeofcommercially sensitive information. As regards the latter, somewhat disappointingly, the FCO seems to increasingly employ the concept of “exchange of commercially sensitive information” as a fall-back argument in case it cannot prove the existence of an agreement or concerted action. This is even more worrying, given that the FCO generally considers exchanges of commercial information to imply anti-competitive purposes, and thus shifts the burden of proof towards the undertakings involved in any such information exchange.



This seems problematic not just from an in dubio/fairtrialperspective;ithasalsoledtosignificantlegaluncertaintyforcompanies.


As in many other jurisdictions, the FCO does not operate with different bodies for the investigation and decision of its cases, respectively. Rather, the same decision body that investigates a potential competition law infringement is also competent to decide the case and–whereapplicable–toimposeadministrativefines.Hereliesasignificantstructuralshortcoming in the public enforcement proceedings, the downsides of which can be observed in many cases. Even though in theory the FCO is obliged to conduct its investigations in anunbiasedandobjectivemanner, inpractice theFCOofficialswhodecide toopenaninvestigationdoshowastrongcommitmenttocloseanysuchcasewithadecisionfindinga competition law infringement.The only type of “peer review” that exists is a review by the FCO’s litigation division. Such review, however, only focuses on whether or not the envisaged decision would stand in court. It does not, in turn, question the quality or completeness of the investigative process, or the evidence on which the decision is based. TheFCOdoesnothave to investigateordecidecases inaspecific timeframe. Rather,the length and depth of an investigation can be adapted to the individual circumstances of the case. In practice, this can lead to lengthy proceedings which can easily go on for several years. On average, investigations by the FCO take some 20 months between the firstinvestigativemeasureandthefinaldecision.German law protects correspondence with defence counsel from seizure and review by the FCO. However, the law only protects correspondence between an outside counsel and his client that directly relates to the investigation at hand and which was created after the opening of the proceeding. All correspondence dating from before the opening of the proceeding is not protected, and nor is internal correspondence by in-house counsel, regardless of when it was created. In order to obtain access to non-privileged documentary evidence,theFCOhasinthepastevendawn-raidedlawfirms.In general, any investigative measures undertaken by the FCO can be appealed by the companies concerned. The competent court for hearing any such appeals is the local court in Bonn, the seat of the FCO. In practice, however, appealing investigative measures undertaken by the FCO is normally in vain. The local court in Bonn has conceded to the FCO broad discretionary powers when it comes to determining whether and how to investigate a given case. As mentioned above, some investigative measures – such as dawn raids – require prior approval by the local court in Bonn, which is normally granted if the FCO can substantiate that the respective investigative measure might yield relevant evidence in relation to a suspected competition law infringement. The standards of substantiation that the FCO must meet in its application for the relevant court warrant are rather low.


The FCO operates a leniency programme broadly similar to the one used by the EU-Commission. The leniency notice is available also in English on the FCO’s webpage (www.bundeskartellamt.de). The notice sets out the conditions for immunity from, or reduction of, fines for leniency applicants in cartel procedures. The conditions for full immunity



differ depending on whether the FCO already has sufficient knowledge of a cartel. Aleniency applicant is guaranteed full immunity if it reports a cartel to the FCO of which the latterhadnopriorknowledge,providedthat theapplicantsubmitssufficientinformationand evidence that enables the FCO to obtain a search warrant. If the FCO already has sufficientevidenceatitsdisposaltoobtainasearchwarrant,itwillgrantimmunityfromafinetothefirstapplicant,unlesstheavailableevidencealreadyallowstheFCOtoproveitscase,andprovidedthatnoothercartelparticipanthasreceivedfullimmunityunderthefirstalternative. Full immunity is not available for undertakings that were the ringleaders of the cartel, or that have coerced others to participate in the cartel. Full immunity always requires that the applicant cooperates fully and on a continuous basis with the FCO.Cartel participantswho are not eligible for full immunitymay still obtain a significantreductionof thefinebyup to50%,provided that theyprovide theFCOwithverbal orwritteninformationand,whereavailable,evidencethatrepresentsasignificantcontributionto proving the offence, and provided that the applicant cooperates fully and on a continuous basis with the FCO. The amount of the reduction will be based on the value of the contributions to uncovering and proving the infringement and the sequence of the applications.A cartel participant can contact the head of the special unit for combatting cartels or the chairman of the competent decision division to declare his willingness to cooperate (marker). The marker can be placed verbally or in writing, in German or English. The timing of the placement of the marker determines the rank of the application. If the FCO accepts an application in English, the applicant is obliged to provide a written German translationwithout undue delay. A leniency applicationfiled by an undertaking is alsoconsidered by the FCO as one made on behalf of individuals participating in the cartel as current or former employees of the undertaking. Joint applications by cartel participants are inadmissible.The FCO asks for basic information on the cartel when the marker is placed, such as the type and duration of the infringement, the product and geographic markets affected, and the identityofthoseinvolved.TheFCOalsoasksforclarificationastowhetherand–whereapplicable – with which other competition authorities leniency applications have been, or areintendedtobefiled.Uponplacementofthemarker,theFCOgrantsatimeperiodofupto eight weeks within which a full leniency application has to be submitted.TheFCOconfirmsinwritingthatamarkerhasbeenplacedandthataleniencyapplicationhas been submitted, including date and time of receipt. In case of an application for full immunitywhere theFCOdoes not have sufficient evidence to obtain a searchwarrant,theFCOwillconfirmthat theapplicantwillbegrantedfull immunity,providedthat theapplicant continues to fully cooperate with the FCO. In all other cases, the FCO will inform the applicant of his provisional position in the ranking order and that he is in principle eligibleforimmunityorareduction.Afinaldecisionastowhetherapossiblereductioninthefinewillbegrantedand–whereapplicable–towhatextent,willonlybetakenbytheFCO at the very end of the investigative phase, i.e. once the FCO is in a position to evaluate the received input in view of the established infringement. TheFCOendeavours to assure theconfidentialityof theprocess andwill seek to avoidrevealing the identity of leniency applicants. However, once the FCO issues a statement of objections, the addressees of such statements of objections have the right to fully access thecasefile,includingallconfidentialinformation,andinparticularallandanyleniencyapplications. If the FCO has to rely on statements of a leniency applicant as evidence to prove its case, it also has to disclose the identity of the leniency applicant in its decision.



As mentioned before, leniency applicants must cooperate fully and continuously with the FCO. Unless requested otherwise by the FCO, they must end their involvement in the infringement immediately, and they must hand over to the FCO all information and evidence available to them. They must also name all the current and former employees involved in the cartel agreement, and take the necessary measures that all employees, from whom information and evidence can be requested, cooperate fully and on a continuous basis with the FCO during the proceedings. Leniency applicants are also required to keep their leniencyapplicationconfidential.


In recent years, an informal practice has evolved that provides a possibility for companies under investigation to enter into a settlement with the FCO. However, other than the EU Commission, the FCO has not published formal settlement guidelines. Even though there is no formal settlement procedure in place, there are a number of general principles that governthesettlementprocess.Asettlementrequiresinthefirstplaceaguiltypleaonthepart of the undertaking that wishes to settle the case. In return, the FCO grants a reduction ofapotentialfineofupto10%,inadditiontoanyreductionsgrantedundertheleniencynotice. The companies concerned usually also waive their rights for complete access to thefileandforacompletestatementofobjections.However,theFederalCourtofJusticehasheld thatawaiver toappeal thefinaldecisionbytheFCOmayneverbeapartofasettlementagreement.ThefinaldecisionoftheFCOinsettlementcaseswouldnormallyonlycontainashortsummaryoftherelevantfacts,whichmakesitmoredifficultforthirdparties to extract from the decision any information that may be relevant for the preparation of follow-on actions. Settlements are always individual in character. Nothing prevents the FCO from settling a case with one company but ending settlement discussions with another. The FCO is principally bound by the settlement, unless new facts arise ex post which would justify re-opening the case.


Complaints can be lodged by anyone in any form: orally; by fax; email; phone; or inwriting. There are no legal requirements for lodging a complaint, as it is only regarded as an incitement for the FCO to open a formal proceeding. Even anonymous complaints are acceptable. However, in practice, a complaint is unlikely to trigger an investigation if it lacks details and exact determinations regarding the alleged infringement. Thus a written complaint,withenclosedcopiesofalldocuments/fileswithpotentialrelevance,increasesthechancesofsuccesssignificantly.The FCO is not obliged to take action on each complaint that it receives. Rather, it has wide discretionary powers in this respect. It is only required to exercise the said power in an objective, thorough and dutiful manner.In June 2012, the FCO launched an online whistle-blower system which allowed it to receive anonymous tip-offs of cartel law infringements. The system guaranteed the anonymity of informers, while still allowing for continual reciprocal communication with FCO investigators via a secure electronic mailbox. The FCO’s new whistleblowing hotline has been criticised for lacking a sound legal basis, and for incentivising false accusations by competitors, customers or even frustrated employees.



Penalties and sanctions

Infringementsofcompetitionlawcanbesanctionedwithadministrativefinesofupto10%of the total group turnover. In contrast to European law, according to a February 2013 court order issued by the German Federal Court of Justice, this 10% limit is not a cap but, interpretingitinconformitywithGermanconstitutionallaw,theupperlimitofthefiningrange. As a reaction to this judgment by the German Federal Court, the FCO has issued the newfiningguidelinesofJune2013,whichhavebeendealtwithindetailabove.An issue which is, to a certain extent, still open at the moment is the issue of liability of parent companies to their subsidiaries’ infringement of cartel rules. Even though it seems to be generally accepted that a parent is liable for violations by a wholly owned subsidiary, the courts still have to deal with individual aspects, in particular with respect to 50:50 joint ventures, and on the precise reconciliation of the European notion of an “undertaking” which,inthisfield,isstillforeigntotheGermansubstantiveandproceduralrulestolaw.

Right of appeal against FCO decisions

Decisions of the FCO can be appealed before the Higher Regional Court in Düsseldorf, which isexclusivelycompetent. Anappealagainstadecision imposingafineproducessuspensory effects. During the appeal procedure, it is possible to introduce new facts and evidence. In general, the court is also open to the introduction of economic expert evidence, whilst in some cases the court has claimed sufficient knowledge to assess importanteconomic aspects of the case on its own. Given that the Higher Regional Court in Düsseldorf is exclusively competent for hearing appeals against decisions by the FCO, the court is highly specialised and its decisions reflectprofoundcompetitionlawknowledgeandexpertise.Whilsttheappealprocedureisgenerallyhighlyeffectiveandstraightforward,itcanalsoentailsignificanteffortsandcostsfor the parties involved. In a recent case (Flüssiggas, LPG), the oral hearing before the Higher Regional Court in Düsseldorf took almost three years, and more than 130 sessions. The Higher Regional Court in Düsseldorf is, in practice, not shy in overturning or rectifying FCO decisions. In a ruling of 26 June 2009 in relation to the cement cartel case, for instance, thecourtreducedtheFCO’soriginalfineof€660mto€328.5m.Ontheotherhand,thecourtisalsoentitledtoincreasethelevelofthefine,andhasnothesitatedtodoso.IntheLPG-casementionedabove,thecourtincreasedsomeofthefinesthatwereoriginallyimposedby the FCO by 80%. It should be noted, however, that the legality of such reformatio in peius is highly questionable. Under certain circumstances, the decisions of the Higher Regional Court in Düsseldorf can beappealed–confinedtopointsoflaw–beforetheGermanFederalCourtofJustice.Thelong duration of the appeal proceedings before the Higher Regional Court in Düsseldorf, andthe“openness”ofthedecisions,havelargelycontributedtothesignificantincreaseinsettlement proceedings before the FCO.

Criminal sanctions

Cartels are not criminalised under German law. Rather, cartels generally qualify as an administrative offence, with one important exception: bid rigging constitutes a criminal offence under section 298 of the German Criminal Code and can be sanctioned with up to fiveyearsinprison.



Cross-border issues

The FCO traditionally cooperates rather closely with US and ECN authorities. It is to a certain extent remarkable that this cooperation has not yet triggered major complaints by undertakings in cartel cases. On the other hand, there are no noteworthy examples of cartels of an international character sanctioned by the FCO.


In June 2017, the 9th amendment to the ARC entered into force and implemented the EU cartel damages Directive 2014/104/EU. The following changes are of particular relevance: firstly,itisnowpresumedthatacartelinfringementleadstodamages.However,thecarteldefendant has the right to rebut this presumption. Secondly, it is now expressly stipulated that the defendant (cartel member) may invoke the passing-on defence against (direct) customers.Forthebenefitofanyclaimantthatisanindirectpurchaser,thereisarebuttablepresumption that the damage was passed on. Thirdly, for (potential) claimants, as well as for defendants, the new law provides tools to require the other party to disclose some of its internal information or documents. Third parties can also be required to disclose certain evidence. The claim is, however, limited by the principle of proportionality. Also, leniency applications and settlement documents are not captured by the disclosure provisions. Fourthly,whereasleniencyapplicantsthusfaronlybenefitedinrelationtotheimpositionoffines,applicantswillnowalsobenefitfromrestrictedcivildamagesliability.Inthisregard,they only have to compensate for damages incurred by their direct or indirect purchasers. In relation to other damaged parties, leniency applicants are liable only if these parties cannot obtain full compensation from the other cartelist. Fifthly, the 9th amendment also intends to make settlements more attractive. The settlement of one cartel member with a damaged party will now prevent not only the damaged party from bringing further claims concerning the damage caused, but will also prevent the other cartel members from recourse in terms of their contribution claims regarding damages covered by the settlement. Consequently, the liability of the other cartel members is reduced by the damage caused by a settling cartel member. Sixthly, the regular limitation period for cartel damages claims is extended fromthreetofiveyearsaftertheendoftheyearinwhichtheclaimaroseandtheclaimantgained knowledge. Seventhly, in Germany, the losing party generally bears all court costs, including those incurred by the counterparty. This approach led in the past to a relatively highfinancialriskexposure,giventhefactthatoftenparticipatingcartelmembersjointhedefendant (third-party intervention). Thus, the imminent costs of bringing a claim are often unforeseeable for the claimant. To reduce this risk, the reform introduces a limitation: a claimant is now only liable for the cost of one additional intervening third party.On 12 July 2016, the German Federal Court of Justice delivered its judgment in the Lottoblock II case. With this judgment the court has further clarified the scope of thebinding effect of decisions by the competition authorities, as well as the requirements for subsequent follow-on actions. The underlying case concerned a follow-on action in a boycott/refusal to deal case. The defendants had on one single occasion taken the joint decision not to deal with the claimant in the future. This decision was later on found to be in violation of the applicable German and European competition rules. The claimant lodged an action for damages in respect of the lucrum cessans that it had allegedly suffered asaresultoftheboycott.Inthefirstplace,theGermanFederalCourtofJusticeheldthatthe binding effect of a competition authority’s decision is not confined to the operativeprovisionsofthedecisionbutratheralsocomprisesthefactualandlegalfindingscontained



in the body of thedecision.Thecourtthenclarifiedthatthemereexistenceofaprohibitiondecision does not as such in every single case imply that the infringement had actually been put in practice and executed for a certain time period. The court recalled in this respect that under the applicable laws, a prohibition decision could even be issued in order to prevent a future restriction of competition. However, the German Federal Court of Justice held that there exists a general legal presumption that anti-competitive agreements which are aimed at permanently restricting competition and are indeed executed by the cartelists for as long as the cartelists do not take action which clearly evidences that they stopped acting in line with the cartel arrangement. On this basis, the court rejected the defendants’ argument that the single agreement not to dealwiththeclaimanthadceasedatthelatestonthedaywhentheGermancartelofficeissued its prohibition decision. Rather, the court found that the mere issuance of the prohibitiondecisionwasnotsufficienttoassumethatthejointboycotthadindeedstopped.In order to rebut the legal presumption that the anti-competitive boycott was permanently executed, the defendants would rather have been required to explicitly and undoubtedly distance themselves from the cartel arrangement, which had not happened in the case at stake. The practical relevance and importance of this judgment cannot be overestimated. It basically opens the door widely for the recovery of so-called “post cartel” damages claims. Whereasuntiltodaythegeneralviewhadbeenthatcartelinfringementsandtheirrespectiveanti-competitive effects would normally cease on the day of the dawn raids and that cartel damages claims going beyond this point of time would be limited to a rather short “cartel shadow” period, this will no longer apply in the future. Rather, claimants will in the future regularly be able to recover damages also for longer time periods after the cartel activity has ceased.A common misunderstanding is that actions for declaratory judgments in the context of private competition litigation are not possible in Germany. In practice, this misunderstanding has led in many cases to actions being brought before the courts of other EU Member States (in particular, in The Netherlands) notwithstanding the fact that the case had its closest links to Germany, and even German substantive law was applicable. In its judgment of 9 November 2016, the higher regional court of Karlsruhe has – in line with a number of earlier judgments by other regional and higher regional courts – made clear that actions for declaratory judgments are very well admissible in private competition litigation – and not only in exceptional cases but rather as a general rule. The claimants in thiscasesoughtadeclaratoryjudgmentfromthecourtfindingthatthemembersofacartelin respect of ready-mix concrete were jointly and severally liable for compensating the claimant for all losses resulting from the cartel. The defendants argued that such action for a declaratory judgment was inadmissible in view of the German law principle that actions for declaratory judgments are only possible where the claimant is unable to bring an action for(specific)damages(principleofprimacyofdamagesactions).Thedefendantsallegedthat the claimant was very well in a position to calculate/estimate its losses so that it would be obliged to bring a proper damages action. The Karlsruhe court, however, rejected the defendants’argument.Itheldthattheclaimantdidnothavesufficientknowledgefromthepublicly available information which would allow it to determine the precise scope of its damage,nortoprovidethecourtwithsufficientinformationinordertoallowittoestimatethe damage according to section 287 German Code of Civil Procedure. In the court’s view, the claimant would have had to conduct extensive investigations, or to engage economic expertsinordertoobtainsufficientinformationforthedeterminationofitsdamages,andthat requiring claimants to do so would illegitimately undermine their protection under the civil law system.



In more general terms, the court then continued by saying that – irrespective of the individual circumstances of the case at stake – one must not apply too strict standards when assessing the admissibility of actions for declaratory judgments in private competition litigation. In line with the jurisprudence of the German Federal Court of Justice in unfair competition cases, claimants should be entitled to bring actions for declaratory judgments if they can substantiate that they have been affected by anti-competitive behaviour “with a certain likelihood”. Secondly, the court found that cartels presumably produce their anti-competitive effects duringaperiodofatleastoneyearaftertheinfringmentceased.Thisfindingisinlinewiththe Federal Supreme Court’s judgment of July 2016 in which the Federal Supreme Court found that there existed no presumption whatsoever that the opening of a cartel investigation or even a prohibition/fining decision would automatically eliminate all anti-competitiveeffects. Whereas the Supreme Court found, however, that the anti-competitive effectswould normally persist as long as the cartelists have not pro-actively returned to normal competition, the Higher Regional Court of Karlsruhe applied a more conservative approach in that it deems the “cartel shadow effect” to be generally limited to one to two years. Thirdly, according to the Higher Regional Court of Karlsruhe, a general presumption for umbrella effects exists. The court argued insofar that under normal competitive conditions, companies would always set their prices in relation to their competitors’ prices. Only under unusual circumstances – for which the defendants would bear the burden of proof – exceptions from this general rule are conceivable. Fourthly,inrespectofthepassing-ondefencethecourtconfirmedpriorjurisprudencebyother German courts according to which a defendant must meet very high standards if it wishes to raise a passing-on defence successfully. The court emphasised in this respect that the defendant has to substantiate and prove all relevant market parameters such as, in particular, demand elasticity, price developments, and product specifications in order toshow that the passing-on of the cartel overcharge is more than just a hypothetical theory but rather a likely scenario. But that’s not all: the defendants are also required to show that the passing-on of the cartel overcharge has not resulted in other types of damages for the direct purchasers, such as, for instance, volume effects. Fifthly, the court took the view (and insofar contradicted the Higher Regional Court of Düsseldorf)thatamerecompetitionauthority’spressreleasedoesnormallynotsufficeinordertoconvey“sufficientknowledge”sothatthesubjective,atthattimestillapplicable,three-year limitation period would start upon publication of such press release. Rather, sufficientknowledgegenerallyrequires,inthecourt’sview,accesstothefile.Hence,onlyiftheclaimanthasnottakentheappropriatemeasuresinordertobegrantedaccesstothefilewithinareasonabletimeframe,canitbedeemedto“oughttohave”sufficientknowledgewhich would trigger the start of the knowledge-based three-year limitation period.

Reform proposals

GiventhatthemostrecentreformoftheGWBbecameeffectiveonlyafewmonthsago,there are currently no reform proposals on the table which have any reasonable chance of being pursued in the imminent future. In this context, it is worth mentioning that the legislator did not follow certain proposals, in particular those which advocated the non-applicationofcompetitionlawtocertainfieldsofbusinesssuchaspublicbroadcast.


Haver&MailänderRechtsanwältePartnerschaftmbBLenzhalde 83-85, 70192 Stuttgart, Germany

Tel: +49 711 227 440 / Fax: +49 711 299 1935 / URL: www.haver-mailaender.de

Prof. Dr. Ulrich SchnelleTel: +49 711 227 4427 / Email: [email protected] is a partner in theStuttgartOffice ofHaver&Mailänderand head of the practice group for competition, public procurement and state aid law. He specialises in EU and German Competition Law and has extensive experience in defending companies in cartel investigations before theEUCommissionandtheGermanFederalCartelOffice.Anotherfocusof his work is the practice in cartel damages actions. He also advises clients on merger control issues and has particular expertise in cases of abuse of a dominant position. A furtherfield of activity is his advice to clientsseeking to cooperate with competitors or with suppliers and/or customers in horizontal or vertical contractual relationships. Ulrich Schnelle graduated from the University of Freiburg in 1992, obtained his doctoral degree there in 1992 and was admitted to the Bar in the same year. He is an alumnus of the University of Geneva, the University of Illinois (LL.M.) and the University of Passau as well as Freiburg.

Dr. Volker SoyezTel: +32 263 947 15 / Email: vs@haver-mailaender.deVolkerSoyezisapartnerintheBrusselsOfficeofHaver&Mailänder.Hespecialises in EU and German competition law and has extensive experience in defending companies in cartel investigations before the EU-Commission and the German Federal Cartel Office. A particular focus of Dr. Soyez’practice is cartel damages actions. He has represented claimants in various cases,e.g.“elevators”,“coffeeroasters”,and“firetrucks”.Dr.Soyezisthefounder and member of the Editorial Board of Global Competition Litigation Review. Another area of particular expertise of Dr. Soyez is competition law compliance. He heads the working group “antitrust compliance” in the German Compliance Association. Dr. Soyez graduated from Frankfurt University in 2000, obtained his Ph.D. in 2002, and was admitted to the Bar in 2002. He is an alumnus of Université de Fribourg and Universidad Complutense de Madrid.



IndiaNaval Satarawala Chopra, Manika Brar & Aman Singh Sethi

Shardul Amarchand Mangaldas & Co.


Competition law in India is governed by the Competition Act, 2002 (Competition Act) and the related rules and regulations. The Competition Act aims to prevent anti-competitive practices, promote and sustain competition, protect interests of the consumers and ensure freedom of trade in markets. The Competition Commission of India (CCI) is the statutory authority tasked with the enforcement of the Competition Act. The CCI adjudicates cases relating to anti-competitive agreements, abuse of a dominant position and also regulates combinations (merger control). Orders of the CCI can be appealed to the National Company Law Appellate Tribunal (NCLAT),1 with a further appeal to the Supreme Court of India (Supreme Court).

Law relating to cartels

Section 3 of the Competition Act prohibits anti-competitive agreements which cause or are likely to cause an appreciable adverse effect on competition (AAEC) in India, and treats these as void. Such agreements include cartels, which are presumed under the Competition Act to have an AAEC. The term “agreement” has been very broadly defined under the CompetitionAct, andincludes any arrangement, understanding or action in concert, irrespective of whether it is formal, written or intended to be enforceable by legal proceedings. Even a nod or a wink is enough to show the existence of an agreement. Section 3(3) of the Competition Act provides that certain categories of agreements between enterprises or persons engaged in identical or similar trade of goods or provision of services, i.e., at the same level of the production chain (horizontal agreements) are presumed to have an AAEC. The presumption of an AAEC is a rebuttable presumption and the parties to the agreement have the opportunity to prove that their agreement does not, or is not likely to cause, an AAEC. This shifting of the burden of proof on to the defendants is an important weapon in the CCI’s anti-cartel armoury.There are four categories of horizontal agreements that are covered by the presumption of an AAEC. These are agreements which: (a) directlyorindirectlydeterminepurchaseorsaleprices;(b) limit or control production, supply, markets, technical development, investment or the

provisionofservices;(c) share the market or source of production or provision of services by way of allocation of

the geographical area of the market, type of goods or services, or number of customers inthemarketorinanyothersimilarway;or


Shardul Amarchand Mangaldas & Co. India

(d) directly or indirectly result in bid rigging or collusive bidding.In determining whether an agreement causes an AAEC in India, the CCI is required to consider a number of “negative” and “positive” factors listed under Section 19(3) of the CompetitionAct.The“negative”factorsare:(i)thecreationofbarrierstoentry;(ii)drivingexisting competitors out of the market; and (iii) foreclosing competition by hinderingentry into the market. The “positive”factorsare:(i)accrualofbenefitstocustomers;(ii)improvementinproductionordistribution;and(iii)promotionoftechnical,scientificandeconomic development.

Treatment of efficiency-enhancing joint ventures

The presumption of an AAEC for horizontal agreements does not apply to “any agreement entered into by way of joint ventures if such agreement increases efficiency in production, supply, distribution, storage, acquisition or control of goods or provision of services”. The onustoprovethatthejointventureagreementisefficiency-enhancingliesonthepartiestosuch agreement.

Brief summary of the process before the CCI

An investigation into alleged anti-competitive conduct can be initiated by the CCI either: (i) on its own motion (suo moto);(ii)onthebasisofacomplaint(inIndiancompetitionlawparlance,knownasan“Information”)filedbyanyparty;or(iii)followingareferencefromthe government, or a statutory authority. Cartel investigations can also be initiated pursuant to a leniency application where the CCI would typically treat the case as a suo moto case (the leniency regime in India is discussed separately below). If, on the basis of the evidence available before it, the CCI forms a prima facie view that a contravention of the Competition Act has taken place, it will order a detailed investigation intothematterthroughitsindependentinvestigativewing,theofficeoftheDirectorGeneral(DG). In the absence of a prima facie case being made out, the CCI will close the case at this threshold stage itself. When the DG receives a direction to investigate from the CCI, it must conduct theinvestigation in a timely manner and submit a report containing its findings on theallegations to the CCI (DG’s Report). The DG typically conducts an in-depth and invasive investigation and will not shy away from asking for detailed and historic information, including voluminous documents and records (including emails and telephone records) from the concerned parties. The DG will also issue summons for individuals for recording their statement on oath and can conduct cross-examinations. The Competition Act imposes a penalty for failure to comply with the directions of the DG and non-furnishing of information (discussed separately).Upon receipt and review of the DG’s Report, the CCI will forward the DG’s Report to the parties concerned, and, if there is a reference by a statutory authority, to that authority, giving them an opportunity to respond to the DG’s Report. Upon receiving a response from the parties/statutory authority, the CCI conducts oral hearings. Note, if the CCI is notsatisfiedwiththeDG’sReport,itmayrequiretheDGtoconductfurtherinvestigationbeforeforwardingthefinalreporttotheparties.Once oral hearings in the matter are concluded, the CCI must, as far as practicable, pass its decisiononthematterwithin21daysofthedateoffinalarguments.However,thisisrarelyadheredtoinpractice,andtheCCIoftentakesmuchlongerinissuingitsfinalorders.



Sanctions imposed by the CCI

There are no criminal sanctions for a cartel violation under the Competition Act. However, the CCI is empowered to impose monetary penalties. If the CCI concludes that an agreement is in breach of Section 3 of the Competition Act, it can pass any or all of the following orders:(a) direct the parties involved to discontinue and not re-enter into an anti-competitive

agreement–a“ceaseanddesist”direction;(b) impose a penalty of up to 10% of the average turnover of the contravening enterprise

forthethreeprecedingfinancialyears.SpecificallywheretheCCIfindsacartel,ithasthe option to impose a penalty amounting to up to three times the cartel participant’s profits,or10%of its turnover, foreachyearof thecontinuanceof suchagreement,whicheverishigher;2

(c) directthemodificationoftheterms/clausesofananti-competitiveagreement;and/or(d) pass any other order, including directing the payment of costs.ContraventionoftheordersoftheCCIcanleadtofurtherpenaltiesandtheCCIcanfileacriminal complaint in case of such contravention, which could result in imprisonment for up to three years.

Personal liability for contraventions done by a company

For violations of the Competition Act by a company, every person who, at the time the contravention was committed, was in charge of, and was responsible of the company for the conduct of its business, is deemed to be guilty of the contravention and can be punished. However, that person will not be liable if the person is able to prove that the contravention was committed without the person’s knowledge or that the person exercised all due diligence to prevent the commission of the contravention.Further, if it is proved that a contravention of the Competition Act has taken place with the assistance or consent of, or is attributable to any neglect on the part of any director, manager,secretaryorotherofficerofthecompany,thatpersonisalsoliableforthebreachand can be punished by the CCI.

Overview of investigative powers in India

The DG and the CCI have been vested with wide powers which include powers of a civil court relating to summoning and enforcing the attendance of any person and examining them on oath, requiring the discovery and production of documents, receiving evidence by wayofanaffidavit,issuingcommissionsfortheexaminationofwitnessesordocuments,and requisitioning any public record or document, or copy of a public record or document fromanyoffice.In addition to the informant/complainant and the enterprise(s) accused of contravening the Competition Act, the DG typically sends information requests to competitors, suppliers, and customers for the purposes of its investigation.

Summons and depositions of individuals

Both the DG and the CCI have the power to obtain statements from individuals on oath. Thedepositionsare,however,typicallyconductedbytheDGforthekeyofficialsofthecartel participants and third parties. Failure to appear for these depositions or to provide information requested may result in the CCI initiating separate penalty proceedings for non-cooperation. The CCI has the power to



imposemonetarypenaltiesofuptoINR100,000(approximatelyUS$1,600)3 for each day offailuretocomplysubjecttoacapofINR10million(approximatelyUS$160,000).TheCCI has recently become quite strict against individuals who failed to appear for deposition at the stipulated date and time, without prior intimation to the DG, or those who have failed to provide the requisite information sought during the deposition and has penalised them for this failure.

Dawn raids

The DG has the power to carry out unannounced search and seizure inspections of an enterprise, popularly referred to as a “dawn raid”. The DG’s powers of search and seizure are quite extensive and parties being “raided” have an obligation to cooperate with the DG’s officialsduringthesearch.However, the DG may invoke these powers only with the approval of the Chief Metropolitan Magistrate, New Delhi, and in cases where the DG has reasonable grounds to believe that documents which are useful for evidentiary purposes may be destroyed, mutilated, falsified or secreted. The requirement to obtain awarrant from theChiefMetropolitanMagistrate, New Delhi, is a means to ensure that the dawn raids are conducted in exceptional circumstances and the powers are not misused by the DG. On the basis of publicly available information to date, only two dawn raids have been conducted.ThefirstwasagainstJ.C.Bamford(JCB) in an abuse of dominance case. JCB had challenged the DG’s raid in the Delhi High Court as the warrant did not permit the DG to seize the documents of JCB and only permitted a search. Further, the dawn raid was conducted despite JCB cooperating with the investigation and therefore was not warranted. The Delhi High Court did not permit the DG to rely on the information gathered during this raid on the ground that by seizing documents relying on a warrant that only allowed the DG to search the premises, the DG had misused its dawn raid powers and went beyond the directions stipulated in the warrant. The matter is now pending before the Supreme Court. The second dawn raid was conducted against several battery manufacturers who were alleged to be members of a cartel.


Since the provisions of the Competition Act governing anti-competitive agreements came into force on 20 May 2009, the CCI has been extremely active in the investigation and prosecution of cartels. As of December 2017, there have been a total of sixty (60) orders (nine of which are in 2017) passed under Section 27 of the Competition Act, where infringements were found after a detailed investigation, usually resulting in financialpenalties and/or behavioural remedies. WhiletheCCIinitiatedseveralcartelinvestigationswhenSection3wasenforced,almostnoneoftheseweredisposedofinthefirsttwoyears.Mostoftheseinvestigationsreachedfruition only in 2011, with twenty-seven (27) orders containing substantial discussions on cartelisation. Since then, the CCI has maintained a consistent pace in disposing of cases relating to cartelisation, albeit with a brief dip in 2016, where an unusually low number of orders (2) were passed. As mentioned above, in the year 2017, the CCI has passed nine orders. It cannot, however, be assessed as to how many cartel investigations are ongoing as the prima facie orders in cartel cases are typically not published on the CCI website.On penalties, the CCI has been adopting a more cautious approach, as previously many orders were remanded back to the CCI by the erstwhile COMPAT, on the grounds that



the penalty imposed was not supported by reasons and mitigating factors argued by the parties were not taken into consideration. In the orders passed in the year 2017, the CCI has been providing more detailed reasons for imposing penalties, and has also carefully considered the mitigating factors. The total penalty imposed by the CCI in all cartel matters in theyear2017wasINR226crores(approximatelyUS$35.5million),asagainst INR147crores(approximatelyUS$23million)intheyear2016,whichwasinrespectofonlytwo infringements demonstrating that CCI has become more conservative while levying penalties. Theyear2017hasalsobeeninterestingastheCCIpasseditsfirstleniencydecision,4 and has come down hard on enterprises that were held to be colluding in the supply of public procurement contracts,5 though it was argued that some of these enterprises belong to the same parent.6WhiletheCCI’strystwithtradeassociationsinthepharmaceuticalsector7 andthefilmindustrycontinued,8 the scrutiny also expanded to container trailer associations.9


Issues in enforcement policyWhilethereareseveralissueswiththeCCI’senforcementpolicy,someofthesignificantones are set out below:(a) Absence of a case prioritisation policyUnder the present structure of the Competition Act, the CCI has a legal duty to consider and issue orders in relation to all information and references received by it. CCI does not have the power to prioritise cases like the Competition Markets Authority (CMA) in the UK, where the “Prioritisation Principles for the CMA” prescribe a range of factors that the CMA is required to consider before commencing an investigation. These include: (i) impact on consumers;(ii)strategicsignificance;(iii)risks;and(iv)resources.UndertheCompetitionAct, where the CCI determines that a prima facie case of contravention is made out, the CCI must issue an order to the DG to investigate the matter irrespective of the DG’s existing case load, importance or de minimis nature of the issues in question, etc. This creates a situation where the DG has to simultaneously investigate a plethora of existing cases. Due to the scarcity of investigative resources and short timelines given to the DG by the CCI for conducting the investigation, the DG often fails to apply itself completely to any case and is forced to send out extremely broad information requests which can be challenged as a fishing and roving exercise inHighCourts. Further, heavy caseloads also lead toinconsistenciesininvestigationswhicharelaterchallenged,leadingtoCCIfindingsbeingoverturned. This results in unnecessary litigation leading to wastage of time and resources. This also adversely affects the productivity of business which has been recognised by the Hon’ble Delhi High Court in a decision.10 (b) Lack of penalty guidelinesWhiletheSupremeCourtintheExcel Crop Care case settled a pressing issue in relation to the turnover to be considered while calculating the quantum of penalty (it has to be “relevant turnover” and not “total turnover”), there are still no guidelines issued by the CCI on the factors to be taken into account when calculating the penalty. (c) Over-reliance on circumstantial evidenceIn a cartel, there are only two clear ways of obtaining direct evidence of an agreement, i.e. dawn raids and through information provided by a leniency applicant, both of which are yet to have a resounding success in India. Due to the challenges in obtaining any



“smoking gun” evidence, the CCI is admittedly constrained to rely heavily on circumstantial evidence, assumptions, and conjecture. This reliance on circumstantial evidence is regularly challenged in appeal and CCI orders have been set aside for the lack of clear evidence.(d) Hearing timelinesTheCCItypicallygivesverylimitedtimetothepartiestofilesubmissionsaswellasmakeoral arguments. This is a serious natural justice violation and several cases of the CCI have been overturned on account of these procedural concerns. If the CCI undertakes better case management and provides a reasonable amount of time to the parties to make submissions/argue their case, it would result in better decisions, addressing the various arguments raised by appellants, and save a lot of time and costs in the long run, as decisions will not be remanded back for a fresh consideration and only substantive legal issues would be addressed in appeal. Sectors under the focus of investigationSince the provisions of the Competition Act governing anti-competitive agreements came into force on 20 May 2009, the highest number of infringement decisions (16) were in the entertainment sector, which is not usually regarded as being prone to cartelisation. Public procurement throughonline tenderingsawfifteen(15)caseswitheight (8) infringementfindings, and transport (excluding railways) saw fourteen (14) cases with seven (7)infringementfindings. Anothersector ispharmaceuticalsdistribution,with thirteen(13)cases and eleven (11) infringements.In2017,theentertainmentsectorsawoneofthefirstsubstantivedecisionsonthemeritsbythe Supreme Court in Competition Commission of India v. Coordination Committee of Artists and Technicians of West Bengal Film and Television & Ors.11 The Supreme Court held that threatstoboycottissuedbytradeassociations,intheeventtheirdemandswerenotfulfilled,amounted to a violation of Section 3 of the Competition Act. The Supreme Court noted that where trade unions espoused the economic interests of their members, who in this case were engagedintheproduction,distributionandexhibitionoffilmsandTVserials,theycouldnotuse the guise of ‘collective bargaining’ or ‘industrial action’ to justify their conduct. Inthesamecase,theSupremeCourtalsonotedthatineverycartelcasethefirststepshouldbe todefinearelevantmarket. Thiswill increase theburdenontheDGandCCIwhiledealing with cartel cases where, so far, the CCI has not conducted any assessment of the relevant market (on account of the presumption of anti-competitive effects in horizontal agreements).The CCI has taken a keen interest in regulating the pharmaceutical sector and is investigating various practices including excessive pricing, anti-competitive conduct of chemist and druggist associations and cartels between pharmaceutical companies. The CCI is currently also in the process of engaging a third party for conducting a study on the pharmaceutical and healthcare sector in India to understand the nature and magnitude of anti-competitive practices in the sector.12 This is a result of the continued trend of repeated violations on part of the Chemists and Druggists Associations. Recently, the CCI, in a case penalising thedruggistassociationanditsofficebearers,encouragedthepharmaceuticalcompaniesto complain against the continuing anti-competitive practices of these associations.13 Separately, it is believed that a similar study is being considered for airline ticket pricing.The CCI’s cartel investigations have also been focused on bid rigging in public procurement cases, as public procurement accounts for 30% of Indian Gross Domestic Product, owing to continued government involvement in sectors like railways, healthcare



and telecommunications, which in many developed economies are dominated by private players.14 Out of the nine (9) cartel cases decided in the last year, four (4) of them were related to bid rigging in public procurement.15


WhilsttheCCIhasthepowertoregulateitsownprocedure,itistobeguidedbytheprinciplesof natural justice. Unlike more mature jurisdictions, there is no equivalent of a “hearing officer”,wheregrievancesofproceduralirregularitiescanberaised.Inexceptionalcases,the courts may interfere in ongoing investigations using their extraordinary writ jurisdiction to stay investigations. However, this is not exercised on a regular basis. Unfortunately, often defendants in an investigation are rendered without any recourse other than to engage with the DG on a without prejudice basis, so as to avoid the separate penalty proceedings for non-cooperation.

Issues with investigation procedure(a) Expansive powers of the DGThe Competition Act and the regulations thereunder do not lay down clear guidelines on the scope of the DG’s powers and the procedure for investigation. The Supreme Court in the Excel Crop CarecasehasclarifiedthattheDGhasthepowertoexpandthescopeof the investigation beyond the allegations mentioned in the prima facie order, provided that the prima facie order is worded broadly enough. As a result, the CCI’s prima facie orders are now worded not only to allow the DG to investigate into the role of individuals beforearrivingatafindingofcontraventiononpartofthecompany,butalsoallowstheDG to extend the investigation to parties not even mentioned in the order. This excessive delegation of power by the CCI to the DG is arguably contrary to the intent of the legislature asthepowertodecidethescopeoftheinvestigationhadbeenspecificallytakenawayfromthe DG by the legislature when the Competition Act was enacted. (b) Inexperienced investigating officersThe staff at the DG’s Office is largely made up of officers on deputation from othergovernment departments who join for a short duration of time. This leads to a situation wherethereisnofixedbaseofofficerswhohavetrainingonprocedures,issuesofnaturaljustice and the law itself. Further, despite having an internal manual for conducting the investigations, there is evident inconsistencyintheconductofdifferentinvestigationofficers.RefusaloftheDGtosupplya copy of the CCI’s prima facieorder to thedefendant,conductingafishingandrovingexerciseandissuingnoticestoindividualsbeforecomingtoafindingofviolationbytheenterprises are some of the common issues faced by the party being investigated. (c) Unrealistic timelines to respond to noticesIthasbecomeapracticeof theDGOffice todemandvoluminous information from theparties often unrelated to the stated scope of the investigation, which raises jurisdictional concerns. The DG unilaterally sets deadlines for providing voluminous and historical informationwhich are usually difficult to complywith. These unrealistic timelines areaccompanied with threats of initiation of proceedings for non-compliance for failing to provide the information in time.


The CCI has the power to impose a “lesser penalty” on a member of an alleged cartel if



such member has made a “full, true and vital disclosure” in respect of alleged violations of the Competition Act. The grant of leniency is governed by the Competition Commission of India (Lesser Penalty) Regulations 2009 (Lesser Penalty Regulations). Under the Lesser PenaltyRegulations,uptoa100%reductioninadministrativefinesmaybegrantedsubjectto certain conditions. Thefirstapplicantforleniencymaybegranteduptoa100%reductioninadministrativefinesifitsatisfiesthefollowingconditions:(a) the applicant makes a vital disclosure by submitting evidence of a cartel enabling

the CCI to form a prima facie opinion regarding the existence of a cartel, where the CCI did not have the evidence to form such an opinion, or establish a violation of the CompetitionActbyprovidingevidencethattheDGdidnothave;

(b) theapplicantcooperateswiththeDGthroughouttheinvestigation;(c) the applicant ceases participation in the cartel from the time of the disclosure unless

directedotherwise;and(d) the applicant does not destroy, conceal, manipulate or remove any relevant documents.If, according to the CCI, the leniency applicant fails to comply with any of these conditions, they may not secure any leniency. There is a sliding scale of leniency under the Lesser Penalty Regulations. Subsequent applicantsmayhavetheirfinesreducedonsubmittingevidencewhichmay,intheopinionof the CCI, provide “significant added value” to the evidence already in the CCI/DG’s possession. Applicants must also continuously cooperate throughout the investigation. Thesecondandthird/subsequentapplicant’sfinescanbereducedbyupto50%and30%,respectively. ThebiggestchallengewhiledecidingwhethertofileforleniencyinIndiaisthefactthatleniency is not guaranteed and is subject to the discretion of CCI. Further, the requirement of complete cooperation with the CCI is very onerous.

Amendments to the leniency regime

The Lesser Penalty Regulations were amended on 24 August 2017 and the following changes have been made:(a) individualscanalsofileforleniency.However,itisunclearwhetheranapplicantwhich

is a company will be permitted to add names to the list of individuals provided in the original leniency application to cover those individuals whose involvement in a cartel isdiscoveredbytheapplicantsubsequenttofilingsuchapplication;

(b) whilst the amendment has left unchanged the CCI’s discretion to reduce penalties for thefirst,secondandthirdapplicants,theamendmentshaveclarifiedthatanysubsequent(i.e. after the third) leniency applicant will also be eligible for a reduction in penalty of up to 30%. Of course, in order to avail of leniency, such subsequent applicant will have to satisfy the requirement of having provided “significant added value” to the evidence alreadyinpossessionoftheCCIortheDG(i.e.beyondwhatthefirst,secondandthirdapplicantshavealreadyprovided)toestablishtheexistenceofacartel;

(c) the amendment has explicitly provided that defendants will be permitted access to the non-confidentialversionoftheinformation,documentsandevidencefurnishedaspartof the leniency application. However, this will be allowed only after the investigation is complete and the CCI has provided a copy of the DG’s report to the defendants. Despite therecognitionoftherighttoaccessthecasefile,giventhebelatedstageatwhichsuchaccessispermitted,itcouldraisenaturaljusticeconcernsforthedefendants;and



(d) theearlierleniencyprogrammeprovidedthattheCCIwouldtreatasconfidential the identity of the leniency applicant or “the information obtained from it” (not necessarily as a part of the leniency application), unless the disclosure was required by law, or the applicant had agreed to the disclosure, or there had been public disclosure by the applicant. Under the revised leniency programme: i. first,itappears(whetherintentionalornot)thatconfidentialityasprovidedabove

would only extend to information contained in the leniency application. It may be the CCI’s position that any other information would be subject to the ordinary principles of confidentiality where the requirement of confidentiality must beasserted according to the Competition Commission of India (General Regulations), 2009andgrantofconfidentialityisatthediscretionoftheCCI;and

ii. second, despite the leniency applicant not agreeing to the disclosure of any information, documents and evidence contained in its application, the DG has been granted the power to disclose it to parties to the proceedings provided he deems it necessary for purposes of the investigation after obtaining the prior approval of the CCI.

Decisional practice

The Brushless DC FanscaseistheCCI’sfirstorderinaleniencymatter. Thecasewasinitiated based on information received from the Central Bureau of Investigation, alleging cartelisationamongthreefirms:PyramidElectronics(Pyramid) and two others. Based on this, the CCI passed a prima facie order directing the DG to investigate. Following the receiptofanoticefromtheDG,Pyramidfiledaleniencyapplication.Whileholdingthecompaniesliableforbeingpartofacartel,theCCIdeterminedapenaltyof INR 62,36,634 (approximately US$ 98,000), being 100% of the net profit for FY2012–13 for Pyramid. However, the CCI granted a 75% reduction in penalty, and imposed a penalty of INR15,59,159 (approximatelyUS$ 25,000) on the leniency applicant. Ingranting leniency to Pyramid, the CCI considered the following factors: (a) Pyramidwasthefirstandtheonlypartytoaccepttheexistenceofthecartel;(b) theevidencesubmittedbyPyramidplayeda significant role in revealing themodus

operandi ofthecartelwhichsubstantiatedtheevidenceinpossessionoftheCCI;(c) thecooperationextendedbyPyramidduringtheinvestigation;and(d) the stage at which Pyramid had approached the CCI (i.e., after the commencement of

the DG investigation) and the evidence already in the CCI’s possession at the time of the leniency application.

The CCI also imposed penalties on the individuals in charge of the contravening parties, at the rateof10%of their average income for the threeprecedingfinancialyears. Theemployee of Pyramid was granted a 75% reduction in the penalty.


The Indian competition regime does not provide for settlement of cases. Proceedings before the CCI are proceedings in rem. Therefore, even if the parties settle their grievances and the informantseekswithdrawaloftheinformationfiledbeforetheCCI,theCCIisempoweredto continue to proceed with the case.


The Competition Act grants liberty to any person (whether directly aggrieved or not) to fileinformation before the CCI, alleging infringement of the Competition Act. In addition,



the CCI has recently launched a module on its website where anonymous complaints can be uploaded. Challenges on issues relating to natural justice, admissibility of untested and unchallenged evidence being relied upon to launch an invasive inquiry can be expected.As discussed above, India does not have a case prioritisation policy. Therefore, CCI has to undertake a prima facieassessmentoftheallegationsandpassordersineverycasefiledbefore it.


In 2017, a highly contested issue pertaining to the penalties being imposed in the case of multi-productfirmswassettledbytheSupremeCourt. TheSupremeCourtaffirmedtheCOMPAT’s holding that under Section 27 of the Competition Act, the word turnover would refertothe“relevant”turnoverandnotthe“total”turnoveroftheenterprise.Whilerelyingon the principle of proportionality and purposive interpretation of the provisions of the Competition Act, the Supreme Court observed that when the violations arise from particular productsorcircumstances,imposingfinesonproductsandcircumstancesunrelatedtotheviolation would lead to unequitable and punitive outcomes.The decisional practice of the CCI in the last 12 months shows that it is being more conservative in levying penalties. CCI has gone through a phase where its orders were being challenged on the grounds that no reasoning has been provided for the quantum of penalty imposed by it and many such orders were remanded back to the CCI. Perhaps learning from its mistakes, the CCI seems to be following a more cautious approach by passing more reasoned order on penalties and taking due note of the mitigating factors. In the Cochin Port Trust case,16theCCIfoundfivecontainertrailerassociationsandtheirofficebearersguiltyofpricefixationbywayofanimpositionofa“turnsystem”.Theturnsystem created a single window for allocating work to the container trailer transporters, and implemented a uniform rate system for the work that was taken up by them. The CCI did not impose any monetary penalty, taking into account the following mitigating factors: (i) theturnsystemwasinoperationforalimitedperiod;and(ii)theanti-competitiveconductwas discontinued even before the investigation was ordered in the case. Also, in another case in the entertainment sector,17 the CCI, while holding the agreements and practices ofassociationsofcraftsmeninthefilmindustryasanti-competitive,didnot imposeanymonetary penalty on the association taking into account the following mitigating factors: (i) the practice adopted in the agreements existed since 1966; (ii) the objective of theagreementswasnot anti-competitive; (iii) only twoclausesof the agreementwereanti-competitive;and(iv)theassociationsweredailywageearnersassociationssotheCCIdidnot want to impose an unnecessary burden on them.Wearealsoseeinganincreasingtrendofpenalisingindividualsforparticipatinginacartel.Inmostofthecartelcasesin2017,fineshavebeenimposedonindividualsinvolvedinthedecision-making process of the company, based on the average income for the last three years for such individuals.


NotalldecisionsoftheCCIareappealable.TheCompetitionActspecifiestheordersoftheCCI which are appealable. These include:(a) orders where CCI closes a case at the prima faciestage;(b) orderswhereCCI finds the parties guilty of contravention of the provisions of the

CompetitionAct;(c) interim ordersoftheCCI;



(d) rectificationorders;and(e) penalty orders.The appeals before the erstwhile COMPAT have been majorly successful. An appeal under the Competition Act is a full merits appeal. After examining the facts and evidence, the NCLAT can either dismiss the appeal or set aside the order in whole or in part, substitute the CCI’sfindingswithitsown,orremandthecasebacktotheCCI.COMPAThasremandedmany penalty cases such as the Cement Cartel case and Coal India case back to the CCI for fresh hearings.WhilstappealsoftheordersoftheCCImentionedabovemaybefiledasastatutoryright,ordersnotspecifiedasappealableundertheCompetitionActsuchasanorderoftheCCIfindingaprima faciecaseorordersrelatedtoconfidentialitycanonlybechallengedinawrit before the constitutional courts.Further appeals may be made before the Supreme Court.

Criminal sanctions

As indicated above, the CCI has no jurisdiction to impose criminal sanctions on the entities for cartel infringements.The only situation where the Competition Act allows for criminal sanctions is on the non-paymentoffines imposed. Suchnon-payment ispunishableby imprisonment foramaximumtermofthreeyearsoramaximumfineofINR250million(approximatelyUS$4 million), or both. But this does not make the Competition Act a criminal statute as the power to imprison defaulters is only with the Chief Metropolitan Magistrate, New Delhi and the CCI can only act as a litigant in such a case.

Cross-border issues

The CCI has extraterritorial powers under Section 32 of the Competition Act. Notwithstanding whether an agreement referred to in Section 3 of the Competition Act has been entered into outside India or the party(s) to the agreement are outside India, the CCI can inquire into such agreements if they cause or are likely to cause any AAEC in India. The CCI has issued prima facie orders against Japanese spare auto-parts companies where, in some instances, although the alleged anti-competitive conduct was committed in Japan, there may have been AAEC in India. The process followed by the CCI and the DG during the course of the investigation is presently under challenge before the Delhi High Court.


The Competition Act does not provide for private standalone enforcement actions to be pursued before the courts. Parties are free to bring cases before the CCI and, where a prima facie case of contravention is made out, the private party may participate in the DG’s investigation. Thereafter, once the investigation report has been circulated by the CCI for seeking responses, the private party may participate in the proceedings and hearings before the CCI.Separately, the appellate tribunal has the power to adjudicate on a claim for compensation that may arise from the orders of the CCI or the orders of the appellate tribunal in an appeal against the CCI’s orders. The government, or local authority, or any enterprise or any person, may make an application to the appellate authority to adjudicate upon a claim of compensation. However, such a person or enterprise or government authority should be able to demonstrate the loss or damage which has been suffered on account of a contravention of the provisions of the Competition Act. Further, class action suits are also permissible.



It is important to note that the Competition Act makes explicit that an application for compensation must be made only after either the CCI or the NCLAT, on appeal, has determined that a violation of the Competition Act has taken place. Since the enforcement of the Competition Act, there have been no reported compensation claims following cartel decisions. Presently, two compensation applications are pending before NCLAT in abuse of dominance cases. However, given that the defendants in these cases have preferred appeals before theSupremeCourts impugningthefindings thatresult infollow-onactionsfordamagesin compensation proceedings, the Supreme Court is presently considering whether these proceedings should be allowed to continue pending the appeal before it.

Reform proposals

Although there are no specific amendments that are expected in the near future, aspractitioners we believe that the following reforms should be undertaken. Adoption of prioritisation principlesTheCCIshouldbegiventhepowertoprioritisecasessoas toensurethemostefficientallocation of investigative resources. Penalty guidelinesFollowing more mature jurisdictions such as the UK and the EU, the CCI should frame guidelines on the imposition of penalties. These guidelines will provide helpful guidance to enterprises when they are determining their exposure to liability and will also reduce theappealsthatarebeingfiledpurelyonthequestionofreasonablenessofthequantumofpenalty being imposed and the treatment of aggravating and mitigating factors.Guaranteed leniencyWhile the amendment of the Lesser Penalty Regulations has bought about some long-awaited changes to the leniency regime, the regulations still don’t provide for guaranteed leniency, which leaves a lot of discretion with the CCI and uncertainty for applicants. This reform is necessary to make the leniency regime more effective in attracting cartel participants to become leniency applicants. Absence of guaranteed leniency results in a high level of uncertainty for cartel participants when considering leniency. The leniency regime needs to be effective so that cartels can be caught based on direct evidence rather than circumstantial evidence, which often makes the CCI’s decisions vulnerable to appeal.

Procedural guidelines for the CCI and the DG

Detailed procedural guidance should be provided for carrying out enquiries and proceedings bytheCCI,whichshouldbeinlinewiththeprinciplesofnaturaljustice.WhilsttheDGhasanInvestigationManual,thesameisnotavailableinthepublicdomain;therefore,itisnotpossibleforpartiestopointoutspecificirregularitieswiththeinvestigationprocess.Theprocedure for investigations conducted by the DG should be outlined and available to the advocates/parties. These guidelines should cover issues including the nature and period of information that can be sought by the DG with reasons therefor, the manner of collecting and submitting information, the procedure for dawn raids, the manner of taking depositions and conducting cross-examination, etc. Additionally, the DG should have staff that are properly trained in conducting investigations.

* * *


Endnotes1. The Competition Appellate Tribunal (COMPAT) was constituted under Section 53A

oftheCompetitionActasanappellatetribunaltohearappealsagainstspecificorderspassed by the CCI. However, the Finance Act, 2017 vested all functions and powers of the erstwhile COMPAT with the NCLAT.

2. In Excel Crop Care v. Competition Commission of India, [(2017) 8 SCC 47] (Excel Crop Care case), the Supreme Court held that while levying a penalty involving multi-productfirms,the“relevant” turnover relating to the products or services covered by the infringement must be considered, rather than the “total” turnover.

3. Exchange rate used USD 1 = INR 63.72.4. Re: Cartelization in respect of tenders floated by Indian Railways for supply of Brushless

DC Fans and other electrical items (Brushless DC Fans case), Suo Moto Case No. 03 of 2014, CCI.

5. Western Coalfields v. SVS Enterprises, Case No. 34 of 2015, CCI.6. Delhi Jal Board v. Aditya Birla Chemicals Limited & Ors.,ReferenceCaseNo.03&

04 of 2013, CCI.7. The Belgaum District Chemists and Druggists Association v. Abbott India Ltd. & Others,

CaseNo.C-175/09/DGIR/27/28-MRTP,CCI;Sudeep P.M. v. All Kerala Chemist and Druggist Association, Case No. 54 of 2015, CCI.

8. In re: Shri Vipul A. Shah v. All India Film Employee Confederation Others, Case No. 19of2014,CCI;In re: T. G. Vinayakumar (also known as Vinayan) v. Association of Malayalam Movie Artists and Others, Case No. 98 of 2014, CCI.

9. Cochin Port Trust v Container Trailer Owners Coordination Committee and Others, Reference Case No. 06 of 2014, CCI.

10. Google Inc. v. Competition Commission of India, LPA No.733/2014, decided on 27th April 2015.

11. Competition Commission of India v. Coordination Committee of Artists and Technicians of West Bengal Film and Television & Ors. ((2017) 5 SCC 17), Order dated 7th March 2017.

12. Request for Proposal for the engagement of an Agency for conducting a Study on the Pharmaceutical and Health Care Sector, September 6th, 2017, No. 7 (213)/AW/PHARMA/2017-CCI.

13. Sudeep P.M. v. All Kerala Chemist and Druggist Association, Case No. 54 of 2015, CCI.

14. http://www.cci.gov.in/sites/default/files/presentation_document/p4.pdf?download=1.15. Delhi Jal Board v. Aditya Birla Chemicals Limited & Ors.,ReferenceCaseNo.03&

04of2013;CCI Western Coalfields v. SVS Enterprises,CaseNo.34of2015,CCI;Director, Supplies & Disposals Haryana v. Shree Cements, Reference Case No. 05 of 2013,CCI;BrushlessDCFanscase.

16. Cochin Port Trust v Container Trailer Owners Coordination Committee and Others, Reference Case No. 06 of 2014, CCI.

17. Shri Vipul A. Shah v. All India Film Employee Confederation and Others, Case No. 19 of 2014, CCI.



ShardulAmarchandMangaldas&Co.Amarchand Towers, 216, Okhla Industrial Estate, New Delhi – 110 020, India

Tel: +91 11 4159 0700 / +91 11 4060 6060 / URL: www.amsshardul.com

Naval Satarawala ChopraTel: +91 98100 11191 / Email: [email protected] Partner, Competition LawNaval is the first and only Indian lawyer in GCR’s top “40 under 40”competitionlawyersintheworld;andhasbeenlistedasaglobal“ThoughtLeader” (Who’s Who Legal, 2017). Naval has successfully defended various companies against price fixingallegations. He is presently advising auto components manufacturers in ongoing cartel investigations He is also championing due process and natural justice issues against the CCI before the Delhi High Court.Naval has advised clients in prominent abuse of dominance cases on predatory and excessive pricing, unfair terms and conditions and leveraging. He is currentlyadvisingMonsantoCompanyincasesfiledbyIndianseedcompaniesas well as the National Stock Exchange in appeal before the Supreme Court.Naval is particularly skilled in advising on antitrust aspects of technology-related matters and has successfully defended companies such as Uber, WhatsAppandMicrosoft.

Manika BrarTel: +91 98100 98321 / Email: [email protected], Competition LawManika has been an integral member of the practice since the enforcement of thecompetitionlawinIndiain2009,andhasmanyfirststohercredit.Shehas considerable expertise in advising on cartel investigations, dominance cases and other competition issues. Manika has also worked extensively on the merger control side with several notable successes, making her an all-rounder when it comes to competition law.Shewas involved in the first case in India on predatory pricing, the firstfollow-oncompensationclaim,andthefirstcasewherea“dawnraid”wassuccessfully conducted. She regularly conducts competition law compliance training for several Indian and multinational clients.Manika has been listed as a foremost practitioner under 45 in “Who’s Who Legal: Competition – Future Leaders”.


Aman Singh SethiTel: +91 85276 96027 / Email: [email protected] Associate, Competition LawAman has diverse work experience – he has been closely involved in matters pertaining to anti-competitive agreements and abuse of dominance before the Competition Commission of India, the National Company Law Appellate Tribunal as well as the Supreme Court. He has also been involved in several bigticketmergersnotifiedtotheCCI.Amanhasworkedforclientsinthehigh-tech/disruptive industry, agrochemicals and agricultural traits, cement, petrochemicals, and telecommunication sectors in contentious cases. He also advises clients on issues related to the interplay of competition law and intellectual property.


IndonesiaBenedicta Frizka, Jonathan Tjenggoro & Lia Alizia

Makarim & Taira S.


Under Republic of Indonesia Law Number 5 of 1999 regarding Monopolistic Practices and Unfair Business Competition (the Indonesian Competition Law or “ICL”), cartels are regulated as follows. LawNo. 5 defines an “agreement” as “an action by one ormore entrepreneurs to bindthemselves to one or more other entrepreneurs under any name, whether entered into in writing or not”.Under the ICL, cartel behaviour falls under several articles, as follows:(a) Article 5, which prohibits price-fixingagreements between competing business actors,

and states that: “Business actors are prohibited from entering into any agreement with competitors in

order to fix prices for certain goods and/or services to be borne by the consumers or clients in the same relevant market.”

Article 5 of the Anti-Monopoly Law, however, provides two exemptions to this rule: (a) thatbusinesscompetitorsmayagreeonapricewithintheframeworkofajointventure;or (b) if mandated by law.

Given its wording, Article 5 follows the so-called per se illegal doctrine, i.e. investigators from the Business Competition Supervisory Commission (“KPPU”) will require no further investigation into the practice’s actual effect on the market or the intentions of individuals who are engaged in the practice in order to assess a violation.

Under KPPU Regulation Number 4 of 2011 regarding Guideline to Article 5, price-fixingisaviolationoftheICLbecauseiteliminatescompetitionwithinthemarket.Ina competitive market, the sales price of goods and services moves toward the marginal cost of production and the production amount of the goods and services will increase accordingly.Acompetitivemarketwillbeefficientandbenefitconsumers.Further,theeffectofprice-fixingisbasicallythesameasinamonopoly.Supplierscontrollingmonopoliesobtainmonopolisticprofits.Pricecompetitioniseliminatedthroughprice-fixing.

Underaprice-fixingarrangement,however,agroupofsuppliersorsuppliersandbuyerstogether agree to maximise the selling price (to maximise income), to temporarily lower the prices (as a barrier to a new entrant) or to stabilise prices (to avoid price wars). In doingso,finalconsumersdonotbenefitfromproductivitygains,economiesofscale,or competitive price movements.

Inlinewiththisdescription,price-fixingmustberegardedasaformofcollusion.Thus,price-fixingwhichisprohibitedinaccordancewithArticle5isprice-fixingwhicharisesfrom an agreement between two ormore parties. Without such an agreement, any


Makarim & Taira S. Indonesia

similarities in prices set between business actors in the same market cannot be regarded as a violation of Article 5.

Competitively speaking, collusion is any agreement to restrict competition between business actors which would otherwise be competitors, to exert a common effect upon a relevant market.

Under ICLArticle 5, price-fixing covers not only fixing of the final price, but alsocovers agreements on price structures or pricing schemes. Therefore, prohibited price-fixingdoesnotalwaysmeantheimpositionofthesamefinalpricetoconsumers,butmaytaketheformofanagreementonprofitmargins(thedifferencebetweenthesellingprice and production cost).

Ingeneral,formsofprice-fixingcoveredunderArticle5are,amongothers:• agreementstoincreaseordecreaseprices;• agreementsonusingacertainstandardformulaasabasisforcalculatingprices;• agreementsonkeepingafixedcomparisonbetweenthecompetingpricesofcertain

products;• agreementsoneliminatingdiscountsorstipulatingdiscountuniformity;• agreementsontherequirementsfortheprovisionofcredittotheconsumers;• agreements on eliminating products offered with a low price in the market

(inexpensivesubstitutes),soastolimitsupplyandmaintainhighprices;• agreementoncompliancewithannouncedprices;• agreementtonotsellproductsiftheagreedpriceisnotachieved;and• agreement to use uniform prices as a preliminary step in negotiations.

In their preliminary investigation into an alleged cartel, the KPPU investigator tries to identifyprice-fixingbasedonpreliminaryevidencederivedfromreportsortheKPPUtakes the initiative to obtain evidence of the alleged violation of Article 5 of Law No. 5 of1999.Theevidencerequiredisofmutuallyagreedprice-fixingandofthebusinessactors’ compliance with the agreement. This evidence may be direct evidence (hard evidence) or indirect evidence which indicates the relationship between and conformity of the evidence (circumstantial evidence).

To uphold circumstantial evidence, the investigator requires additional factors (‘plus factor’) to differentiate parallel business conduct from illegal agreements. In other words, theKPPUcannotmake afindingof violationon the basis of circumstantialevidence alone.

Fromtheinvestigator’sperspective,thebestverificationmethodistousebothdirectandindirect evidence. The best use of indirect evidence is by combining communication evidence and economic evidence.

Analysis of the market structure is conducted by the investigator to determine whether the relevant market would be supportive of collusive behavior. If so, indirect evidence may be used as an initial indication of the existence of coordination in the relevant market which can be used as an indication of violation of Article 5 of Law No. 5 of 1999.

Given theabove, after theKPPU investigator attempts toobtain sufficient evidence(at least two elements of proof) based on the facts found during the investigation, the question will be whether there is evidence of an agreement, either direct or indirect. If the evidence obtained by the investigator is direct evidence, the KPPU investigator will have a good chance of convincing theCommission Panel that the price-fixinghas occurred. On the other hand, if the evidence obtained by the KPPU investigator



is indirect, it is then necessary to analyse communications and economic evidence. Analysis of communication evidence indirectly indicates the agreement. The use of economic analysis evidence becomes of key importance in indirect evidence, i.e. to prove the existence of an agreement. Economic analysis plays its role to deduce coordination or agreement among the business actors in the relevant market.

(b) Article 9, which prohibits business actors from dividing marketing territory (market allocation) of goods and services, states:

“Business actors are prohibited from entering into an agreement with business competitors with the intention to divide the marketing areas or market allocation of the goods and/or services that may cause monopolistic practices and/or unfair business competition”.

Article 9 assumes the existence of an agreement between business actors. The application of Article 9 depends on 3 (three) criteria: the parties are business actors, compete with each other and enter into a relevant arrangement. In the distribution area of the market, the business competitors allocate market share to each buyer according to local criteria, thereby limiting competition between them. Therefore, it will be easier forbusinessactorstoincreasepricesorreduceproductiontoincreaseprofits.

A market allocation agreement is made when business actors enter into a mutual agreement that ends up limiting the distribution of the same/similar/complementary goods and services in a particular area. The forms that this type of agreement can take are, among other things, an obligation to supply certain goods and services and not others, to supply in certain areas and not in others, not doing advertising campaigns, refraining from aggressive trading practices, maintaining certain sales distribution channels and maintaining particular traders in certain areas.

A market allocation agreement will only be effective if the consumers have no ability tomovefromoneareatoanotherareaorfindasubstituteofthegoodsand/orservices.

Basically, market allocations between business actors will not only impose economic lossesontheconsumerbutalsoonefficientbusinessactors.Thebusinessactorswillbe restricted to expand their businesses and markets and will lose their opportunity to increase market share.

Article 9 subscribes to the so-called rule of reason doctrine, i.e. to prove a violation, the KPPU investigator must examine the underlying reasons for the arrangement as well as the existence of monopolistic practices or unfair business competition caused by the arrangement, or whether the business actors have an acceptable reason which increases consumerbenefit,suchasthecertaintyoftheexistenceofsupplyatcompetitiveprices.

An example of a market allocation agreement handled by the KPPU in 2008 was for the market allocation for the person in charge of technical matters for the electrical installation construction business in South Sulawesi. According to the KPPU, the existence of the market allocation was proven by the agreement between Board of Management of electricity and mechanical associations in Indonesia, particularly, between associations in South Sulawesi.

As a result of the market allocation agreement, installation companies were not able to use another person, other than the one allocated to its area. According to the business actors, the market allocation agreement was entered into primarily to increase the safety and security of electrical installations and improve resources.

However, in its decision, KPPU struck down the market allocation agreement and prohibited the business actors from entering into another market allocation agreement.

(c) Article 11, which prohibits business actors from establishing a cartel to control the production and/or marketing of products, states:



“Business actors are prohibited from entering into any agreement with a competitor with the intention of influencing the price by determining the production and/or marketing of goods and/or services, which may cause monopolistic practices and/or unfair business competition”.

For an agreement to violate Article 11, the agreement must be among competitors. Therefore, an Article 11 violation depends on three criteria: the parties must be business actors;theymustbecompetitors;andtheymusthaveconcludedarelevantagreement.

Given its wording, Article 11 subscribes to the so-called rule of reason doctrine, i.e. to prove the violation, the KPPU investigator must examine the underlying reasons for the arrangement as well as the existence of monopolistic practices or unfair business competition caused by the arrangement.

Under Article 1 (2), the term ‘monopolistic practices’ means the centralisation of economic power by one or more entrepreneurs creating control over the production and/or marketing of certain goods and/or services, resulting in unfair business competition and which can injure the public interest. Under Article 1 (6), unfair business competition means competition among entrepreneurs in their production activities and/or in marketing goods and/or services, conducted in a manner which is unfair or contradictory to the law or which hampers business competition.

Forming a cartel is a strategy where business actors will enter into a horizontal agreement to regulateproductionandmarketing to influence thepriceofproduct. Cartelswillbe created more easily if the participants are companies of comparable size. Only then, production quota arrangements or price stipulations may be achieved because the production capacities and costs among the companies are similar.

Homogenous goods or services may not support diverse consumer preferences and therefore, pricing competition will be the primary effective competitive variable. Accordingly, the business actors in the relevant market will be more likely to be tempted toengageincartelstoavoidpricewarswhichmayjeopardisetheirprofits.Tofindoutthe level of a customers’ preference and determine the degree of product homogeneity in a market, KPPU investigators will conduct surveys.

A relatively high entry barrier for newcomers will strengthen a cartel. There are few opportunities for a newcomer tofill gaps in strongly cartelisedmarkets. Cartels inindustries with high entry barriers will therefore generally survive competition from newcomers.

In the investigation of a cartel’s production and marketing, the KPPU has in case law recognised the concept of concerted action, which is an action in which all the cartel participants, without necessarily entering into an explicit agreement between them, perform some action which implements a mutual policy on the production and marketing of their products. This concept was used by the KPPU in respect of the recent cattle importing cartel.

Under Article 30, the KPPU is responsible for the supervision of the application of the ICL, including its enforcement. Its duties include:• reviewing agreements, business practices and mergers that may lead to unfair

competition;• takingaction,withintheauthoritygivenitbytheICL;• givingadvicetothegovernmentonpolicythathasanimpactoncompetition;• issuingguidelinesorpublicationsrelatedtotheICL;and• providing the President and House of Representatives regular reports on the results

of the KPPU’s work and activities.



IftheKPPUidentifiesapotential violation, the KPPU will establish an investigative team to conduct in-depth searches for evidence, the underlying reasons for the arrangement, and the existence of monopolistic practices or unfair business competition caused by the arrangement (i.e. an effects test). To obtain evidence, the KPPU investigator will, among other things, request documents (hard copy or soft copy) from the relevant parties, summonswitnesses and carry out in-fieldinvestigations (if necessary).

However, in its investigations, since the KPPU has no authority to take any action, suchassummonswitnesses,orconductsearchestofindevidenceofanagreement,orwiretap the management of a company, the KPPU investigators often face obstacles. Under Article 36 (G) of the ICL, the KPPU needs to cooperate with other authorities (e.g. the Police Force) if they need assistance because, for example, a witness is not cooperative.

Upon receipt of sufficient evidence, the KPPU investigator will examine whethersanctionable cartel behavior has taken place. If so, the KPPU may impose a sanction according to its authority under the ICL. These include administrative, principal and additional criminal sanctions (see below for the administrative and criminal sanctions).

Up until now, the cases and recommendations the KPPU has handled have been triggered by reports or undertaken at the initiative of the KPPU, based on research and studies of strategic sectors of industry, concentration and whether there is an economic aspect. The KPPU has examined, for example, an ocean freight cargo rates cartel, a cooking oil cartel, a cement cartel, a fuel surcharge cartel, a pharmaceutical drug cartel, a tire cartel, an imported cattle cartel, and a scooter cartel.

Overview of investigative powers in Indonesia

Under the ICL, in the investigation of a potential violation, the KPPU will act as follows (“Case Handling”):• carryoutaninternalstudyofthefindings;• carryoutresearch;• monitorthebusinessactors;• carryoutapreliminaryinvestigation;• filethecasedossier;• holdKPPUhearings;and• issue a decision.During the Case Handling, the KPPU investigator may conduct a preliminary investigation to obtain more evidence. The KPPU investigator will, among other things, request documents (hard copy or soft copy) from the relevant parties, summons witnesses, the reported party, experts and other related parties as well as conduct an on-site inspection (if necessary). The KPPU will also hold hearings and summons the relevant parties to provide the required documents and information. These hearings are part of the case handling.The KPPU investigator will also cooperate with other authorities (e.g. the police force) if they need further assistance if, for example, a witness who has been summoned is not cooperative. Under the ICL, if a party who has been summonsed is uncooperative, for example, he/she refuses to provide the requested documents or information and/or explanation,underArticle48(3),theKPPUmayimposeafineoffromIDR1,000,000,000(onebillionRupiah,approximatelyequivalenttoUS$70,000)toIDR5,000,000,000(fivebillion Rupiah) or a prison sentence of up to 3 (three) months. It is worth noting that the finesinthedraftnewlawaregenerallymuchhigherthaninthecurrentlaw.



Followingthepreliminaryinvestigation, theKPPUinvestigatorwillfile thecasedossierand decide whether the case should go to hearings. Based on the evidence provided in the hearings, the KPPU will decide whether the allegation has been proven and whether a sanction should be imposed.Since the ICL does not yet acknowledge the concept of leniency, in its investigation of acartel,fewcartelistsadmittotheiractivitiesandsotheKPPUmustfindevidenceofacartel in the documents which are provided to them. In addition, KPPU investigators must use circumstantial evidence, such as economic evidence, including the profit, turnover,productioncapacityandotherdatainfinancialstatements.Inaddition to theeconomicevidence in thefinancial statements, theKPPU investigatoralso uses statistical tests to prove a correlation between the cartel agreement and changes in turnover and production during a certain period related to the cartel agreement, as well aswhethertherehasbeenanyincreaseinprofitsincethecartelagreementcameintoeffect,derived from changes in price, production, or marketing.


In2017,automatictransmissionscooterproducers,Honda(AHM)andYamaha(YIMM)were found guilty by the Business Competition Supervisory Commission (KPPU) for formingacartelbyfixingthepricesfor100–125ccscooters.Theallegationwasinitiallymade due to a meeting between the president directors of both brands on a golf course, which meeting resulted in a price equalisation order at a certain level. The KPPU used email correspondence as evidence to support its allegations.TheKPPUallegedthattheprofitsofthesetwobrandsweretoohighandcausedmillionsof consumers in Indonesia to suffer losses since they sold them for more than twice the productioncost.Attheendofitsruling,theKPPUorderedYamahatopayanRp25billion(approximately EUR 1.6 million) fine and Honda an IDR 22.5 billion (approximatelyEUR1.4million)fine.TheKPPUaddedanextra50%toYamaha’sfinebecauseYamahadeliberately and systematically tried to submit false data and facts to create a certain perception favouringYamaha. Meanwhile, Honda’s finewas reduced by 10% becauseHonda was cooperative throughout the proceedings.The KPPU applied the per se illegalprincipletotheYamahaandHonda(price)cartelcaseunder KPPU Regulation Number 4 of 2011, because according to their email correspondence, YamahaandHondaagreedtoraise theirpricesbymaintainingafixedratiobetweentheprices.HondaplayedtheroleofthepricesetterwhileYamahawasthefollower.AlthoughtheKPPUallegedthattheprofitsofthesetwobrandswastoohighandcausedmillionsofconsumers in Indonesia to suffer a loss, following the per se illegal principle, the KPPU did not prove the losses suffered. In addition to the scooter cartel case, some noteworthy cartel investigations have been conducted by the KPPU within the last 12 months, including among others, into an alleged garlic cartel and an alleged chili cartel in several areas in Indonesia.


Since its establishment on 7 June 2000, the KPPU has already had 3 (three) management teams,eachwithatenureof5(five)years. EventhoughtheKPPUhastheauthoritytohandle legal enforcement broadly in anti-monopoly issues, in the third management period, the KPPU has focused its enforcement primarily on certain strategic sectors, i.e. food,



health, energy, infrastructure, including logistics, and banking in 7 (seven) provinces with a highnumberoftransactions,i.e.Jakarta,WestJava,EastJava,NorthSumatera,RiauIsland(Batam), East Kalimantan and South Sulawesi. At the beginning of Muhammad Nawir Messi’s leadership (2012–2015), and during Muhammad Syarkawi Rauf’s term (2015–to date), the KPPU became more selective in selecting cases that originated from reports of bid-rigging. The plan is to restrict the focus oftheKPPU’sinvestigatorstohandlethecasesinthe5(five)strategicsectorsnotedabove.In addition, bid-rigging also falls under criminal law, and can therefore also be investigated by other law enforcement agencies, such as the Corruption Eradication Commission, the Police, and the Attorney General. An example of this is the trans-Jakarta bid-rigging case which is also being investigated by the Attorney General.


Under the ICL, the KPPU has the authority to:• accept reports from the public and/or business actors alleging monopolistic practices

and/orunfairbusinesscompetition;• search for evidence and initiate preliminary investigations into the business actors to

provetheexistenceofmonopolisticpracticesand/orunfairbusinesscompetition;and• impose sanctions on convicted business actors.The KPPU’s investigators are expected to have independence with regard to their power andduties. KPPUinvestigatorsmustbe free fromthe influenceofanyparty, includingCommissioners in the KPPU’s council. In order to ensure their independence, the KPPU investigators who conduct a preliminary investigation do not play a role in the prosecution of the case.In addition, in the hearings, the parties have equal access to all the documents the KPPU investigators intend to produce as evidence.For the avoidance of doubt, Indonesia’s Constitutional Court (Mahkamah Konstitusi) through its Decision No. 85/PUU-XIV/2016 of 20 September 2017 clarified that theKPPU’s authority to investigate under the ICL is only for administrative investigations to collect administrative evidence. Its authority does not cover other investigative procedures, including among others, those under criminal procedural law, which shall only be undertaken upon meeting certain circumstances.


In the past, many KPPU cartel-related decisions were overturned by the District and Supreme Court due to a lack of direct evidence. This issue is expected to be resolved by the proposed leniency programme in the draft amendments to the ICL. It is expected that the leniency programme may assist the KPPU in collecting direct evidence of cartel violation.


As with leniency, the ICL does not cover any administrative settlement (such as a plea bargain) for a cartel or other cases handled by the KPPU. Therefore, if the business actors admit participation in a cartel and submit evidence of a cartel to the KPPU investigator, the KPPUinvestigatorwillproceedtothefilingandhearingssteps.Ifthehearingsaretherebymade shorter, there might be a reduction in the sanction under the KPPU’s decision.




Under Article 38, anybody who knows or suspects that a business actor has violated the ICL, or has suffered a loss as a result of a violation of the ICL, may report it in writing to the KPPU, along with the identity of the reporter, the details of the violation and the damages suffered (ifany).Toprotectthereporter,theKPPUmustkeeptheidentityofthereporterconfidential.Uponreceiptofacompletereportallegingacartel(withsufficientevidence)andevidenceof the damages, the KPPU investigators will go straight to hearings without a preliminary investigation. In the hearings, the KPPU’s role is replaced by the reporting party. The ICL is silent on objections to a report. Therefore, it is important for the KPPU investigatortore-confirmtheexistenceofthecartelbeforeitgoestohearing.


Under Article 48, the KPPU has the authority to impose administrative sanctions on business actorswhoviolatethecartelprovisions.TheseincludeafineoffromIDR1,000,000,000(onebillionRupiah)uptoIDR25,000,000,000(twenty-fivebillionRupiah)aswellasthedamagessufferedbytheaffectedparties.Thesefineswillincreasesubstantiallywhenthelaw is amended.Under Article 47 and KPPU Regulation No 4 of 2009 regarding Administrative Action Guidelines, the KPPU is required to complete 2 (two) steps in determining the amount of afine:• Determine the basic value and make adjustments by increasing or reducing the basic

value. The basic value is calculated according to the sales volume achieved by the business actor excluding the Value Added Tax (VAT) and other related taxes in the relevant market.

• Considerthemarketsituationwhichmayresultinanadditiontoorreductioninthefinebased on the basic value according to an overall assessment, taking into account all the related aspects, which include:• whether the business actor continually or repeatedly engaged in the cartel violation,

inwhichcase,thebasicvaluewillbeincreasedbyupto100%;• whetherthebusinessactorrefusedtocooperateinthepreliminaryinvestigation;

and• regarding the leader or initiator of the cartel, the KPPU investigators will look

at the steps the leader or initiator of the cartel took to restrict or threaten other business actors.

The basic value may be reduced if the KPPU decides that:• the cartel participant has provided evidence of the discontinuance of the cartel after the

KPPU’sinvestigatorstartedthepreliminaryinvestigationintothecartel;• thecartelparticipanthasprovidedevidenceofitsminimalinvolvementinthecartel;• thecartelparticipanthasbeencooperativeinthecasehandlingprocess;and• the cartel participant is willing to sign a statement regarding its intention to change its

behaviour and not be involved in other activities which violate the ICL.Thefinalamountof thefineshouldnotexceedIDR25,000,000,000(twenty-fivebillionRupiah) or 10% of total turnover during the current business year, whichever is lower.


Under Article 48, the KPPU has the authority to impose administrative sanctions on business



actorswhoviolatethecartelprovisions.TheseincludeafineoffromIDR1,000,000,000(onebillionRupiah)uptoIDR25,000,000,000(twenty-fivebillionRupiah)aswellasthedamagessufferedbytheaffectedparties.Thesefineswillincreasesubstantiallywhenthelaw is amended.Under Article 47 and KPPU Regulation No 4 of 2009 regarding Administrative Action Guidelines, the KPPU is required to complete 2 (two) steps in determining the amount of afine:• Determine the basic value and make adjustments by increasing or reducing the basic

value. The basic value is calculated according to the sales volume achieved by the business actor excluding the Value Added Tax (VAT) and other related taxes in the relevant market.

• Considerthemarketsituationwhichmayresultinanadditiontoorreductioninthefinebased on the basic value according to an overall assessment, taking into account all the related aspects, which include:• whether the business actor continually or repeatedly engaged in the cartel violation,

inwhichcase,thebasicvaluewillbeincreasedbyupto100%;• whetherthebusinessactorrefusedtocooperateinthepreliminaryinvestigation;

and• regarding the leader or initiator of the cartel, the KPPU investigators will look

at the steps the leader or initiator of the cartel took to restrict or threaten other business actors.

The basic value may be reduced if the KPPU decides that:• the cartel participant has provided evidence of the discontinuance of the cartel after the

KPPU’sinvestigatorstartedthepreliminaryinvestigationintothecartel;• thecartelparticipanthasprovidedevidenceofitsminimalinvolvementinthecartel;• thecartelparticipanthasbeencooperativeinthecasehandlingprocess;and• the cartel participant is willing to sign a statement regarding its intention to change its

behaviour and not be involved in other activities which violate the ICL.Thefinalamountof thefineshouldnotexceedIDR25,000,000,000(twenty-fivebillionRupiah) or 10% of total turnover during the current business year, whichever is lower.

Criminal sanctions

Under the ICL, the sanctions available upon conviction of participation in a cartel include:• a fine of from IDR 1,000,000,000 (one billion Rupiah) up to IDR 25,000,000,000

(twenty-fivebillionRupiah);• revocationofthecartelagreement;and• the determination of the compensation to paid due to the cartel agreement.In addition to the above sanctions, under the ICL, for:• aprice cartel violation (Article5), a criminalfineof from IDR5,000,000,000 (five

billionRupiah)uptoIDR25,000,000,000(twenty-fivebillionRupiah)maybeimposedorimprisonmentforupto5(five)months;while

• foraproductionandmarketingcartelviolation(Article11)acriminalfineoffromIDR25,000,000,000(twenty-fivebillionRupiah)uptoIDR100,000,000,000(onehundredbillion Rupiah) may be imposed, or imprisonment for up to 6 (six) months.

Further, in addition to the above sanctions, under Article 10 of the Criminal Code, for a criminal cartel offence, the business licence may be revoked, and the directors or commissionersmaybebarredfromthesepositionsfor2(two)to5(five)years.



Cross-border issues

The ICL does not cover cartels which have no connection to the Indonesian territory, even iftheyhaveanimpactontheIndonesianeconomy.Article1definesabusinessactorasanyindividual or entity, whether a legal entity or non-legal entity, established and domiciled or engaging in activities within the jurisdiction of the Republic of Indonesia, either individually or jointly through agreements, engaged in various kinds of business activities in the economic sector. Some caution should be taken interpreting the above, as the KPPU has recognised a single economic entity doctrine (SEED). Therefore, a cartel arrangement by parent companies outside of Indonesia, if it is also apply to their subsidiaries in Indonesia, can fall under the jurisdiction of the ICL, as in the Temasek cartel case. However, following the meeting with the Korean Fair Trade Commission (“KTFC”), the KPPU entered into a cooperation agreement on 8 November 2013 which focuses on the following four aspects: enforcement of the anti-monopoly law, regular dialogues, exchanges of information through direct communications, and technical assistance. This cooperation is important because Korea is one of Indonesia’s biggest business partners and one of the biggest investors in Indonesia through more than 2,100 (two thousand one hundred) companies in Indonesia.


The statistics in the KPPU’s website show that 70% of the cases handled by the KPPU are tender cases, most of which are related to the procurement of goods and services. Cartel cases are at the next level of importance and are an ongoing focus.

Reform proposals

A new draft law amending the ICL has been in preparation by the KPPU since 23 September 2014 and is currently being reviewed by the executive authorities of the Indonesian Government. However, no deadline has been set for the introduction and adoption of the Bill.Itwillreformthecross-borderauthorityoftheKPPUbyamendingthedefinitionofa business actor. It is also likely that a leniency clause will be included in the proposed competitionlaw.Themaximumfineisproposedtobefrom5%to30%ofthesalesvalueearned during the period of the breach. In addition, any business actor that repeats a cartel violation may have its business licence revoked and placed on the black list.


Makarim&TairaS.Summitmas I, 16th–17th Fls. Jl. Jendral Sudirman Kav 61–62 Jakarta 12190, Indonesia

Tel: +62 21 252 1272, 50808300 / URL: www.makarim.com

Benedicta Frizka (Associate)Tel: +62 21 252 1272, 50808300 / Email: [email protected] Frizka is an Associate in the Firm’s Corporate and Commercial Group. Her experience includes advising on general corporate matters and realestaterelatedmatters.Shehasalsoassistedclientswithmergerfilingsand provided them advice on Indonesian competition law.

Jonathan Tjenggoro (Senior Associate)Tel: +62 21 252 1272, 50808300 Email: [email protected] Jonathan Tjenggoro is a Senior Associate in the Firm’s Corporate and Commercial practice group. He has worked with M&T since 2012 andassists clients with a range of corporate transactions and general commercial advice, including foreign investment. He has recently been active on a numberofrealestateprojects.Healsoadvisesonmergercontrolfilingsandother competition law matters.


Lia Alizia (Partner)Tel: +62 21 252 1272, 50808300 / Email: [email protected] LiaAliziaisaPartnerintheCorporate,CommercialandLitigation&DisputeResolutions departments of M&T. She has dealt with a wide variety ofcorporate,commercialandlitigation&disputeresolutionmatters.Themajorareas of expertise include anti bribery, anti-corruption, property, Indonesian employment and IPR-related issues. She has handled employment-related matters, mass terminations of employment in various industries, the resolution of disputes and the enforcement of IPR. Lia has authored a number of significantpublicationsandoftenspeaksatlocalandoverseasseminarsandtraining programmes on employment matters.


IsraelEytan Epstein, Mazor Matzkevich & Shani Galant-Frankfurt

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The Restrictive Trade Practices Law 5748-1988 (the Antitrust Law) deals with restrictive arrangements and an infringement of this chapter is considered a criminal offence, and is also subject to civil and administrative enforcement.A‘restrictivearrangement’isdefinedasanarrangementmadebetweentwoormorepersonsconducting business that restricts at least one party to the arrangement, in a manner that may prevent or reduce competition (section 2(a) of the Antitrust Law). Inaddition,theAntitrustLawprovidesinsection2(b)foranumberofspecificrestraints,theexistence of which constitutes an irrefu table presumption that damage to competition exists (that is, per se illegal practices), in horizontal arrangements. Accordingly, a horizontal arrangement involving a restraint relating to one of the following issues shall be deemed a restric tive arrangement:• thepricetobedemanded,offeredorpaid;• theprofittobeobtained;• the division of all or part of the market, in accordance with the location of the business

or in accordance with the persons or type of persons with whom business is to be conducted(marketallocation);and

• the quantity, quality or type of assets or services in the business.For many years the accepted legal approach was that the definition of a restrictivearrangement in section 2 does not distinguish between horizontal and vertical agreements – both may be found to be restric tive arrangements under the irrefutable presumption of section 2(b). During the past decade, several rulings have eroded that rule, and in August 2015, the Supreme Court decisively overturned that rule.1 The Supreme Court held that the irrefutable presumptions of section 2(b) generally do not apply to vertical arrangements, and that vertical arrangements may only be regarded restrictive arrangements if their potential to harm competition to a non-negligible extent is proven. In addition, section 5 of the Antitrust Law determines that a course of action determined by a trade association for its members or some of them, which is liable to eliminate or reduce competition among them, or such course of action which the trade association recommendedtothem,shallbedeemedtobearestrictivearrangementasdefinedinsection2, and the trade association and any of its members acting in accord ance with such course of action shall be deemed to be a party to a restric tive arrangement. The level of knowledge required for a criminal liability is awareness to the elements of the offence.Intentionisnotrequiredforafindingofliability.It should be noted that entry into a restrictive arrangement without the authorisation of the Antitrust Tribunal (or without a temporary authorisation) is forbidden, unless the


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arrangementwasspecificallyexemptedbytheDirectorGeneraloftheAntitrustAuthority,or is exempted according to one or more of the block exemptions. Currently there are 14 block exemption rules, as follows:• BlockExemptionforArrangementsofMinorImportance;• BlockExemptionforJointVentures;• BlockExemptionforAgreementsfortheExecutionofResearchandDevelopment;• BlockExemptionforRestraintsAncillarytoMergers;• BlockExemptionforExclusiveDistributionAgreements;• BlockExemptionforExclusivePurchaseAgreements;• BlockExemptionforFranchiseAgreements;• BlockExemptionforArrangementsbetweenAircraftCarriers;• Block Exemption for Arrangements between Aircraft Carriers, in Routes Subject to the

OpenSkytreaty;• BlockExemptionforArrangementsbetweenSeaCarriers;• BlockExemptionforAgreementsbetweenRelatedCompanies;• BlockExemptionforNon-HorizontalAgreementsthatDoNotConcernPrice;• Block Exemption for Collaborations Among Competitors Regarding Export of Defence

Equipment;and• Block Exemption for Agreements Regarding the Export of Security Equipment outside

the State of Israel.Two enforcement institutions were established under the Antitrust Law: the Israeli Antitrust Authority(theIAA);andtheAntitrustTribunal.The IAA, headed by the Director General, is an independent govern ment enforcement agency established in 1994. The IAA employs about 100 staff and is divided into three professional departments: legal; economic; and investigations. Thus, the IAA conductsboth investigations and legal proceedings regarding restrictive arrangements, and uses its vast enforcement measures for this end. The Antitrust Tribunal, sitting with the District Court of Jerusalem, has an exclusive jurisdiction over non-criminal government antitrust pro ceedings. The District Court of Jerusalem has exclusive jurisdiction over criminal antitrust matters. Civil antitrust cases could be brought in any court in Israel which has a local jurisdiction, in accordance with the court’s jurisdiction based on the amount of sought damages.

Overview of investigative powers in Israel

Upon the order of the Director General or authorised IAA staff, every person and entity is obliged, to provide all information, documents, ledgers or other certificates that, inthe opinion of the Director General, would ensure or facilitate the implementation of the Antitrust Law. The IAA makes extensive use of this power.The Director General (or authorised IAA staff) may, if they have reasonable grounds to believe it is nec essary to ensure implementation of the Antitrust Law or to prevent its contravention: • enter into any business premises and conduct a search without a search warrant.

Notably, entry into residential premises is only permissible in accordance with a search warranthandeddownbythecourt;and

• seize any article or document (including computer material), if they have reasonable grounds to believe that it may serve as an evidence.

Furthermore, in the event that suspicion arises that a breach of the Antitrust Law has been committed, the Director General, or authorised IAAs, may investi gate any person


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related to such contravention, or any person who may have information regarding such contravention, and may order any such person to accompany him on an investigation and to provide any details, documents or information relevant to such contravention. An investigator is authorised to compel oral testimonies, and the person under investigation is obliged to answer any question, except for ques tions that might incriminate him or her. Such testimonies may be used against the provider thereof. In addition, wiretapping is permissible in certain circum stances subject to the approval of the presidentofadistrictcourt.Withrespecttoacarteloffence,theDirectorGeneral,thechiefof the IAA’s investigations department and his deputy, and any authorised investigators, shall have some powers of detention, arrest and release.


In the past year, the IAA issued three indictments against several companies and their managers: (1) In July 2017, the IAA issued an indictment against computers and servers’ companies

and their managers, for coordinating the tenders for the purchase of computer servers and accessories issued by Bezeq – the biggest telecommunication company, and the Electric Corporation of Israel.2

(2) In December 2017, the IAA issued an indictment against the National Taxi Drivers Association and its CEO, in respect of the association’s recommendation to airport drivers not to give passengers any discounts from the price list.3

(3) In addition, in June 2017, the IAA announced its intention to issue indictments against several travel companies and some functionaries in these companies, subject to a hearing, in respect of market allocation, fraudulent activity and money laundering activity in respect to offering travel services to youth delegations to Poland. According to the IAA, the suspects agreed in advance that they would not compete against each other’s in offering travel services to the delegations.4

In December 2017, the IAA announced its intention to issue indictments, subject to a hearing, against a number of video games and game console stores in respect of allegedly coordinating the price of the “FIFA17” football video game, as well as the price of “PlayStation” and “Xbox” game consoles.5 As previously mentioned, the Antitrust Law does not determine minimum levels for sanctions. Until recently, in most cases, individuals were sentenced to community service, for periods of up to six months, in lieu of imprisonment, while imprisonment was the exception (the longest imprisonment imposed by a court was nine months, in the Floor Tiling cartel case in 2002, and nine months on the leader of the Textbooks cartel, owing to his involvement in coordinating price bids on government tenders for the distribution and supply of textbooks in 2016). Court decisions in recent years, including the Supreme Court’s decisions, indicate that the customary punishment for cartel offences are between a few months of actual imprisonment and community service. Thus, in March 2017, the Supreme Court sentenced two bakeries’ CEOs for imprisonment of three months in addition to three months of community service, by that accepting their appeal on the District Court sentence (of one year’s imprisonment). In reference to the Supreme Court’s punishment policy, in January 2018, the District Court of Jerusalem sentencedsixmanagersofWaterMetercompaniesforimprisonmentforaperiodofonetofour-and-a-halfmonths,inadditiontoseveralmonthsofcommunityserviceandfines,while two other managers were only sentenced to a few months of community service due to personal circumstances.6


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In 2017, the the District Court of Jerusalem convicted the deputy head of the council Daliyat al-Karmel, Danor company and other defendants, for bid-rigging of the municipal council’s procurements. The District Court of Jerusalem sentenced the defendants for several months ofcommunityservice,andfines.7 Moreover, in March 2017, the Antitrust Tribunal approved a consent decree between the IAA and the two largest private Israeli mass media companies (Reshet and Keshet). In the framework of this consent decree, the companies admitted their liability for restrictive arrangements, and undertook to pay to the State Treasury the total sum of NIS 410,000.8

In October 2017, the IAA published a draft for public comments of the consent decree which was reached between the IAA and Tnuva Company, which is one of Israel’s leading food suppliers. In the framework of this consent decree, Tnuva will admit its liability for three restrictive arrangements, and will undertake to pay to its relevant customers the precedential sum of NIS 25 million, which will be automatically transferred to them as a credit in their payment cards.9


Due to the IAA’s limited resources on the one hand, and the vest enforcement means and measured on the other hand, the IAA must prioritise its enforcement activities. Hence, the various enforcement activities are prioritised among themselves (e.g., administrative sanctions including monetary sanctions, versus criminal sanctions), and against other regulatory activities. As far as it is published, the IAA does not target specificmarkets for its enforcementactivities, but instead uses its authority to deal with activities which it considers are most harmful to competition.


As previously mentioned, due to the limited resources, the IAA must prioritise its investigation activities, and therefore investigations are usually held against alleged hard-core cartels activity. Mostly, in recent years, investigations were lunched against alleged bid rigging activities, and alleged coordination of governmental procurements, and for that sake the IAA investigation department often combines forces with other enforcements and investigation authorities such as the police’s fraud unit.


TheIAAadoptedanofficialleniencyprogrammeforcompaniesandindividualsin2005.The programme provides for amnesty from crimi nal prosecution to a cartel member – an individualoracorporationanditsdirectors,officersandemployees–thatcomesforwardfirstandhelpstheIAAintheinvestigationofcartelactivitiespriortotheopeningofanopeninvestigation, provided this party is not ‘the leader’ of the cartel. The leniency programme is designed to grant immunity only in regard to cartel activities and obstruction of justice offences related to the cartel activity (as opposed to other forms of criminal antitrust activ ities such as illegal restrictive arrangements other than cartels, abuse of dominance and illegal mergers).The leniency programme sets out the following conditions in order to grant an amnesty:• Leniencywillbegrantedtothefirstparty–corporationorindividual–tocomeforward


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and deliver full information with respect to an illegal activity in which the applicant was involved.

• Leniency will not be granted to an individual or a corporation that was clearly ‘the leader’ of the cartel (i.e., coerced others to join the illegal activity or initiated it or had a dominant role in the illegal conduct).

• Leniency will be granted to a party reporting illegal activity before an open investigation has commenced.

• If a corporation qualifies for leniency, all directors, officers and employees of thatcorporation will receive full amnesty from crimi nal prosecution.

If the corporation approaches the IAA to deliver information with respect to the illegal activity, the approach should follow a clear and binding decision of the corporation to deliver information to the IAA, as opposed to the unilateral approach of an individual.

• In case the corporation does not approach the IAA, executives and employees may approach the IAA on their own initiative, deliver information and be granted individual leniency if they meet the programme’s conditions (e.g., the individual was not ‘the leader’ of the cartel).

• Leniency will be granted only to those who have terminated their part in the illegal activity (however, applicants are required to receive the IAA’s consent to advise other parties they have ceased their participation in the cartel).

• Leniency will be granted to those who fully cooperate with the IAA investigation on an ongoing basis. This cooperation includes providing the information held by the applicant for immunity, by way of full and true disclosure, including detailed cartel-related documents and the names of those involved. If a corporation is applying for immunity, information is expected to be provided by all the relevant employees and managers. In addition, the applicant for immunity must comply with the provi sions of the IAA during and after the investigation, to assist in the inves tigation and to fully testify with respect to the cartel, as necessary.

• Leniency will not be granted to a person who was previously either convicted of a cartel offence or has been granted immunity pursu ant to the leniency programme in regard to a different cartel.

According to the revised public statement regarding the criteria and considerations in setting the level of monetary sanctions (Public Statement 1/16), the Director General shall refrain from imposing a monetary sanction on a person who was granted immunity under the immunity programme.Notably, we are unaware of any indictments based on the implementation of the leniency programme.


As in every criminal case, the prosecution may enter into a plea bar gain in antitrust cases, which is then subject to the approval of the Court. However, if the plea bar gain includes an agreement to become a state witness, the agreement requires pre-approval by a state district attorney. In practice, the IAA has entered into plea bargain settlements in many cases. Alternatively, if the IAA chooses civil enforcement rather than the criminal route, it may enter into a consent decree with the parties to the restrictive arrangement. The consent decree is subject to the approval of the Antitrust Tribunal. Violation of the consent decree can lead to monetary sanctions and other sanctions, including criminal sanctions for breaching the court’s order (e.g., sanctions for contempt of court).


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Private enforcement is possible under the Antitrust Law. An act or omission contrary to the provisions of the Antitrust Law shall constitute a tort in accordance with the Torts Ordinance [New Version], 5728-1968, enabling any person to seek a remedy from the court through a civil action for the actual damages he or she suffered. The submission of class actions is also possible in antitrust cases. Note that the purpose of damages under Israeli law is restitutive and the Antitrust Law does not allow punitive or exemplary damages. However, in October 2013, a new bill was published proposing several amendments to the Antitrust Law. Inter alia, the bill suggests adopting the American triple damages model in private enforcement of antitrust, except for cases where the defendant was granted immunity from criminal prosecution under the leniency programme of the IAA.

The ‘indirect purchaser’ doctrine was expressly asserted in several matters before the courts,butultimatelythecasesweresettledwithoutthecourtrulingontheissue.Whilenoexpress ruling has yet been given on the application of the ‘indirect purchaser’ doctrine in antitrust cases, past decision demonstrated a tendency towards the rejection of that defence. For example, in November 2013, in its decision to reject a motion for dismissal of a class actionapplication,theCentralDistrictCourtdeterminedthattheexistenceofaconflictofinterest between the members of two distinct subgroups of the class action group (direct and indirect injured mem bers) does not deny the possibility of providing compensation to any of the group’s members. Note, however, that this issue was not in the core of the debate in that application and was not the subject of the deci sion. Nevertheless, we may witness a change in the future, due to an opinion submitted by the State Attorney General to the Central District Court in the Aviation cartel case,10 in which it is argued that indirect consumers should be allowed to claim their damages from the cartel members. These developments may be the path for rejecting the ‘pass-on’ defence in antitrust private actions.


The following administrative sanctions are available under the Antitrust Law for cartel activity: • The Director General may impose monetary sanctions on corpora tions and individuals

that are involved in violations of the Law, in lieu of criminal indictment monetary sanction. In October 2016, the Director General published revised guidelines regarding the cri teria and considerations in setting the level of monetary sanctions (Director General’s Public Statement 1/16).

• A consent decree, according to which the Director General and the parties to the cartel may agree, inter alia, on an amount of money to be paid to the State Treasury. The consent decree may include a provision according to which the parties to the cartel do not confess to being parties to a restrictive arrangement. To date, very few car tel cases have been concluded with a consent decree. The authori sation of the Director General to impose monetary sanctions in 2012 substantially strengthened the director’s negotiationpower and enabled the settlementwith Israel’sfive largest bankswhichwere held to be parties to a restrictive arrangement (for the exchange of information regarding present and future bank fees charged to customers). The IAA settled for NIS 70 million – a substantial increase compare with the former ‘record’ of NIS 8 million in the Telephone Operators cartel.

• An injunction order by the Antitrust Tribunal upon request of the Director General to cease the illegal activity.

• The Director General may issue an administrative determina tion, by which certain arrangements are declared to be restrictive arrangements. Such determination, unless


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reversed by the Antitrust Tribunal, is considered to be prima facie evidence in any judicial proceeding.

Under article 50D of the Antitrust Law, the Director General can impose monetary sanctions of up to NIS 1 million on an individual. As for corporations, if in the year preceding the fiscalyearinwhichtheinfringementtookplace,thecorporationturnoverexceededNIS10million, the Director General may impose a monetary sanction of up to 8 per cent of the turnover, up to approximately NIS 24 million.


The Director General’s decision to grant an exemption to a restrictive arrangement, a declaration by the Director General that certain conduct is a restrictive arrangement and a decision to impose monetary sanctions are all appealable to the Antitrust Tribunal within 30 days (the Antitrust Tribunal’s decisions is appealable to the Supreme Court within 45 days). Only the decision made by the Supreme Court is binding to the lower courts. It should be highlighted that, according to the Antitrust Law, the appellate can be both the parties, the IAA and third parties, depending on the decision. The Tribunal applies a de novo assessment in reviewing the case, and the standard of proof is preponderance of the evidence (balance of probabilities).

Criminal sanctions

The sanctions available under the Antitrust Law for criminal offences are up to three years’ imprisonment (or five years, in aggravating circumstances) or a maximum fine of 2.2millionshekels.Inaddition,adailyfineofNIS14,000maybeimposedforeachdaythattheoffencepersists.Ifacorporationisinvolved,thesaidfineswillbedoubled.Furthermore, if an offence under the Law was committed by a corporation, then every person that was, at the time of the offence, an active director, a partner (except for a limited partner)oraseniorofficerresponsiblefortherelevantfieldshallalsobeliable,unlessthatperson has proven that the offence was committed without his or her knowledge and that he or she took all reasonable measures to ensure compliance with the Law.

Cross-border issues

The Antitrust Law does not explicitly mention that it applies to conduct taking place outside Israel, nor does it negate its application to such foreign conduct. In 1999, the Director General of the IAA determined that an arrangement existed in the market for selective fragrances, and addressed the issue of the extraterritorial application of the Israeli antitrust legislation. According to the declaration James Richardson, an Australian registered company which held a licence from the Airports Authority to operate a duty-free shop at the Israeli airport, and held over 30 per cent of the Israeli market in selective fragrances, entered into a restrictive arrangements with foreign selective perfume manufacturers to distort competition for selective fragrances in Israel. James Richardson sought, through its restrictive arrangements with the foreign suppliers, to maintain its 30 per cent markdown on imported selective fragrances.In addressing the extraterritorial application of the Israeli antitrust legislation, the Director General referred to foreign jurisprudence on the issue, in particular he adopted the “Effect Doctrine” developed and implemented in the US and the EU. The Director General held that a restrictive arrangement between foreign parties entered into outside the borders


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ofIsraelbutthepurposeorresultofwhich,inwholeorinpart,issignificantdamagetocompetition in the Israeli market, will fall within the purview of the Israeli Antitrust Law. TheAntitrust Tribunal addressed this issue for the first time in 2011, and adopted theDirector General’s approach.11

In September 2013, the Director General issued a Declaration under Section 43(a)(1) of the Antitrust Law in regards to an international cartel entered into between foreign companies to coordinate bids submitted in tenders for gas insulated switchgears (GIS) in many countries around the world, including Israel.12 In his decision the Director General further discusses the Effect Doctrine, and emphasised that extraterritorial application of the antitrust law can be concluded when the conduct is taking place outside the state borders, only when there is a clear connection between that conduct and the local market. The Director General indicated that the very fact that bids submitted in Israel were based on the agreements betweenthecartelmemberswasindeedamanifestationofthe‘strikinginfluence’ofthecartel on the Israeli market, thus justifying the enforcement of Israeli law.13 The Director General concluded that: “The restrictive arrangement which is the subject of this declaration was conducted

abroad by non-Israeli companies. Nonetheless, its influence over competition in the local market obliges the conclusion according to which the performance of such arrangement breaches the Israeli Antitrust Law”.

The issue of extraterritoriality in antitrust cases has not yet beenfirmly decided by thecourts in the context of a claim for damages or in a criminal proceeding. Private civil proceedings against foreign entities are subject to the rules of service outside the state of Israel as provided in the Civil Procedure Regulations, 5744-1984 (CP Regulation). Particularly, in the case of a foreign defendant who is not personally present in Israel, a plaintiff needs the court’s approval to serve its claim outside the jurisdiction, as a precondition for the court’s jurisdiction over that defendant.14

The court may grant a motion for service outside the jurisdiction if the claim falls under one of the categories listed in Regulation 500 of the CP Regulation. Regulation 500 stipulates a list of 10 situations in which service outside the jurisdiction could be permitted.15 The common denominator of the factors detailed in the Regulation is the existence of a link between the dispute and Israel. For instance, when relief is sought against a party domiciled in Israel or that the claim concerns real estate located in Israel, and matters that concern a breach of a contract entered into in Israel or breach of a contract that occurred in Israel, irrespective of where the contract was entered.In recent years, several decisions of the Israeli district courts in Israel have granted (ex parte) permission for service outside of the jurisdiction to foreign corporations which allegedly engaged in illegal global cartels, based on Regulation 500(7) of the CP Regulation, which requires that the claim be founded on an act or omission that has taken place within the state of Israel. For example, the Registrar of the Central District Court approved, ex parte, amotionforserviceoutsideofIsraelintheclassactionfiledregardingtheliquidcrystaldisplayflatpanelCartel(theLCDcartel).16 The basis for this decision was that the sale of flatpanelstoIsraelipurchasers,orproductsthatcontainflatscreens–ofwhichpriceswereallegedlyfixedbytherespondentsoutsideofIsrael–fallswithinthemeaningofan‘actwithin the State’, as stated in Regulation 500(7).17

However, the ruling of the Registrar was later reversed on appeal. The Central District Court accepted the appeal of the foreign defendants, rejecting the argument that damages in antitrust cases should be deemed part of the ‘act within the State’ for Regulation 500(7)


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purposes. The District Court emphasised that under customary case law ‘an act’ is a separate element that must be distinguished from the ‘damage’ component. The Court stated that if the Israeli legislator wishes to force the Law’s jurisdiction on foreign parties to facilitate the commencement of lawsuits against foreign parties in Israel, amendment to the law or to the regulations is required.18 In August 2017, the Supreme Court upheld this decision in theLCDCartelCase,andruledthatdamage,initself,wouldnotsufficetograntpermissionfor a service outside Israel, if the act or omission of the alleged cartel were not performed in Israel.19Thus,thesignificanceofthedecisionisthatIsraeliplaintiffsarenotabletobringan action against foreign companies that participated in a global cartel which affected the Israeli market and consumers, unless the alleged illegal activity (in full or in part) occurred, de facto, in Israel or the defendants has some recognised presence in Israel.


The past few years have been characterised by an increasing number of motions to certify class actions based on alleged global cartels. The initiation for these claims is usually made by private practitioners, and the actual plaintiffs are private consumer organisations or Israeli individuals while the respondents are foreign companies that were allegedly parties to global cartels that according to the plaintiffs’ claim affected the Israeli market and harmed consumers. Thus, since 2013, several applications to approve actions as class actions have been submitted against alleged members of international cartels (with or without the participation of a company based in Israel): the International Air Freight Forwardingcartel; theLCD CartelCase;theGIS cartel;theCathode ray tube cartel;andtheOptical Disk Drivers cartel. To date, no decision has been made as to whether or not to certify any of these applications. However, as stated above, the recent ruling of the Supreme Court in the LCD Cartel Case limitsthepossibilityoffilingclassactionsagainstforeignentitiesthathavenopresenceinIsrael.

Reform proposals

The main reform proposals and expected future development is in the framework of a proposed bill published in October 2017 by the IAA (a Memorandum of the Antitrust Law (Amendment No.) – (Reinforcing Enforcement and Reducing the Regulatory Burden), 5767–2017). The Memorandum offers numerous amendments to the Law. Thus, for example, it is proposed to broaden the self-assessment regime, and also expend the exemption decisions issued by the Director General. In addition, the bill offers to shorten the time in which the IAA must decide in applications for an exemption of a restrictive arrangement from 90 to 30 days, and grant the authority the power to extend the period to additional periods that do not exceed 120 additional days.

* * *

Endnotes1. CA 5823/14 Shufersal Ltd et al v State of Israel, October 22nd, 2015, published in Nevo. 2. Publication 501274 (July 10th, 2017). 3. Publication 501342 (December 7th, 2017). 4. Publication 501176 (February 13th, 2017).


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5. Publication 501344 (December 12th, 2017).6. Jerusalem District Court, Criminal Case 49529-12-11, The State of Israel v. Avi Victor

Ben Dror, January 2nd, 2018, published in Nevo.7. Jerusalem District Court, Criminal Case 17500-02-17, The State of Israel v. Carmi

Makalda and others, August 6th, 2017. 8. Publication 501196 (March 1st, 2017).9. Publication 501309 (October 23th, 2017).10. Haifa District Court, Civil Cases 1118, 1117, 1114/99 Tower Air et al v. Aviation

Services Ltd et al, May 6th, 2007, published in Nevo.11. Restrictive Arrangement 513-04 ACUM Ltd – the Society of Israeli Music Composers,

Authors and Publishers v. the Director General et al, 2011, paragraph 26.12. The Director General’s declaration under Section 43(a)(1) regarding a restrictive

arrangement between GIS manufacturers, September 16th, 2013, published in the IAA’s website (No. 500473).

13. The Director General decided not to include in the Determination the worldwide cartel members who had never submitted bids in GIS tenders in Israel. The Director General determined that considering: (1) the agreement applied to many countries (not just Israel); and (2) there is a satisfactory explanation and competitive reason for thesespecificcompanies to refrain fromactivities in Israelduring theperiodof thecartel(the geopolitical situation during the relevant period), it is difficult to attribute theparticipation of these companies in the global cartel to an impact on the Israeli market. Therefore, and in light of the terms of the effects doctrine, it cannot be determined that they were a party to a cartel in Israel. Ibid., paragraph 140.

14. Additional methods for serving a foreign defendant under the CP Regulation are through personal service when a representative of the corporation is present in Israel, or via an ‘agent’ of the foreign defendant that is located in Israel. An individual or a corporation is deemed to be an ‘agent’ if it is proved to have strong ties with the foreign defendant.

15. FulfilmentofoneofthegroundsfortheserviceoutofthejurisdictionunderRegulation500 will allow the court to properly exercise jurisdiction over foreign entities, subject to compliance with the forum non conveniens doctrine.

16. Central District Court, Class Action 53990-11-13 Hatzlacha Consumer Movement for the Promotion of Equitable Economic Society (RA) v. AU Optronic Corporation and others, November 27th, 2013, published in Nevo.

17. Central District Court, Class Action 53990-11-13 Hatzlacha Consumer Movement for the Promotion of Equitable Economic Society (RA) v. AU Optronic Corporation and others, September 5th, 2014, published in Nevo.

18. Central District Court, Class Action 53990-11-13 Hatzlacha consumer movement for the promotion of equitable economic society (RA) v. AU Optronic Corporation and others, December 29th, 2016, published in Nevo.

19. Supreme Court, Permission for Civil Appeal 925/17 Hatzlacha consumer movement for the promotion of equitable economic society (RA) v AU Optronic Corporation and others, July 31st, 2017, published in Nevo.


MFiron&CoAdgar 360 Tower, 2 Hashlosha St, Tel Aviv 6706054, Israel

Tel:+97237540800/Fax:+97237540011/URL:www.firon.co.il

Eytan EpsteinTel: +972 3 754 0800 / Email: [email protected]&Co.Mr.Epsteinhasrepeatedlybeen listed in The International Who’s Who of Competition Lawyers and has also been elected by leading research organisations, such as Chambers and Partners and The Legal 500, as one of the leading competition law practitioners in Israel.Mr. Epstein is a graduate of the Tel Aviv University Faculty of Law (1984) and, after being admitted to the Israel Bar in 1985, worked in DG IV (competition)inBrussels.Heestablishedhisfirmin1989andmergedwithM. Firon in 2016. Mr. Epstein is a member of the International Bar Association (IBA), serves as a member of the BIC and is the representative of the Israel Bar. Mr. Epstein has published numerous articles on antitrust and the legal environment of Israel’s foreign trade. He is also the author, together with Tamar Dolev-Green, of the book “Competition Law in Israel” (WoltersKluwer 2015).

Mazor MatzkevichTel: +972 3 754 0800 / Email: [email protected]&Co,headingthecompetition,antitrust and regulatory affairs department.Ms. Matzkevich practice focuses on all aspects of antitrust including litigationinadministrativeandcriminalcases,mergernotificationsandthenew Concentration Law and Food Law.Ms. Matzkevich joined the Israel Antitrust Authority in 1998, and between 1999 and 2002 headed the Authority’s Criminal Division. In addition, Ms. Matzkevich was responsible for the Authority’s regulatory activity in sectors such as professional organisations, water and environment.In2003,afterbeingadmitted to theNewYorkStateBar,Ms.Matzkevichjoined the Federal Trade Commission (FTC) as a staff attorney, until 2009. In 2010 Ms. Matzkevich joined Epstein Chomsky, Osnat and Co, as a partner, untilitsmergerwithMFiron&Coin2016.

M Firon & Co Israel

Shani Galant-Frankfurt Tel: +972 3 754 0800 / Email: [email protected] Shani Galant-Frankfurt is an advocate at M Firon & Co and part of theantitrust and regulatory affairs department.Ms. Galant-Frankfurt advises on both civil and criminal antitrust cases. Her practice includes, among others, notifications ofmergers, advising clientsand providing legal opinions in respect of all aspects of competition and antitrust law. Ms. Galant-Frankfurt received her law degree (LL.B.), with Honours, from Interdisciplinary Center Hertzliya (IDC) in 2014, and her Master of Laws (LL.M.), with the highest Honours, from IDC in 2017.


ItalyDavide Cacchioli, Alessandro Bardanzellu & Lisa Noja

Pedersoli Studio Legale


In Italy, cartels are prohibited by Art. 101 of the Treaty on the Functioning of the European Union (“TFEU”) and Art. 2 of Italian Law No. 287/1990 (the “Competition Act”). Such provisions ban agreements, concerted practices and decisions of associations of undertakings, which, directly or indirectly, prevent, restrict or distort competition, including, inter alia, those that: (i) fix purchase or resale prices or other contractualconditions;(ii)limitorrestrictproduction,marketoutletsormarketaccess,investment,ortechnologicalprocess;and(iii)sharemarketsorsourcesofsupply.Art. 101 TFEU applies when the agreement is capable of affecting trade between Member States, while Art. 2 of the Competition Act applies when the practice affects the domestic market or a substantial part of it. The Italian Competition Authority (“ICA”) is entrusted with the public enforcement of the above provisions. Typically, the ICA tends to apply Art. 101 TFEU even when the alleged cartel has a purely national dimension. In fact, Art. 2 of the Competition Act is currently applied only when the conduct under investigation has a very limited geographic impact. In any event, in practice, this distinction has no particular relevance, given that, pursuant to Art. 1(4) of the Competition Act, the latter must be interpreted in accordance with EU competition law.Pursuant to Art. 15 of the Competition Act, the ICA is entitled to impose pecuniary sanctions on the undertakings involved in a cartel, which range up to 10% of their worldwide consolidated turnover. No fines (or any other punitive measures, including criminalsanctions) can be levied on individuals. The ICA’s decisions may be appealed before the Regional Administrative Tribunal for Latium (“TAR Lazio”)within 60 days from their publication (or notification). ThejudgmentoffirstinstancecanbefurtherappealedbeforetheSupremeAdministrativeCourt(“Consiglio di Stato”).Also national civil courts are entitled to directly apply Art. 101 TFEU and Art. 2 of the Competition Act, in connection with stand-alone or follow-on actions (private enforcement). The recent Legislative Decree No. 3/2017 (the “Damages Decree”, see infra), which implemented the Directive 2014/104/EU on actions for damages under national and EU competition law in Italy, has strengthened the private enforcement regime in Italy and is expected to increase the number of actions for damages.

Overview of investigative powers in Italy

The ICA may initiate a cartel investigation ex officio, following a third-party complaint, or a leniency application.


Pedersoli Studio Legale Italy

TheCompetitionActentruststheICAwithsignificantinvestigativepowers,amongwhich,the possibility to request documents or information to undertakings or individuals, and to carry out dawn raids at the companies’ premises. Failure to provide the requested documents/information,withoutalegitimatejustification,mayresultinafineupto€25,823.Providingfalsedocuments/informationmayresultinafineupto€51,645.DawnraidsareconductedbytheICA’sofficialstogetherwiththeItalianfinancialpolice(“Guardia di Finanza”). Typically, dawn raids are carried out immediately after the opening of an investigation which, at the time of the inspection, is not publicly known yet. Infact,theICA’sofficialsgenerallynotifythecompanyofboththeinspectiondecisionandthe opening decision, which describes the alleged restrictive practice and the scope of the investigation.TheICA’sofficialsdonotneedpreviousjudicialauthorisationtocarryoutadawnraid,norare they required to wait for the arrival of the company’s internal or external legal counsel in order to start the activities. They can access the entire premises and check and seize bothpaperandelectronicdocuments.However,theICA’sofficialscannotseizedocumentscovered by legal privilege, nor can they inspect private locations.Duringdawnraids,theofficialsmayalsorequestoralclarificationstotheemployees.Eventhough there is a general duty to cooperate during the investigation, the employees may refuse to answer any questions if the replies would lead to a self-incrimination. Moreover, in the event the employee is not fully aware of the requested information, the ICA generally accepts written replies submitted a few days after the inspection. The inspection activities are summarised in the minutes of the dawn raid, which include thelistoftheseizeddocumentsandtheoralclarificationsprovidedduringtheinspection.


From November 2016 to December 2017, the ICA concluded seven cartel proceedings, imposingoverallfinesequaltoapproximately€394million.In Case I792 – Gare ossigenoterapia e ventiloterapia, the ICA sanctioned three distinct bid-rigging conducts relating to public tenders for the supply of home oxygen therapy and ventilotherapy services. Sanctions totalled approximately€47million (with the highestindividualfine,leviedonVivisol,equaltoapproximately€10million).In Case I742 – Tondini per cemento armato, the ICA sanctioned a cartel in the market forconcretesteelrodsandweldedmeshandimposedfinesequaltoapproximately€140million(withFerriereNordsanctionedbyapproximately€43.5million).In Case I793 – Aumento prezzi cemento, the ICA found that the main cement producers (and the relating association of undertakings) had entered into a cartel aimed at partitioning the Italian market and collusively increasing the price of cement. Sanctions totalled approximately€184million(withItalcementisanctionedbyapproximately€84million).In Case I796 – Servizi di supporto e assistenza tecnica alla PA nei programmi cofinanziati dall’UE,theICAconcludedthatthemainconsultancycompanies(KPMG,EY,PwCandDeloitte) rigged a public tender for the supply of certain technical assistance services for theuseofEuropeanStructuralFunds.Overallsanctionsamountedtoapproximately€23million,withthehighestfine,equaltoapproximately€8.5million,leviedonEY.In Case I794 – ABI/SEDA, the ICA found that the Italian Banking Association (ABI) and 11 banks had entered into a restrictive agreement in connection with the adoption of the system remunerating the SEPA Electronic Database Alignment (SEDA), a banking ancillary service



to SEPA payments. However, the ICA did not impose any sanctions, taking into account the non-severe nature of the infringement and the fact that, during the proceedings, the parties had developed a new remuneration system, endorsed by the ICA, which had replaced the one under scrutiny. Finally, two Art. 101 TFEU proceedings were closed by the ICA without ascertaining the existence of any infringement.In Case I791 – Mercato del noleggio autoveicoli a lungo termine, which concerned an alleged unlawful exchange of information between undertakings providing long-term car rental services, the ICA closed the investigation after the adoption of the Statement of Objections(“SO”)andthefinalhearing,concludingthattheevidenceinitspossessiondidnotsupportthefindingofananticompetitivepractice.Similarly, Case I802 – RC Auto, initiated following certain public statements made by two insurance companies, which suggested the existence of an alleged collusive conduct in the car insurance market, was closed by the ICA without ascertaining any antitrust infringement. In particular, already in the SO, the ICA concluded that the investigation had not revealed any anticompetitive conduct.In the same reference period, the ICA opened 11 proceedings concerning alleged violations of Art. 101 TFEU and/or Art. 2 of the Competition Act. Five of these investigations do not seem to strictly qualify as cartels, since they respectively concern: i. The alleged foreclosure effect stemming from the exclusivity clauses included in the

agreements entered into by the companies managing the taxi service in Rome and Milan and their members (see Case I801A – Servizio di prenotazione del trasporto mediante taxi – Roma, and Case I801B – Servizio di prenotazione del trasporto mediante taxi – Milano).

ii. The alleged anticompetitive effect stemming from the creation of a cooperative joint ventureentrustedwiththetaskofrealisingandinstallingopticalfibresinsomeItaliancities (see Case I799 – Tim-Fastweb-Realizzazione rete in fibra).

iii. The restrictive impact of certain provisions included in a Regulation adopted by an association of undertakings (see Case I812 – F.I.G.C. regolamentazione dell’attività di direttore sportivo, collaboratore della gestione sportiva, osservatore calcistico e match analyst).

iv. An alleged resale price maintenance conduct by a supplier in the online sale of stoves to its distributors (see Case I813 – Restrizioni alle vendite online di stufe).

The outstanding proceedings initiated in the last 12 months appear to concern typical cartel infringements, such as: • Alleged bid-rigging in connection with the supply of heli-rescue services and the

preventionofforestfires(seeCaseI806–Affidamento appalti per attività antincendio boschivo).

• Alleged bid-rigging in connection with the provision of facility management services (see Case I808 – Gara CONSIP FM4-Accordi tra i principali operatori del facility management).

• Alleged market-sharing and price-increase agreements in the markets for corrugated board sheets and cardboard packaging (see Case I805 – Prezzi del cartone ondulato).

• Allegedcollusioninthesupplyofleasingandfinancialservicesforthepurchaseofcarvehicles (see Case I811 – Finanziamenti auto).

• Alleged collusion in the sale of TV broadcasting rights of Serie A and Serie B football matches outside Italy (see Case I814 – Diritti internazionali).



• Alleged bid-rigging in connection with the supply of collection and disposal of medical waste services (see Case I816 – Gara SO.RE.SA. rifiuti sanitari Regione Campania).


In relation to the ICA’s recent practice, the following key issues should be highlighted:• The ICA has increased its enforcement activity, opening several Art. 101 TFEU

proceedings and heavily sanctioning the involved undertakings. The ICA’s investigations have covered a broad range of markets, from “traditional” industrial products (cardboard packaging, cement), to more sophisticated services (technical assistance,facilitymanagement,andleasingandfinancialservices).

• Particularly important has been the ICA’s activity in fighting collusion in publictenders (bid rigging). The ICA is closely cooperating with the Italian Anti-Corruption Authority (“ANAC”) in ascertaining the existence of unlawful practices, which prevent the optimal realisation of public interests and increase public expenditure (see, e.g., Cases I808 and I806, as well as Case I785 – Gara Consip servizi di pulizia nelle scuole, closedinDecember2015,withoverallsanctionsequalto€114million,andultimatelyconfirmedbytheConsiglio di Stato with its judgments No. 740, 927 and 928/2017).

• The ICA is attaching growing relevance to antitrust compliance programmes which, ifeffectivelyimplemented,canleadtoareductionof thefineupto15%(seeCasesI792, I793 and I796, where the ICA took into account the proper and timely adoption ofanantitrustcomplianceprogrammetoreducethefines;conversely,inCaseI742,nodiscounts were granted, because the programmes had been adopted after the issuance of the SO).


The ICA is an independent administrative authority, entrusted with the power to ascertain potential antitrust infringements and impose sanctions. The ICA thus enjoys a quasi-judicial role. Therefore, the right of defence of the undertakings involved in a cartel investigation needs to be adequately protected. In particular, the ICA has to ensure that the undertakings have access to the documents and information included in the investigationfile. However, based on a confidentialityrequest by an interested party, the ICA may either prevent undertakings from accessing certain documents (or part of documents), provided that they do not include inculpatory evidence, or defer their access until the SO has been issued (this is the case, e.g., for leniency statements). The ICA’s decision preventing or deferring access to certain documents needs to be adequately motivated and can be appealed before the administrative courts (see, ex multis, the TAR Lazio judgment No. 12445/2017). The ICA’s recent trend shows growing attention vis-à-vis the undertakings’ substantive defences brought in the course of the proceedings, which are typically developed in the writtenreplytotheSOandinthefinalhearingbeforetheICA’sBoard.Clear evidence of this trend is the fact that two recent investigations (Cases I791 and I802) were closed without ascertaining an Art. 101 TFEU infringement, and that, in Case I794, no sanctions were levied. In particular, in Cases I791 and I794, the parties were able to persuade the ICA’s Board, in their written and oral pleas, that their conduct did not qualify as anticompetitive (Case I791), or did not constitute a serious antitrust infringement (Case I794).This ICA’s attitude has also been emphasised by the ICA’s Chairman, Mr. Pitruzzella, in the ICA’s 2017 Annual Report. In particular, Mr. Pitruzzella recalled the clear distinction



between the investigative phase,carriedoutbytheICA’sofficials,andthedecision-makingpower, which is exclusively reserved to the ICA’s Board, which properly balances and assesses the inculpatory evidence and the undertakings’ substantive defences and may overturn the accusations outlined in the SO.


The leniency programme was introduced in Italy in February 2007, through the ICA’s adoption of an ad hoc Notice (the “Leniency Notice”, subsequently amended in July 2013). AccordingtotheLeniencyNotice,thefirstundertakingprovidinginformationandevidenceto the ICA, which is decisive to ascertain the existence of an undisclosed cartel, possibly throughaninspection,benefitsfromthefullimmunityfromthefine.The immunity is not granted if the ICA is already aware of the cartel. In this case, the undertakingmaybenefitfromareductionofthefine,generallyupto50%,iftheevidencesubmitted,duetoitsnatureordegreeofdetail,significantlystrengthensthesetofevidencealready in the ICA’s possession, and appreciably contributes to prove the existence of the cartel. Despite the advantages granted to the applicants, the leniency programme has not been frequentlyusedbyundertakingsinItaly.Infact,since2007,onlyfivecartelinvestigationshave been opened following a leniency application. The immunity was also granted by the ICA in other two proceedings, initiated ex officio, in light of the cooperation provided by one of the involved undertakings.Giventheconfidentialnatureofaleniencyapplication,whichisnotpubliclydisclosedinthe ICA’s opening decision, it is not possible to state if any of the pending cartel proceedings have been initiated based on a leniency application. However, it cannot be ruled out that the ICA’s recent enhanced activity in cartel enforcement may also be a consequence of leniency applications.The role played by the leniency programme in cartel enforcement has been (indirectly) recognised also by the Italian legislator while adopting the Damages Decree. In fact, Art. 4(5) of the Damages Decree prevents leniency statements, and the documents enclosed to such statements, from being subject to a disclosure order or, in any event, from being submitted to a civil court in an action for damages.The rationale of this prohibition clearly aims at protecting the enforcement of the leniency programme, which would be seriously jeopardised if the leniency statements and relating evidence could be subsequently used against the applicant in an action for damages. Moreover,pursuanttotheDamagesDecree,theimmunityleniencyapplicantalsobenefitsfrom a partial derogation from the general rule whereby each undertaking participating in a cartel infringement may be held jointly and severally liable for the full amount of the damages suffered by a third party. In fact, the immunity leniency applicant is jointly and severally liable only towards its direct and indirect purchasers, unless the other injured parties cannot obtain full compensation from the other cartelists.


Unlike EU competition law, the Competition Act does not provide for the possibility to close proceedings with an administrative settlement.The only possibility to close proceedings in a “negotiated” manner is through the adoption of commitments, as provided by Art. 14-ter of the Competition Act. The ICA continues to apply this instrument also in Art. 101 TFEU proceedings, unless the practice under scrutiny



qualifies as a “hard-core” restriction. In such case, consistentwithEURegulationNo.1/2003, the ICA is prevented from accepting commitments, as proceedings will likely be closedwiththeimpositionofafine.The use of commitments was particularly relevant in recent Case I794, which, as noted, concerned an alleged restrictive agreement relating to the remuneration system for the SEPA Electronic Database Alignment (SEDA). The commitments proposed by the parties during the investigation, which consisted, inter alia, in an alternative remunerating system based on multilateral interchange fees, were rejected by the ICA, which maintained that the conduct under scrutiny qualified as a “hard-core” violation. Nevertheless, thepartiesinitiatedaparallelproceedingwiththeICA,withaviewtodefininganalternativeremuneration system in an open and transparent manner.At the end of the investigation, the ICA concluded that the conduct at stake did not qualify as a serious Art. 101 TFEU violation. In its assessment, the ICA appreciated the parties’ availability to change the remuneration system and affirmed that the new remunerationsystem met the conditions set forth in Art. 101(3) TFEU. Therefore, even though the ICA formally rejected the commitments, it positively appreciated the parties’ proposed behaviour, whichjustified,togetherwithotherelements,thenon-impositionofanysanctions.


ThirdpartiesmayfileacomplaintwiththeICA,allegingtheexistenceofacartel.Thereare no procedural or substantive formalities. The ICA does not have any legal obligation to open an investigation following a third-party complaint. It is thus advisable that a complaint be particularly detailed and accurate, in order to stimulate the ICA’s intervention. Moreover, given that the ICA is also entrusted with the competence to scrutinise and sanction unfair commercial practices, a complaint may also be assessed from this perspective and potentially lead to the opening of an investigation for an alleged violation of the Consumer Code (Legislative Decree No. 206/2005, as subsequently amended).TheICA’sdecisionrefusingtoopenaninvestigationneedstobeadequatelyjustifiedandcan be appealed by the complainant, who needs to prove that the decision jeopardised its interests.In Italy, third-party complaints play a very important role in cartel enforcement. For instance, therecentCasesI792andI793,whichledtotheimpositionoffines,wereopenedfollowingthird-party complaints. Moreover, based on the content of the ICA’s opening decisions, also the pending Cases I816, I814, and I806 appear to have been initiated following third-party complaints.


PursuanttoArt.15oftheCompetitionAct,theICAmayimposefinesrangingupto10%ofthe undertaking’s worldwide consolidated turnover. Indeterminingtheamountofthefine,theICAtakesintoaccounttheprincipleslaiddownin Law No. 689/81 (e.g., the gravity and duration of the infringement), as well as the specificcriteriasetforthintheICA’sGuidelinesonthemethodofsettingfines(the“FiningGuidelines”), adopted in October 2014.TheFiningGuidelines’ calculationprocess canbe summarisedas follows: the ICAfirstestablishesthebasicamountofthefine,whichconsistsinagravityamount(upto30%ofthe value of goods or services to which the infringement directly or indirectly relates, sold



by the involved undertaking during the last full year of its participation in the infringement) multiplied by the number of years of participation in the infringement. In case of secret cartels, the gravity amount is, in principle, no lower than 15%. Moreover, for the most serious infringements (such as cartels) the ICA may also include in the basic amount the entryfee,anadditionalfixedsumcomprisedbetween15%and25%ofthevalueofsales.Thebasicamountofthefinecanbeadjustedinordertotakeintoaccountcertainaggravatingor mitigating circumstances. Each of the aggravating/attenuating circumstances may normally result in an increase (or decrease) of the basic amount of up to 15%, and the overall adjustment for all applicable aggravating or mitigating circumstances should not exceed 50%. Exceptionally, in case of recidivism, the basic amount may be increased up to 100%. Similarly, in case of participation in the “amnesty plus” programme (i.e., cooperating with the ICA in the detection of an infringement different than the one forming the object of the investigation), the basic amount may be reduced up to 50%.The amount of the fine so resulting may be increased up to 50% when the involvedundertakinghasasignificantworldwideturnoverorbelongstoalargegroup.Anincreaseisalsopossibleinordertotakeintoaccounttheillegalprofitsstemmingfromtheinfringement,if they can be estimated.Iftheabovestepsleadtoanamountexceedingthe10%statutorycap,thefineisreducedaccordingly.Thereafter, the Fining Guidelines take into account: (i) the applicability of the leniency discounts;and(ii)theinvolvedundertaking’sinabilitytopay,whichariseswhenthefinewouldirremediablyjeopardisethelattereconomicprofitability,potentiallydeterminingitsexit from the market.Finally, the ICA retains the possibility to depart from the Fining Guidelines when this is requiredbythespecificcircumstancesofthecase,e.g.,imposingasymbolicfine.ThefineimposedbytheICAshallbepaidwithin90daysfromthenotification/publicationof thedecision. Undertakingsmayalso request the ICA topay thefineby instalments,especiallyiftheyarefacingfinancialdifficulties.Oncethepaymentdeadlinehasexpired,thestatutoryinterestsapplyforthefirstsemesterofdelay.Ifthefineisnotpaidafterninemonths(90days+sixmonths),apenaltyinterestequalto10%ofthefineappliesforeachsemesterofdelay,whichsupersedesthestatutoryinterest.In practice, approximately 30 days after the expiration of the 90-day deadline, the ICA sends a letter informing the insolvent undertaking that its credit resulting from the unpaid finewillbetransferredtotheFiscalAgency(Agenzia delle Entrate), which will then initiate the enforcement procedure.


Pursuant to Art. 33 of the Competition Act, the ICA’s decisions may be appealed before the TAR Laziowithin60daysfromtheirnotificationorpublication.TheTAR Lazio may rulebothonfactualandlegalissues.Thejudgmentoffirstinstancemaybesubsequentlyappealed, on questions of law only, before the Consiglio di Stato, within 30 days from its notification,orthreemonthsfromitspublication.EachoftheTAR Lazio and Consiglio di Stato judgments are generally issued in approximately one year. Exceptionally, pursuant to Art. 396 of the Civil Procedure Code, the judgments rendered by the Consiglio di Stato may be appealed before the Supreme Court (“Corte di Cassazione”) for questions of jurisdiction or competence, as well as for revocation.



In the judicial review of the ICA’s decisions, the rules set forth in the Procedural Administrative Code (Legislative Decree No. 104/2010) apply. The claimant may request the application of interim measures, alleging that the execution of the ICA’s decision (including the sanction imposed) before the adoption of the finaljudgment would seriously and irreparably damage its position. The administrative courts typically adopt a rather strict approach vis-à-vis the application of interim measures. As far as the merits of the case are concerned, the judicial review consists in a control of legality of the appealed decision based on a potential lack of jurisdiction, violation of law, and/or misuse of power. Accordingly, even though the administrative courts may exercise effective control on the factual, legal and economic assessment carried out by the ICA, they cannot replace the latter analysis with a new one. This aspect has been repeatedly criticised, especially in light of the growing complexity of the ICA’s analysis, which often includes detailed economic evaluations.The control of legality carried out by the Italian administrative courts in connection with the ICA’s decisions has constantly been very thorough and has led to the annulment of various of the ICA’s decisions (recently, see the TAR Lazio judgments No. 12811, 12812, 12814 and 12816/2016, relating to Case I790 – Vendita diritti televisivi Serie A 2015-2018;andtheTAR Lazio judgments No. 4743 to 4758/2017, relating to Case I777 – Tassi sui mutui nelle province di Bolzano e Trento).Pursuant to Art. 134 of the Procedural Administrative Code, the administrative courts enjoy full jurisdictioninconnectionwith theassessmentof thefines imposedbytheICAand,thus, are entitled to annul or reduce them. Insomerecentcases,theadministrativecourtshave(significantly)reducedthesanctionslevied by the ICA. For instance, with its judgments No. 9050, 9057, 9062/2017, the TAR LazioreducedthefineimposedtocertainundertakingsinvolvedinCaseI783–Accordo tra operatori del settore vending;withitsjudgmentsNo.11885,11886and11887/2017,theTAR LazioreducedthefineimposedtoundertakingsinvolvedinCaseI780–Mercato del calcestruzzo in Veneto;andwithitsjudgmentsNo.11984,11985,11986and11987/2017,theTAR LazioreducedthefineimposedtoundertakingsinvolvedinCaseI784–Ecoambiente-Bando di gara per lo smaltimento dei rifiuti da raccolta differenziata. Similarly, with its judgment No. 4733/2017, the Consiglio di Stato reducedthefineimposedtotheundertakingsinvolved in Case I782 – Gare per servizi di bonifica e smaltimento di materiali inquinanti e/o pericolosi presso gli arsenali di Taranto, La Spezia ed Augusta.

Criminal sanctions

Italian law does not provide for any criminal sanctions in connection with antitrust infringements. However, certain forms of cartels might also constitute a criminal violation. For instance, bid-rigging is prohibited under Art. 353 of the Criminal Code, and market manipulation is sanctioned under Art. 501 of the Criminal Code.The recent ICA’s focus on bid-rigging cases is also the result of increased cooperation between the ICA, the Guardia di Finanza, the ANAC, and the Public Prosecutor. Based on public information, the above institutions heavily cooperated in connection with the pending investigation concerning an alleged bid-rigging in the public tender for the supply of facility management services (see Case I808). The investigation has led to the opening of three parallel proceedings by each of the ICA, the ANAC, and the Public Prosecutor of Rome.



Along this line, on January 10 and 11, 2018, the ICA signed two distinct cooperation agreements with each of the Public Prosecutor of Rome and the Public Prosecutor of Milan, respectively. The documents aim at enhancing cooperation between these public institutions, withaviewtomoreeffectivelydetectingandfightingcriminalandanticompetitivepracticesin the public sector. In particular, the documents established a cooperation framework that would allow the ICA and the Public Prosecutors to exchange information relating to administrative/criminal proceedingsinitiatedbyeachoftheaboveinstitutionsinamoreefficientandtimelymanner.The Public Prosecutors are entitled to send to the ICA (upon request or spontaneously) documents relating to a criminal investigation (including requests of supervision measures and indictments) that may be of relevance in connection with antitrust proceedings. In turn, the ICA may send to the Public Prosecutors – or may be requested to send – any documents (including, e.g., leniency statements) which might give rise to a criminal violation. In exchanging the above documents, the ICA and the Public Prosecutors need to protect theconfidentialnatureoftheinformation,andavoidanyconductthatmayjeopardisetheirrespective investigations.

Cross-border issues

The ICA actively cooperates with competition authorities of other jurisdictions (including, in particular, the EU Commission) and is a member of both the European Competition Network (ECN) and the International Competition Network (ICN). As outlined in public speeches by the ICA’s Chairman, coordination between European competition authorities is increasingly important, given the growing number of antitrust issues with a cross-border impact (see, e.g., the “Big Data”) and the need to ensure a common approach within the European Union.


In Italy, private antitrust enforcement is not yet fully developed, even though there appears to be an increasing awareness by the undertakings participating in a cartel of the risks to be exposed to individual or collective actions for damages. Follow-on actions are more frequent than stand-alone initiatives. In particular, the prior intervention of the ICA seems to serve as an incentive for potentially-harmed undertakings (or individuals) to initiate a private action.In this scenario, the adoption of the Damages Decree constitutes a major improvement, which will likely increase the number of follow-on damage actions. In particular, Art. 10 of the Damages Decree entitles any legal or natural persons who suffered damages from an antitrust infringement to initiate a private action. These actions fall within the mandatory jurisdiction of the Specialized Sections in Company Law of the Civil Court of the three main Italian judicial districts, namely, Milan, Rome and Naples, whicharecompetentonaterritorialbasis.Thejudgmentsoffirstinstancemaybeappealedbefore the competent Court of Appeals both on questions of facts and law, and, subsequently, before the Corte di Cassazione on questions of law only. Furthermore, the Damages Decree introduced certain rules to reduce the burden of proof ofplaintiffsinfollow-onactions.Inparticular,pursuanttoArt.7(1),theICA’sfindingofa cartel infringement (confirmedafter judicial review) isbindingoncivil courts incaseof damages actions, in relation to the nature of the infringement and its actual, personal,



temporal and territorial scope. This means that the claimants do not need to demonstrate the anticompetitive nature of the challenged conduct before the competent court. Moreover, Art. 14(2) of the Damages Decree established a rebuttable presumption of the existence of a direct causal link between a challenged cartel conduct and the alleged damages. Accordingly, a potential claimant does not need to prove that the cartel gave rise to damages. There is, in fact, a reversal of the burden of proof and it is up to the defendant(s) to show that the contested conduct did not produce any damages. Finally, the claimant has to demonstrate before the competent civil court that it actually suffered damages, and quantify them.Damages arising from an anticompetitive conduct are assessed based on general civil law provisions. This means that they are limited to the claimant’s actual loss and may also be awarded ex aequo et bono by the court, if a precise amount cannot be established.The Damages Decree recognised the concept of “passing on”, which may be alternatively used: (i) by the defendant, to object that the plaintiff passed on the overcharge resulting fromtheinfringementand, thus, that the latterdidnotsufferanydamages;or(ii)byanindirect purchaser claiming damages, to allege that the overcharges stemming from the illegal conduct were ultimately passed on him.Specificprovisionswerealsointroducedinconnectionwiththedisclosureofdocuments.The court may order the parties or third entities to disclose any relevant evidence. However, documents covered by legal privilege cannot be disclosed, and the court should ensure that anyconfidential information included in thedisclosed evidence is adequatelyprotected.TheordermayalsoconcerndocumentsincludedinanICA’sinvestigationfile.However,as previously noted, leniency statements, documents enclosed to such statements, and settlement submissions are fully protected and cannot be produced in a civil action.Finally, pursuant to Art. 8 of the Damages Decree, damages actions are subject to a limitation period of five years. Such period starts runningwhen the anticompetitive conduct hasceased and the claimant is – or, using reasonable care, should be – aware of: (i) the conduct anditsanticompetitivenature;(ii)theidentityoftheinfringingcompanies;and(iii)thefactthat the conduct at stake caused harm to the claimant. The limitation period is suspended during theICA’sproceedings,untiloneyearafter theadoptionof thefinal infringementdecision or the closing of the proceedings. In Italy, collective damage actions (based on the opt-in system) are also possible. In particular, Art. 140-bis of the Consumer Code entitles consumers to act, through associations or committees, to seek, inter alia, damages for certain breaches of contract or torts, including anticompetitive conduct. The provisions set forth in the Damages Decree also apply to class actions.Todate,noclassactionsrequestingantitrustdamageshavebeencertifiedbythecompetentcourts. However, based on public information, it appears that certain small business trade unions are promoting among their members (mostly, small hauliers) a collective action to claim damages from the truck manufacturers involved in the cartel sanctioned by the EU Commission (see the Decision of July 19, 2016, case AT.39824 – Trucks). Technically, the action does not qualify as a “class action”, which can be put forward by consumers only, but, given its relevance, may constitute one of thefirstexamples in Italyofacollectiveclaim brought by the alleged victims of a cartel.

Reform proposals

Currently, no major reforms are publicly being discussed in connection with cartel enforcement.



However, there is an ongoing debate among antitrust experts and practitioners on the possibilitytointroduceaspecificsettlementprocedure,similartothatadoptedattheEUlevel, which, in certain circumstances, might simplify the ICA’s administrative proceedings.Another possible development is linked to the EU Commission’s Proposal for a Directive providing Member State’s competition authorities with more effective enforcement powers (the so-called “ECN+ Directive”). The Proposal, presented in March 2017, is currently under discussion. If adopted, the ECN+ Directive would, inter alia, introduce common principles to harmonise leniency regimes in the EU Member States, as well as entitle national competition authorities to conduct inspections in premises other than the business premises,andenforcedecisionsimposingfinesinforeignEUMemberStates.The implementation of the ECN+ Directive would likely require a legislative amendment of certain provisions of the Competition Act.


Pedersoli Studio LegaleVia Monte di Pietà 15, 20121 – Milan, Italy

Tel: +39 02 303 051 / URL: www.pedersoli.it

Davide CacchioliTel: +39 02 303 051 / Email: [email protected] is Equity Partner and head of the competition department. He advises on all aspects of competition law, including merger-control cases, cartel investigations and proceedings concerning abuses of dominance. In addition, he advises on the Consumer Code’s matters and on unfair commercial practices. He received a law degree (J.D.), with Honours, from the University of Parma in 1994 and in 2004 he received a LL.M. in Corporate Law (with Honours) from the Northwestern University of Chicago. He joined the Italian Bar in 1999. He joined Pedersoli Studio Legale in 2005, and was a partner from 2006 and equity partner from 2008. He is a “recommended lawyer” for Competition in the main international legal directories (e.g., Chambers & Partners and The Legal 500 EMEA). According to his clients Davide, “has a complete knowledge of Italian and EU competition law and is able to provide brilliant solutions creating a huge added value” (Chambers Europe,2016).DavideisfluentinEnglish.

Alessandro BardanzelluTel: +39 02 303 051 / Email: [email protected]’s practice primarily focuses on Italian and EU competition law, including cartels, merger control and abuse of dominance. He represents Italian and foreign companies in proceedings before the Italian Antitrust Authority and the EU Commission and on appeal, respectively, before the Italian Administrative Courts and the EU Courts. He also has experience in EU Law, Sports Law, and Italian Consumer Code’s matters. Alessandro graduated cum laude from the University of Rome “La Sapienza” in 2005, and obtained two LL.M.s from the Leiden University in 2006, and the New YorkUniversitySchoolofLawin2014.AlessandrowasadmittedtotheBarin Italy in 2008. Before joining Pedersoli Studio Legale in 2016, he worked withthelawfirmClearyGottliebSteen&HamiltonLLP(Milanoffice)from2007until2016.AlessandroisanativeItalianspeaker,isfluentinEnglishand has a good knowledge of Spanish and German.


Lisa NojaTel: +39 02 303 051 / Email: [email protected] specialises in competition law and advises on domestic and EU matters relating to merger control, cartels, abuse of dominance and consumer protection. She represents Italian and foreign clients both in proceedings before the Italian Antitrust Authority and the EU Commission. She has also experience in M&A transactions and commercial agreements. Lisa Nojagraduated cum laude from the Cattolica University of Milan in 1998 and gained an LL.M. from the University of California (Davis) in 2001. She was admittedtotheItalianBarin2002andtotheNewYorkBarin2003.Shejoined Pedersoli Studio Legale from Pavia e Ansaldo in 2005.


JapanCatherine E. Palmer, Daiske Yoshida & Hiroki Kobayashi

Latham & Watkins


The “Act on Prohibition of Private Monopolization and Maintenance of Fair Trade” (Law No. 54 of 1947), commonly known as the “Antimonopoly Act” (the “AMA”) governs cartel enforcement in Japan. The AMA prohibits businesses from engaging in “unreasonable restraintoftrade”,whichisdefinedasbusinessactivitiesbywhichabusiness,“inconcertwith other enterprises, mutually restrict[ing] or conduct[ing] their business activities in such amannerastofix,maintainorincreaseprices,ortolimitproduction,technology,products,facilities or counterparties, thereby causing… a substantial restraint of competition in any particularfieldof trade”(AMAart.2,para.6). Thiscoversprice-fixingcartels (kakaku karuteru), bid-rigging in public projects (nyusatsu dango), and bid-rigging in private industry (juchu chosei). The AMA also prohibits businesses from engaging in “unfair trade practices”, including concerted refusals to deal (AMA art. 2, para. 9(i)). Additionally, the AMA prohibits businesses from entering into an international agreement or contract that constitutes an unreasonable restraint of trade or unfair trade practice (AMA art. 6).The Japan Fair Trade Commission (the “JFTC”) is the government agency responsible forenforcingtheAMA,andmayimposecease-and-desistordersandadministrativefines(called“surcharges”)onfirmsthatitfindstohaveengagedincartelconduct.Surchargesare calculated pursuant to a complex but rigid formula set forth in the AMA. Since 1 April 2015, appeals from JFTC orders are considered by the Tokyo District Court.Inaddition toadministrative sanctions,firmsand individuals facecriminalexposure forcartelviolations.ThefilingbytheJFTCofacriminalaccusationtotheProsecutorGeneralistheexclusivemeansbywhichacriminalprosecutionmaybebroughtagainstfirmsandindividuals for cartel violation of the AMA (AMA art. 96.1). If the JFTC determines through itsinvestigationthatacaseisparticularlyegregiousandhasasignificanteffectonpeople’slives,orthattheadministrativeremediesarenotsufficient,itmayfileacriminalaccusationwiththeProsecutorGeneral,whichmayresultinafineofuptoJPY500m(approximatelyUS$4.37m) forfirms,or imprisonmentofup tofiveyears andafineofup to JPY5m(approximatelyUS$43,700)forindividuals.SuchcriminalpenaltiesareinadditiontotheJFTC’s administrative sanctions.Firms may face civil damages claims from customers, but Japan does not have enhanced damages or class actions for antitrust claims. Firms may also be debarred from government contracts. Inaddition,directorsoffirmsthathavebeenfoundtohaveengagedincartelconductmaybesuedbyshareholdersforbreachoffiduciaryduty.The government sometimes exempts certain types of concerted behaviour. For example, in connection with the increase in the consumption tax in 2014, a law was passed to permit


Latham & Watkins Japan

specific typesofbusinesses to apply to the JFTC to setup“pass-oncartels” and“pricerepresentation cartels”, which would allow for uniform behaviour and fairness among competitors in responding to the tax increase.

Overview of investigative powers in Japan

Administrative investigationUnder article 47 of the AMA, the JFTC may conduct an investigation using the following measures:(1)orderingpersonstobeinterrogated,andgatheringtheiropinionsorreports;(2)orderingexpertwitnessestogiveopinions;(3)orderingpersonstosubmitbooksanddocuments,andtokeepsuchdocumentsattheJFTC;and(4)enteringandinspectingthefirm’spremisesoranyothernecessarysites.In practice, the JFTC typically starts a cartel investigation with simultaneous surprise inspections (called “on-site inspections”) on all suspected cartel members, including any leniency applicants. The JFTC sometimes sends out written questionnaires regarding industry practices, which may be followed by an on-site inspection. During the on-site inspection, the JFTC may seize any documents it considers to be relevant, and will make copiesofelectronicfiles.Suchinspectionscantakeplaceatafirm’sheadquarters,aswellas any offices, facilities or employee residences thatmay have relevantmaterials. TheJFTC will seize and keep original documents through the duration of the investigation, including any appeals. Firms may request to make copies of materials that are needed for business, either during the inspection or at the JFTC’s premises. Also, the JFTC usually requiresfirmstosubmitdetailedreportsaboutthebusinessoperationsandsalesdata.TheJFTC may interview witnesses during the on-site inspection.As discussed further below, the JFTC does not recognise the concept of attorney-client privilege or legal privilege as it exists in American or English law, and potentially may seize documents that contain attorney-client communications as part of its on-site inspection.In addition to seizing documents and materials, the JFTC may request individuals to submit to voluntary interviews after the on-site inspection. If an individual refuses, the JFTC can issue an order for a compulsory interview. In both voluntary and compulsory interviews, the interviewee does not have the right to have counsel present. At the end of an interview session, the JFTC may require the interviewee to sign a statement that it has prepared. In the past, the interviewee was given an opportunity to correct mistakes, such as typographical errors, but typically was not permitted to make substantive changes, and was not given an opportunity to consult with counsel before signing. The JFTC issued new guidelines effective as of January 2016 clarifying that witnesses are permitted to consult withcounselduringbreaks,andthattherecordshouldreflectanycorrectionssuggestedbywitnesses.Theintervieweeandthefirmmaynotreceiveacopyofthesignedstatement.Anindividual may be interviewed multiple times, though usually no more than eight hours per day excluding breaks. Employees of leniency applicants are subject to the same procedure.Article39oftheAMArequirestheJFTCtokeepconfidentialanyinformationithasseized,been provided, or created, including witness statements. However, prosecutors may use suchsignedstatementsasevidenceduringacriminaltrial,andafirmmayobtaincopiesof its employees’ statements in order to challenge or appeal an administrative order. In addition, “interested parties”, such as injured parties, may seek to review and obtain copies ofdocumentsfromtheappeal,butthefirmwillbegivenanopportunitytorequestredactionsofconfidentialbusinessinformation.



Criminal investigationCriminal investigations in Japan are governed by the Code of Criminal Procedure (Law No. 131 of 1948). The Prosecutor General may refer cases to a regional public prosecutor’s officetocommenceacriminalprosecutionbasedonthefilingofanaccusationbytheJFTC.Prior to commencing the prosecution, prosecutors will try to obtain information from witnesses on a voluntary basis as much as possible, including obtaining signed statements. This process may occur in tandem with the JFTC’s investigation. Prosecutors may also use written statements obtained by the JFTC as evidence.The prosecutors or policemen may arrest a suspect, typically with an arrest warrant. If it becomes necessary to detain a suspect, the prosecutor must obtain a pre-indictment detention order from a court within 48 hours following the arrest. The initial detention period is 10 days, subject to extension by another 10 days if necessary. The prosecutor must initiate the prosecution of the suspect within that period, or release the suspect. The prosecutor thereforewilltrytoextractaconfessionfromthesuspectwithinthefirst20days,butmayimmediately re-arrest the suspect on a different charge, to begin the interrogation process anew. Once a suspect has been arrested, he or she has the right to consult privately with counsel, and may assert the right against self-incrimination. However, counsel is usually not permitted to be present during the interrogation. Prosecutors may use signed statements obtained through interrogation as evidence at trial. The Criminal Procedure Law was amended on 24 May 2016, including requiring audio and video recording of interrogations in certain cases, but not for violations of the AMA. Also, the amendment has introduced the concept of “plea bargaining”, which will come into effect by June 2018.


New guidelines on administrative investigation proceduresPursuanttooneoftheprovisionsofthe2013AmendmentstotheAMA,theCabinetOfficeorganised an advisory panel to consider the JFTC’s administrative investigation procedures, considering procedures in other countries. Based on the advisory panel’s recommendations, the JFTC issued new guidelines to its administrative investigation procedures, effective as of 4 January 2016.The new guidelines require inspectors to be clear about the purpose and subject matter of the inspection, and expressly permit attorneys to be present at the on-site inspection. During voluntary witness interviews, the basic principle is that third persons including attorneys maynotbepresent,andwitnessesmaynotrecordortakenotes;however,inspectorshavethediscretion to permit interpreters and attorneys to be present or for witnesses to take notes, if inspectors judge that they would be helpful. Interviews should be no longer than eight hours per day, unless the interviewee agrees, and should not go past 10pm. Interviewees may take breaks as needed, and the inspectors may not restrict interviewees’ conduct during breaks, includingcontactingthirdpersons(includingattorneys)orcreatingnotes;also,thedurationofbreaksshouldbeofsufficientlengthtopermitconsultationwithattorneys.Witnessesarerequiredattheconclusionoftheinterviewstoaffixtheirstampstotheinterviewrecordsasprepared by the inspectors, but witnesses will be given an opportunity to correct any errors. Further, parties and witnesses (or their attorneys) may submit grievances regarding on-site inspectionsortheconductofinspectorsduringwitnessinterviews;suchgrievancesmustbesubmitted to the JFTC’s Secretariat within one week of the event.Consistent with the advisory panel’s recommendation, the guidelines do not recognise attorney-client privilege. However, it provides that there will be follow-up consideration



of the guidelines after two years, and that revisions (specifically including whether torecognise the attorney-client privilege) will be considered at that time if required.Criminal prosecutionsThe JFTC referred cartel matters for criminal prosecution in 2012 and 2013 in connection withthebearingscase,buttherewerenoofficialannouncementsofsuchreferralsin2014or 2015. In 2016, theTokyoDistrict Prosecutor’sOffice brought criminal proceedingsagainst10of11firmsthathadbeenfinedbytheJFTCforbid-rigginginconnectionwithTohokuEarthquakereconstructionwork.The10firmswerefoundguiltyandcriminallyfinedatotalofJPY1.38bn(approximatelyUS$12m)beforededuction(eachfirmcoulddeduct50%ofthecriminalfinefromtheJFTCsurcharge,whichtotalledapproximatelyJPY1.35bn(approximatelyUS$11.8m)).TheJFTChasnotannouncedanycriminalreferralsthus far in 2017. Enforcement dataAccordingtotheJFTC’sofficialstatisticsforfiscalyear2016(April2016throughMarch2017),theJFTCimposedadministrativeordersagainstatotalof51firmsin11separatecases,includingsurchargestotallingapproximatelyJPY9.14bn(approximatelyUS$80m).This was a slight increase compared to the previous year, after three years of continued decreases.Infiscalyear2015,therewereadministrativeordersagainstatotalof39firmsinnineseparatecases,includingsurchargestotallingapproximatelyJPY8.5bn(approximatelyUS$ 74m); and in fiscal year 2014, there were administrative orders against a total of132firmsin10separatecases, includingsurcharges totallingapproximatelyJPY17.1bn(approximatelyUS$150m).In the meantime, the number of leniency applications have steadily increased, from 61 applications in fiscal 2014 and 102 in fiscal 2015, to 124 in fiscal 2016. The averagesurchargeperfirminfiscal2016wasapproximatelyJPY286m(approximatelyUS$2.5m),comparedwithapproximatelyJPY275m(approximatelyUS$2.4m)infiscal2015.In 2017, the JFTC did not issue any decisions relating to an international investigation. In March 2017, the JFTC investigated and issued a warning to a Japanese subsidiary of aGermansecuritiesfirmforexchanging informationwith theJapanesesubsidiaryofanAmerican securities firm regarding customer inquiries, pricing and other informationrelating to European government bonds, using the chat function of a trading platform. The JFTC warned that such information exchanges could constitute violations of the AMA, but stopped short of issuing a cease-and-desist notice or imposing surcharges. In domestic cartel cases, the JFTC issued cease-and-desist and surcharge orders against: threebiddersforhybridopticalcommunicationandtransmissionequipmentinFebruary;fivebiddersfordigitalradioequipmentforfirerescueinFebruary;sixbiddersforhorticulturalconstruction inFebruary; abidder for specialisedVinylonproducts inMarch; and threewallpaper distributors in March. The JFTC conducted several on-site inspections in 2017. These included on-site inspections of:nineroadrepairfirmsinFebruaryforcolludingonasphaltprices;theTohoku(NortheastJapan)BureauoftheMinistryofAgricultureand31constructionfirmsinconnectionwithearthquake reconstructionwork inApril; suppliers of uniforms forNTT inApril; threecannedfoodmanufacturersinApril;andsevendepartmentstoresforallegedcollusionondelivery prices in July.


JFTC investigations are fairly quick, typically resulting in issuance of an administrative order



within12to18monthsafterthefirston-siteinspection.Thisspeedimposesagreatburdenonfirmsandtheirlawyers,whoarerequiredtodealwithalargevolumeofinformationina compressed time period, often with limited access to documents because they have been seized.ThesituationismadeevenmoredifficultiftheJFTChasinterviewedemployeesduring the on-site inspection, without any opportunity for such employees to consult with counsel before or during the interview. Although the JFTC permits counsel to be present at interviews conducted during on-site inspections, it will not wait for counsel to arrive. For voluntary interviews after the on-site inspections, the JFTC does not permit counsel to be present (although it now will permit interviewees to consult with counsel during breaks). If the interviews result in signed statements by employees acknowledging the cartel conduct, itobviouslyimpactsthefirm’sabilitytodefenditself.Thechallengeismultipliediftheconductisinternationalinscope,requiringfirmsandtheircounsel to consider strategy in other jurisdictions. Under the Japanese leniency system, firmsuptothefifthleniencyapplicantmayobtainareductiontothesurcharge,eveniftheyseek leniency after the on-site inspection. If the cartel was purely domestic, with no effect on othercountries,thenitmayseemsensibleforafirmthatissubjecttoanon-siteinspectiontoapply for leniency, provided that there are facts supporting such an application. However, if the client has operations in other countries and it is uncertain whether the cartel may have affected other countries, it is essential to consult with foreign counsel and carefully consider the effect such a leniency application could have in other jurisdictions. In some cases, even if the client has relatively small operations in other countries or it is possible but not certain that the cartel had an impact in those other countries, it may be advisable for the client to consider seeking leniency in some or all of these other countries, because the exposure could be greater to the client company and its employees. On the other hand, in some cases, it may be better to not submit a leniency application in Japan, in order to mitigate exposure elsewhere.Anothersignificantissueisthelimitonhowfirmsmayinteractwithcounsel.BecausetheJFTC is not prohibited from seizing attorney-client communications, there is some risk for attorneys in sending advice to clients in writing. Not permitting attorneys to participate in witnessinterviewsalsocreatesrisk,notonlyforthefirmsbutalsofortheindividuals,whomay not fully understand that they face criminal exposure in Japan or elsewhere based on their statements.Suchsystemicdisadvantages tofirmsthataresubject to investigationmaybesomewhatalleviated by the recent amendments to the AMA, especially giving an opportunity for parties to be heard before orders are issued, giving parties an opportunity to review the evidence before the hearing, changing the forum for administrative appeals from the JFTC to the Tokyo District Court and permitting the submission of new evidence in the appeal. Also, the new JFTC guidelines on administrative investigation procedures expressly permit witnesses to consult with counsel during breaks and to request corrections to witness statements, as well as to submit complaints to the JFTC on the conduct of inspectors. It remains to be seen how the amendments will work in practice, but these changes indicate that the JFTC is making an effort to address concerns regarding its procedures.


The JFTC instituted a leniency system in January 2006. There has been a total of 1,062 leniencyapplicationsfiledbetween its inceptionandMarch2017,witha sharp increasein applications since 2010, when the JFTC increased the maximum number of leniency



applicantspercase,andpermittedjointapplicationsbyfirmsinthesamecorporategroup.Afteraperiodoflowleniencyfilingsin2013and2014,itappearsthatfilingspickedupagainin2015.Nevertheless,thenumberofnewcasesresultingfromleniencyfilingshavebeen low: compared with 19 in 2012 and 12 in 2013, there were only four in 2014, seven in 2015, and nine in 2016. UnderJapan’ssystem,atotaloffivefirmsmayobtainleniencyfromadministrativefinesonagivenproduct.ThefirstfirmtoapplyforleniencybeforetheJFTCinvestigationbeginsis entitled to receive full immunity, and the second applicant receives a 50% reduction to thesurcharge.Thethird,fourthandfifthapplicantswillreceivea30%reduction.Afteracasehasbeeninitiated,amaximumofthreefirmsmayapply(uptoamaximumoffiveincluding applicants before the start of the case), and the amount of the leniency would be 30% for all of them.The JFTC is considering revising the surcharge system so that the amount of reduction orenhancementwillbebasedonthedegreeofeachfirm’scooperation,similartotheEUsystem. This arose from a concern that applicants are not incentivised to cooperate with the JFTC if the surcharges are solely based on a mechanical formula based on the order of filingleniencyapplications.The JFTC is also considering amending the surcharge system to be able to seek surcharges againstforeignfirmswithnosalesinJapan.AlthoughtheJFTChasattemptedtoimposesurchargesagainstforeignfirms,todateithasbeensuccessfulinpursuingJapanesefirms,whichmay be a further disincentive for firms (both Japanese and foreign) to apply forleniency. Leniency only applies to administrative sanctions, not to criminal or civil claims. However, the Ministry of Justice has stated that it would give due deference to the JFTC and notprosecutethefirstleniencyapplicant.If a JFTC investigation has not yet started, before applying for leniency, an applicant may anonymously ask the JFTC by telephone whether leniency is available for a particular product, and how many other applicants have already applied, if any. To obtain a marker, the applicant must fax to the JFTC a copy of “Form 1”, a one-page form that requires the identificationoftheapplicant,therelevantproduct,thetypeofconductbeingreported,andthe period that the conduct took place. Once a marker has been obtained, the applicant must submit “Form 2” within a period designated by the JFTC (usually two to three weeks), which requires more detailed information about the conduct and submission of supporting evidence. In certain cases, for example, if there is concern about the potential discoverability of the submission in other jurisdictions, the JFTC may permit the applicant to submit certain information orally.If the JFTC investigation has started, an applicant may apply for leniency by submitting “Form 3” within 20 days after the start of the investigation. Form 3 requires the submission of information similar to Form 2.Leniency may be denied if, for example, the applicant submitted false information, failed to provide requested information, prevented others from leaving the cartel, or continued to participate in the cartel after the investigation started.During the investigation, the JFTC does not publicly disclose the identity of the leniency applicants, and leniency applicants will be subjected to on-site inspections. Since 1 June 2016, the JFTC has published the identities of the leniency applicants and the percentage reduction received by each for all leniency applications received after that date, with respect to issued decisions.



TheJFTCisrequiredtomaintaintheconfidentialityofdocumentsrelatingtoitsinvestigation,including leniency submissions, during the course of an investigation.


The JFTC currently does not have a settlement process. The Diet passed an amendment in December 2016 instituting a settlement process for administrative settlement in antitrust casesotherthancartelcases,aspartoftheTrans-PacificPartnership(“TPP”)Agreement,but the amendment has not been implemented because of the United States’ withdrawal from the TPP. There is also no “amnesty plus”.


Article 45 of the AMA permits third parties to report suspected violations to the JFTC, which theJFTCis required todulyconsider. If the thirdparty’s reportwassufficientlydetailed and in writing, the JFTC must inform the third party whether it has taken steps in response to the report. The third party is not entitled to receive any reward for making a report.


The surcharge imposed by the JFTC is calculated by applying certain rates to the sales of the relevant product over the period of the violation, up to a maximum of three years. The applicable rates are set by Article 7-2 of the AMA, and vary depending on the type and size ofthefirm.Forunreasonablerestraintoftrade,theratesare:10%forlargemanufacturers;4%forsmallandmediummanufacturers;3%forlargeretailers;1.2%forsmallandmediumretailers;2%forlargewholesalers;and1%forsmallandmediumwholesalers.Theseratesmaybeadjustedupwardsordownwardsbasedoncertainfactors. If thefirmceasedtheconduct early and did not take a leading role, then the applicable rate is reduced by 20%. If thefirmrepeatedlyengagedin theconduct,or tooka leadingrole, theapplicablerateis increasedby50%;and if thefirmboth repeatedlyengaged in theconductand tookaleadingrole, theapplicablerateisdoubled. If theresultingamountis lessthanJPY1m(approximatelyUS$8,750),asurchargewillnotbeimposed.Inadditiontothesurcharge,firmsmaybesubjecttocease-and-desistordersoradministrativeguidance.Since the 2013 amendment, before issuing an administrative order, the JFTC has given partiespriorwrittennotificationandanadequateopportunitytoreviewthecasefile(andmake a copy of the party’s own documents), after which there has been a hearing presided byaJFTCofficer.Inthehearing,apartymaymakearguments(orallyorinwriting)andsubmit supplementary evidence. The JFTC issues its administrative order only after the hearing.


Once the JFTC has issued its order, a party may appeal it either based on the liability findings or the amount of the surcharge. Appeals are considered by theTokyoDistrictCourt.ThecourtisnotboundbytheJFTC’sfactualfindings,andpartiesarepermittedtosubmit new evidence.

Criminal sanctions

FirmsfaceamaximumcriminalfineofJPY500m(approximatelyUS$4.37m),andindividuals



faceuptofiveyears’imprisonmentandamaximumfineofJPY5m(approximatelyUS$43,700). If the term of imprisonment is no more than three years, the court may impose a suspendedsentence(i.e.,probation).Inmostwhite-collarcriminalcasesinJapan,afirst-time offender will receive a suspended sentence without any actual jail time. To date, no Japanese court has sentenced an individual to actual jail time for a cartel offence.Firmsthataresubjecttobothanadministrativesurchargeandacriminalfinewillreceivea reduction in the amount of the administrative surcharge, equivalent to one-half of the amountofthecriminalfine.

Cross-border issues

Onrareoccasions, theJFTChasissuedadministrativesanctionsagainstforeignfirmsforcartel conduct affecting the Japanese market. The most recent examples are a cease-and-desist orderagainstEuropeanfirmsintheMarine Hose case in 2008, a cease-and-desist order and surchargeordersagainstAsianfirmsintheCRT case in 2009, and a cease-and-desist order andsurchargeorderagainstaNorwegianshippingfirmintheAutomotive Shipping case in 2014. However, the JFTC has not been able to enforce such orders extraterritorially. In the MarineHosecase,fourEuropeanfirmsandoneJapanesefirmwerefoundtohaveviolatedtheAMA,buttheJapanesefirmwastheonlypartythattheJFTCdecidedtofine.IntheCRT case, a surcharge payment order was issued against Korean, Malaysian and Indonesian firms,buttheorderitselfacknowledgedthatthefirmshadnopresenceandnoauthorisedrepresentatives in Japan, so the JFTC could serve notice of the orders only by publication in Japan.TheAsianfirmsappealedtheorders,butwasdeniedbytheJFTCinMay2015,whichheldthattheparentsoftheforeignfirms(whichwerepresentinJapan)shouldberegardedas purchasers of the relevant products. In 2016, the Tokyo District Court upheld the JFTC’s finding,anddidnotreachthe issueofextraterritorialitybecauseitdeemedtheparents tobepresentinJapan. IntheAutoShippingcase,theNorwegianfirmdidnotmakepublicwhether it paid the surcharge. As discussed above, the JFTC is considering amending the AMAsothatitcanmoreeasilyseeksurchargesfromforeignfirms.The JFTC has cooperation agreements with foreign antitrust enforcers, and coordinates investigations with them, for example, to conduct simultaneous dawn raids. In connection with the Marine Hose and CRT cases mentioned above, as well as in certain automotive parts cases, the JFTC has publicly stated that it coordinated the investigations with the U.S. DOJ and the European Commission. In multijurisdictional leniency applications, the JFTC will ask the applicant for a waiver to permit it to discuss the case with other competition authorities. In addition, Japan has mutual legal assistance treaties (“MLAT”) with various countries, pursuant to which Japanese prosecutors may cooperate with foreign authorities to obtain evidence in criminal investigations.In 2017, the JFTC entered cooperation agreements with the competition authorities of Canada, Singapore and Mongolia. In October 2017, it held the first meeting withthe European Commission pursuant to their agreement in March 2016 to have closer cooperation, including exchanges of information obtained during investigations.


Japanese law permits private antitrust actions, but there have been few cases in this area. Japan is not a litigious society in general, and the lack of a class action system, limited discovery and limited damages, all tend to dissuade private actions.Onebasisforaprivateactionisarticle25oftheAMA,whichprovidesthatfirmsthathave violated the AMA shall indemnify injured parties. Such cases can only be brought in the



TokyoHighCourt,andonlyaftertheJFTChasinstructedthatitsdecisionisfinal.Insuchcases, liability is usually not an issue, because there is a rebuttable presumption that the JFTC’sfactualfindingsarecorrect. Instead,thelitigationisoverthescopeofdamages,for which the court may seek the JFTC’s opinion. Alternatively, an injured party may bring a general tort claim under article 709 of the Civil Code in any district court in Japan. To establish a claim under article 709, the plaintiff must prove the defendant’s intent or negligence, the amount of the damages, and causation.Any party that was injured by a violation of the AMA, including both direct and indirect purchasers, can bring a claim under either statute. But any incentive to pursue a private action in Japan is probably even smaller for indirect purchasers, because there is no class action system for antitrust violations, and the possible recovery may be too small for a single plaintiff to pursue. There is no “pass on” defence as such, but it may be taken into account in assessing the damages amount. There are no punitive damages in Japan.In addition, although not a “private enforcement” action as such, an increasing number of derivativeclaimsarefiledbyshareholdersoffirmsthathavebeenfoundtobeviolatingtheAMA.Suchclaimantsseektocollectdamagesfromthefirm’sdirectorsonbehalfofthefirm,andimprovementstothefirm’santitrustcompliance.Discovery is limited in Japan, but a private plaintiff may seek the court’s permission to obtainevidencefromlitigantsandthirdpartiesbymakingspecificdisclosurerequestsforrelevant documents that are known to exist. Also, an “interested party”, including injured parties,mayreviewandcopyfilingsfromappealproceedingsandcriminaltrials,subjecttoredaction of sensitive information.

Reform proposals

As discussed above, the JFTC has made substantial efforts in reforming its cartel enforcement system. It has issued new guidelines regarding administrative investigation procedures, which show considerable progress – for example, permitting witnesses to consult with counsel during breaks. In addition, although the attorney-client privilege remains to be recognised, the JFTC has indicated that it will revisit the question again in two years. Further, it is considering an amendment to the AMA so that it can determine the amount ofthesurchargedependingonthedegreeofafirm’scooperation,ratherthanamechanicalapproachbasedontheorderoffilingtheleniencyapplication,andtomakeiteasiertoseeksurchargesfromforeignfirmsbynotrestrictingthebasisofthesurchargestorevenuesinJapan over the previous three years. During 2017, the JFTC hosted meetings and invited public comments on possible amendments to the AMA.


Latham&WatkinsMarunouchi Building, 32nd Floor, 2-4-1 Marunouchi, Chiyoda-ku, Tokyo 100-6332, Japan

Tel: +81 3 6212 7800 / URL: www.lw.com

Catherine E. Palmer Tel: +852 2912 2626 / Email: [email protected],apartnerintheHongKongofficeofLatham&Watkins,isthefirm’sAsiaChairofLitigationandleadsthefirm’sAsiaCorporateRiskand Government Investigations Team. Ms. Palmer focuses her practice on the representation of multinational companies involved in criminal or regulatory investigations throughout the world, with an emphasis on global corruption/bribery investigations, global antitrust cartel investigations, environmental investigations and investigations related to US trade and economic sanction issues. Prior to joining Latham, Ms. Palmer served 12 years in the US Department of Justice as a senior federal prosecutor. During her service with the US Department of Justice, Ms. Palmer held various roles, including Special Assistant to the US Attorney General, Chief of the Criminal Division, as well as Assistant United States Attorney, in the US Attorney’s Office,EasternDistrictofNewYork.

Daiske YoshidaTel: +81 3 6212 7800 / Email: daiske.yoshida@lw.comDaiskeYoshidaisapartnerintheTokyoofficeofLatham&Watkins.Hehasextensive experience in cross-border litigation, arbitration and investigations in a wide range of subject areas, including intellectual property, antitrust, anticorruption, securities, accountant liability, and general commercial disputes. Mr.Yoshida represents clients inUS federal and state courts aswell as international arbitrations, and leads large-scale internal investigations in Japan, US and Europe involving antitrust, anticorruption and securities law issues. His experience includes cases both at the trial and appellate levels, including appeals before the US Supreme Court and the Second, Ninth and FederalCircuitCourtofAppeals.Mr.Yoshidaisqualifiedtopractisebeforethe NewYork Bar and in Japan asGaikokuho-Jimu-Bengoshi (registered foreignlawyer,NewYorklaw).HeisfluentinJapaneseandEnglish.


Hiroki Kobayashi Tel: +81 3 6212 7800 / Email: [email protected] Kobayashi is a partner of Latham & Watkins Gaikokuho JointEnterprise in Tokyo. His practice focuses on general corporate matters, including cross-border mergers and acquisitions, as well as project developmentandfinance.Mr.KobayashiadvisesonJapaneselegalissuesrelatingtoavarietyofareaswithinLatham&Watkins’transactionalpractice,including corporate law, employment, antitrust, bankruptcy and various government regulatory matters. Mr. Kobayashi is admitted to practise in JapanandNewYork.HeisamemberoftheDaiichiTokyoBarAssociationinJapanandtheNewYorkStateBarAssociation.


MalaysiaRaymond Yong & Penny Wong

Rahmat Lim & Partners


Section 4(1) of the Malaysian Competition Act 2010 (“Competition Act”) prohibits a horizontal agreement between enterprises insofar as it has the object or effect of significantlypreventing, restrictingordistortingcompetition inanymarket forgoodsorservices. “Horizontal agreements” are agreements between enterprises which operate on the same level of the production or distribution chain. For the purposes of the Competition Act, a parent and a subsidiary company is regarded as a single enterprise if, notwithstanding their separate legal entity, they form a single economic unit whereby the subsidiaries do not enjoy real autonomy in determining their actions on the market. As such, agreements entered into between a parent company and its subsidiary will not be subject to Section 4(1) of the Competition Act unless it can be shown that the subsidiary company has autonomous powers over its business operations. Horizontal agreements which have the following object are deemed anti-competitive, i.e. “hard-core restrictions” or “cartel infringements”, without having to show its anti-competitive effect: (a) fixing,directlyorindirectly,apurchaseorsellingpriceoranyothertradingconditions;(b) sharingmarketorsourcesofsupply;(c) limiting or controlling:

(i) production;(ii) marketoutletsormarketaccess;(iii)technicalortechnologicaldevelopment;or(iv)investment;or

(d) bid-rigging.A horizontal agreement which does not fall within any of the abovementioned categories will have to be assessed on a case-by-case basis to determine whether such agreement has a“significant”anti-competitiveeffect.Ingeneral,ifthecombinedmarketsharesofpartieswho are competitors do not exceed 20%, any agreement entered into between both parties isunlikelytobeconsideredtohavea“significant”anti-competitiveeffectonthemarketand will likely be permissible. The market share threshold would not apply to horizontal agreements which are deemed anti-competitive, i.e. “hard-core restrictions”. Similarly, a vertical agreement entered into between parties who are not competitors and whose individual market shares do not exceed 25% in the relevant market would also be unlikely tobeconsideredtohavea“significant”anti-competitiveeffectonthemarket.Notwithstanding the above, an enterprise may still relieve itself from liability for a cartel infringement if it is able to satisfy all of the following requirements:


Rahmat Lim & Partners Malaysia

(a) there are significant identifiable technological, efficiency or social benefits directlyarisingfromtheagreement;

(b) thebenefitscouldnotreasonablyhavebeenprovidedbythepartiestotheagreementwithout the agreement having the effect of preventing, restricting or distorting competition;

(c) thedetrimentaleffectoftheagreementoncompetitionisproportionatetothebenefitsprovided;and

(d) the agreement does not allow the enterprise concerned to eliminate competition completely in respect of a substantial part of the goods or services.

Theonusliesontheenterprisetoprovethatalltherequirementsabovehavebeensatisfiedandthatthebenefitshavebeenpassedontotheconsumers.The relevant authority overseeing issues falling within the ambit of the Competition Act is the Malaysia Competition Commission (“MyCC”). The MyCC derives its powers from the Malaysian Competition Commission Act 2010 (“Competition Commission Act”) in order to carry out its functions such as to implement and to enforce the provisions of the Competition Act, amongst others. However, MyCC is not the only authority overseeing competition issues in Malaysia. There arealsoseparatecompetitionlawprovisionsunderthefollowingsectorspecificlegislations:(a) theCommunicationsandMultimediaAct1998;(b) theEnergyCommissionAct2001;(c) the Petroleum Development Act 1974 and the Petroleum Regulations 1974 insofar as the

commercial activities are directly in connection with upstream operations comprising activities of exploring, exploiting, winning and obtaining petroleum whether onshore oroffshoreofMalaysia;and

(d) the Malaysian Aviation Commission Act 2015.Any commercial activity falling under the aforementioned legislations is exempted from theCompetitionActandinstead,wouldbegovernedbythesector-specificregulators.The following activities are also not subject to the provisions of the Competition Act:(a) an agreement or conduct to the extent to which it is engaged in order to comply with a

legislativerequirement;(b) collective bargaining activities or collective agreements in respect of employment

termsandconditionsandwhicharenegotiatedorconcludedbetweenparties;and(c) an enterprise entrusted with the operation of services of general economic interest or

having the character of a revenue-producing monopoly.

Overview of investigative powers in Malaysia

The MyCC has wide investigative powers under the Competition Act and the Competition Commission Act. The MyCC has the power to commence an investigation on an enterprise either:(a) on its own initiative where it has reason to suspect that such enterprise has infringed

anyprohibitionundertheCompetitionAct;or(b) upon receiving a complaint by a person to carry out an investigation on any enterprise,

agreement or conduct.Incarryingout its investigation,aMyCCofficerwillhavealloranyofthepowersofapoliceofficerinrelationtoapoliceinvestigationinseizablecasesasprovidedforundertheMalaysian Criminal Procedure Code. The wide investigative powers of the MyCC, as set out in the Competition Act, include:



(a) Power to require provision of information: The MyCC may request in writing any information or document which is relevant to the performance of its powers and functions. The MyCC may also request an individual to provide a statement explaining any information or document required by the MyCC. It is an offence to intentionally fail to disclose or omit relevant information or provide false and misleading information to the MyCC.

(b) Power to retain documents: The MyCC may take and retain any document for a duration which it deems necessary.

(c) Power to access records, etc.: The MyCC may require access to a person’s records, books, accounts or other things necessary for the purposes of carrying out its functions under the Competition Act. Failure to allow such access to the MyCC and any attempt to destroy, conceal, mutilate or alter any such records are considered as offences under the Competition Act.

(d) Power to search and seize with warrant: The MyCC may obtain a warrant to enter the premises to search and seize any record, book, account, document, computerised data or any other thing which contains or is reasonably suspected to contain information of an infringement or offence, including entry by force at any reasonable time by day or night.Whereitisnotpracticabletoremoveanyrecord,book,account,documentorcomputerised data, the MyCC is authorised to seal, by any means, such information at the premises or container in which it is found. It is an offence to break, tamper with or damage such seal or to remove any such sealed records from the premises.

(e) Power to search and seize without warrant: If the MyCC has reasonable cause to believe that, as a result of the delay in obtaining the warrant, the investigation would be adversely affected or that evidence is likely to be tampered with, removed, damaged or destroyed, the MyCC may enter the premises without a warrant. A refusal to provide the MyCC entry to the premises or any attempt to assault, obstruct, hinder or delay such entry also constitutes an offence under the Competition Act.

(f) Power to access computerised data: The MyCC may require access to computerised data, whether stored in a computer or otherwise. The necessary password, encryption code, decryption code, software or hardware to access such data will need to be provided to the MyCC.

Notwithstanding the wide investigative powers of the MyCC as set out above, the CompetitionAct prohibits any usage or disclosure of confidential information obtainedunder the Competition Act unless, amongst others, the disclosure is necessary for the MyCC to carry out its functions or is made with the consent of the person who provided the information. “Confidential information” includes any trade, business or industrialinformation that belongs to any person which has economic value and is not generally made public. Any individual who is found to have made an unauthorised disclosure or usage of suchconfidentialinformationwouldhavecommittedanoffenceundertheCompetitionAct.Further, any communication between a professional legal adviser and his client is covered under legal professional privilege and will not be required to be disclosed to the MyCC. The legal professional privilege only extends to communication between the enterprise and its external legal adviser and does not include communication with its in-house legal counsel.


TheMyCChadissuedfiveinfringementdecisionsforabreachofaSection4prohibitionundertheCompetitionAct,fourofwhichwereinrelationtoaprice-fixingcartel,sincetheCompetition Act came into force on 1 January 2012.



In February 2017, the MyCC had issued a proposed decision against the General Insurance Association of Malaysia (“PIAM”) and 22 of its members for being parties to an anti-competitiveagreement tofix thediscounts for tradeparts at25%for sixvehiclemakes(namelyProton,Perodua,Nissan,Toyota,HondaandNaza)andat15%,specificallyfortheProtonSagaBLMmodel.TheMyCCalsofoundthatPIAMhadattemptedtofixthelabour hourly rates for workshops under the Approved Repairers Scheme at RM30 per hour. Thefinancial penalty thatwasproposedby theMyCCamounted toRM213.45million,whichwillbethehighestfinancialpenaltyimposedbytheMyCCiftheproposeddecisionisupheld.TheMyCChasnotissueditsfinaldecisionatthedatethisarticlewaswritten.The MyCC also carried out an investigation on a group of sand operators in Kelantan for allegedlyfixingthepricesofsandforcertainterritoriesinKelantan.However,asthesandoperators undertook to, amongst others, rescind the issued price list of sand, terminate any other anti-competitive behaviour in relation to the price list and to issue a press release of suchundertaking invariousmajornewspapers, theMyCCdidnot impose anyfinancialpenalties on the sand operators. To date, there have not been any reports or press statements on dawn raids being carried out by the MyCC.


Based on the recent investigations and decisions issued by the MyCC, the focus of the MyCC’s enforcement appears to be towards anti-competitive agreements, as opposed to abuse of a dominant position. Since the Competition Act came into force on 1 January 2012,anumberoftradeassociationshavebeeninvestigatedandfinedbytheMyCCforexchanging sensitive information during its meetings, including fixing the prices of itsproducts or services, the most recent being the proposed decision issued against PIAM and 22 of its members. Such investigations are often initiated on MyCC’s own accord after the trade associations issue a public statement or a press release announcing a decision amongst the members to increase prices.


In Malaysia, the investigation and decision-making process are both executed by the MyCC. The investigation will be carried out by the Enforcement Division whereas the decision on whether or not there is an infringement will be made by the commission members of the MyCC comprising individuals with experience and knowledge in matters relating to business, industry or economics. ThereisnospecificlimitationperiodfortheMyCCtocommenceaninvestigationagainstanenterprise or for the MyCC to arrive at its decision. Upon completion of the investigation, theMyCCwillfirstissueaproposeddecisiontotheenterprisesettingoutthegroundsfortheMyCC’sfindings. Upon receiving theproposeddecision, the enterprise isgivenanopportunity to submit a written and, if it chooses to do so, an oral representation to the MyCC. The proposed decision will not be publicly available and will only be made known to the enterprise being investigated. Upon receiving the enterprise’s representations, the MyCCwill thendecidewhether tomakeafindingof infringementor afindingofnon-infringement. As set out earlier, the MyCC has wide investigative powers under the Competition Act, akintothatofapoliceofficerundertheCriminalProcedureCode.Assuch,anyattempttoobstruct the MyCC’s investigation would be a criminal offence.




The Competition Act has a leniency regime whereby a reduction of up to 100% of any penalties imposed can be granted to an enterprise which has:(a) admitteditsinvolvementinacartelinfringement;and(b) providedinformationoranotherformofco-operationtotheMyCCwhichsignificantly

assistedorislikelytosignificantlyassistintheidentificationorinvestigationofanyfindingofaninfringementbyanenterprise.

The percentage of reduction that can be granted to the enterprise would differ depending on:(a) whether theenterprisewas thefirst tobring thesuspectedcartel infringement to the

attentionoftheMyCC;(b) the stage in the investigation at which:

(i) aninvolvementintheinfringementwasadmitted;or(ii) any information or other co-operation that was provided.

However, the granting of leniency does not absolve the enterprise from any other legal consequences, such as a civil proceeding being brought against the enterprise by any person who has suffered loss or damages directly as a result of the infringement. To date, there have not been any public reports that an enterprise has been granted leniency by the MyCC. Intheeventleniencyisavailableinaparticularsituation,theLeniencyOfficerappointedbytheMyCCwillprovidea“marker”tothefirstapplicantinordertopreserveitsprioritywhile the application is being prepared. The function of the marker is essentially to indicate the priority, date and time, as well as the subject matter of the application. The marker will remain valid for a period of 30 days, during which period the applicant is required to complete its application by providing information such as, amongst others, a detailed description of the suspected infringement and any documentary evidence of the cartel conduct, e.g. minutes or notes of meetings, price lists and agreements. Uponreceivingaleniencyapplication,theMyCCwillfirstgranta“conditionalleniency”wherebytheapplicantisrequiredtofulfilcertainconditions. ThegrantofleniencywillonlybemadeunconditionalaftertheapplicanthasfulfilledalltheconditionsimposedbytheMyCCandtheMyCChasmadeaninfringementfindingonthecartelconduct.All leniency applicants are required to enter into a written conditional leniency agreement with the MyCC which sets out the following conditions:(a) admissionoftheapplicant’sinvolvementinthecartelconductandprovidingsignificant

assistancetotheMyCC’sinvestigation;(b) the applicant to cease and desist immediately from engaging in any further infringing

activitiesunlessotherwiserequiredbytheMyCC;(c) fullandhonestdisclosurebytheapplicant;(d) the applicant provides continuous co-operation to the MyCC in the course of its

investigation;(e) the applicant agrees not to destroy any relevant document which may assist the MyCC

initsinvestigation;(f) theapplicantshouldnotharassorintimidateotherstoparticipateinthecartel;and(g) the applicant undertakes not to disclose any aspect of its leniency application.TheMyCChastherighttowithdrawthegrantofleniencyshouldtheapplicantfailtofulfilany of the abovementioned conditions. Failure to comply with the conditions set out above would result in the conditional grant of leniency being revoked by the MyCC. Even if the grant of leniency has been made unconditional, the MyCC reserves the right to revoke such



leniency if it subsequently discovers that the applicant has failed to comply with any of the conditions required.


There is currently no administrative settlement of cases in Malaysia. However, the Competition Act allows for the MyCC to accept an undertaking from an enterprise where the enterprise agrees to do or to refrain from a particular conduct. Upon accepting such undertaking from the enterprise, the MyCC will close the investigation without making an infringementfindingandnofinancialpenaltieswillbeimposedontheenterprise.In 2017, MyCC had accepted an undertaking by a group of sand operators (as discussed earlier)forallegedlyfixingthepricesofsandincertainterritoriesinKelantan.Asaresult,nofindingofinfringementwasmadeontheseenterprisesandnofinancialpenaltieswereimposed. All undertakings signed between the MyCC and the enterprises are publicly available documents.


The MyCC can commence an investigation upon receiving a complaint on any enterprise, agreement or conduct that has infringed the Competition Act. However, under the MyCC’s Guidelines on Complaints Procedure, only complaints in relation to alleged infringing activities after the Competition Act came into force on 1 January 2012 will be considered. A complaint can be lodged either via a hard copy Complaint Form which can be downloaded from the MyCC’s website or via an e-Complaint. The Complaint Form should include information about the complainant, the infringing party and the alleged infringing activity being complained of and should be supported with any relevant information and documents. Uponreceivingacomplaint, theMyCCwillfirstascertainwhethersuchcomplaint fallswithin its powers under the Competition Act. If it does, the MyCC will then take into account its strategic priorities before launching a formal investigation. A formal investigation will only be conducted if the MyCC has reasonable grounds for suspecting that there is an infringement of the Competition Act.


Intheeventofaninfringementfinding,theMyCCmayrequiretheenterprisetocarryoutany or both of the following:(a) pay afinancial penaltyup to amaximumof10%of theworldwide turnoverof the

enterpriseovertheperiodduringwhichtheinfringementoccurred;or(b) comply with any directions or steps as deemed appropriate by the MyCC. Indeterminingtheamountoffinancialpenaltytobeimposedontheinfringingenterprise,the MyCC will take into consideration the following factors:(a) theseriousness(gravity)oftheinfringement;(b) turnoverofthemarketinvolved;(c) durationoftheinfringement;(d) impactoftheinfringement;(e) degreeoffault(negligentorintentional);(f) roleoftheenterpriseintheinfringement;(g) recidivism;(h) existenceofacomplianceprogramme;and(i) leveloffinancialpenaltiesimposedinsimilarcases.



Further, the MyCC will also consider whether there are any aggravating or mitigating factors whichwouldincreaseorreducetheamountoffinancialpenaltiesimposed.Forexample,thefinancialpenaltiesimposedwillbeincreasediftheenterpriseistheleaderorinstigatorof the infringing activity and if the enterprise has not provided any co-operation to the MyCC during its investigation. On the contrary, if the enterprise only played a minor role in the infringing activity (especially where its participation is due to threats or coercion) and the enterprise has an existing corporate compliance programme, these factors will be taken intoconsiderationtopotentiallyreducetheamountoffinesimposed.Partieswillfirstbeinformedofthefinancialpenaltiesorremedialactionsimposedonitwhen the MyCC issues its proposed decision. Parties will then be given an opportunity to appeal any penalties or remedial actions before members of the MyCC.


Anenterprisewhichisdissatisfiedwiththedecisionof theMyCCcansubmitanappealto the CAT. In submitting its notice of appeal, the enterprise is to state, in summary, the substance of the decision appealed against. The CAT has the power to:(a) remitthematterbacktotheMyCC;(b) impose,revokeorvarytheamountofthefinancialpenaltyimposedbytheMyCC;(c) givesuchdirectionastheMyCCcouldhavegiven;or(d) make any other decision which the MyCC could have made. IntheeventtheMyCChasimposedafinancialpenaltyontheenterprise,theenterpriseisallowed to apply for a stay of the MyCC’s decision pending appeal, subject to the CAT’s approval. The powers of the CAT to hear an appeal is similar to the powers of a subordinate court with regards to the enforcement of attendance of witnesses, hearing evidence on oath or affirmationaswellaspunishmentforcontempt.The latest decision issued by the CAT was to dismiss the appeal by Prompt Dynamics Sdn. Bhd.,acontainerdepotoperatoragainsttheMyCC’sdecisioninfindingthatithadengagedin price-cartel activities. The MyCC found that a number of container depot operators in PenanghadissuednoticesandflyerstoincreasethedepotgatechargesfromRM5toRM25.TheCATfoundnoreasontodisturbtheMyCC’sfindingsanduphelditsdecisiontoimposeafinancialpenaltyofRM152,042.In July 2017, My E.G. Services Berhad (“MyEG”) had also lodged an appeal with the CAT tooverturntheMyCC’sdecisionforfindingthatMyEGhadabuseditsdominantpositionfor providing different treatment for equivalent transactions in the provision of mandatory insurances for the renewal of foreign workers permit. As of 20 December 2017, the CAT has not issued its decision on this matter.

Criminal sanctions

There are currently no criminal sanctions for a cartel infringement. However, there are criminal liabilities if the enterprise or an individual commits an offence under the Competition Act, such as obstructing the MyCC’s investigation. Ifabodycorporateisfoundtohavecommittedanoffence,itmaybeliabletoafinenotexceedingRM5millionandforasecondorsubsequentoffence,afinenotexceedingRM10million. If an individual is found to have committed an offence, such individual may be liabletoafinenotexceedingRM1millionorimprisonmentforatermnotexceedingfive



yearsorbothandforasecondorsubsequentoffence,afinenotexceedingRM2millionorimprisonmentforatermnotexceedingfiveyearsorboth.

Cross-border issues

The Competition Act only applies to commercial activities outside of Malaysia if it has an effect on competition in any market in Malaysia. The MyCC does not have jurisdiction to investigate an enterprise which committed a cartel outside of Malaysia if it does not impact the Malaysian market.


Under the Competition Act, a person who has suffered any loss or damages directly as a result of the infringement by the enterprise is entitled to bring a right of action for relief in a civil proceeding in a court. Such action can be brought by any person regardless of whether such person dealt directly or indirectly with the infringing enterprise. As of 20 December 2017, there has not been any publicly available information on any private action that has been commenced by any person in the courts of Malaysia.


RahmatLim&PartnersSuite 33.01, The Gardens North Tower, Mid Valley City, Lingkaran Syed Putra, 59200 Kuala Lumpur, Malaysia

Tel: +603 2299 3888 / Fax: +603 2287 1278 / URL: www.rahmatlim.com

Raymond YongTel: +603 2299 3810 / Email: [email protected] has been actively involved in the area of competition law since the introduction of the Competition Act 2010 and is recognised as a recommended competition lawyer in Malaysia by the Global Competition Review. He is also recognised as a leading individual in the antitrust and competition practice area by The Legal 500.Raymond regularly deals with the Malaysia Competition Commission (“MyCC”) including representing clients in investigations, lodgement of complaints and leniency applications. He has also appeared before the Competition Appeal Tribunal and advised a trade association on an exemption application to the MyCC. Raymond has assisted clients extensively in various commercial arrangements, alliances, joint ventures and mergers and acquisitions. His clients include multi-national corporations, government-linked companies and trade associations from a range of sectors such as financial services,fast-moving consumer goods, building materials, construction, hospitality, property, plantation, automotive, pharmaceutical and healthcare.

Penny WongTel: +603 2299 3915 / Email: [email protected] mainly advises on competition law and data protection matters. Her experience includes advising on compliance with the Competition Act 2010, providing competition law training, review of business practices and agreements and drafting competition compliance and dawn raid manuals. She has also been actively involved in investigations by the Malaysia Competition Commission and appeared before the Competition Appeal Tribunal. Her clients include government-linked companies and multi-national companies in various sectors such as pharmaceutical, property, insurance and hospitality. Apart from practising competition law, she has also been actively involved in various personal data protection compliance programmes for clients, including reviewing business practices, providing advice on personal data protection related matters, drafting relevant documentations, as well as compliance manuals.



New ZealandJennifer Hambleton & Oliver Meech

MinterEllisonRuddWatts


New Zealand’s Commerce Act 1986 (the Act) prohibits a person from entering into a contract or arrangement, or arriving at an understanding, that contains a cartel provision and prohibits giving effect to a cartel provision. A cartel provision is a provision that has the purpose, effect, or likely effect of one or more of the following in relation to the supply or acquisition of goods in New Zealand:• pricefixing;• restrictingoutput;and/or• market allocating.The New Zealand Commerce Commission (NZCC) is the independent statutory authority that administers the Act. The NZCC has the power to investigate potential breaches of the cartel prohibition and can initiate civil proceedings in the High Court for civil pecuniary penalties and other orders, such as banning orders, where it believes parties have engaged in cartel conduct. The NZCC has no general power to determine a breach of the Act or impose penalties. Such is the role of the courts. Damages claims can also be brought for loss suffered by affected persons. New Zealand’s law in relation to cartel conduct was, after a drawn-out legislative process, amended with effect from August 2017. The cartel prohibition described above replaced thepreviousprohibitioninrelationtopricefixingaspreviouslydefined.Otherkeychangesinclude:• the introduction of new exceptions to the cartel prohibition for collaborative activities

(replacing the old ‘joint venture’ exemption), vertical supply contracts, and joint buying andpromotionagreements;and

• a new clearance regime for collaborative activities.The new cartel prohibition applies immediately to all contracts entered into after 15 August 2017. However, transitional provisions provide for a nine-month grace period during which the NZCC cannot enforce the cartel prohibition in relation to pre-15 August contracts. That grace period will end on 15 May 2018.

Overview of investigative powers in New Zealand

The NZCC can initiate an investigation based on its own information, as a result of a complaint, or an application for immunity pursuant to its Cartel Leniency and/or Cooperation Policies. Investigations of cartel conduct in New Zealand may also follow the announcement of cartel investigations or enforcement actions in other jurisdictions,


MinterEllisonRuddWatts New Zealand

although most recently the NZCC’s cartel enforcement activity appears to have been focused on domestic cartels. Power to obtain documents and evidenceUnder section 98 of the Act, the NZCC has broad powers to:• requiretheproductionofspecificdocumentsorinformation;and/or• require individuals to attend an interview with the NZCC to give evidence (either orally

or in writing) and produce documents, if it considers it necessary or desirable to do so for the purposes of carrying out its functions and exercising its powers.While theNZCC’s powers are very broad, the courts have recognised that they are notunlimited. The Supreme Court in AstraZeneca Ltd v Commerce Commission [2009] NZSC 92confirmed that a section98noticemust relate to a subjectmatter that theNZCChasjurisdiction to investigate. In particular, the Court held that the NZCC does not have the power to use a section 98 notice to “check whether it has the necessary power by reference to somethingitmaydiscoverona‘fishingexpedition’pursuanttothenotice”.Inthatcase,theSupreme Court found that the section 98 notice was invalid because an exemption from the restrictive trade practices sections of the Act applied to the conduct that it was investigating. A person cannot refuse to comply with a section 98 notice on the ground that to do so might tend to incriminate them. However, statements made to the NZCC by an individual in a compulsory interview cannot be used against them in criminal proceedings or proceedings for pecuniary penalties under the Act, except in the case of perjury and offences relating to the obstruction of the NZCC’s exercise of its investigatory powers. The statements can, however, be used against the individual’s employer. A recipient of a section 98 notice is not required to produce documents that are legally privileged. Power to obtain a search warrantUnder section 98A of the Act, the NZCC can apply to a Judge of the District Court or High Court,oranotherissuingofficer,forasearchwarrantto,amongstotherthings:• carryoutunannouncedsearchesofbusinessandresidentialpremises;• searchcomputerhard-drivesusingforensicITtools;and• seize documents and other evidence. Theissuingofficermustbesatisfiedthattherearereasonablegroundstobelievethatthesearch warrant is necessary for the purpose of ascertaining whether a person has engaged in or is engaging in conduct that constitutes or may constitute a contravention of the Act. The NZCC’s power to obtain a search warrant was successfully challenged in Tranz Rail Ltd v District Court at Wellington [2002] 3 NZLR 780 (CA). In that case, the Court of Appeal held that a section 98A warrant allowing the NZCC to enter the premises of Tranz Rail and seize material as part of an investigation into alleged predatory pricing was invalid because the NZCC could have issued a section 98 notice requiring Tranz Rail to provide the relevant information. The NZCC’s argument that it would have allowed the company time to destroy potentially relevant material was found to be unwarranted because informal discussions had already taken place.The NZCC does not have any general surveillance powers and cannot obtain a warrant for the use of surveillance and interception devices. In New Zealand, these powers are only available for serious criminal offences.Sanctions for non-complianceIn New Zealand, it is a criminal offence to:



• without reasonable excuse, refuse or fail to comply with a notice requiring the provision ofdocumentsorinformationortoappearbeforetheNZCC;

• knowingly provide the NZCC with false or misleading documents, information or evidence;

• inthecontextofacompulsoryinterview,refusetotakeanoathoraffirmation,answeranyquestionorproduceanydocument;or

• resist, obstruct or delay a NZCC employee acting pursuant to a search warrant. A person who commits any of these offences is liable on conviction to, in the case of an individual,afineofuptoNZ$100,000andinthecaseofabodycorporate,afineofuptoNZ$300,000. The finemaximawas increased tenfold from the previousmaxima,witheffect from August 2017 in the last round of legislative changes to the Act.These sanctions have been used, though relatively rarely:• in2005,KoppersArchWoodProtectionand its formergeneralmanagerwerefined

NZ$25,000andNZ$8,000,respectivelyforfailingtoproducedocumentswhenrequiredtodoso;

• in 2006, Osmose, a participant in the same wood preservatives cartel as Koppers, was finedNZ$13,000afteritpleadedguiltytoachargeoffailingtoprovidedocuments;and

• in 2008, Aerolineas Argentinas pleaded guilty to a charge of failing to comply with a statutorynoticebyprovidingtherequireddocumentsfivemonthsaftertheduedateandwasfinedNZ$11,000.

Thefines in each of these caseswere under the old, and significantly lower,maximumpenalties.Breach of the cartel prohibition itself is not a criminal offence in New Zealand, though civil pecuniary penalties can be imposed on both companies and individuals.


Cartel investigation and prosecution activity for the NZCC was, in 2017, at a lower level than in previous years, with the NZCC focused for much of the year on concluding its long-standing cases in the real estate and livestock industries. The NZCC does not publish information about its active investigations. Notably, however, on 2 November 2017 the High Court dismissed the NZCC’s proceedings against Lodge Real Estate Limited, Monarch Real Estate Limited and two individuals for allegedpricefixingrelatingtoTradeMe’slistingfees.TheNZCCallegedthatagroupofagencies agreed to all withdraw their standard listings from Trade Me and that any Trade Me listings in the future would be “vendor funded”, meaning that it would be funded by the vendor and/or the particular real estate agent. It is rare for the NZCC to lose a cartel case. While the High Court was persuaded that the real estate agencies had entered into anarrangement or understanding to withdraw their standard listings from Trade Me and move to “vendor funding” of Trade Me’s “per listing” fees, the Court held that the arrangement didnothave thepurposeoreffectoffixing,controllingormaintaining thepriceof realestate sales/commissions or advertising services. In effect, the proven arrangement or understanding was that the agencies would not absorb TradeMe’s increased listing fees – but there was no proven arrangement or understanding as to what the agencies would themselves charge to vendors for TradeMe listings. Thecase is significantbecause,while theNZCCoriginallyfiledproceedingsagainst13national and regional real estate agencies, only two, Lodge and Monarch, defended the proceedings. The remaining agencies admitted that they had contravened the Act, entered



into settlement agreements with the NZCC and were subsequently ordered to pay pecuniary penaltiestotallingmorethanNZ$18.97million.Thefollowingpenaltieswereorderedbythe High Court in 2017 as part of these settlements: • OnlineRealtyLimited (trading under theRayWhite banner)was ordered to pay a

penaltyofNZ$1.05millioninAugust2017;and• PropertyBrokersLimitedwas ordered to pay a penalty ofNZ$1.45million and its

directorwasorderedtopayapenaltyofNZ$50,000inApril2017.The NZCC has announced its intention to appeal the High Court’s decision. That appeal will likely be heard in 2018. The year 2017 also saw the conclusion of the NZCC’s long-standing case against members of the livestock industry for price fixing conduct arising from the livestock industry’sresponsetotheintroductionoftheNationalAnimalIdentificationandTracingAct2012.In October, Elders Rural Holdings reached a settlement agreement with the NZCC and admitteditwasinvolvedinthreeanti-competitiveagreementswithPGGWrightsonLimited,Rural Livestock Limited, and other members of the New Zealand Stock and Station Agents’ Association. However, as Elders had ceased trading in July 2014 when it sold its livestock business to an unrelated third party, Elders and the NZCC agreed to declarations and Elders’ Australianparentcompany,EldersLimited,agreedtopayNZ$200,000towardstheNZCC’sinvestigationcosts. PGGWrightsonandRuralLivestockwerepreviouslyfinedNZ$2.7millionandNZ$475,000,respectively,fortheconduct.TheNZCCalsofiledproceedingsintheHighCourtinDecember2017againstGEAMilfosInternational Limited, a herd management and milk testing company, for alleged cartel conduct between mid-2012 and September 2014. The NZCC alleges that Milfos and its competitor agreed to use a common quote calculator to generate quotes for retail customers. The trial date has yet to be set, although we expect it to be heard in late 2018 or early 2019.


The NZCC announces its competition and consumer law enforcement priorities annually. The NZCC has stated, however, that cartels will always be a priority because of the significanceoftheirpotentialimpactonmarketsandtheeconomyasawhole.The NZCC has regard to the following criteria when determining whether to commence or continue enforcement action and the type of enforcement action it will take: • theextentofthedetrimentcausedbytheconduct;• theseriousnessoftheconduct;and• whether taking enforcement action is in the wider public interest.Each of these criteria are considered together, in the context of the available information and the relevance of the conduct to the NZCC’s responsibilities and priority areas for new enforcement activity. In general, however, the greater the likely level of detriment arising from the conduct in question or the more serious the conduct is, the more likely it is that the NZCC will take enforcement action.


The NZCC’s Competition and Consumer Investigation Guidelines set out the NZCC’s investigation process. The process has three stages:(1) Screening and prioritising incoming issues. The NZCC undertakes a screening process

to identify whether there is a reasonable basis for suspecting a breach has occurred or may occur and whether it is a matter that is appropriate for the NZCC to investigate.



Complainantsarenotifiedatthisstageoftheprocesswhethertheirmatterresultedin no further action or will be investigated.

(2) Investigating and gathering information.(3) Outcome.Attheendofaninvestigation,investigatedpartiesarenotifiedofthatfact

and any outcome such as the type and level of enforcement response selected. The complainantandanyotheraffectedpartieswillalsobenotifiedwherereasonable.TheNZCCmayalsopublishtheoutcomeonitsenforcementregister;forexample,wherean investigation results in a warning letter being issued.

The NZCC applies its enforcement criteria discussed in the section above when deciding whether to investigate or to take enforcement action. The NZCC has also published Enforcement Response Guidelines which set out the factors it takes into account when deciding the type of enforcement action it will take in a given case. In general, the NZCC has stated that the enforcement response selected will have one of the following aims: • stoppingtheunlawfulconduct;• deterringfutureunlawfulconductbythatpersonorothers;• remedyinganyharmcausedbytheunlawfulconduct;• punishingthewrongdoer(whereappropriate);• encouragingbusinessestocomply;or• providing informative public precedent. The NZCC expressly recognises and observes the principles of natural justice when making decisions that affect a person’s rights, obligations, or interests. If a person considers that the NZCC has exercised its decision-making powers improperly, that person can apply to the High Court for a review of that decision.


The NZCC operates a Cartel Leniency Policy (Policy) which encourages ‘whistle-blowing’ by cartel participants. The Policy is an important aspect of the NZCC’s enforcement tool-kit, with the NZCC recognising that a leniency policy is the single most effective tool available to detect cartels.The Policy is not part of the Act and has no formal legal status, but is a policy statement that outlines the NZCC’s approach to granting immunity in return for cooperation by companies and individuals.The current version of the Policy has been in operation since 2010. The NZCC is currently updating the Policy in light of the recent changes made to the Act and is likely to publish the updated version in early 2018. The remainder of this section outlines the position under the current/2010 version of the Policy. The Policy applies only to cartel behaviour. The NZCC has a general Cooperation Policy that applies to breaches of other provisions of the Act.UnderthePolicy,theNZCCmaygrantconditionalimmunitytothefirstcartelmembertoapproach the NZCC. The immunity is from prosecution by the NZCC only, and does not extend to private enforcement actions by third parties. Conditions for immunityThe applicant must meet (and continue to meet) the following conditions for immunity to be available:• theapplicantisthefirstapplicanttomeetthecriteriaforconditionalimmunity;• theapplicantisorwasaparticipantinthecartel;



• the party admits that its participation in the cartel may breach the relevant sections of theAct;

• the applicant is no longer involved in the cartel, or has informed the NZCC that it will ceaseitsinvolvement(exceptinparticularcircumstances);

• theapplicanthasnotcoercedotherstoparticipateinthecartel;• the applicant makes admissions in relation to actions that are genuinely corporate acts

asopposedtothoseundertakenbyindividuals(inthecaseofcompanies);and• the applicant agrees to provide full and continuing cooperation to the NZCC in its

investigation, and in any subsequent proceedings. Companydirectors,officersandemployeesmayobtainconditionalderivativeimmunityviathe company’s successful application on the same conditions. Immunity applicants are prioritised according to the time of their application. Only the firstcartelparticipanttoapproachtheNZCCandmeettherequiredcriteriaiseligibleforconditional immunity. However, a subsequent applicant may be able to obtain conditional immunity if the first applicant fails to meet the conditions for immunity. Subsequentapplicants who are not eligible for conditional immunity but are willing to cooperate with theNZCC’sinvestigationcanbenefitfromcooperationconcessions(i.e.,reducedpenalties).The application processThefirststepintheapplicationprocessistoobtaina‘marker’.Thisallowsanapplicanttoreservetheirplaceasthefirst to‘blowthewhistle’oncartelconduct. Ahypotheticalinquiry, on a ‘no names’ basis, may be made to establish whether conditional leniency is available before a marker is placed. Toobtain amarker, the applicantmust provide theNZCCwith sufficient details of thenature of the cartel, such as the product(s) and/or service(s) involved, the main participants, and the impact of the cartel on a market in New Zealand. This information allows the NZCC to determine whether leniency is available. Once a marker has been obtained, the applicant must then provide the NZCC with a written or oral statement called a ‘proffer’ to perfect the marker. The standard time allowed to perfect the marker is 28 calendar days, but a longer or shorter time may be agreed with the NZCC.Onceamarkerhasbeen‘perfected’,theNZCCwillconfirmthatconditionalimmunityhasbeen granted. The NZCC requires that parties enter into a Conditional Grant of Immunity Agreement (CGI Agreement). The terms are non-negotiable and accessible via the NZCC’s website. Subsequent applicants will be informed of their place in the queue for conditional immunity. Ifthefirstapplicantfailstoperfectthemarker,orifconditionalimmunityisnotgranted,the NZCC may offer a marker or conditional immunity to the next applicant in the queue, subject to their meeting the conditions of immunity. ConfidentialityTheNZCCrequiresthatimmunityapplicantskeepconfidentialthefactoforthecontentof the immunity application, its investigation and/or any civil proceedings brought by the NZCC, except as required by law or the rules of its stock exchange. The NZCC has stated that it endeavours to protect to the fullest extent confidentialinformation provided by holders of a marker or conditional immunity. However, the CGI Agreement allows the NZCC to disclose any information provided by the leniency applicant for the purposes of conducting the NZCC’s investigation. If it does so, it will impose an obligationofconfidenceontherecipient.



In relation to international cartels, the NZCC will not share confidential informationprovided by an applicant, including the applicant’s identity, with other competition authorities without their consent. However, the NZCC does expect an applicant to provide a waiver to allow the NZCC to discuss information with overseas regulators unless there is good reason not to, such as asymmetry in leniency positions in other jurisdictions. The NZCC may receive requests to disclose information relating to a conditional leniency holderpursuanttotheOfficialInformationAct1982(OIA). If this occurs, the NZCC will give the conditional leniency holder an opportunity to comment on any proposed release of the information and to take such action as the applicant considers necessary to resist the OIA request.There are a number of grounds to withhold information requested under the OIA including thatthedisclosureofinformationprovidedunderanobligationofconfidencewouldprejudicethe supply of similar information or would unreasonably prejudice the commercial position of the person who supplied the information. If the NZCC declines a request to disclose information under the OIA, the requesting party may request a review of the decision by the Ombudsman.The NZCC may also be required to discover primary documents provided to it by the leniency applicant in any proceedings initiated by the NZCC. If so, the NZCC can seek confidentialityorderswhereapplicabletorestricttheinspectionofdocumentstocounseland experts or similar. Any documents referred to in open court during any proceedings would, however, become part of the public record. The NZCC has stated that it will not waive any privilege it may hold in relation to information provided by a leniency applicant in the event a third party makes an application for discovery of that information. We are not aware of any challenges through theNewZealand courts to date to obtaininformation or documents provided by a conditional leniency holder to the NZCC.


The NZCC is open to early resolution, including settlement, of actual or potential court proceedings in appropriate cases. The NZCC may not consider it appropriate to settle where the conduct is particularly serious or a legal precedent is required. Settlements with the NZCC can be:• Out-of-court, where proceedings have not been issued and the terms of the settlement

do not require the Court’s approval. Generally, an admission of breach will be required. • In-court, where settlements have been commenced or the Court’s involvement is

required to implement the settlement terms. For example, the Court will need to be involved if a penalty is to be set, or it needs to make other orders.

WhiletheNZCCmayagreetorecommendtotheCourtthataparticularpenaltyshouldbeimposed, ultimately it is for the Court to set the appropriate penalty and not the parties. In exercising its discretion, the Court will have regard to the following matters: • thedurationofthecontraveningconduct;• theseniorityoftheemployeesorofficersinvolvedinthecontravention;• theextentofanybenefitderivedfromthecontraveningconduct;• thedegreeofmarketpowerheldbythedefendant;• theroleofthedefendantintheimpugnedconduct;• thesizeandresourcesofthedefendant;



• the degree of cooperationbythedefendantwiththeNZCC;• thefactthatliabilityisadmitted;and• the extent to which a defendant has developed and implemented a compliance programme.


A third party can complain to the NZCC about suspected cartel conduct. The NZCC will then choose whether to investigate and, if it considers there has been a breach, to take enforcement action. The criteria applied by the NZCC when determining what action, if any, to take is outlined earlier in this chapter. There is no obligation on the NZCC to commence an investigation or to take enforcement action for suspected breaches of the Act. The NZCC will, where practicable, keep a complainant informed of its decision to investigate or not, and of any enforcement action taken. There is no ability for a third party to appeal a decision not to investigate or take enforcement action, although a third party could seek judicial review of the decision. Third-party complainants can bring a private action for damages or injunctive relief for breach of the cartel prohibition. Exemplary damages can also be awarded under section 82A, although we are not aware of any exemplary damages having been awarded to date.


The maximum pecuniary penalties for cartel conduct are:• For companies – the greater ofNZ$10million or three times the commercial gain

derived from the anti-competitive activity (or 10% of group turnover in New Zealand if the amount of the gain cannot be determined) per breach.

• Forindividuals–NZ$500,000perbreach.The courts must impose penalties on individuals unless there are good reasons not to. Companies cannot indemnify individuals for these penalties or reimburse their legal costs if they are found to have breached the cartel prohibition and a penalty has been ordered. Courts can order persons who have engaged in cartel conduct to be excluded from company managementforuptofiveyears.The highest penalty against a company for cartel conduct to date has been theNZ$7.5million agreed by Air New Zealand and approved by the High Court for Air New Zealand’s partintheaircargocartel.TheNZ$7.5millionpenaltyincludeda20%discountforAirNewZealand’sadmissions.ThehighestpenaltyagainstanindividualsofarwasNZ$100,000forpricefixingandexclusionaryconductimposedontheGeneralManagerofasupplierwhoparticipated in the wood preservative chemicals cartel. In terms of the recent enforcement activity, in 2016 and 2017: • The highest penalty ordered against a company for cartel conduct was in the real estate

pricefixingcase,withtheHighCourtimposingpenaltieson11agenciesinanumberofseparatejudgmentsrangingfromNZ$900,000toNZ$2.575million.

• The highest penalty imposed on an individual for cartel conduct was also in the real estate pricefixingcase,withtheHighCourtimposingapenaltyofNZ$50,000onthedirector of one of the participating agencies, Property Brokers.


In New Zealand, it is the High Court that determines whether there has been a breach of the Act and orders pecuniary penalties.



Decisions of the High Court can be appealed to the Court of Appeal within 20 working days of the decision. A decision of the Court of Appeal can only be appealed to the Supreme Courtwithleave.Anapplicationforleavemustbefiledandservedwithin20workingdaysof the decision.An appeal to the Court of Appeal proceeds by way of re-hearing. In general, the parties to an appeal cannot adduce further evidence. However, a party can apply for leave to do so on questions of fact by oral examination in Court. If leave is granted, cross-examination will be allowed.

Criminal sanctions

New Zealand does not have criminal sanctions for cartel conduct. The introduction of criminal sanctions was last considered by the previous National Party-led coalition government in 2015. Initially it was proposed to introduce criminal sanctions, but in a policy turn-around that proposal was abandoned prior to the introduction of the new cartel prohibition.

Cross-border issues

The Act applies to conduct engaged:• insideNewZealand;or• outside of New Zealand by any person resident or carrying on business in New Zealand

to the extent that such conduct affects a market in New Zealand. TheActwas amended inAugust 2017 to confirm that a person (personA) engages inconduct in New Zealand if: • anyactoromissionformingpartoftheconductoccursinNewZealand;or• another person (person B) engages in conduct in New Zealand, and the conduct of

person B is deemed to be the conduct of person A.The application of the Act to conduct outside of New Zealand was considered in Commerce Commission v Visy Board Pty Ltd [2012] NZCA 383. In that case, Visy Board Pty Ltd (Visy), an Australian company, admitted to having participated in cartel conduct with AmcorAustraliaandwasfinedAU$36millioninAustralia.The New Zealand High Court found that whether or not a person is ‘carrying on business inNewZealand’isnotconfinedtowhetherornotthecompanymaintainedasystematicand continuous physical presence in New Zealand, and the analysis requires recognition of the practical modes of transacting business, including the fact that modern day commerce necessitates dealing with consumers through a variety of methods of communication including the internet. The Court of Appeal supported this approach, focusing the analysis on whether a company’s conduct ‘relates to’ New Zealand markets and less so on where a company is physically based.Some of the reasons that Visy was found to carry on business in New Zealand included:• Visy operated Visy Board NZ as an integrated division of Visy and presented itself to

trans-TasmancustomersasonebusinessincludingtheNewZealanddivision;• VisywasdirectlyinvolvedinVisyBoardNZ’sNewZealandoperations;and• Visy dealt directly with New Zealand customers on various occasions, particularly with

major customers.International cooperationUnder the Act, the NZCC may provide compulsorily acquired information or investigative assistance to an overseas regulator where the NZCC has a cooperation arrangement with the



relevant regulator or the Minister of Commerce has entered into an applicable government-to-government cooperation arrangement.The NZCC has cooperation agreements with a number of overseas agencies including the Australian Competition and Consumer Commission, Canada’s Commissioner of Competition and Taiwan’s Fair Trade Commission. These agreements generally provide for cooperation between the agencies on matters of common interest, including:• notificationrelatingtoactivitiesthatimpactontheotherjurisdiction;• co-ordinationofenforcementactivities;• exchangeofinformationincertaincircumstances;and• joint educational programmes and publications.The NZCC can only provide compulsorily acquired information and/or investigative assistancetoanoverseasregulator if it issatisfied(amongotherconsiderations) that theprovision of the information or assistance will not be inconsistent with the cooperation arrangement and that to do so will not undermine New Zealand’s international trade interests. The NZCC can impose conditions on the provision of information or assistance to overseas regulators,includingconditionsrelatingtothemaintenanceofconfidentiality.WheretheNZCC provides information to an overseas regulator, it is required to notify the person who supplied the information or any other person to whom the information relates of the provision of that information.


Any person that contravenes the cartel prohibition is liable for any loss or damage caused by the conduct. In addition, the High Court can order exemplary damages, notwithstanding that the person may have paid, or at a later date be required to pay, pecuniary penalties in relation to the same conduct. A private litigant can also apply for an injunction.An action for damages under the Act must be brought within three years after the matter giving rise to the contravention was discovered or ought reasonably to have been discovered, with a ‘long-stop’ limitation of 10 years.In New Zealand, a private litigant cannot simply rely on a judgment in a pecuniary penalty case as prima facie evidence of a breach or that loss or damage occurred. As a result, plaintiffs in a follow-on case must establish both a breach of the Act and the loss or damage caused to them. Admission of a breach during a settlement with the NZCC is also not necessarily probative evidence of liability. The courts recognise the reality that parties can decide to settle litigation for various reasons, and not all settlements are made with admissions of liability. Wearenotawareofanysuccessfulfollowonorstand-alonecivildamagesclaimsforcartelconduct in New Zealand to date. For example, in Schenker AG v Commerce Commission, athirdparty(Schenker)attemptedtoobtainaccesstodocumentsthathadbeenfiledbythedefendant airlines in the air cargo litigation. Schenker was a potential follow-on claimant and wanted access to the documents to investigate whether it may have suffered loss as a result of the alleged conduct. The Court declined access. It is possible that some claims have been settled out of court but the fact and terms of settlementwouldbeconfidentialasbetweentheparties.Unlike jurisdictions such asAustralia and theUnited States, there is no codified ‘classactions’ regime in New Zealand. The High Court Rules do allow for representative actions broughtbyanamedrepresentativeplaintifforplaintiffsonbehalfof,andforthebenefitof,



others with the “same interest” in the subject matter of the proceeding. However, to date, no representative actions alleging breaches of the Act have been brought.

Reform proposals

In June 2017, the Minister for Commerce and Consumer Affairs announced proposals to amend the Act to, amongst other things:• providetheNZCCwiththepowertoundertakemarketstudies;and• allow the NZCC to accept court enforceable undertakings as part of its settlement

process.The proposals followed a targeted review of the Act. However, the current status of the proposed reforms is unclear as a result of the change of government that occurred towards the end of 2017. There are no current reform proposals in relation to the cartel prohibitions specifically.However, we expect the NZCC to publish its updated Cartel Leniency Policy and Process Guidelines in early 2018.


MinterEllisonRuddWattsLevel 20, 88 Shortland Street, Auckland, New Zealand Level18,125TheTerrace,Wellington,NewZealand

Tel: +64 9 353 9700 / +64 4 498 5000 / URL: www.minterellison.co.nz

Jennifer HambletonTel: +64 9 353 9794 / Email: [email protected] Hambleton is a Senior Associate with extensive experience in contentious and non-contentious competition and consumer law and general commercial litigation. Jennifer has advised clients in the technology and telecommunications, insurance, gambling, airline, accommodation, FMCG, pharmaceuticals and energy industries on a range of commercial issues. This includes advising clients on the competition law implications of mergers and joint ventures, exclusive agreements, pricing practices, dealings with competitors and market behaviour, consumer law issues arising from contractual terms and advertising and promotions, contractual issues including termination rights, restraints of tradeandconfidentiality,andcompliancewithindustry-specificcodes.

Oliver MeechTel: +64 4 498 5095 / Email: [email protected] Oliver Meech is an experienced litigator and dispute resolution specialist handling complex commercial litigation, and competition, regulatory and consumer law matters.Oliver advises on contentious and non-contentious aspects of competition, regulatory and consumer law. He advises on mergers and acquisitions, restrictive trade practices, unilateral conduct and regulation. He advises clients in Commerce and Fair Trading Act investigations and with their interactions with the commercial regulators. He advises on front-end compliance and, in the consumer law area, has represented clients before the courts and before the Advertising Standards Complaints Board. Chambers Asia-Pacific 2018 describes Oliver as “a well-reputed competition and consumer law specialist”.



PakistanHira Ahmad, Ameer Nausherwan Adil & Ali Qaisar

LMA Ebrahim Hosain


The substantive law governing competition in Pakistan is primarily contained in the Competition Act 2010 (the “Act”). Section 4 of the Act prescribes agreements or decisions “which have the object or effect of preventing, restricting or reducing competition within the relevant market”. Such “prohibited agreements” include various forms of cartelisation and Section 4 (2) provides a non-exhaustive list of such agreements, including agreements relatingto:pricefixing;marketsharing;limitingproduction,distributionorsaleofgoodsorservices;limitingtechnicaldevelopmentorproduction;andcollusivetenderingorbidding.The types of agreements listed under Section 4 (2) of the Act are deemed to have an anti-competitive object. It should be noted that an agreement may breach the provisions of the Act if it is found to have an anti-competitive object orananti-competitiveeffect.Whereananti-competitiveobject is found, it is irrelevant whether the agreement also in fact has an anti-competitive effect and vice versa.A “prohibited agreement” may take the form of an informal agreement, arrangement, understanding, concerted practice or decision and it is irrelevant for the purposes of the Act whether or not such agreements are legally enforceable.The provisions of the Act are enforced by the Competition Commission of Pakistan (“CCP”), which is an independent, quasi-judicial body, with the power to conduct enquiries into the affairs of undertakings, initiate proceedings under the Act and, where a contravention of the Act is found, to make appropriate orders. The CCP is deemed to be a civil court under the Code of Civil Procedure 1908 for the purposes of proceedings under the Act and the primary remedies under the Act are remedial orders and civil penalties. However, failure to comply with an order of the CCP constitutes a criminal offence punishable with imprisonment or afine.Appeals of orders of the CCP lie with the Appellate Bench of the CCP, the Competition Appellate Tribunal and the Supreme Court of Pakistan, in that order.

Overview of investigative powers in Pakistan

Section 33 (1) of the Act grants the CCP the powers of a civil court in relation to: summoning andenforcingtheattendanceofwitnessesandexaminingsuchwitnessesonoath;discoveryandproductionofdocumentsorothermaterialobjectsasevidence;acceptingevidencebywayofaffidavits;requisitioningpublicrecords;andissuingcommissionsfortheexaminationof any witness and/or document. Furthermore, Section 33 (3) of the Act empowers the CCP to require any undertaking to produce documents and/or furnish information to the CCP for the purposes of the Act.


LMA Ebrahim Hosain Pakistan

TheCCPmay,forreasonstoberecordedinwriting,authoriseanofficertoenterandsearchanypremisesforthepurposesofenforcingtheAct.Anofficermakingsuchasearchmayimpound documents and make copies of records and information stored on computers. Where anundertaking refuses,without reasonable cause, to allow theCCP’s authorisedofficertoenterandsearchitspremises,aninvestigatingofficermayentersuchpremisesbyforce,ifnecessary.Anorderauthorisinganinvestigatingofficertoenterpremisesbyforcemust be signed by at least two members of the CCP. The Act makes it a criminal offence foraninvestigatingofficertousethepowerofforcibleentryexcessively,vexatiouslyorwith mala fideintent,punishablewithafineand/orimprisonment.TheCCPhasnot–tothe best of our knowledge – resorted to the use of its power to forcibly enter premises in recent years.Under Section 37 of the Act, the CCP may conduct enquiries into any matter relevant to the purposes of the Act on its own motion and must conduct enquiries into matters referred to it by the Federal Government. The CCP is also required to conduct enquiries where it receives a written complaint from an undertaking or a registered association of consumers unlessitisoftheopinionthatthecomplaintisfrivolous,vexatious,basedoninsufficientfacts or unsupported by prima facie evidence. The CCP also has the power to outsource ‘studies’, but not enquiries, by hiring consultants on a contractual basis.The Islamabad High Court has recently drawn a distinction between the CCP’s power to undertake studies and its power to initiate enquiries under the Act and has stated that the CCP cannot initiate enquiries based on vague or unsupported complaints from third parties and that, in such cases, it could only undertake a study and then initiate enquiries if prima facie evidence of violation of the Act was found to exist (2016 CLD 1688).


The CCP did not issue any orders relating to cartel-related activity during the year 2017, nor – to the best of our knowledge – did it issue any “show cause notices” in relation to suspected breaches of Section 4 of the Act. Instead, most of the CCP’s enforcement activity during 2017 focused on deceptive marketing practices.However, significant cartel enforcement activity undertakenby theCCP in recent yearsincludes:• In April 2015, the CCP imposed a total penalty of PKR 140 million on the Pakistan

Automobile Manufacturers Authorised Dealers Association on account of: price fixinginthemarketforgenuinespareparts;pricefixinginthemarketforbodyrepairsandpaint jobs;andrestricting theprovisionofservicesbyrestricting themovementof human resources within the industry. In its order, the CCP repeated its caution from an earlier order that while “trade associations can play an important role in the development of the sector they represent… [they] have a responsibility to ensure that their forum is not used as a platform for collusive activities. The rule of thumb is not to allow discussion, deliberations, or sharing of sensitive commercial information that may allow members, who are competitors, to coordinate business policy”. The CCP also referred to the decision by the European Court of Justice in Dole Food Company, Inc. vs European Commission, which in the view of the CCP “sets a precedent for information exchange to be an infringement by object” and stated that it was “inclined to agree” with the “demanding approach preferred by other jurisdictions”.

• In February 2016, the CCP imposed a total penalty of PKR 100 million on the Pakistan Poultry Association for advertising the rates of broiler chicken and chicken eggs in



daily newspapers. The penalty was levied as a result of suo moto action by the CCP and was particularly high in light of the fact that the Pakistan Poultry Association had been the subject of an earlier order passed by the CCP on similar facts in 2010.

• In June 2016, the CCP concluded an enquiry against the All Pakistan Newspapers Society (APNS) for alleged violations of Section 4 of the Act. The enquiry was initiated pursuant to a complaint by the Evacuee Trust Property Board (a statutory body responsible for managing evacuee properties attached to educational, charitable or religious trusts). The CCP concluded in its Enquiry Report that the APNS was prima facie contravening Section 4 of the Act in relation to the market for advertising space in newspapers and periodicals by, inter alia, accrediting advertising agencies, fixingagencycommissions,restrictingdirectbusinessandoperatingaclearingsystemon behalf of its members. The Enquiry Report recommended that the CCP initiate proceedings against APNS accordingly.

• In 2016, the CCP conducted an investigation and enquiry into alleged collusive behaviour and cartelisation by the Pharma Bureau, an association of multinational pharmaceutical companies in Pakistan. The investigation was undertaken on the CCP’s own initiative. As part of the investigation, the CCP inspected the premises of the Pharma Bureau in April 2016 and impounded documents and materials with the cooperation of representatives of the Pharma Bureau. In its August 2016 Enquiry Report, the CCP noted that the Pharma Bureau and its member undertakings had exchanged commercially sensitive information and strategic data and cooperated with a view to obtaining price increase approvals from the Drug Regulatory Authority of Pakistan and concluded that the Pharma Bureau and its member undertakings had prima facie engaged in collusive behaviour in violation of Section 4 of the Act. A “show cause” notice was issued to the Pharma Bureau in November 2016, but – as of January2018–afinalorderhasnotbeenpassedonthematter.

On 11th January 2018, the CCP announced that it had initiated (yet another) enquiry into possible collusion between market players in the poultry sector. The enquiry has been initiated by the CCP using its suo moto powers under the Act and follows an inspection by CCPofficersofapoultryassociationinLahore,Pakistan.


An inherent hurdle to enforcement in cases of cartelisation is the lack of resources available to the CCP. The CCP had 160 staff members working on competition enforcement matters in the year 2016, with 12% of these staff members working on cartel enforcement. Despite the lack of resources, the CCP has managed to keep up a reasonable output and has levied billionsofrupeesinfinessinceitsinception.However, a significant impediment to effective enforcement of theAct is the easewithwhich undertakings have been able to obtain injunctions in traditional courts due to the fact that the appeal system provided under the Act has only recently become fully operational. TheCCP,withitslimitedresources,hadbeenunabletocollectsubstantialamountsoffineslevied by it as a result of such court actions. However, following the passage of the Competition Appellate Tribunal Rules 2015, the Competition Appellate Tribunal (“CAT”) has become operational and the Supreme Court of Pakistan has referred all pending appeals against the CCP’s orders to the CAT (press release 21st August 2017). The CAT has shown an inclination to uphold the CCP’s orders, and it is hoped that the work of the CAT will aid in more effective enforcement of the Act andrecoveryoffines.




InproceedingsbeforetheCCP,emphasisislaidonefficiencyratherthanoncompliancewith strict procedural requirements. The CCP has stated in its “Guidelines on Conduct of Proceedings Before the Commission” that the CCP shall “administer and enforce the [Act], rules and regulations effectively, with the minimum of procedural requirements”. The Guidelines further state that “no proceedings of the Commission shall be invalid by reason of any defect or irregularity unless the presiding authority, on an objection taken by any party, is of the opinion that substantial injustice has been caused by such defect or irregularity or there are otherwise sufficient reasons for doing so…”. Furthermore, the lack of strict procedural requirements is further compounded by the fact that parties to proceedings under the Act need not be represented by lawyers and may instead be represented by members of the Institute of Chartered Accountants of Pakistan or the Institute of Cost and Management Accountants of Pakistan in accordance with regulation 8 of the Competition Commission of Pakistan (Conduct of Business) Regulations, 2007.Notwithstanding the above, the appeals process described further below provides safeguards for parties’ procedural rights. It may also be noted that while the Act does not prescribe any strict procedural requirements to be observed in proceedings before the CCP, the Competition Commission (Appeal) Rules 2007 and the Competition Appellate Tribunal Rules 2015 do set out stricter procedural requirements to be observed by the Competition Appellate Bench and the Competition Appellate Tribunal, respectively.


WheretheCCPissatisfiedthatanundertakingisapartytoa“prohibitedagreement”,theActempowersittograntleniencytoanundertakingthatfirstmakestrueandfulldisclosurein respect of the alleged violation.Under the Competition (Leniency) Regulations 2013 (“Leniency Regulations”), the Competition Commission may either grant an undertaking complete immunity from financialpenaltiesundertheActorgrantareductionintheamountofpenaltiesthatwouldotherwise be payable.Inordertobeeligibleforcompleteimmunityfromfinancialpenalties,anundertakingmustbethefirsttoprovidetheCCPwithevidenceofaprohibitedactivityofwhichtheCCPdoesnotalreadyhavesufficient information toestablish itsexistence, inaddition to fulfillingother conditions.Alternatively, the CCP may grant reductions in penalties of up to 100% to undertakings which provide independent, additional and corroborating or contemporaneous evidence of a prohibited activity either prior to the CCP issuing a “show cause” notice in respect of suchactivityorafterinitiationofproceedingsundertheAct,butpriortoafinalorderbeingpassed.The Leniency Regulations further provide that, during appellate proceedings, the CCP may grant an undertaking a reduction of up to 85% in penalties if such undertaking provides the CCP with additional evidence previously unknown to the CCP of a nature which would add significantvaluetotheevidencealreadyinthepossessionoftheCCP.The order for leniency passed by the CCP in favour of Siemens (Pakistan) Engineering Company Limited (“Siemens”) in April 2012 remains the only such order to have been passed by the CCP since the passage of the Leniency Regulations. The application for leniency was made by Siemens subsequent to the initiation of an enquiry by the CCP into



collusive bidding in the supply of electrical equipment, including air-insulated switchgear and transformers, by the Pakistan Electric Power Equipment Manufacturers Association anditsmemberundertakings.Initsfinalorder,theCCPstatedthat“given the fact that this application is the first ever Leniency Application… we are of the view that this decision is most likely to be pivotal in shaping the landscape as to how cartel players may react. In our considered view, immunity in terms of para 73 above or up to 100% reduction in penalty in terms of para 76 above would serve as an incentive to all participants of a cartel to come forward”. However, it appears that the leniency regime has not yet proven to be as strong an incentive as the CCP had hoped.


The legal framework in Pakistan does not currently provide for the administrative settlement of cases.


As mentioned above, the Act provides that the CCP may initiate enquiries into potential violations of the Act upon receipt of a written complaint from an undertaking or a registered association of consumers unless it is of the opinion that the complaint is frivolous, vexatious, basedoninsufficientfactsorunsupportedbyprima facie evidence.


Sanctionsfor“prohibitedagreements”undertheActareintheformofimpositionoffinesby the CCP, which may extend to PKR 75,000,000 or an amount not exceeding 10% of the annual turnover of the concerned undertaking. In addition, in the case of “prohibited agreements”, the CCP may annul the relevant agreement or require the concerned undertaking to amend the agreement or related practice and not to repeat the prohibitions specifiedundertheActortoenterintoanyotheragreementorengageinanyotherpracticewith a similar object or effect.


An appeal against an order of the CCP may be made to the Competition Appellate Bench (“CAB”), in the case of an order passed by a single member of the CCP. In the event that the impugned order was passed by two or more members of the CCP, the appeal lies with the CAT.The CAB is composed of at least two members of the CCP, and cannot include any member associated with the original order. Appeals to the CAB are governed by the Competition Commission (Appeal) Rules, 2007. An applicant seeking to appeal an order of the CCP mustfileanappealwiththeCABwithin30daysofreceivingacopyoftheorderwhichtheapplicant seeks to challenge. This limitation period is extendable at the bench’s discretion ifitissatisfiedthattherewassufficientcausefornotfilingtheappealwithinthe30-dayperiod.Appeals to the CAT are governed by the Competition Appellate Tribunal Rules 2015 and mustbefiledwithin60daysoftheapplicantreceivingacopyoftheimpugnedorder.AswithappealstotheCAB,theCAThasthediscretiontoextendtheperiodforfilinganappealprovidedthattherewassufficientcausefortheapplicant’sfailuretofileanappealwithinthe prescribed period.



An appeal against an order of the Competition Appellate Tribunal may be made to the Supreme Court within 60 days of the relevant order.

Criminal sanctions

As mentioned above, the primary remedies available to the CCP under the Act are civil penalties and remedial orders. No criminal sanctions are attracted by an initial violation of the Act. However, under Section 38 (5) of the Act, failure to comply with an order of the CCP constitutes a criminal offence punishable with imprisonment for up to one year or a fineofuptoPKR25,000,000.Tothebestofourknowledge,nocriminalproceedingshavebeen brought under the Act to date.

Cross-border issues

Section 1 (3) of the Act states that it “shall apply to all undertakings and all actions or matters that take place in Pakistan and distort competition in Pakistan” and, as such, the Act doesnothaveanyextraterritorialeffect.However,inanygivenmatter,itmaybesufficientfor one or more undertakings from amongst several to be doing business in Pakistan for the matter to fall within the CCP’s jurisdiction.In at least one case, the CCP has also acted upon a complaint by a foreign undertaking in relation to international tenders in Pakistan by requiring the relevant government department to remove restrictive clauses from bidding documents relating to a tender for the procurement of bulldozers which placed restrictions on the country of origin of the equipment. (Press release 12th January 2016.)The CCP also frequently participates in various conferences, seminars and training programmes held at various international forums to facilitate cooperation among international competition authorities.


Beyondthefilingofcomplaintsbythirdparties,ashighlightedabove,privateenforcementofcompetition lawsdoesnotplayasignificantrole in thecompetition lawlandscapeofPakistan.

Reform proposals

There are no reform proposals in relation to the CCP or the Act that are expected to be implemented in the near future.


LMA Ebrahim Hosain4-C, 9th Zamzama Commercial Lane, DHA Phase 5, Karachi, Pakistan

Tel: +92 213 583 5101 104 / URL: www.lma-eh.com

Hira Ahmad Tel: +92 213 583 5101 104 Ext. 313 / Email: [email protected] Ahmad is a Partner at LMA Ebrahim Hosain. She was called to the Bar at Lincoln’s Inn in 2008 after graduating with an LL.B. (Hons) degree from theUniversityofLondon. Ms.Ahmadhasbeenwith thefirmsince2011.Priortojoiningthefirm,HiraworkedasaLawOfficerintheLegalDepartment of the State Bank of Pakistan (the country’s central bank).Ms. Ahmad is presently involved in numerous cases relating to the Competition Commission of Pakistan. Her areas of expertise include banking, LNG power projects,finance,corporatelawandIT.SheisfluentinEnglishandUrdu.

Ameer Nausherwan AdilTel: +92 213 583 5101 104 Ext. 326 / Email: [email protected] Nausherwan Adil is a Senior Associate in the Corporate Department. Mr. Adil completed the Legal Practice Course (LPC) at BPP University, London, after graduating with an LL.B. (Hons) degree from the University of Kent,UnitedKingdom.Mr.AdilhasbeenwiththefirmsinceJuly2014andisactivelyinvolvedinclinicalnegligenceandbanking&financelitigationcases conducted at the subordinate courts of Pakistan. He is also enrolled as an Advocate of the High Courts of Pakistan. Mr. Adil was recently involved in working closely with the Competition Commission of Pakistan in relation to the amalgamation of two asset managementcompanies.Hisareasofexpertiseincludebanking&finance,litigation,corporatelaw,powerprojects,clinicalnegligenceandmergers&acquisitions.Mr.AdilisfluentinEnglish,UrduandSindhi.


Ali QaisarTel: +92 213 583 5101 104 Ext. 324 / Email: a.qaisar@lma-eh.comAliQaisarhasbeenanAssociateatthefirmsince2015andaSeniorAssociatesince 2017. Ali graduated from the University of Manchester with an LL.B. (Hons)in2013andreceivedaMaster’sinCorporate&CommercialLawfromQueen Mary, University of London in 2014. Ali is enrolled as an Advocate in the courts of Sindh and is a member of the Karachi Bar Association and Sindh Bar Council.Ali routinely advises clients on a wide range of matters relating to the law onbanking&finance,paymentsystemscorporate,commercial,competition,information technology and insurance law.


RomaniaSilviu Stoica & Mihaela Ion

Popovici Nițu Stoica & Asociații


The legal regime of cartels in Romania is primarily set out in article 5 of the Competition Act no. 21/1996 (the “Competition Act”),1 which mirrors the text of article 101 of the Treaty on the Functioning of the European Union. The cartel regime is further detailed for implementation purposes in wide secondary legislation (the “Secondary Legislation”) issued by the Romanian Competition Council (the “RCC”). Ascartelsaredeemedtobethemostdamaginganti-competitivepractices,fightingagainstthese practices is one of RCC’s main priorities. In this respect, the RCC set up in its StrategyPlan for 2017–2022 somegeneral objectives aimed at improving identificationand sanctioning of anti-competitive practices, such as cartels:2 (a) extension of preliminary examinationsinordertodetectanti-competitivepractices;(b)identificationandmonitoringofmarketswhichhaveastructurepronetocollusion;and(c)identificationandsanctioningof cartels by implementing complex investigation techniques of companies’ behaviour and using economic analysis methods in evaluating behaviour on the markets. In the last 12 months, some procedural aspects aimed at facilitating the investigation procedureconductedbytheRCCweremodified.Also,RCCissuedtwosetofguidelinesinordertofightmoreefficientlyagainstcartelsundertheformofbidrigging,namelytheguidelines with respect to participation in consortium to public bid proceedings3 and the guidelines for detecting and deterrence of anti-competitive practices during public bidding proceedings.4 The priorities and objectives of RCC will be implemented by using new IT tools as RCC is undergoing a digitisation process. One of the new IT instruments5 concerns the improvement of the cooperation between public authorities, while the other one concerns a pilot project regarding bid rigging screening.Also, the RCC has set up the Competition Whistle-blowers online platform, which enables individuals to anonymously and voluntary signal potential violation of the competition law. In addition, individuals may notify on the RCC’s website the potential existence of an anti-competitive deed.6 In line with the monitoring market objective, the RCC (a) has launched the “Price Monitor” which applies to basic food products and enables price comparison between them,7 and (b) will launch a similar price comparison platform regarding fuel prices.8 For the implementation of the Price Monitor, the Competition Act was amended, as now food retailers have the obligation to provide RCC with information regarding prices in view of drawing up studies, analysis or price comparisons. A similar amendment is expected in order to implement the system with respect to fuel prices.


Popovici Nițu Stoica & Asociații Romania

Enforcement of cartel policyThe public enforcement body of domestic competition rules is the RCC.WithintheRCC,theCartelOfficemainlysetsthegeneralstrategyoftheRCC’sPlenum(“Plenum”), examines complaints, proposes the initiation of investigations ex officio, etc. Besidethedirectionforcartels,aspecificdirection,theDirectiononBidsandPetitions,wasorganised which focused on bid rigging breaches. In addition, for proper functioning of public procurement,9 under the umbrella of the “Module on Bid Rigging”,10 the RCC closely cooperates with various public institutions (e.g., National Council for Solving Complaints (CNSC), National Authority for Regulating and Monitoring Public Procurement, etc.). The RCC’s decisions are subject to first appeal at the Bucharest Court ofAppeal andsecond appeal at the High Court of Cassation and Justice. Fines for inaccurate or deceptive information provided or the RCC’s inspection refusal may be challenged at District 1 Bucharest Court and appealed at Bucharest Tribunal.TheRCCmay:(1)applyfinesonlytocartelpartiesbetween0.5%and10%of the totalturnoverinRomaniainthefinancialyearbeforesanctioning;(2)requestthepartiestoendthepractice;(3)imposecomminatoryfinesifapartyfailstoobserveobligationsimposedbytheRCC;and(4)informthecriminalinvestigationbodiesofanyacttheRCCfindsandmight represent a criminal offence. For undertakings with no registered turnover, the RCC will consider the previous year and so on, until an annual turnover is determined.Individuals initiating a cartel cannot be sanctioned by the RCC. Natural persons can be “punished” based on the company’s internal procedures, tort law11 or criminal law. The Competition Act regulates criminal liability only for natural persons participating in a cartel with fraudulent intent. However, the individuals initiating a cartel cannot be sanctioned by theRCCbutbythecriminalinvestigationbodiesbasedonRCC’snotification.With respect to criminal liability, the New Criminal Code regulates a special criminaloffence regarding bid rigging for eliminating, by coercion or corruption, a participant from a public tender, and for agreements to distort the bidding price.12

As regards private enforcement of competition rules, article 66 of the Competition Act sets the general framework. Legal and natural persons harmed by cartels may seek relief in court. The RCC Regulation13 states thatclaimsfordamagesmaybefiledbypersonsboth directly and indirectly affected by anti-competitive behaviour. The Competition Act expressly regulates rights of specific bodies to bring representative damages actions onbehalf of consumers (please refer to the section “Developments in private enforcement of antitrust laws”).

Overview of investigative powers in Romania

The RCC used its wide investigative powers last year as most investigations were ex officio (i.e., around 54% of investigations on anti-competitive practices).14 Key powers of the RCC are: information requests sent to undertakings that might have relevantdata;anddawnraids.Dawn raids are the most important source of information. An inspection order issued by theRCC’sPresident(whichqualifiesasanadministrativeact)andajudiciaryauthorisationfrom the President of Bucharest Court of Appeal, or by a judge appointed by the latter, are needed. Now, the judiciary authorisation can be appealed at the High Court of Cassation and Justice within 72 hours (instead of the previous 48-hour term) from communication, but the appeal does not suspend the enforcement.



Since the amendments of the Competition Act, competition inspectors may legally proceed to the dawn raid and inspect any locations used by the undertaking, not only the ones legally owned (e.g. premises, lands and means of transportation) but also those used de facto including the domicile, the lands or the means of transportation of administrators, directors, managers and other employees. Inspectorsmaycollectcopiesanduseanyfinancialandcommercialdocuments–since2015– even preparatory documents drafted by the undertaking investigated for the exclusive purpose of exercising its right to defence. The only documents remaining under protection are communications between the undertaking under investigation and its lawyer made exclusively for the purpose of exercising the right of defence. In addition, the competition inspectors can seal any premises for preventing concealment or destruction of information. The inspector may search electronic data storage devices by accessing the equipment and previewing the documents at the company’s headquarters, or by just copying data. Aside from dawn raids, another investigative power of the RCC is to send information requests to investigated undertakings or to public authorities. Failure to comply with theRCC’srequestmayleadtofines.Finesrangebetween0.1%and1%oftheturnoverachievedinthepreviousfinancialyearforundertakings,andbetween1,000Leiand20,000Lei for public entities.The RCC may also obtain statements from individuals who might have information on the investigation. Thus, the RCC may interview any individual or company’s representative(s) with their consent.


At the end of 2016, the RCC had 35 ongoing investigations on alleged anti-competitive agreements, out of which 38% concerned cartels. The RCC opened 13 new investigations, out of which 30% were into alleged cartels. Six of these new investigations concern potential infringements of both national and European competition legislation. The RCC mentioned in its 2016 annual report the key sectors from a perspective competition – energy, construction, food sector, health, communications, liberal and independent professions, media, transportation, public utilities and banking. The newinvestigationsconcernfieldsbelongingtothesekeysectorssuchaswoodprocessing,distribution of movies to cinemas, tourism agencies, market of notary services and natural gas distribution. The RCC carried out dawn raids at 68 headquarters and working units of various companies. This is rather similar to 2015 when the RCC carried out dawn raids at 61 headquarters and working units of various companies. In2016,TheRCCfinalised25investigations,outofwhich24%concernedcartels.Theinvestigationsfinalisedin2016concernfinancialaudit,dairyproducts,maritimepilotageand towage services market. With respect to the level offines applied, in 2016, the total valueoffines amounted to76,802,672 Lei (approx. 17 million euro), which is much less than the 240,101,502 Lei (approx. 53 million euro) fines imposed in 2015. The biggest fine imposed last yearamounted to 4.9 million euro for horizontal agreements and abuse of dominant position in the market of maritime pilotage and towage, much smaller than the 37 million euro aggregatedfineimposedin2015foranti-competitivepracticesonthemarketofproductionanddistributionof electric energy. The total amountoffines imposedby theRCC last



year for infringement of the Competition Act under the form of cartels was 19,811,861 Lei (approx. 4 million euro). It is important to mention that, in 2016, RCC closed several cartel investigations without sanctions. As a general rule, the RCC decides to close an investigation/reject a complaint bylackofproofs,mentioningthat thestandardofproof isnotmet. Withrespect to thestandard of proof applied by RCC, within some orders it is used beyond any reasonable doubt,whileinothersitisusedasthestandardofsufficientproofsoftheinfringement’sexistence. Most of the closing orders concern cases of alleged bid rigging in relation to road construction works markets.15 One of the most interesting cartels sanctioned by the RCC concerned a case on the maritime pilotage and towage services market which involved the Compania Nationala “Administratia Porturilor Maritime” SA Constanta (CN APM) held by the RCC as having in this case a double role: both regulator and undertaking.16 WhileCNAPMwas sanctioned for anabuse of dominant position having as effect the foreclosure of the market, some private companies acting on the maritime pilotage and towage services market were sanctioned for enteringintocartelagreementsconsistinginpricefixingandmarketsharinggeneratedbythe contract concluded by the joint venture and CN APM.


The RCC is the only administrative domestic authority empowered to apply article 5 of the Competition Act and article 101 of the TFEU when Single Market trade may be affected.SincethemodificationoftheCompetitionAct,theprioritisationprincipleallowstheRCCtodecidewhatcasescomefirst,basedon thepotential impactoneffectivecompetition,consumers’ general interest, or strategic importance of the economic sector concerned. However, there are no precise, public criteria based on which the RCC may decide to prioritise the cases. The RCC itself in its Strategy Plan for 2017–2020 mentioned its intention to review the criteria of the prioritisation principle. National courts act as complementary authorities empowered to enforce competition rules, by ex post judicial review of the RCC’s decisions and hearings on private enforcement.The RCC may initiate an investigation for potential competition infringements either ex officio or following the complaint of a natural or legal person proving an interest, and if legal or factual grounds exist (as we will detail in the “Third-party complaints” section).The RCC also performs sector enquiries. In practice, in many of its sector enquiries, the RCC had leads on potential anti-competitive practices, opening ex officio investigations. Also, in its sector enquires, the RCC can issue recommendations. In 2016, the RCC published the followingreportsregardingsectorinquirieson:electricity;sanitationservicesatnationallevel;servicesprovidedbyinsolvencypractitioners;autoinsurance;andservicesofaccessto the electronic communications infrastructure (Net City). In 2016, the RCC also initiated sector inquiries in markets such as exploitation of natural and mineral resources, copyright and related rights, retail banking services, the production and marketing of cement, and electronic commerce regarding marketing strategies.


A balance between the public and private interests of parties involved in an alleged cartel is the main objective of national competition legislation.Therightofdefenceinitsvariousforms,suchastherighttoaccesstheinvestigationfile,the right to submit written observations to investigation reports, the right to defence during



the hearings before the Plenum, and the right to a separate hearing, act to support private interests. As means of protection for undertakings under investigation, the competition legislation contains strict rules for carrying out investigations and, in some cases, for example, dawn raids, the RCC must have the court’s prior formal approval. PartiesalsoenjoytherighttoappealincourtcertainactsoftheRCClike:inspectionorders;interim decisions; qualification of some information as non-confidential; or sanctioningdecisions, etc.As additional protection, the competition legislation usually sets time limits for various phases of the RCC’s decision-making process, but they are not mandatory. For example, deliberations must take place the same day with the hearings or on another day if the Plenum decides deliberations will be postponed for certain reasons. After deliberation, the meeting secretary has 120 days to draft and communicate the decision. However, the competition legislationdoesnotstipulateamaximumtermforfinalisingtheinvestigation.In practice, the duration of investigations in cartel matters can change on a yearly basis. Like in 2015, the average duration in 2016 was of approximately two-and-a-half years. Inpractice,most investigation reports that reach thePlenumfinalisewith a sanctioningdecision. Limited cases exist where the Plenum has issued a rejection decision or returned the investigation report for further analysis.


Domestic leniency policy regulated by the Competition Act and detailed in the RCC’s Guidelines on the conditions and criteria for the leniency policy applicability (“Leniency Guidelines”)17 is intensively promoted by the RCC, including through its Leniency Module. However, leniency is not very often used, probably because of the possibility that the acknowledgmentofanti-competitivepracticesmightbackfireascriminal liabilityof theapplicant’s legal representatives. The New Criminal Code amendments to non-punishment and penalty reduction regimes are, however, expected to lead to more effective coordination between criminal penalties and leniency policy and encourage leniency applications. It is also true that uncertainty as to whether a leniency application might expose natural persons to criminal investigations still continues to undermine requests for leniency.Leniencyalso applies to cartels andconducts tofine immunityoronly reduction. Fineimmunity is available before and after the RCC initiates an investigation. A basic rule in leniency proceedings says one cartel may only have one successful immunity applicant, so thefollowingapplicantsmaygetfinereductions:30%to50%forthefirstapplicant;20%to30%forthesecondapplicant;andupto20%forsubsequentapplicants.Since the entry into force of Government Emergency Ordinance no 39/2017 transposing the EuropeanDirectiveonprivateenforcement,theundertakingbenefitingfromimmunitywillbe jointly liable for damages from anti-competitive practices.18 The RCC will not disclose the immunity applicant’s identity to third parties (including other parties to the alleged infringement) that have access to statements made in the context of leniency (including applicant’s identity), only until the investigation report is issued, during fileaccess.Our jurisdiction reports only two cases of “successful” leniencies: (a) in an investigation into taxi companies for fixing transportation tariffs; and (b) in an investigation for bidrigging in oil and gas drilling works. The latter was actually opened following a leniency application.19




Our domestic antitrust legal framework does not regulate a settlement procedure similar to that in EU legislation. Some procedural options to fast-track the procedures with the RCC exist, however. One is the recognition of involvement in the alleged cartel. The recognition works like a mitigating circumstance.According to RCC’s activity report, in 2016, 119 undertakings/associations of undertakings were sanctioned, of which 94 recognised the infringement of the Competition Act. The procedure of recognition has been detailed in the secondary instructions of the CC entered into force in November 2016. In exchange of acknowledgment of the anti-competitivebehaviour,theundertakingcanbenefitfromasubstantialreductionofthefinerangingbetween10%and30%.However,thefinecannotbebelow0.2%oftheturnoverrealisedinthefinancialyearprecedingthesanction.Also,therecognitioncantakeplaceeven before the RCC issues the investigation report.20Anundertakingthatbenefitedfromthe leniency policy may also use the acknowledgment procedure to gain an additional reductionofthefine.Inordertobenefitfromareductionofthefine,theundertakingsmustsubmitaformalrequestthat will include (a) the clear recognition of the anti-competitive practice and accept the maximumsumforeseenforthefine,(b)theconfirmationtheywereinformedaccordinglyand they had the possibility to express their opinions with respect to the infringement, (c) the confirmationthattheywillrequestaccesstothefileand/ortheorganisationofhearingsincasetheinvestigationreportcommunicateddoesnotreflectthepropositionsofthepractice’srecognition. In case the RCC does not accept the terms of the request and therefore the reductionofthefineisnotawarded,therecognitioncannotbeusedasevidence.Also,incasetherecognitionoperatedandareductionoffineisawarded,iftheundertakingdecidestochallengetheRCC’sdecision,itwilllosethebenefitofrecognitionasitwillnotbe considered a mitigating circumstance anymore.


Generally, any natural or legal person proving an interest canfile a complaint for anti-competitive practices, but this does not automatically mean the RCC opens an investigation. Following preliminary assessment of the complaint, the RCC may decide to: (1) open an investigation;(2)dismissthecomplaint;or(3)informtheapplicantthatthefactsdescribedin the complaint fall outside the Competition Act, or are already analysed by the European Commission or other national competition authority. The complainant may challenge the rejection decision in court within 30 days from communication.As an example, in 2016, in two of the sanctioning decisions for concluding horizontal agreements, the anti-competitive behaviour was signalled by third-party complaints.21 Thirdpartieshaveaccesstodocumentsfrominvestigationfilesinlimitedsituations.Forexample, the author of a complaint which was informed by the RCC that it would reject its complaintmayrequestaccesstothenon-confidentialversionofthedocumentsconsideredby the RCC in its preliminary assessment. In investigations initiated following complaints, the President of the RCC may approve the hearing of the complainant and/or provide a non-confidentialversionoftheinvestigationreport,ifthelatterdemandsso.In addition, any individual can inform on its own intention and anonymously the RCC of the existence of potential anti-competitive behaviours, using the online whistle-blowers



platform.22 Their identity cannot be spotted and thus will not be disclosed and their action willnotbeconsideredaninfringementofconfidentialityobligationsprovidedbytheLabourCode or in their employment agreements. The RCC has already launched an investigation on the tourism market following such report. TheRCCcanalsobenotifiedusinganotherITtoolavailableonitssite–thenotificationcanbemadeanonymously,butthereisnoguaranteethatthepersonwillnotbeidentified/their identity will not be disclosed.


The RCC’s procedure on imposing sanctions is rather transparent. In the past few years in cartelcases,theRCChasusuallysetthebasicamountofthefineto3%or4%ofthetotalturnoverachievedinRomaniainthepreviousfinancialyear.The principle on responsibility for sanctions is that the offender is personally and individuallyliableforpayingthefine.Nevertheless,incaseofthird-partycomplaints,co-infringers in a cartel case are jointly liable before third parties. Also, in case of associations of undertakings, thefine applied to associations of undertakingswhichmaynot exceed10% of the total turnover of each member active on the market affected by the association’s infringement.Asanexample,in2016,theRCCsanctionedwithafineamountingto8.4%of the turnover, the Chamber of Financial Auditors of Romania for establishing an hourly average fee to be practised by its members.23 This high percentage was applied merely because the undertaking’s turnover was rather small.


Sanctioned parties may appeal the RCC’s decision in order to seek its annulment before Bucharest Court of Appeal. The court has the prerogative to review the decision under all aspects of fact and law.Some procedural omissions or errors made during the investigation or in the RCC’s decision-makingprocesscanbechallengedonlywithinaspecificterm(e.g.,72hoursfromcommunication for judiciary authorisation of dawn raids).There were cases where courts ruled differently when the RCC’s decision was challenged separately by the sanctioned undertakings, even if the facts and evidence were identical for all sanctioned undertakings, mainly because precedents do not have the force of law in our legal system. Courts may also consider new evidence, not only those from the RCC’s file, such as:documents; witnesses; and expert evidence. There are no officially acknowledged andcertifiedcompetitionexpertsthatmaybeusedtoestablishtheexistenceofcartelsincourt,but the judge may ask non-binding opinions from “specialists” in competition.UndertheamendedversionoftheCompetitionAct(a)thedocumentsdataandconfidentialinformationfromtheRCCfilemayberequired,usuallyonlyonce,aftertheinvestigationreporthasbeencommunicated,and(b)decisionsregardingaccesstoconfidentialinformationarenotqualifiedanymoreasunilateraladministrativeacts,sotheycanbechallengedonlyalongwiththeRCC’sfinaldecisionwithrespecttotheinvestigation.Up to now, we have limited cases where the court has overturned RCC’s decisions. Nonetheless (a) the courts have started to pay more attention to assessing the evidence provided by the parties, and (b) have started to reduce fines imposed by the RCC byconducting an analysis of theproportionality of the saidfines. In 2016, thenumberof



decisions upheld by the High Court of Cassation was still high – in 95% of the cases the court confirmed theRCC’s position. Nonetheless, the fines imposed by theRCCwerereduced in 19% of the cases. In 2016, the Bucharest Court of Appeal annulled RCC’s decision through which it sanctioned several companies for bid rigging in a tender organised by the Ministry of National Defense in order to purchase “infantry weapons” and related “optical apparatus”.24 In this case, the Court of Appeal considered that the RCC did not prove beyond any reasonable doubt that the companies have been part of an anti-competitive agreement.Also in 2016, the High Court of Cassation and Justice partially annulled RCC’s decision through which it sanctioned a cartel between several oil companies consisting in the cessation of commercialising a particular type of fuel (Eco-Premium gas).25 ThefineimposedbytheRCC was reduced from 3.2% of the companies’ turnover to 2.6%.

Criminal sanctions

Further to our comments in “Overview of the law and enforcement regime relating to cartels” section, the implementation act of the New Criminal Code provides that persons who reveal their participation in the prohibited practice before the initiation of criminal proceedings will not be liable for the deed. A disclosure after the initiation of criminal proceedings leads to a reduction by half in the punishment limits.To our knowledge, there has been only one case in which an individual has been criminally prosecuted for participation in a cartel. However, we expect anti-competitive criminal case-law on bid rigging banned by article 246 of the New Criminal Code, to be punished by imprisonmentfromonetofiveyears.The RCC and criminal investigation bodies have the legal possibility to simultaneously investigate the same deed based on different grounds, which raises some questions in terms of cooperation between these authorities.Article 34 (6) of the Competition Act allows for information collected during investigations to be used also for the more extensive purpose of applying the law in the area of competition, and states the RCC’s right to inform other public authorities if aspects under their jurisdiction are found. The generality of these provisions raises questions as to what type of informationtheRCCwillprovidetootherauthorities:allconfidentialinformationobtainedbycompetitionlaw-specificproceduralinstruments,includinginformationreceivedinthecontext of leniency or acknowledgment.The absence of express limitations in this respect would, in fact, render leniency or recognition policies less appealing, especially in bid rigging cases, as it brings exposure to individual sanctions if the information provided to the RCC is disclosed to the criminal authorities.As the number of investigations launched based on information received within the Module of Bid-Rigging and from authorities investigating criminal cases has increased, new and clearrulesshouldbeenactedto:(a)introducespecificboundariestoinformationexchangeswithprosecutors;(b)increasecooperationtransparency;and(c)ensuretheprotectionoftherights of the parties under the RCC’s investigation.

Cross-border issues

According to article 2 (5) of the Competition Act, domestic competition rules apply to all practices with anti-competitive effects on the Romanian market, even if the infringement



was committed outside Romania. The RCC, as a member of the European Competition Network (“ECN”), applies article 101 of the TFEU according to the Council Regulation (EC) no. 1/2003, when trade between Member States may be affected.Settled practice between ECN members shows that the European Commission and national competition authorities inform each other of new cases, coordinate investigations and other information relevant to their activity. In addition, the RCC can exchange evidence with the European Commission and any other European competition authority.26 In 2016, six antitrust case consultations took place between the RCC and the European Commissionsimilar to thefiveantitrustcases in2015. Alsoshowingclosecooperationbetween theRCCandothernationalcompetitionauthorities is theCartelsOffice’s legalpossibility to proceed to dawn raids at the European Commission’s or other national competition authorities’ request. Appointed representatives of competition authorities from EU Member States can participate in the dawn raids requested by them and effectively carried out by the RCC.Also, in June 2016, the European Commission carried out dawn raids at companies in the gas market from Romania, in a European case concerning a potential anti-competitive behaviour aimed at hindering natural gas exports from Romania to other Member States.27 In2016,theRCCalsofinalisedtheReportregardingtheassessmentofcompetitioninthreekeysectors: construction; freight transport; and foodprocessing inRomania, realised incooperation with the Organisation for Economic Cooperation and Development.28


Thedomesticcompetitionframeworkacknowledgesthirdparties’righttofileclaimsbothbefore (so-called stand-alone actions) and after the issuance of a sanctioning decision by the RCC (so-called follow-on actions). Representative actions for damages on behalf of consumers brought by certain bodies or “class actions” are also included.In this field, the Directive29 approved in 2014, transposed through the Emergency Government Ordinance no. 39/2017,30 further amended our national legal framework. The followingarethemostimportantmodifications:a) The Court may impose disclosure of evidence to the defendant/a third party. The

CourtcanalsorequesttheRCCdisclosureofevidenceavailableinitsfilewhentheseevidences cannot be obtained from the parties/other third party. However, some type of evidence can never be disclosed: leniency declarations/transaction proposals.

b) TheRCC’sfinaldecisionsestablishanabsolutelegalassumptionoftheexistenceoftheillegal anti-competitive deed.

c) The statute of limitation is that offive years for stand-alone actions, aswell as forfollow-on actions and it starts running since the plaintiff knew or should have known of the infringement, the damage caused by this infringement and the identity of the infringer.

d) It is presumed, until the contrary proof is provided, that cartels cause damages. Up to this moment, the national courts have dealt with only two private litigations on antitrustmatters(i.e.,stand-aloneactions).Inbothcases,thefirstjurisdictioncourtheldthat the claimants have not proved the alleged infringements of the Competition Act. In one of these cases, Bucharest Court of Appeal awarded the appeal31 and obliged the defendant to paytheplaintiffanindemnificationofapproximately€930,000.Thedecisionwasupheldby the High Court of Cassation and Justice.32



Reform proposals

The RCC has put into public debate its new guidelines concerning a competition policy compliance programme.33 Competition policy compliance programmes are traditionally accepted by the RCC as mitigating circumstances. However, through these new guidelines, the RCC intends to establish criteria based on which these programmes will be accepted as mitigating circumstances. In brief, the RCC will accept such programmes if their concrete implementation at all levels in the company (management, mid-level and employees) can be proved.

* * *

Endnotes 1. CompetitionActno.21/1996republishedintheOfficialJournalofRomaniano.153on

February 29, 2016.2. Competition Council’s Strategy Plan for 2017–2020: http://www.consiliulconcurentei.

ro/uploads/docs/items/bucket12/id12175/plan_strategic_2017-2020_1505.pdf. 3. http://www.consiliulconcurentei.ro/uploads/docs/items/bucket12/id12037/ghid_

consortii_final.pdf. 4. http://www.consiliulconcurentei.ro/uploads/docs/items/bucket11/id11013/ghid_

practici_anticoncurentiale_licitatii.pdf. 5. http://proiecte.consiliulconcurentei.ro/cc2/. 6. https://portal.consiliulconcurentei.ro/solicitari/login. 7. http://www.monitorulpreturilor.info/. 8. http://www.consiliulconcurentei.ro/uploads/docs/items/bucket12/id12906/comunicat_

memo_carburanti_oct_2017_eng.pdf. 9. In 2013, the Competition Council initiated measures to co-opt the National Management

Centre for the Information Society (CNMSI) as collaborating partner. CNMSI manages and operates the Electronic Public Procurement System in Romania.

10. As per Council Annual Report (2010), a notable result of Module on Bid Rigging activity is that ANRMAP introduced a mandatory condition for participating in a public procurement:acertificateofparticipationwithanindependentoffer(swornstatementon observance of competition rules).

11. Act no. 71/2011 for implementation of Act no. 287/2009 regarding the Civil Code published intheOfficialJournalofRomaniano.409onJune10,2011inforcesinceOctober1,2011.

12. Article 246 of the Romanian Civil Code. 13. Council Regulation on the analysis and solving of complaints on the breach of articles

5, 6 and 9 of the Competition Act and articles 101 and 102 of the TFEU, approved by Council’sPresidentOrderno.499/2010publishedintheOfficialJournalofRomaniano. 687 on October 12, 2010.

14. According to the 2016 Council’s Annual Report.15. Orders no. 306 and 307 as of April 22, 2016.16. Decision no. 51 as of August 10, 2016.17. Guidelines on the conditions and criteria for the application of the leniency policy

implementedbyOrderno.300/2009andpublishedintheOfficialJournalofRomaniano. 610 of September 7, 2009.

18. Emergency Ordinance no. 39 of 31 May, 2017 on damages claims in cases of breaching competition law, as wellasonmodification and supplementing Competition Act no. 21/1996.



19. Decision no. 7 as of February 17, 2015.20. The declaration of the undertaking in the sense of declaring its availability to discuss

regarding the recognition does not constitute recognition of the participation of the undertaking to an anti-competitive practice or of its responsibility for this infringement. At the same time, the refusal of the undertaking to use the recognition procedure does not represent a refusal of cooperation or an obstruction of the CC’s procedure.

21. Decisionno.83asofNovember24,2016;Decisionno.91asofDecember13,2016.22. https://secure.secway.info/ro/start.php. 23. Decision no. 91 as of December 13, 2016. 24. Bucharest Court of Appeal, Decision no. June 6, 2016.25. Decision no. 1343 as of April 21, 2016.26. Article 34 (7), Competition Act.27. http://europa.eu/rapid/press-release_STATEMENT-16-2133_en.htm. 28. http://www.oecd.org/competition/romania-competition-assessment-project.htm. 29. The Directive 2014/104/EU of the European Parliament and of the Council of

November 26, 2014 on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of theEuropeanUnion, published inOfficial Journal no.L349, ofDecember5, 2014(“Directive”).

30. Emergency Ordinance no. 39 of May 31, 2017 on damages claims in cases of breaching competition lawaswellasonmodificationandsupplementingCompetitionActno.21/1996.

31. Court of Appeal of Bucharest, Decision no. 1701/2015 of October 30, 2015.32. High Court of Cassation and Justice, Decision no. 1979/2016 of November 23, 2016. 33. http://www.consiliulconcurentei.ro/uploads/docs/items/bucket12/id12280/ghid_

privind_conformarea_cu_regulile_de_concurenta.pdf.


PopoviciNițuStoica&Asociații239 Calea Dorobanti, 6thfloor,Bucharest,1st District, Postal Code 010567, Romania

Tel: +40 21 317 7919 / URL: www.pnsa.ro

Silviu StoicaTel: +40 21 317 7919 / Email: [email protected] SilviuStoica is a partnerwithPopoviciNiţuStoica&Asociaţii andheadof the competition practice group. His practice focuses on a broad range of contentious and non-contentious competition matters, with an emphasis on cartel investigations and industry inquiries, abuses of dominant position and antitrust disputes. Mr. Stoica also advises clients on restrictive agreements and works closely with in-house corporate counsels in sensitive internal compliance reviews. Mr. Stoica has been commended in Chambers Europe as a “strategic and realistic” competition lawyer who is “business-friendly andveryeasytocommunicatewith”.Mr.Stoicahasbeenwiththefirmsinceits inception, pursuing all career stages from associate to senior associate and head of practice group. Silviu Stoica holds a degree in law from the University of Bucharest Faculty of Law and is a member of the Bucharest Bar Association. Mr. Stoica attended US Legal Methods – Introduction toUSLaw,InstituteforUSLawinWashington,DCand theInternationalDevelopment Law Organization Development Lawyers Course (DLC-20E) in Rome.

Mihaela IonTel: +40 21 317 7919 / Email: [email protected] Mihaela Ion is a managing associate within the competition practice group of Popovici Niţu Stoica & Asociaţii. Her area of expertise covers, inparticular, antitrust litigation, unfair trade practices, consumer law, merger control proceedings and state aid. She also assists clients in structuring and implementing compliance programmes, providing regular training as external legal counsel on all relevant aspects of competition law. Chambers Europe reported Ms. Ion as having “great expertise in antitrust investigations and wider competition law”. Ms. Ion holds a degree from ‘Lucian Blaga’ University of Sibiu and is a member of the Romanian Bar Association. She also holds a Master’s degree in European and International Business, CompetitionandRegulatoryLawfromFreieUniversitätBerlin,aMaster’sdegree in competition from the Bucharest Academy for Economic Studies and a Master’s degree in international relations and European integration from the Romanian Diplomatic Institute.



SingaporeLim Chong Kin & Corinne Chew

Drew & Napier LLC


Singapore’s Competition Law RegimeEnacted in 2004, the Competition Act (Cap. 50B) (the “Act”) is the principal statute governing competition law regime in Singapore. The Act is administered and enforced by the Competition Commission of Singapore (the “CCS”), which is a quasi-judicial, statutory body established under Part II of the Act. Cartel matters are decided upon by the CCS, but the CCS’s decisions can be appealed to the Competition Appeal Board (the “CAB”). A decision of the CAB can subsequently be appealed to the High Court on a point of law arising from thedecision, or fromanydecision as to the amountof afinancial penalty.Parties may also appeal High Court decisions to the Court of Appeal under section 74 of the Act.The Section 34 ProhibitionCartel activities are prohibited by section 34 of the Act (the “Section 34 Prohibition”), which provides: “…agreements between undertakings, decisions by associations of undertakings or

concerted practices which have as their object or effect the prevention, restriction or distortion of competition within Singapore are prohibited…”

Section 34(2) of the Act provides examples of the types of arrangements that may fall within theambitofthisprohibition.Specifically,section34(2)oftheActstatesthatagreements,decisions or concerted practices may have the object or effect of preventing, restricting or distorting competition within Singapore if they: • directlyorindirectlyfixpurchaseorsellingpricesoranyothertradingconditions;• limitorcontrolproduction,markets,technicaldevelopmentorinvestment;• sharemarketsorsourcesofsupply;• apply dissimilar conditions to equivalent transactions with other trading parties, thereby

placingthematacompetitivedisadvantage;or• make the conclusion of contracts subject to acceptance by the other parties of

supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of the contracts.

Third Schedule to the Act Section 35 of theAct provides for excluded agreements that are specified in theThirdSchedule to the Act. For example, the Minister may exclude a particular agreement or anyagreementofaparticulardescription ifhe issatisfiedthat thereareexceptionalandcompelling reasons of public policy as to why the Section 34 Prohibition ought not to apply (paragraph 4 of the Third Schedule to the Act).


Drew & Napier LLC Singapore

Other specific activities and industries excluded from the application of the Section 34Prohibitionarespecified inparagraphs5,6and7of theThirdSchedule to theAct,andinclude the supply of piped potable water, the supply of bus services, and cargo terminal operations, amongst others.The Section 34 Prohibition does not apply to vertical agreements unless the Minister otherwisespecifiesbyorder(paragraph8oftheThirdScheduletotheAct).Todate,theMinisterhasnotspecifiedanyverticalagreementtowhichtheSection34Prohibitionwillapply.Additionally, the Section 34 Prohibition does not apply to arrangements that give rise to net economicbenefit(anexclusionthatisprovidedforinparagraph9oftheThirdScheduletothe Act). In order to qualify for the exclusion, it must be shown that the arrangement:• contributes to improving production or distribution, or promoting technical or economic

progress;• does not impose on the undertakings concerned restrictions that are not indispensable

totheattainmentofthoseobjectives;and• does not afford the undertakings concerned with the possibility of eliminating

competition in respect of a substantial part of the goods or services in question.Block Exemption OrdersSection 36 of the Act empowers the Minister to make an order, following the recommendation of the CCS, to exempt certain categories of agreements from the Section 34 Prohibition. The Competition (Block Exemption for Liner Shipping Agreement) Order is the only Block Exemption Order (“BEO”) that has been granted in Singapore since the introduction of competitionlaw.Itinitiallytookeffecton1July2006foraperiodoffiveyears,anditsextension until 2015 was granted by the Minister for Trade and Industry on 16 December 2010. It was then subsequently extended by the CCS, and will now apply until 31 December 2020. CCS’s GuidelinesPursuant to section 61 of the Act, the CCS has published guidelines which outline how the CCS administers and enforces the provisions under the Act. Of relevance to cartel enforcement are the CCS Guidelines on the Section 34 Prohibition 2016 (the “Section 34 Guidelines 2016”), the CCS Guidelines on Lenient Treatment for Undertakings Coming Forward with Information on Cartel Activity 2016 (the “Leniency Guidelines 2016”), and the CCS Practice Statement on the Fast Track Procedure for Section 34 and Section 47 Cases (the “Fast Track Practice Statement”). The Section 34 Guidelines 2016, Leniency Guidelines 2016 and the Fast Track Practice Statement apply to all cases for which the CCS has not issued a provisional infringement decision (“PID”) before 1 December 2016.

Overview of investigative powers in Singapore

TheinvestigativepowersoftheCCSaresetoutintheAct,specifically:• Section 62 of the Act provides that the CCS may conduct an investigation if “there are

reasonable grounds for suspecting that the section 34 prohibition has been infringed by any agreement”. Any investigation will be carried out by either the CCS or a duly appointed inspector (section 62(2) of the Act).

• Section 63 of the Act provides that the CCS has the power to require the production of specifieddocumentsorspecifiedinformation.

• Section 64 of the Act provides that the CCS has the power to enter premises without a warrant.



• Section 65 of the Act provides that the CCS has the power to enter and search premises with a warrant.

The CCS’s powers of investigation are described in detail in the CCS Guidelines on the Powers of Investigation 2016.


The CCS issued two PIDs as of September 2017.Bid Rigging in Electrical Services and Asset Tagging TendersOn 21 March 2017, the CCS issued a PID against three companies, namely the Cyclect Group,1 HPH Engineering Pte. Ltd. (“HPH”) and Peak Top Engineering Pte. Ltd. for their involvement in rigging bids in the tender for the provision of electrical services for the Formula 1 Singapore Grand Prix for 2015 to 2017. The CCS found that Cyclect Group hadpreparedallpricescheduleandfinalbidpricesfortheothertwocompanies,withtheintention that Cyclect Group would win the three-year term tender. The CCS’s PID was also issued against the Cyclect Group and HPH for engaging in bid rigging GEMSWorld Academy Singapore’s tender for the provision of asset taggingservices. The CCS found that Chemicrete Enterprise Pte. Ltd. (a part of the Cyclect Group) hadsoughtHPH’sassistancetosupportitsbid.GEMSWorldAcademySingaporereceivedthree quotes, and awarded the tender to Chemicrete Enterprise Pte. Ltd. The CCS commenced its investigations after receiving complaints on the alleged anti-competitive agreements. Capacitor CartelTheCCSissuedaPIDagainstfivecapacitormanufacturersforpricefixingandexchangingconfidentialbusinessinformationon6April2017.Thefivecapacitormanufacturersare:• Panasonic Industrial Devices Singapore, and Panasonic Industrial Devices Malaysia

Sdn.Bhd.;• RubyconSingaporePte.Ltd.;• SingaporeChemi-conPte.Ltd.;• Nichicon(Singapore)Pte.Ltd.;and• ELNA Electronics (S) Pte. Ltd. The five capacitor manufacturers were alleged to have engaged in anti-competitiveagreements, including price fixing and the unlawful exchange of confidential businessinformation in respect of the sale, distribution and pricing of Aluminium Electrolytic Capacitors (“AECs”) to customers in Singapore. The CCS commenced its investigation after receiving an application for immunity under its leniency programme fromone of thefive capacitormanufacturers. Its investigationrevealed that thefivecapacitormanufacturersheldregularmeetings inSingaporewherethey exchanged commercially sensitive business information such as customer quotations, sales volumes, production capacities, business plans and pricing strategies. They also discussed and agreed on sales prices and agreed to collectively reject customers’ requests for price reduction for AECs which are sold in the ASEAN region, including Singapore.A number of cartel investigations are ongoing. For example, the CCS’s investigation into pricefixingandmarketsharingamongst13freshchickendistributorswhichjointlyaccountfor more than 90 per cent of the market in Singapore is still ongoing.




The CCS released the Fast Track Practice Statement and the revised versions of its Guidelines on the Section 34 Prohibition, i.e. the Section 34 Guidelines 2016, and leniency regime, i.e. the Leniency Guidelines 2016, on 1 November 2016. TheSection34Guidelines2016clarifiestheCCS’sanalyticalframeworkandconsiderationsin relation to the Section 34Prohibition. TheCCS clarified its stance towards verticalagreements. It noted in the Section 34 Guidelines 2016 that the fact that undertakings are in a vertical relationship and/or have a vertical agreement does not, however, preclude the findingofahorizontalconcertedpracticewhichhasasitsobjectoreffecttheprevention,restriction or distortion of competition within Singapore. In particular, while dual distribution agreements may generally be considered as vertical agreements, a horizontal concerted practice is likely to be found in agreements of a hub-and-spoke nature.The Leniency Guidelines 2016 provide greater clarity on the CCS’s leniency programme, including the requirements for leniency, how a leniency marker or conditional immunity/leniency is secured, perfected and/or withdrawn, and the disclosure and use of information obtained from the leniency applicant by the CCS. It also introduces new express requirements for leniency applications.The Fast Track Practice Statement introduces a fast-track procedure for infringements of the Section 34 Prohibition to incentivise parties under investigation to cooperate with the CCS. The purpose of introducing the fast-track procedure is to assist the CCS to more effectively andefficientlyenforcetheAct.


In deciding whether to launch a formal investigation, the CCS takes into account its strategic priorities and the merits of the case. The CCS prioritises its enforcement efforts based on: • potentialimpactontheeconomyandsocietyoftheconduct(e.g. thesignificanceof

the industry in the Singapore economy, whether the infringement has a great impact on business costs in Singapore, how large a consumer base the industry has, how much the infringementwilladdtocostsofliving);

• severity of the conduct (e.g. hard-core price-fixing, serious abuse of dominance,mergerswhichsubstantiallylessencompetition);

• importance of deterring similar conduct (e.g. whether other companies will follow suit andengageinthesameconductifitisleftunchecked);

• resource considerations (e.g. how many cases the CCS is handling, how resource-intensivethecaseisrelativetotheexpectedbenefits);and

• risk of over-intervention (e.g. when action by the CCS may inadvertently deter innovation and entrepreneurship).

There is no prescribed timeframe for the conclusion of the CCS’s cartel investigations. The timeframe for an investigation depends largely on the nature and complexity of each case.


The CCS’s leniency programme is described in detail in the Leniency Guidelines 2016. Leniency applications may be made orally or in writing to the CCS.If apartyprovides sufficient information to theCCS toestablish theexistenceofcartelactivity before the CCS has opened an investigation, that party may benefit from full



immunityfromfinancialpenalties(“full immunity”). To earn full immunity, the leniency applicant must also ensure that it:• provides the CCS with all the information, documents and evidence available to it

regardingthecartelactivity;• grantsanappropriatewaiverofconfidentialitytotheCCSinrespectofotherjurisdictions

andregulatoryauthoritieswhichhavebeennotifiedoftheconductand/orfromwhomleniencyhasbeensought;

• unconditionallyadmitsliabilitytotheconductforwhichleniencyissought;• maintains continuous and complete cooperation throughout the investigation and until

theconclusionofanyactionbytheCCSarisingasaresultoftheinvestigation;• refrains from further participation in the cartel activity from the time of disclosure of

thecartelactivitytotheCCS(exceptasmaybedirectedbytheCCS);• mustnothavebeentheonetoinitiatethecartel;and• must not have taken any steps to coerce another undertaking to take part in the cartel

activity.AftertheCCShascommencedaninvestigation,thefirstpartythatprovidesinformationto theCCSabout thecartel that issufficientfor it to issuean infringementdecisioncanbenefitfromlenienttreatmentbywayofareductionofupto100percentinthelevelofthefinancialpenalties. Subsequent leniencyapplicantsmaybenefit froma reduction infinancialpenaltiesofupto50percent.The CCS provides a marker system for leniency applications. If the leniency applicant is unabletoimmediatelysubmitsufficientevidencetoallowtheCCStoestablishtheexistenceofthecartelactivity,theleniencyapplicantwillbegivenalimitedtimetogathersufficientinformation and evidence in order to perfect the marker. If the leniency applicant fails to perfect the marker within the given time, the next leniency applicant in the marker queue will be allowed to perfect its marker to obtain full immunity or a 100 per cent reduction in financialpenalties.Oncethemarkerhasbeenperfected,theotherleniencyapplicantsinthemarker queue will be informed that they no longer qualify for full immunity or a 100 per centreductioninfinancialpenalties.The CCS also operates a “Leniency Plus system”. A party cooperating with the CCS in relation to a cartel in one market (Cartel A), may also be involved in a completely separate cartel activity in another market (Cartel B). Under the Leniency Plus system, if the party wastoprovideinformationinrespectofCartelB, itmaynotonlystandtobenefitfromlenienttreatmentinrespectofCartelB,butmaybenefitfromfurtherreductioninpenaltiesin respect of Cartel A.


The fast-track procedure provides an avenue for parties to admit liability for infringements of the Act (and comply with various other conditions) in return for a reduction in the amount offinancialpenaltytobeimposed.ItexistsinparalleltotheCCS’sleniencyprogrammeand is distinct from voluntary commitments offered to the CCS, in that the latter does not involveanyadmissionof liabilitiesby thepartiesunder investigationandfindingofinfringement under the Act. The fast-track procedure can be initiated by the CCS prior to or after a PID but not after an infringement decision has been issued. The CCS envisages that, in general, the fast-track procedure will be initiated prior to a PID being issued. Parties under investigation can proactively indicate to the CCS their willingness to engage in a fast-track procedure



discussion. However, the CCS has discretion in determining whether a case is suitable for the fast-track procedure. The Fast Track Practice Statement sets out the fast-track procedure. The fast-track procedure consists of the following stages, namely, initiation, discussion, agreement, and acceptance.


Third parties may lodge complaints with the CCS if they believe that there has been a breach of the Section 34 Prohibition. The CCS will check at the onset that the complaint falls within its scope of powers under the Act. If the subject matter of the complaint is under the CCS’s purview, the CCS may ask the complainant to provide further information. If the complaint cannot be substantiated, the matter will be closed. The CCS will inform the complainant of its decision to not take any action in relation to a complaint. If the complaint can be substantiated with relevant information, the CCS will evaluate and assess whether the subject matter of the complaint is likely to have an appreciable adverse effect on competition. The CCS may launch an investigation if there are reasonable grounds for suspecting that competition law has been breached.


The CCS, under section 69 of the Act, can make such directions as it considers appropriate to bring an infringement to an end or to remedy, mitigate or eliminate any adverse effect oftheinfringement.Whilesection69oftheActprovidesgeneraldiscretiontotheCCSinmaking directions to bring an infringement to an end or to remedy, mitigate or eliminate anyadverseeffectoftheinfringement,itprovidesspecificexamplesofthedirectionsthatthe CCS may make, including:• requiringpartiestotheagreementtomodifyorterminatetheagreement;• thepaymenttotheCCSofsuchfinancialpenaltyinrespectoftheinfringementasthe

CCS may determine (where it determines that the infringement has been committed intentionallyornegligently),suchfinancialpenaltynotexceeding10percentofsuchturnover of the business of the undertaking in Singapore for each year of infringement forsuchperiod,uptoamaximumofthreeyears;

• to enter such legally enforceable agreements designed to prevent or lessen the anti-competitiveeffectsthathavearisenasmaybespecifiedbytheCCS;

• to dispose of such operations, assets or shares of such undertaking in such manner as maybespecifiedbytheCCS;and

• to provide a performance bond, guarantee or other form of security on such terms and conditions as the CCS may determine.

The CCS’s Guidelines on the Appropriate Amount of Penalty was revised in 2016 (“Revised Penalty Guidelines 2016”). The CCS has stated in the Revised Penalty Guidelines 2016 thatitwilladoptthefollowingsix-stepapproachwhendeterminingtheamountoffinancialpenalty to impose:• the calculation of the base penalty having regard to the seriousness of the infringement

(expressed as a percentage rate) and the turnover of the business of the undertaking in Singapore for the relevant product and relevant geographic markets affected by the infringementintheundertaking’slastbusinessyear;

• theadjustmentforthedurationoftheinfringement;• theadjustmentforotherrelevantfactors,e.g.deterrentvalue;



• theadjustmentforaggravatingormitigatingfactors;• theadjustmentifthestatutorymaximumpenaltyisexceeded;and• the adjustment for immunity, leniency reductions and/or fast-track procedure discounts. TheCCShasimposedfinancialpenaltiesonthepartiesinvolvedincartelactivitiesineveryinfringement decision published to date, save for the parties who have enjoyed immunity under the leniency programme. Section69(4)oftheActprovidesthatthemaximumamountoffinancialpenaltyimposedmay not exceed 10 per cent of the turnover of the business of the undertaking in Singapore for each year of infringement, up to a maximum of three years. There are no minimum penalties (in absolute terms) stipulated in the Act.


Parties to an agreement or persons whose conduct in respect of which the CCS has made a decision as to the infringement of the Section 34 Prohibition may appeal against (or with respectto)thatdecision,theimpositionoramountofanyfinancialpenalty,oranydirectionsissued by the CCS, to the CAB. An appellant would be required to prove its case on a balance of probabilities to succeed in its appeal. Appeals are made by lodging a notice of appeal, in accordance with the Competition (Appeals) Regulations, within two months from the date of the CCS’s infringement decision. The CAB is an independent body established under section 72 of the Act. It comprises 30 members including lawyers, economists, accountants, academics and other business people.Intheusualcourse,apaneloffivememberswillbeappointedtohearanappeal.Ithasbroadpowerstomakedirectionsitthinksfittodeterminethejust,expeditiousandeconomic conduct of the appeal proceedings.As of September 2017, the CAB has received 12 appeals relating to the cartel infringement decisions and issued its appeal decisions in nine of these appeals. Three appeals were withdrawn by the appellants. A decision of the CAB can subsequently be appealed to the High Court on a point of law arisingfromthedecision,orontheamountofafinancialpenalty(section74oftheAct).Appeals are brought by way of originating summons, and the procedure governing the appeal is set out in order 55 of the Rules of Court (Cap 322, R 5, 2006 Rev ed). Parties may also appeal High Court decisions to the Court of Appeal under section 74 of the Act. Such appeals are governed by the same procedure as all other civil appeals in Singapore. There is no further appeal right from the Court of Appeal. There have been no appeals against the decisions of the CAB to date.

Criminal sanctions

No criminal sanctions may be imposed on individuals in respect of cartel conduct or competition law violations in Singapore. However, criminal liability can arise where a person: • refusestoprovideinformationpursuanttoarequirementonhimorhertodoso;• destroysorfalsifiesdocuments;• providesfalseormisleadinginformation;or• obstructsanofficeroftheCCSinthedischargeofhisorherduties.Offencesarepunishablebyaprisonsentencenotexceeding12months,afinenotexceeding$10,000,orboth.TherehavebeennosuchcriminalsanctionsimposedinSingaporetodate.



Cross-border issues

Section 88 of the Act provides for cooperation between the CCS and foreign competition bodies.TheCCSinkeditsfirstcross-borderenforcementcooperationagreementwiththeJapan Fair Trade Commission (“JFTC”) on 22 June 2017.The agreement provides for extensive cooperation between the two competition authorities as it allows for the authorities to notify each other of potential infringements of the other party’s competition laws. It also allows the exchange of information and coordination on enforcement of cases, such as cartel investigations, that are of mutual interest. Both competition authorities can request that the other competition authority initiate enforcement activities. For example, if the CCS uncovers cartel activities undertaken in Japan that affect Singapore, the CCS can request that the JFTC initiate investigations.While this is thefirst cooperation agreement that is formalisedbetween theCCSand aforeign competition authority, it is worthwhile to note that many of Singapore’s Free Trade Agreements (“FTAs”) include chapters on competition and provide for cooperation on competition matters. Further, the CCS already cooperates with foreign competition authorities on cartel investigations through its leniency programme. Leniency applicants are required to grant awaiverof confidentiality to theCCS in respectof any jurisdictionwhere the leniencyapplicanthasalsoappliedforleniency,asaconditiontobenefitfromtotalimmunityfromfinancialpenalties.


Parties may bring private actions for a breach of competition law under section 86 of the Act, which provides that any person who suffers loss or damage directly as a result of an infringement (including, inter alia, of the Section 34 Prohibition) shall have a right of action for relief in civil proceedings. The Act does not allow parties to claim for double or treble damages.SuchrightsarepredicatedonaninfringementfindingbytheCCS,andmayonlybebroughtwithin two years following the expiry of any applicable appeal periods. Third parties do not have standing to bring such claims in other circumstances, or to lodge an appeal with the CAB.To date, there have not been any follow-on claims brought to court in respect of a violation of the Section 34 Prohibition.

Reform proposals

The CCS has indicated that it is undertaking a comprehensive review of the Act in December 2016.2 Legislative amendments to the Act are likely to be introduced in Parliament in 2018, as the CCS will be taking over consumer-protection functions from SPRING Singapore (a government agency sharing the same parent Ministry, i.e. the Ministry of Trade and Industry as the CCS).3

* * *

Endnotes1. Chemicrete Enterprises Pte. Ltd., Cyclect Electrical Engineering Pte. Ltd. and Cyclect

Holdings Pte. Ltd. (together the “Cyclect Group”).



2. A Decade in Control, 13 December 2016, International Financial Law Review (see http://www.iflr.com/Article/3646766/A-decade-in-control.html).

3. Speech by Minister Iswaran at the opening of the SBF Centre, 5 September 2017, Ministry of Trade and Industry (https://www.mti.gov.sg/NewsRoom/Pages/Speech-by-Minister-Iswaran-at-the-opening-of-the-SBF-Centre-.aspx).


Drew&NapierLLC10 Collyer Quay, #10-01 Ocean Financial Centre, 049315, Singapore

Tel: +65 6531 2266 / URL: www.drewnapier.com

Lim Chong KinTel: +65 6531 4110 / Email: [email protected] is aDirectorwithDrew&Napier LLC. He heads boththe Competition and Regulatory (Contentious and Non-Contentious), and the Telecommunications, Media and Technology practices.Chong Kin has experience in advising the sectoral competition regulators on liberalisation matters since 1999, including drafting, implementing and enforcing the competition law framework for the telecom, media and postal sectors, before moving onto the general Competition Act.He continues to advise both regulators and industry on competition matters under various sectoral competition codes and is widely acknowledged by peers, clients and rivals as a leading competition lawyer in Singapore. Asialaw 2017 lists him as a market-leading lawyer, noting, “[Chong Kin] is averytechnicallyproficientandcommerciallysavvylawyer.Heisalsoveryentrenched in the competition space, giving him unique insights into policy direction and interpretation”.

Corinne ChewTel: +65 6531 2326 / Email: [email protected] CorinneChewisaDirectoratDrew&NapierLLC.Corinne’sexperienceextends to all areas of competition law practice, including assisting clients in thefilingofmergernotificationstotheCCS,leniencyapplicationsandassistingclients with CCS investigations. Corinne has also assisted multinational and local companies in setting up competition law compliance and audit structures, dawn raid and whistleblowing programmes and conducting audit checks for companies in a wide range of industries in Singapore and other jurisdictions such as China, Thailand, Malaysia, Indonesia, South Korea and Vietnam. Corinne’s corporate experience includes providing contractual and regulatory advice for listed and unlisted companies in a broad spectrum of industries. Corinne is listed as a leading individual in Competition and Antitrust in Singapore by Asia Pacific Legal 500 2017.



SwedenPeter Forsberg, Haris Catovic & David Olander

Hannes Snellman Attorneys Ltd


The Swedish law applicable to anticompetitive agreements is in large part equivalent to EU competition law and Article 101(1) of the Treaty on the Functioning of the European Union (“TFEU”). The Swedish Competition Act (“Competition Act”) came into force on 1 November 2008 and governs all types of actions that may distort effective competition. The Competition Act aims at, as far as possible, assimilating EU competition law and is thus interpreted in accordance with practice from the European Commission (“Commission”) and the Court of Justice of the European Union (“ECJ”). Chapter 2 of the Competition Act governs the substantive provisions relevant for anticompetitive agreements and cartel enforcement. The CompetitionActdoesnotprovidealegaldefinitionofwhata“cartel”is,butitisgenerallyunderstood to signify an agreement entered between competitors which aims to distort competitiononaspecificmarket.Chapter 2, Article 1 and Chapter 2, Article 2 of the Competition Act are modelled after Article 101(1) and 101(3) of the TFEU. Article 1 strictly prohibits cooperation between undertakings which has as its object or effect the prevention, restriction or distortion of competition in the market to an appreciable extent, whereas Article 2 sets out the possible exemptions to the prohibition found in Article 1. The geographic scope of the Competition Act stretches to behaviours affecting the territory of Sweden. The ultimate reach of the Competition Act is determined by whether the anticompetitive behaviour has potential to, or actually affects, a market in Sweden. Hence, although an agreement concerns foreign undertakings or is organised from outside of Sweden, if it has an appreciable effect on competition in Sweden, the Competition Act is applicable and the undertakings may be held liable. However, where trade between EU Member States may also be affected, EU competition law will correspondingly be applicable. The Swedish Competition Authority (“SCA”) is the central administrative authority for the administration and enforcement of competition law in Sweden. The SCA plays a key role inthecompetitionfieldandisentrustedwithinvestigativepowersaswellasinterventionand, to some extent, decision-making powers. The SCA’s powers stem from the provisions in Chapter 5 of the Competition Act.The SCA investigates possible infringements of the Competition Act and may require an undertaking to terminate practices found to be contrary to competition law. If the undertaking fails to comply with an order from the SCA, an administrative fine maybe imposed on the undertaking for non-compliance. In situations where the SCA has


Hannes Snellman Attorneys Ltd Sweden

established the existence of an infringement of the Competition Act, the Patent and Market Court (“PMC”)may imposefinesofup to10%of the infringingcompanies’ aggregateworldwide group turnover. Thus, the SCA does not have decision-making powers equivalent to the Commission.The PMC acts as a division within the Stockholm District Court (“SDC”)asthefirstinstancein competition law matters, merger control proceedings and in damages actions. Decisions and judgments by the PMC can subsequently be appealed to the Patent and Market Court of Appeal (“PMCA”), as the highest instance. A precondition for the PMCA to hear and conduct an examination of an appealed case or matter is that the court grants a leave to appeal. A reorganisation of the court system was made effective as of 1 September 2016, where the PMC was established as a separate division within the SDC and where the Market Court (“MC”) was replaced by the PMCA. The reorganisation of the court system for competition law matters was deemed necessary due to the complex and comprehensive nature of competition law violation and merger control cases. The intention is to obtain a uniform examination and handling of competition law matters, which is a welcome change bymany stakeholders. The new court system creates amore unified and concentratedjudicial system. The consequence of an agreement found to fall within the provisions of Chapter 2, Article 1 of the Competition Act is that such agreements are unenforceable. In caseswhere the undertakings’market shares and turnover are below certain specificthresholds, the agreement will fall outside of the competition rules, in line with the SCA’s guidance on Agreements of Minor Importance. The de minimis rules do not apply to hardcore restrictions, however, such as cartel-like behaviour.

Overview of investigative powers in Sweden

The SCA has investigative powers which are broadly similar to those of the Commission. The investigative powers are set out in Chapter 5 of the Competition Act and include:Requests for information: The Competition Act provides the SCA with extensive powers to require information, documents and other materials from undertakings which are suspected of an infringement, but also third parties. The SCA may require such information when necessary for the performance of its duties under the Competition Act by issuing a request for information under Chapter 5, Article 1(1) of the Competition Act.TheSCAmayalsoperformtradeorsector-specificinvestigationsbyrequestinginformationfrom customers, competitors and other undertakings to assess and highlight potential competition concerns in the private and/or public sector which may hinder competition. Sucharequestmaybeimposedunderpenaltyofanadministrativefineforfailuretoadhereto the SCA’s request for information.The SCA may also request information at the request of another National Competition Authority (“NCA”) in the EU. Call in for questioning: Individuals who are believed to be able to provide relevant information may be called in for questioning by the SCA. Orders to provide information andappearforquestioningmaybeimposedunderpenaltyofanadministrativefinefornon-compliance. However, privilege against self-incrimination applies and the individual does not have to divulge information that may implicate the individual.Inspection of the business premises – “dawn raids”: In order for the SCA to carry out adawnraid,thePMCmustfirstgrantauthorisationbyacourtorder.WheretheSCAhas



reasonable grounds to assume that the Competition Act has been infringed, or when it is necessaryinordertofulfilSweden’sobligationstotheCommissionoranotherNCA,theSCA can apply to the PMC for authorisation to conduct an unannounced on-site inspection atlocationsrelevanttothesuspectedinfringement;forexample,companypremises.In order to be afforded the right to perform a dawn raid, the SCA has to show reasonable grounds to assume that the prohibition in the Competition Act has been infringed. The standard of proof set out in Chapter 5, Article 3 of the Competition Act is set low, examples of which can be seen in previous cases such as PEAB Sverige et al. and Brunswick Marine in Sweden AB et al. There, the SCA was granted permission to enter and seize materials on the business premises due to indications of parallel behaviours, which was based on statistical analysis of tenders in public procurements. Upon successful application to the PMC, the SCA is granted inspection powers during dawn raids. Such powers include the right to enter any premises, land and means of transport used for the business, but also to carry out unannounced on-site inspections at the residential premises or other premises of members of the board and employees of the undertaking under investigation (in cases where the behaviour which is subject to scrutiny is considered tobesufficientlyserious).Theundertakingwill,asaroutine,notbeheardbeforethePMChas taken its decision and not be informed until the investigation has been initiated. During an unannounced on-site inspection, the SCA has wide powers to conduct necessary inspections in order to enforce the prohibition contained in the Competition Act. Those powers include:• examiningbusinessbooksandothercompanyrecords;• taking or obtaining copies of, or extracts from, books and company records (including

electronicrecords);and• order oral explanations “on the spot”.The SCA is often accompanied by the Swedish Enforcement Service, which assists in gainingaccesstopremisesandapplyingofficialseals.If the PMC denies the SCA’s application of a dawn raid, the SCA may appeal the decision to the PMCA.Seizure of evidence: In the course of conducting a dawn raid, the SCA will do a physical search of the premises in question. The SCA has the power to examine any kind of company records, including taking copies or extracts from such records (electronic records included) as well as “mirroring” digitally stored material for an in-depth search. The SCA is not authorised to review mirrored information off business premises (i.e. at the SCA’s premises) withoutpriorconsentfromthecompany.WhentheSCAreviewsmirroredmaterialattheSCA’s premises, the company will be invited to have a representative present throughout the process to supervise. For more information on mirroring of digitally stored material, please see below.Inspection of non-business premises: The SCA may be authorised by the PMC to inspect other premises, land or other means of transport, including residential premises of directors, managers and other members of staff, where the criteria in Chapter 5, Article 3 of the CompetitionActisfulfilledandtheSCAhasreasonablesuspicionsofaseriousviolationofthe Competition Act.Interviews with company employees: The SCA may, as part of an unannounced on-site inspection, order oral explanations from representatives or employees of the undertaking involved about documents found at the business premises, or what role a particular



individual of interest has in the organisation. However, the interviewee is not required to provide any incriminating information. Furthermore, individuals who are believed to be able to provide relevant information in an investigation can be required to attend hearings at the SCA’s premises. The hearings will be recorded in writing and the interviewee is given the opportunity to examine that record for accuracy.Legal privilege: During an unannounced on-site inspection, the SCA does not have the legal righttoconfiscatedocumentsorstoragedevicescontaininginformationcoveredbylegalprivilege. In the event of a dispute of whether a particular document is legally privileged, the document in question is immediately to be sealed and sent by the SCA to the PMC for the issue to be determined without delay. Legal privilege only pertains to legal advice obtained from external legal counsels who are members of the Swedish Bar Association or his/her associate (Chapter 5, Article 11 of the Competition Act).In practice, the bar to show that a particular document is protected by legal privilege in Sweden is set quite low. In Posten AB et al., the company (“Posten”) claimed that a memorandum found by the SCA during a dawn raid, written by the in-house legal counsel for the purpose of obtaining external legal counsel, should be covered by legal privilege. The PMC agreed with Posten and consequently considered that every written document, which has been entrusted to a lawyer within its profession, is protected under legal privilege.Privilege against self-incrimination: The protection against self-incrimination under SwedishlawreflectstheConventionfortheProtectionofHumanRightsandFundamentalFreedoms, as interpreted by the European Court of Human Rights. It is up to the SCA to prove that an infringement of the Competition Act has been conducted. Although the SCA may require an individual or an undertaking to provide certain documents or information under the Competition Act, the SCA may not compel answers which might involve an admission of the existence of a competition law infringement which the SCA has to prove in court.


The SCA has, for the past few years, prioritised cartel detection by devoting greater resources to develop SCA’s ex officio cartel detection methods. Additionally, the SCA has become more proactive in using media to convey its activities against anticompetitive behaviour. In particular, the SCA has emphasised the potential risks an undertaking may beexposedtobyparticipatinginacartel,suchasheavyfines,badgoodwillandexclusionfromparticipation inpublicprocurement. Through intensifiedactivity in themedia, theSCA aims at increasing awareness of the Competition Act and the leniency programme.Although it varies, on average the SCA performs approximately two dawn raids per year. In October 2016, the SCA performed unannounced on-site inspections after suspicions ofunlawful cooperationbetween several largeDIYbuildingmaterial chains. TheSCAsuspects that the chains have agreed to minimum prices on bathroom ceramics, subsequently resulting in higher prices for the end consumers. In connection with this inspection, the SCA found indications of further cooperation between the chains as to promotional activities. Consequently, the SCA performed an additional unannounced on-site inspection. The second investigation was concluded in March 2017 and showed that the companies had cooperated in several promotional activities in the form of local sales displays. However, the SCA found no conclusive evidence in support of the suspicion and concluded that the contacts between the undertakings did not have anticompetitive effect and closed the



investigationwithout takingany furtheractions. However, thefirst investigation is stillongoing and it remains to be seen whether the SCA will take any further actions.In 2015, the online travel agencies (“OTA”) Booking.com and Expedia were subject to investigations in a number of EU Member States. The SCA investigated whether the OTAs applied anticompetitive parity clauses in relation to Swedish hotels. The investigations were closed after the OTAs made changes to the clauses. In 2016, 10 NCAs and the Commission decided to follow up which effect the changed agreements had on the OTA market. The finalreportwaspublishedinApril2017andtheSCAconcludedthatthenewagreementshad improved the conditions for competition between the OTAs.Looking at which sectors the SCA has analysed in recent years, the SCA tends to prioritise those markets exposed to competitive imbalance. Sectors that have been under the SCA’s scrutiny in the past are building and construction, the health care sector and the petrol and timbermarkets.Moreover,theSCAreceivesapproximatelyfiveleniencyapplicationsperyear, whereof approximately half are summary applications.Aleris Diagnostik, Capio S:t Görans Sjukhus et al. In December 2015, three companies withinthehealthcareandnursingsectorwerefinedatotalofapproximatelySEK28millionfor collusion during a public tender of clinical physiology. The SCA sued the companies beforetheSDCandrequestedfinesamountingtoatotalofSEK41million.Alerishad,prior to the companies submitting their respective tender offers, agreed to share the contract with the other two, regardless of which company eventually would be awarded the contract. TheSDCfoundthatthepracticewasanticompetitivebyobjectandimposedfinesonthehealth care companies. The case was appealed to the PMCA, which set aside the SDC’s judgment and ruled in the health care companies’ favour. According to the PMCA, the agreements between the companies imposed an obligation on the winning party to, on request, appoint a losing party as subcontractor. The PMCA established that the agreements did not stipulate which volume a subcontractor would be awarded which meant that the parties had not agreed to share a certain volume of the market. The PMCA also pointed out that the decisive criteria to award the winner in the public tender had been the lowest price. Under those circumstances, the PMCA concluded that the agreements could not be heldanticompetitivebyobjectandthattheSCAhadnotpresentedsufficientevidencetoestablish that the agreements had anticompetitive effects.The SCA sued TeliaSonera, Sweden’s largest telecommunications operator, and Göteborg Energi GothNet,alocalnetworkoperatorinGothenburg,attheSDCrequestingatotalfineof SEK 35 million for having formed a bid-rigging cartel prior to a public tender procedure by the City of Gothenburg in 2009. The SCA claimed that when the City of Gothenburg procured data communication services, TeliaSonera and GothNet agreed that TeliaSonera would refrain from submitting a tender offer in the procurement, despite the fact that GothNet and TeliaSonera are major competitors on the market. Subsequently winning the bid, GothNet contracted TeliaSonera as a subcontractor. The court ruled in favour of the SCA’sclaimandorderedeachofthepartiestopaySEK8millioninfines.Thejudgmenthas been appealed and the case is pending before the PMCA.Alfa Quality Moving, NFB Transport Systems and ICM Kungsholms were sued in 2014 for approximately SEK 42 million. The companies had in two subsequent transactions included ancillary restraints which, according to the SCA, were too far-reaching. The SCA claimed that the competition clauses amounted to unlawful non-competes and market-sharing. This was the first case where too far-reaching ancillary restraints have beeninterpreted as being able to create potential anticompetitiveagreements,givingrisetofines.AlthoughthecourtagreedwiththeSCAthatthenon-competeclausesoffiveyearswere



too far-reaching, the court found that the purpose of the clauses had been reasonable and that the SCA had not been able to show any negative effects on competition as a result of the agreements. The SCA decided to appeal the case to the PMCA, which held that for the successful implementation of a transaction, non-compete clauses may be necessary as long as they are directly related to the merger. The PMCA ruled that such clauses are a form of “loyalty guarantee” between the seller and the purchaser, providing the buyer with a certain degree of security. The SCA argued that the moving companies had knowingly planned on non-compete clauses exceeding the three-year period outlined in the Commission’s guiding notice on ancillary restraints. However, the PMCA found that the three-year timeframe only reflectsthedurationunderwhichcompaniesnormallycanassumetobeprotectedundertheCommission notice instead of the maximum duration for a non-compete clause. The court didnotfindanyevidenceinsupportofthatthenon-competeclauseswereautomaticallyanticompetitive by object. The PMCA further concluded that the SCA did not provide any evidence proving that the clauses had anticompetitive effects. Consequently, the PMCA dismissed the SCA’s appeal and fully upheld the SDC ruling.Following a third-party complaint, Electrolux and seven of its exclusive distributors were subject to an investigation by the SCA concerning potential bid-rigging in connection to a public tender of institutional kitchen equipment. The investigation showed that Electrolux and the distributors had entered into exclusive distribution agreements which prohibited each distributor from making active sales and marketing campaigns into a geographic area which was exclusively allocated for another distributor within Electrolux’s exclusive distribution network. The exclusive geographic areas coincided with the counties-based division in the public tender. The distributors had submitted tender offers only in the counties that were allocated for each individual distributor according to the exclusive distribution agreements with Electrolux. The SCA found that it was not established whether the practice restricted competition and harmed consumers. As a result of the SCA’s investigation, Electrolux developed new guidance for its exclusive distributor’s future practices in public tenders. The SCA therefore decided not to take any further actions and closed the investigation.In April and June 2017, the SCA performed unannounced on-site inspections against the insurance companies Söderberg & Partners, AIG, If, Trygg-Hansa and Folksam for suspected collusion in public tenders of insurance services. The SCA is currently examining whetherSöderberg&Partnersinformedtheinsurancecompaniesabouttheirprogressinpublic tenders, which Söderberg& Partners was handling in the capacity as insurancebroker, and advised them on when to adjust their tender offers. During the unannounced on-site inspection at Söderberg & Partners and following the company’s consent, theSCA decided to index and mirror digital material at the authority’s premises. Söderberg &PartnersappealedtheSCA’sdecisiontothePMC,questioningwhethertheSCAactedbeyond its investigatory powers when the authority copied and confiscated the digitalmaterial. The PMC ruled that the SCA’s conduct during unannounced on-site inspections is not admissible for judicial review under Swedish law, therefore it rejected the company’s appeal.Söderberg&PartnerschallengedtherulingtothePMCA,arguingthatthePMC’sdecisionmeanttherewasinsufficientjudicialreviewunderSwedishcompetitionlawandthat it was not compatible with EU case law. The PMCA rejected the appeal and upheld the PMC’s ruling.


Enhanced decision-making powers for the SCA: The SCA does not currently have anypowerstoimposefinesoncompaniesinfringingtheCompetitionAct,butmustgoto



thePMCtorequestfinesagainstundertakings thathave infringedthecompetitionrules.In 2015, the Swedish government launched a legislative initiative on whether the SCA should be granted enhanced decision-making powers in the enforcement of antitrust and merger control rules. In June 2016, the initiative proposed that the SCA should be granted enhanced decision-making powers in both antitrust and merger control cases in order to reduce processing times at the SCA and to further harmonise Sweden’s decision-making order with other EU Member States. However, the bill published in September 2017 and which was passed through parliament proposed extended decision-making powers for the SCA only in relation to merger control cases and not as to cases concerning violations of the prohibitions against anticompetitive agreements and abuse of dominant position. The statutory reform entered into force on 1 January 2018. Mirroring: The issue of mirroring has been a much-debated topic in Sweden for the past few years due to the legal uncertainties surrounding the practice. Prior to the amendments to the Competition Act in 1 January 2016, there was no express legal basis allowing the SCA to carry out indexing and searching of digital material at its own premises in connection with unannounced on-site inspections with the consent of the company. The proposed changes to the Competition Act, following an initiative by the Swedish government, were therefore welcomed by the legal community as Chapter 5, Article 6 of the Competition Act now grants the SCA express authority to mirror materials found at unannounced on-site inspections, with the consent of the company. Fishing expeditions: the debate has further been focused on the excess information that becomes available to the SCA through mirroring and whether it is compatible with the Competition Act. The concern is that the SCA may go beyond its original authority and use the excess information for future investigations. In 2014, the MC held that the SCA did not have the authority to use previously mirrored material collected at an unannounced on-site inspection relating to another alleged violation to investigate a potentially new infringement oftheCompetitionAct,henceclarifyingthat“fishingexpeditions”arenotlawful.


As mentioned above, the results of the Swedish government’s initiative launched in April 2015, investigating whether the SCA should be granted enhanced decision-making powers in the enforcement of antitrust and merger control rules, were published earlier this year. The initiative, which was subsequently passed through parliament in fall 2017, proposed extended decision-making powers for the SCA only in relation to merger control cases and not in cartel and abuse of dominance cases. One of the key issues investigated was whether the SCA should have the power to decide onfinancialpenaltiesandactasfirstinstanceincompetitioninfringementcases,withthepossibility for the undertaking concerned to appeal the SCA’s decision to the PMC and furthertothePMCA.Theproposedreformisbelievedtoleadtoamoreefficientsystem,but could potentially also give rise to concerns in regard to legal certainty aspects, since the SCA would be granted double-edged roles as both prosecutor and judge, which is a novelty within the Swedish legal system.The reform entered into force on 1 January 2018.


TheSwedishleniencyprogrammewasamendedin2014tobetterreflecttheEUleniencysystem. The new leniency regime introduced a marker system whereby a company



may apply for a marker and submit limited information about an ongoing infringement. The minimum requirement in order to obtain a marker is to submit information on the market affected by the infringement, the other companies involved and the nature of the infringement.Inordertosecurethemarker,thecompanymust,withinaspecifiedperiod,submitacompletenotification. Unlessthecompanywiththemarkerfails tosubmit theoutstanding information, another company cannot jump the queue for immunity.Toobtainimmunityorreductionsoffines,acompanymustsatisfycertainconditionssetoutinChapter3,Articles11to15oftheCompetitionAct.ThefirstcompanytoprovidetheSCAwithsufficientinformationoftheexistenceofaninfringementwhichtheSCAcanacton may be granted immunity.Alternatively,insituationswheretheSCAalreadyhassufficientinformationtoactwithouttheapplicant’scontribution,thecompanymaystillreceiveimmunityifitisfirsttoprovideinformation which allows an infringement to be established, or contributes in some other waytoaverysignificantextenttofacilitatetheinvestigation.Additionally, a company seeking immunity must also provide all relevant information available, actively cooperate with the SCA throughout the investigation, ensure that no evidence is destroyed, not hinder the SCA’s investigation in any other way, and cease participation in the infringement as soon as possible.In situations where a company has compelled other undertakings to participate in the infringement, immunity will not be available.Whereanothercompanyhasalreadysecuredimmunity,anundertakingapplyingforleniencycanstillbenefitfromareductionoffines. Chapter3,Article13of theCompetitionActprovidesthatacompanymaybenefitfromareductionoffinesiftheundertakingprovidestheSCAwithinformationwhichfacilitatestheinvestigationtoasignificantextentaswellas satisfying the requirements for immunity set out above.According to the SCA’s guidelines, the first company to satisfy the relevant conditionswillbeeligibleforareductionofthefine,whichwillbedependentonthetimingoftheinformation, the added value that the information may contribute, and the company’s cooperation throughout the investigation.

Undertaking Maximum reduction of fines1 50%

2 30%

3 and subsequent 20%


In cases where the facts are uncontested and can be considered to be clear-cut infringements, the SCA may, in accordance with Chapter 3, Article 16 of the Competition Act, issue a fineorder,which isa formofbindingsettlement. Thesystemoffineorders isbuiltonvoluntariness, where the company under investigation may choose to accept the SCA’s settlement termsornot. Afineorder isbindingandasimplifieddecisionon liability isissued. However, the settlement can be appealed to the PMC within a year of written confirmation.It is worth noting that there is no possibility for fine orders to receive any reductionsordiscounts– the advantagesoffineorders are the simplified andexpeditedprocesses. Generally,fineordershavemostoftenbeenusedinbiddingcollusioncases.




Many cases are brought to the SCA by third parties. The SCA may ex officio open an investigationbasedoninformationfromthepublic.Whetheratip-offleadstoanyfurtherinvestigation often depends on whether the SCA believes there is consumer harm, the importance of a precedent and the measures required for the investigation. The SCA has wide investigative discretion and restraints on the capacity for investigations, and resources available,mayinfluencewhetheraninvestigationisopenedornot.Normallyadecisionon whether a matter should be further investigated or written off will be made within one to four months.Undertakings concerned have the possibility, in the event that the SCA decides not to proceed with an alleged infringement, to initiate a private action in the matter.


Chapter 3, Articles 5 to 11 of the Competition Act, contain the provisions applicable to civil penalties. The SCA has the burden to prove that the conditions under the Competition Actforimposingafineonaninfringingundertakingarefulfilled.Accordingtocaselaw,the standard of proof which the SCA will have to satisfy is high, but can to some extent be alteredto takeintoconsiderationtheseriousnessof theinfringement involved,andfinessought in a particular case.LiketheCommission,theSCAhasprovidedguidanceonthesettingoffines,butmaynotfineanundertakingmorethan10%ofitsgroupturnoverduringthepreviousfinancialyear.TheSCAtendstolookattheturnovergeneratedinaspecificmarketwheretheinfringementtookplace. Whendeciding the levelof thefine, theSCAevaluates thegravityand theduration of the infringement.Thebase levelof thefine is setbyconsideringvarious factors suchas the typeand thescope of the infringement and the harmful effect on the market, both actual and potential harm. The base level is then adjusted for aggravating or mitigating circumstances. Factors such as a ring-leading role or relapse in anticompetitive behaviour are seen as aggravating circumstances, whereas full cooperation with the SCA and partial participation in the infringement may provide mitigating circumstances. For each circumstance, the level is adjusted by 5% to 15%.


In contrast to the Commission, it is the PMC that delivers the infringement judgment and not the SCA. The SCA rather acts as a prosecutor and will be heard in front of the court together with the investigated undertaking. If the decision of the PMC is appealed and subsequently granted leave to appeal, the PMCA performs a review of facts and substance, affecting both the legal assessment and possible sanctions.Inregardstodamagesactions,itisthePMCthatactsasthefirstinstanceinactionsforcarteldamages. The PMC’s judgment or decision can be appealed to the PMCA which, if leave to appeal is granted, will hear and conduct an examination of the appealed case or matter. As part of the European process to harmonise actions for competition damages across all Member States, a legislative reform entered into force in late December 2016 to implement the EU Directive on Antitrust Damages. The new Antitrust Damages Act includes several newreforms;forinstance,arebuttablepresumptionthatcartelscauseharm,clearerlimitationperiodsandthatafinal infringementdecisionconstitutesfullproofof the existence of a competition law infringement.



Criminal sanctions

Breach of the competition rules is not a criminal offence in Sweden. However, a trading prohibition may be imposed on an individual in cases of particularly serious infringements. Chapter 2, Article 1 of the Competition Act governs such prohibition. The SCA will seek a trading prohibition only in situations where it is considered to be in the public interest and theindividualhasseriouslyfailedtofulfilhisorherobligations.The consequence following a trading prohibition is a ban for the individual concerned for a period of three to 10 years to run business operations or hold a senior position in a company. Furthermore, an individual failing to abide by a trading prohibition risks imprisonment of up to two years. The SCA does not take into consideration that an individual may have left or been removed from a post when seeking a trading prohibition.Incircumstanceswhereeither thecompanybenefitsfromleniency,or the individualhascontributedandpersonallycooperatedtoasignificantextent,theSCAmaygrantimmunityfrom a trading prohibition.

Cross-border issues

In situations where anticompetitive conduct may be subject to enforcement in multiple European jurisdictions, Regulation 1/2003 provides that the SCA and other European NCAsmustcooperatecloselyfortheinvestigationofapotentialinfringement.Withintheframework of the European Competition Network (“ECN”), NCAs may assist each other in investigations by sharing information or performing surprise visits on behalf of another NCA. It is not uncommon, for example, for the SCA to assist in an unannounced on-site inspection in Sweden on behalf of another NCA.Furthermore, a Nordic Cooperation Agreement exists between the NCAs in Denmark, Finland,Iceland,NorwayandSweden. TheNordiccountriesexchangenon-confidentialinformation and information about cases of interest. Besides the Nordic Cooperation Agreement and the ECN, Sweden is also part of the International Competition Network and the Organisation for Economic Cooperation and Development.


On 27 December 2016, the Swedish Government implemented the EU Directive on Antitrust Damages Actions in national legislation by enacting an entirely new Act on Antitrust Damages (the “Antitrust Damages Act”). The purpose of the reform is to facilitate for parties that have suffered from a violation of competition law to claim damages. The new Antitrust Damages Act includes provisions that clarify and simplify procedures for both damages claims and court proceedings in antitrust damages claims and introduces severalnewreforms,forinstance:arebuttablepresumptionthatcartelscauseharm;afinalinfringement decision will constitute full proof of the occurrence of a competition law violation;aswellasclearerlimitationperiods.It follows from Chapter 2, Article 1 of the Antitrust Damages Act that if an undertaking intentionally or negligently infringes the prohibition against anticompetitive agreements, the undertaking shall compensate any damage that is caused thereby.ThescopeofthoseentitledtoclaimdamagesisnotdefinedintheAntitrustDamagesActbut can in general be described as “victims of competition law violations”. In principle, the victim is entitled to full compensation for damages suffered. The victim is therefore not only tobecompensatedforactuallosssuffered,butalsoforanylossofprofitresultingfromtheinfringement, including interest from the time the harm occurred until compensation is paid.



Case law on private enforcement is very limited. To date, there have been few actions brought before Swedish courts. One example of private enforcement follows the Swedish Asphalt Cartel, where damage claims were brought by several municipalities which had beencustomersof the cartelmembers. Each claimwas, however,finally settledoutofcourt.Yarps Network Services AB v. Telia Company AB. In 2013, the MC had found Telia, owner of the national telephone network, accountable for abusing a dominant position in 2003 by applying negative margins that constituted an unlawful “margin squeeze” which potentially affectedcertaincompanies,amongthemYarps(then“Spray”)andTele2.In2006,Yarpsinitiated damages actions against Telia and claimed compensation based on Telia’s allegedly abusiveconduct.InMarch2016,theSDCheldTelialiableforharmsufferedbyYarpsandordered Telia to pay damages. However, in June 2017, Svea Court of Appeal came to the oppositeconclusionandfoundthatYarpshadnotprovedthatTelia’sconducthadsufficientanticompetitive effects to constitute an abuse of a dominant position and therefore reversed theSDC’sjudgmentanddismissedYarps’damageclaim.Tele2 Sverige AB v. Telia Company AB. In 2005, Tele2 initiated damages actions against Telia based on Telia’s allegedly abusive conduct during 2003. In May 2016, the SDC held Telia liable for harm suffered by Tele2 and ordered Telia to pay damages. However, in December 2017, Svea Court of Appeal came to the opposite conclusion and found that, although Telia’s conduct constituted an abuse, Tele2 had not proved that the conduct had caused Tele2 the alleged harm. Therefore, Svea Court of Appeal reversed the SDC’s judgment and dismissed Tele2’s damage claim. The Swedish law on collective redress is not restricted to a certain type of claim or area of law, and can thus be applicable when two or more victims of the same competition law violation want to bring action against any undertakingparticipatinginacartel.Collectiveredresshasnotyetbeenusedinthefieldof competition law.

Reform proposals

As mentioned above, the Antitrust Damages Act entered into force in December 2016 and thus implemented the EU Directive on Antitrust Damages. The Antitrust Damages Act introduces several new reforms, for instance, a rebuttable presumption that cartels cause harm,clearerlimitationperiodsandthatafinalinfringementdecisionconstitutesfullproofof the occurrence of a competition law infringement.


Hannes Snellman AttorneysKungsträdgårdsgatan20,11147,Box7801,Stockholm,Sweden

Tel: +46 760 000 000 / URL: www.hannessnellman.com


Peter ForsbergTel: +46 76 000 00 80 / Email: [email protected] Forsberg is partner and head of the Competition & Procurementpractice group at Hannes Snellman in Stockholm. He advises Swedish and international companies on competition law and public procurement issues. In particular, he has solid experience of domestic and international merger control, competition law disputes and compliance work. He regularly represents clients in proceedings before national competition authorities as well as before the European Commission. He has recently been involved inmatters in the following sectors: financial services; food and consumerproducts;forestproducts;pharmaceuticals;andtelecommunications.

Haris CatovicTel: +46 76 000 00 50 / Email: [email protected] Haris Catovic is an associate at Hannes Snellman in Stockholm. He is specialised in EU and Swedish competition law and advises on all aspects of competition law.

David OlanderTel: +46 76 000 00 57 / Email: [email protected] David Olander is an associate at Hannes Snellman in Stockholm. He is specialised in EU and Swedish competition law and advises on all aspects of competition law.


SwitzerlandMario Strebel, Christophe Pétermann & Renato Bucher

Meyerlustenberger Lachenal Ltd.


Legal frameworkCartels and monopolies in Switzerland are mainly governed by the Federal Act of 6 October 1995 on Cartels and Other Restraints of Competition (“Cartel Act”;lastmajorrevisionin2003). The purpose of the Cartel Act is to prevent harmful economic or social effects of cartels and other restraints of competition and, by doing so, to promote competition in the interests of a liberal market economy. However, the objective is not limited to economic aspects. General public interest considerations may also be taken into account. The law grants the Swiss Competition Commission (“Comco”) the power to assess economic consequences of restrictions of competition and concentrations between undertakings, and leaves it to the Federal Council (the Swiss government) to assess the balance with the general public interest.Uponspecificrequestbytheundertakings,subjecttoadecisionbytheComcoortheappellate courts, the Federal Council may authorise anti-competitive conduct in exceptional cases if such conduct is deemed necessary for compelling public interest reasons (article 8 Cartel Act). To date, this has never happened.The Cartel Act prohibits unlawful restraints of competition such as anti-competitive agreements.Anti-competitiveagreementsaredefinedasbindingornon-bindingagreementsor concerted practices between undertakings operating at the same or different market levels that have a restraint of competition as their object or effect (article 4 § 1 Cartel Act). To be unlawful,anagreementmusteithereliminateeffectivecompetitionorsignificantlyrestrictcompetitionwithoutbeingjustifiedoneconomicefficiencygrounds(article5§1CartelAct).According to article 5 § 3 and 4 Cartel Act, the following agreements are presumed to eliminate effective competition and are thus considered as hardcore restrictions (“hardcore agreements”):• horizontalagreementsthatdirectlyorindirectlyfixprices,restrictquantitiesofgoods

or services to be produced, purchased or supplied, or allocate markets geographically oraccordingtotradingpartners;and

• verticalagreementsthatsetminimumorfixedpricesorallocateterritoriestotheextentthat (passive) sales by other distributors into those territories are not permitted.

The presumption of elimination of effective competition is rebuttable. However, even if such rebuttal is successful, according to recent decisions of the Federal Supreme Court, hardcoreagreementsinprinciplestillamounttosignificantrestrictionsofcompetitioninterms of article 5 § 1 Cartel Act, regardless of any quantitative considerations or actual effects, respectively.


Meyerlustenberger Lachenal Ltd. Switzerland

In addition to the Cartel Act, the regulatory framework also comprises several ordinances of the Swiss government, as well as notices and communications of the Comco, in particular the Notice regarding the Competition Law Treatment of Vertical Agreements of 28 June 2010 (“Verticals Notice”), which has been partly revised on 22 May 2017, and the Notice regarding the Competition Law Treatment of Vertical Agreements in the Motor Vehicle Sector of 29 June 2015, which entered into force on 1 January 2016. On 12 June 2017, the ComcopublishedforthefirsttimeexplanatoryguidelinesontheVerticalsNoticewhichaimat summarising the existing practice of the Comco and the case law of the appellate courts regarding vertical agreements.In general, the Cartel Act is autonomous Swiss law and, as such, to be construed independently from the competition law of the European Union (“EU”), the United States or other countries. However, particularly the EU competition law can and shall serve as an interpretative aid (see section, “Cross-border issues”, below). Aside from the cartel regulation dealing with anti-competitive agreements set out above, article 7 Cartel Act deals with abusive conduct by dominant undertakings.Authorities and enforcement regimeThe Comco and the Secretariat of the Comco (“Secretariat”) are the authorities charged with enforcing and administering the Cartel Act. The Comco is based in the Swiss capital Berne and consists of 12 members. One president and two vice-presidents head the Comco. The majority of the Comco’s members must be independent experts with no interest in or special relationship with any economic group whatsoever. The Comco takes decisions and remedial actions against, and also imposes fineson,undertakingsthatviolateSwisscompetitionlaw.TheComcohaswidedecision-making and remedial powers. It can, inter alia, also issue injunctions to terminate a specificconductortochangeandmodifyaspecificbusinesspractice.Specificchambersof the Comco are empowered to render partial decisions on the closure of proceedings, the approvalofamicablesettlementsincludingothermeasures,inparticularfinesandcosts,forsome of the parties while the proceeding is continued for the other parties. The Secretariat is empowered to conduct investigations and, together with one presidium member of the Comco, to issue any necessary procedural rulings. The Secretariat submits draft decisions to the Comco and implements the latter’s decisions. The total headcount of the Secretariat amounted to 73 employees (63.7 FTEs) by the end of 2016. The Federal Administrative Court (“FAC”),basedinSt.Gall,isthefirstappellateinstanceagainst Comco decisions.The Federal Supreme Court (“FSC”), based in Lausanne, is the second appellate instance, dealingwithappealdecisionsoftheFAC.Itisusuallyalsothefinalinstance,unlesstheparties decide to bring a case before the European Court of Human Rights in Strasbourg.The Federal Criminal Court, based in Bellinzona, is the competent court to decide on the unsealingofseizeddocumentsandelectronicdatauponspecificrequestbytheComco.SanctionsPursuanttoarticle49aCartelAct,directfinesareimposedonundertakingsthatparticipatein hardcore agreements, regardless of whether such agreements eliminate or merely significantlyrestricteffectivecompetition,orthatabusetheirdominantposition.Themaximumfineamountsto10%oftheundertaking’sturnovercumulativelyachievedinSwitzerlandintheprecedingthreefinancialyears.TheCartelActSanctionsOrdinance(“CASO”) lays down the method of calculation of the fines in detail (see section,



“Administrative and civil sanctions” below). And it is the CASO that also lays down the legal prerequisites for leniency applications because ofwhich a finemay bewaived inwhole or in part (see section, “Leniency regime” below). Furthermore, an undertaking that violates an amicable settlement or a legally enforceable decision of the Comco or its appellate courts can be fined up to 10% of the turnovercumulativelyachievedinSwitzerlandintheprecedingthreefinancialyears(article50CartelAct).Throughthisrule,recidivistswithregardtobindingfindingsofillegalcompetitionrestrictionsthatdidnotqualifyashardcoreagreementsmaybefined(indirectly)aswell.Finally, an undertaking that fails to provide information or produce documents, or that only partiallycomplieswithitsobligationsduringanongoinginvestigation,canbefineduptoCHF 100,000 (article 52 Cartel Act).

Overview of investigative powers in Switzerland

The Secretariat is empowered to conduct investigations and, together with one presidium member of the Comco, to issue any necessary procedural ruling. Both the Comco and the Secretariat may hear the parties or witnesses (article 42 § 1 Cartel Act). The parties involved in particular have the right to be present at such hearings and to comment on the hearing minutes. Upon a specific request for information, the undertakings under investigation are alsoobliged to provide the Secretariat with all information required for their investigation and to producenecessarydocuments(article40CartelAct);however,thisisindueconsiderationof the right against self-incrimination (nemo tenetur principle).The Secretariat may use all kinds of evidence to establish the facts. In practice, it typically relies on information gathered in dawn raids and information provided in (written or oral) party and witness statements. Upon request of the Secretariat, one presidium member of the Comco may order dawn raids and seizures (see article 42 § 2 Cartel Act). The Secretariat published a note on selected instruments of investigation in January 2016. Therein, it laid out its best practice particularly with regard to inspections and the seizure of documents and electronic data. The representatives of the Secretariat in charge of the inspection will, inter alia, not wait for the arrival of external lawyers before starting to search the premises. Any evidence discovered while the external lawyers were not present will, however, be set aside and only be screened once the lawyers are present. If deemed necessary, the undertakings being dawnraidedmayrequestthesealingofspecificorevenalldocumentsandelectronicdata.


Ongoing and newly opened cartel investigationsNumerous cartel investigations of the Swiss Competition Commission (Comco) in different industry sectors are currently (still) ongoing. The industry sectors include, inter alia, construction (in particular road construction), buildingmaterials, financialmarketswithregard to reference rates (benchmark and interest rate derivatives, foreign exchange rates and rates for precious metals) and leasing.In addition to these pre-existing investigations, only a few new investigations have been launched during the last 12 months:• On 13 March 2017, the Comco opened an investigation against Bucher Landtechnik

AGanditsaffiliates,whichoffertractorsofthemanufacturersNewHolland,CaseIH



and Steyr, as well as spare parts for tractors. The investigation focuses on the question of whether Bucher Landtechnik AG makes the supply of spare parts for tractors of the mentioned manufacturers dependent on the sale of tractors of these manufacturers. Moreover, there are also indications that Bucher Landtechnik AG imposed restrictions on its resellers regarding the territory into which the resellers were allowed to sell.

• On 4 July 2017, the Comco opened an investigation against the German luggage manufacturer RIMOWA GmbH. The investigation aims at establishing whether RIMOWAGmbH imposedexportbanson itsdistributors fromoutsideSwitzerland,therebyrestrictingparallelanddirectimportsofRIMOWAproductsintoSwitzerland.

• On 21 November 2017, the Comco opened an investigation against Bucher AG Langenthal and Brenntag Schweizerhall AG. In the course of the investigation, the Comco wants to establish whether these two undertakings allocated customers with regard to the distribution of “AdBlue®”, an aqueous urea solution used in order to lower NOx concentration in the diesel exhaust emissions from diesel engines. It is noteworthy that Bucher AG Langenthal is already involved in another ongoing investigation opened in May 2016 with regard to the distribution of the Aspen-branded engine fuel.

Cartel decisionsThe Comco issued several cartel decisions in the last 12 months: • On19December2016, theComcofinedEflare Corporation Pty Ltd (“Eflare”), an

Australian manufacturer of warning lights, and its Swiss distributor Waseg-Handel GmbH (“Waseg”) with amounts of about CHF 8,700, respectively CHF 24,600. Armasuisse,theprocurementdivisionoftheSwissArmedForces,plannedtobuyEflarewarning lights for an amount of about CHF 1.26m. In order to be able to tender an offer,aSwissindependentdealeraskedthePolishdistributorofEflarewarninglightstoprovideanofferwho,inturn,requestedEflareforanoffer.EflarethencontacteditsSwissdistributorWaseginordertodiscusshowtoreacttothatrequest.Referringtoits“exclusive”distributionright,WasegarguedthatthewarninglightsofEflarewouldinanycasehavetobesuppliedtotheindependentdealerbyWasegandthereforeaskedEflarenottoprovidethePolishdistributorwithanoffer.Eflareactedaccordinglyandinformed the Polish distributor that the request for an offer would have to be addressed toWasegastheSwissdistributor.SincetheSwissindependentdealerwasthereforenotabletoimportthewarninglightsofEflareparalleltoSwitzerlandthroughthePolishdistributor,itfiledacomplaintwiththeComco.TheComcocametotheconclusionthat the behaviour of Eflare andWaseg amounted to an unlawful anti-competitiveagreement relating to an absolute territorial protection in terms of article 5 § 4 and 1 Cartel Act. The parties concluded an amicable settlement.

• On21December2016,theComcoannouncedthatitrendereditsfirstsevendecisionsinitsfivebenchmarkandinterestratederivativesinvestigations.Comco’sdecisionsrelate to anti-competitive agreements with regard to the benchmarks Swiss franc LIBOR andYenTIBORaswellastotheinterestratederivativesoftheSwissfrancspread,theEURIBORand theYenLIBOR/EuroyenTIBOR. Theproceedingsoriginally arosefrom one investigation opened on 2 February 2012 that, however, revealed several unconnected facts with regard to the complex benchmarks and interest rate derivatives markets.ThisultimatelyledtothesplitintofiveinvestigationsthattheComconowclosedinfullorpartly,i.e.,againstthoseoftheinvestigated16banksandfivebrokerswhoagreedtoconcludeanamicablesettlement.Intotal,finesintheamountofaboutCHF 99m were imposed in the different investigations on different parties (except in



theYenTIBORinvestigationwhichdidnot lead tofines). Anyhow, theEURIBORandYenLIBOR/EuroyenTIBORcartelinvestigationsarebeingcontinuedagainstthenon-settling parties. The investigations were very complex, both on the merits (by way of example, more than nine million pages of correspondence had to be analysed) and with regard to the procedure itself. For instance, the Comco had to negotiate amicable settlementswithseveralpartiesinparallelanddifferentundertakingsqualifiedforfullimmunityorapartialreductionofafineinthevariousinvestigations.

• On22May2017,theComcoimposedafineonHusqvarna Schweiz AG and its Swedish mother company Husqvarna AB (“Husqvarna”) with an amount of about CHF 657,000 (RPW2017/2,p.284–Husqvarna). The Comco came to the conclusion that there were, at least between 2009 and 2015, anti-competitive agreements on minimum prices (retail price maintenance) in terms of article 5 § 4 and 1 Cartel Act between Husqvarna and its dealers with regard to the Husqvarna “Automower” products, which are robotic lawn mowers. The Comco found further indications towards potential restrictions of parallel and direct imports into Switzerland, but decided not to continue the investigation in thisrespectsinceHusqvarnaagreedtoconcludeanamicablesettlementandbenefittedfromapartial(80%)reductionofthefinebymakinguseof“leniencyplus”(seesection“Leniency/amnesty regime” below). Full immunity was not possible since Husqvarna wasconsideredtobearingleader.Initsdecision,theComcoalsobrieflydiscussedwhether the retail price maintenance at stake could be justified on the grounds ofeconomic efficiency in terms of article 5 § 2CartelAct, namelywith a temporaryprotection of investments for entering new markets (a special case of the free-rider problem). However, the Comco held that the duration of the retail price maintenance atstakewasclearlybeyondwhatcouldbejustified.ItisnoteworthythatHusqvarna is currently also involved in a second investigation opened in 2016 in the course of whichHusqvarnahadfiledtheabovementioned“leniencyplus”application.ThisfirstinvestigationagainstHusqvarnaconcernsallegedlyillegallyfixedpricesandallocatedmarkets by customers with regard to the distribution of the Aspen-branded engine fuel.

• On 10 July 2017, the Comco decided that several construction companies engaged in bid rigging in the Val Müstair, a geographically rather isolated valley in the Romanic-speaking part of Switzerland (RPW 2017/3, p. 421 –Hoch- und Tiefbauleistungen Münstertal). According to the Comco’s decision, the construction companies – indeed, there are only a handful of construction companies, some of which already went out of business – jointly discussed and decided both who shall execute a major part of all publicly and privately procured construction projects in the Val Müstair and at what prices. The cartel lasted at least from 2004, when direct sanctions were introduced into the Cartel Act, until 2012. Until 2008, it was administered by means of special meetings conducted by the Builders’ Association of the Canton of Grisons and subsequently, the companies continued their collaboration without the association’s help. The Comco came to the conclusion that the bid rigging cartel fell within the scope of application of article 5 § 3 letters a and c Cartel Act (horizontal agreements thatfixpricesandallocatetradingpartners).Unlikeinmostothercarteldecisions,thepresumption of eliminated effective competition pursuant to article 5 § 3 Cartel Act couldnotbe rebutted. Nonetheless, theComcodecidednot to imposeanyfinesontwoundertakingsinvolvedsincetheaffiliatedFoffa Conrad AG and Scandella Bau AG receivedfullimmunityfromafinebasedontheirleniencyapplicationandHohenegger SA in Liquidation already went into bankruptcy. Other undertakings who took part in the illegal bid rigging already went out of business several years ago and were therefore



not subject to the investigation. It is noteworthy that the Val Müstair investigation is only one out of 10 investigations relating to the construction industry in the Canton of Grisons, which all have their origin in a dawn raid conducted in 2012. For procedural reasons, the initial investigation, which was extended several times, has been split into 10 separate investigations which in total concern about 40 undertakings.

• On3November2017,theComcoannouncedthatithasfinednineundertakingsactivein thegalvanisingsectorwithfinesofaboutCHF8m. Theundertakingsconcernedagreed to charge their customers certain surcharges, namely relating to the costs of raw materials and transportation, and to abide by minimum prices. Moreover, they repeatedly agreed on price increases. These hardcore agreements in terms of article 5 § 3 Cartel Act have been concluded in the framework of several meetings organised by the Swiss Association of the Galvanizing Companies VSV and its specialist unit SFF. Oneundertakingbenefittedfromafullimmunityfromthefinebasedontheleniencyregime. Moreover, all undertakings involved in the investigation cooperated well with the Comco and agreed to enter into amicable settlements, which could therefore close the case in less than two years of investigation with partial reductions of the imposed finesforallundertakingsconcerned.

In the last 12 months, the FAC rendered several judgments, in particular relating to the publication of decisions rendered by the Comco but also concerning other substantial and procedural questions:• On12October2016,theFACconfirmedtheComco’sdecisiontouseGermanasthe

language of the proceedings 22-0420 (judgment B-2577/2016 of the FAC of 12 October 2016 – Stanze da bagno). X SA (Appellant) is a company based in the Canton of Ticino and one of the largest wholesalers in the sanitary and bathroom sector. In the context of an investigation against the Appellant and 10 other companies active in the German-speaking part of Switzerland, the Comco decided on 29 June 2015 that these companies were involved in illegal price and quantity fixing agreements under theCartelAct.The Appellant claimed an infringement of the right to be heard, of the principle of equal treatment and of non-discrimination, since both the Secretariat’s draft decision of21May2014andtheComco’sdecisionof29June2015werenotifiedinGerman.The FAC, however, stated that there is no legal provision that grants an undertaking concerned an unlimited right to choose the language of the proceedings freely. The authorities have some discretion in the choice of language and must weigh the interests atstake.Inmultipartyproceedingswheretheparties’submissionsarefiledinseveralofficial languages, it isnecessary tochoose the languagewhichcausesas littlecostand delay as possible and ensures that the decision is as comprehensible as possible. Moreover, it is equally important to take into account theofficial language that themajority of the parties speak. In the present case, the FAC ruled that it was correct to choose German as the language of the proceeding. The FAC observed that the majority of the parties were from the German-speaking part of Switzerland. Moreover, during theproceedings,theApplicanthadbeenabletofileallitssubmissionsinItalian.TheFAC also considered that the Applicant’s lawyer understood German. The FAC further denied a right to a translation of the draft decision of the Secretariat and the subsequent decision of the Comco and of all procedural documents. Indeed, according to the FAC, the fact that the Appellant’s submissions were all well motivated shows that it duly understood the accusations.

• On 24 November 2016, the FAC annulled the decision of the Comco to close the investigation in the case Ticketcorner/Hallenstadion and remitted the matter to the



Comco in order for the latter to reassess it (judgment B-3618/2013 of the FAC of 24 November 2016 – Vertrieb von Tickets im Hallenstadion Zürich). The investigation concernsthecooperationinthefieldofticketdistributionbetweentheticketserviceprovider Ticketcorner AG and the operator of the Hallenstadion in Zurich, a big multi-purpose facility located in Zurich. According to a Ticketing Cooperation Agreement, the operator of the Hallenstadion had to impose on organisers of public events in the Hallenstadion in the rental terms the obligation to sell at least 50% of the tickets via Ticketcorner AG. In practice, economic considerations de facto led to 100%. Against this background, competitors of Ticketcorner AG felt illegally foreclosed from the market. The Comco, however, found that there were no grounds for action against thedenouncedconductandcloseditsinvestigation(RPW2012/1,p.74,Vertrieb von Tickets im Hallenstadion Zürich). The FAC now upheld appeals of competitors of Ticketcorner AG against this decision, stating that the Comco wrongfully closed the investigation. According to the FAC, the obligation of organisers of public events in the Hallenstadion to contract with Ticketcorner AG, as imposed by the operator of the Hallenstadion, fundamentally and seriously restricted the freedom of choice for event organisers as, in principle, independent purchasers of ticketing services. The FAC did not hear the Comco’s argument of comparative equality of the Ticketing Cooperation Agreement with exclusive purchase and non-compete undertakings between distribution partners or sole and exclusive supply obligations of suppliers, respectively. According to the FAC – referring to oral deliberations of the FSC in Gaba case (the written reasoning of Gaba was not yet published when the decision was rendered) – the TicketingCooperationAgreementqualifies as a restrictionof competitionbyobjectthat isqualitativelyandquantitativelysignificant,unjustifiedand therefore illegal inthesenseofarticle5§1CartelAct.TheFACalsofoundsufficientgroundstoassumeabusive conduct (cf. article 7 Cartel Act) by Ticketcorner AG and the operator of the Hallenstadion, which were both considered to be market dominant undertakings. An appeal against the decision of the FAC has been lodged with FSC, which means that the judgmentisnotyetfinal.Inthecontextofthisappeal,theFSCalsowillhavetodecideon the question as to whether the FAC’s judgment is an interim decision, as the FAC itselfqualifieditsannulmentdecision,orde factoafinaljudgment.

• On 30 November 2016, the FAC ruled on a request of an undertaking which requested to obtain access to the Comco’s Air Freight decision of 2 December 2013 (judgment BVGE 2016/28 of the FAC of 30 November 2016 – Air Freight).Withthatdecision,theComcofinedelevenairlineswithCHF11mforhavingparticipatedina pricefixingcartel in the context of air freight. Appeals relating to the merits of the Air Freight decision are currently pending before the FAC. The decision of the Comco has not yet been published since separate appeal proceedings relating to the publication of the Comco’s decision are ongoing before the FAC as well (see below). The undertaking which requested access to the (still) unpublished decision of the Comco is active in the air freight sector as well, but has not been a party to the Comco’s investigation. Nevertheless, it was concerned that the Comco’s decision might also contain its name or other direct or indirect indications and hints towards its identity. Therefore the undertaking requested the Comco to obtain access to the version of the Comco’s decision to be published and, if that version should contain such indications or hints to its identity, to delete them prior to its publication. The undertaking based its request on article 8 of the Federal Act of 19 June 1992 on Data Protection (“DPA”), which provides persons (including legal entities) with the right to request information from



thecontrollerofadatafileastowhetherdataconcerningthemisbeingprocessed.TheSecretariat of the Comco refused to provide such access for the time being, mainly since the publication of the Comco’s decision is still contested and the subject of ongoing appeal proceedings before the FAC. The FAC, however, came to the conclusion that a deferment of access to the Comco’s decision constituted a violation of the DPA which also applies to the Comco and the Secretariat. The FAC stated that solely business secrets of the airlines involved in the investigation could militate against providing access to the Comco’s decision. However, deferring access cannot serve this purpose since the question how business secrets shall be protected will have to be answered anyhow once the decision relating to the publication of the Comco’s decision on the meritsbecomesfinalandbinding.ThecasewasthereforeremittedtotheComcotocheck how the legitimate interests of the airlines involved in the investigation may be protected.

• On 25 April 2017, the FAC ruled on the publication of a decision of the Comco from 2013,inwhichtheComcoimposedfinesofaboutCHF16.5mon10wholesalersofFrench speaking books domiciled in the French speaking part of Switzerland (judgment B-6547/2014 of the FAC of 25 April 2017 – publication de la décision relative au marché du livre en français). The Comco accused the wholesalers of having prevented parallel imports (especially from France) by Swiss bookstores between 2005 and 2011. By doing so, the wholesalers shall have violated article 5 § 4 Cartel Act. An appeal pertaining to the merits of this decision is currently pending before the FAC. As to the publication of the Comco’s decision on the merits, one of the parties to the investigation did agree with the publication as such, but requested the Comco to redact several parts of the decision prior to the publication. In particular, this undertaking didnotwant its affiliationwith agroupof companies, informationpertaining to itsinternal organisation and dates of contracts to become public. According to the FAC, this kind of information could, however, not qualify as business secrets, partly because the information concerned was already publicly accessible, e.g. on the group’s website oronWikipedia,orthattherewasnosufficientinterestonthepartoftheundertakinginkeeping such information secret. According to the Comco, the latter was partly shown through the fact that the undertaking disclosed alleged business secrets during the investigationwithouttakinganymeasuresinordertokeepthesesecretsconfidential,thereby making such information accessible also to its competitors who were involved in the investigation too. Finally, the FAC stated that the DPA cannot prevent a publication as intended by the Comco, as it was claimed by the undertaking concerned. ThejudgmentoftheFAChasnotbecomefinalsincetheundertakingconcernedfiledan appeal with the FSC against that ruling.

• On 15 August 2017, the FAC upheld a preliminary decision of the Comco in which the latterdecidednottoremovecertainpassagesfromspecifichearingminutes(judgmentB-1286/2016 of the FAC of 15 August 2017 – Beweisverwertungsverbot). The investigation which is directed against several undertakings active in the gravel market relates, inter alia,topotentialhorizontalpricesandquantityfixingagreements.Oneundertakingclaimedthatspecificpassagesofthehearingminutesshallbeinadmissibleandmustthereforebedeletedfromtheproceeding’scasefile,sincethequestionsandanswersshallbecoveredby theattorney-clientprivilege. TheFACdecided,firstly,that the Secretariat has the right and competence to render preliminary decisions regarding the admissibility of pieces of evidence, although such decision cannot bind the Comco. Given that the question of whether the respective questions and answers



shall be admissible can again be raised before the Comco and the courts deciding on potential appeals against the Comco’s decision on the merits, the FAC stated, secondly, thattheundertakingconcerneddidnotpossessasufficientinterestintheannulmentofthe preliminary decision of the Secretariat. Appeals against such preliminary decisions are admissible only if the decisions are capable of causing an irreparable disadvantage to the undertaking concerned. Therefore, the FAC refused to deal with the merits of the appealanddeclareditinadmissible.Therulingisfinalandbinding.

• On 24 October 2017, the FAC rendered two further decisions relating to the publication of a decision of the Comco, withwhich the Comco fined several undertakings forunlawful price and quantity fixing agreements pursuant to article 5 § 3 CartelAct(judgments B-7768/2016 and B-149/2017 of the FAC of 24 October 2017 – Publikation der Sanktionsverfügung). The Comco intended to publish that decision, both on its website and in its publication journal “Law and Policy of Competition” (“RPW”). Since the undertakings disagreed with the publication of the decision at all, the Comco formally ordered the publication by way of publication decision dated 21 November 2016. Further, the Comco decided that an appeal against its publication decision shall remain without suspensive effect. The FAC, however, restored the suspensive effect and ordered the Comco not to publish the decision on the merits, which was in fact already online for a short period of time, until it has decided on the publication. In its finaldecision,however,theFACupheldtheComco’sdecisiontopublishthedecisionon the merits and rejected the appeal of the undertakings concerned. Referring to the FSC’s leading case Nikon (judgment 142 II 268 of the FSC of 26 May 2016 – Nikon) concerning the publication of decisions of the Comco, the FAC stated that the decision of whether or not to publish the decision in question was in the discretion of the Comco, and that the Comco correctly exercised its discretion. The FAC reiterated the public interest in a publication of decisions of the Comco. Based on the facts of thecase, theFAC further confirmed that thepublication is alsoproportionate, inparticularsincethepublicationofthemerepressreleaseorsummarydidnotsufficeto satisfy the public interest (in particular the interest of other addressees of the Cartel Act, of other authorities applying the Cartel Act as well as the general public) in being informed about the decision. Finally, the FAC refused to grant the undertakings concerned another opportunity to designate business secrets in the Comco’s roughly 700-page decision which shall be redacted since the Comco itself had already invited the undertakings several times to do so. The undertakings have, however, not made use of that opportunity.

• On 30 October 2017, the FAC rendered another nine decisions relating to the publication of a decision of the Comco dated 2 December 2013, in which the Comco prohibitedapricecartelinthecontextofairfreightandfined11airlinesinvolvedwithabout CHF 11m (judgments B-5936/2014, B-5869/2014, B-5920/2014, B-5911/2014, B-5903/2014, B-5858/2014, B-5927/2014, B-5896/2014, B-5943/2014 of 30 October 2017 – Air Freight). The decision on the merits of the case has not yet entered into force since appeals are currently still pending before the FAC. Due to a disagreement between the Comco and the airlines concerned with regard to the publication of the decision on the merits, the Comco formally ordered such publication in a separate decision which gave rise to the present judgment of the FAC. In its judgment, the FAC, inter alia,confirmedthatdecisionsoftheComcomaybepublishedregardlesswhethertheyarealreadyfinalandbinding.Moreover,theFACreiteratedthatdecisionsoftheComco shall generally be published entirely, i.e., mere summaries or press releases are



notsufficient.Inthatcontext,thelengthofthedecision(about400pagesinthecaseat hand) is irrelevant. Notwithstanding the above, the FAC, however, also stated that the interest and in particular the protection of the personality rights of the undertakings concerned have to be taken into account as well, in particular since the publication of decisions of the Comco itself does not serve a corrective purpose. By doing so, the FACexplicitlyconfirmedthatnotonlybusinesssecrets(whichmayneverbepublished;article 25 § 4 of the Cartel Act) but also other interests of the parties to an investigation may prevent or restrict publications of decisions of the Comco. In the case at hand, the interestsoftheundertakingsconcernedhavenotbeensufficientlytakenintoaccountby the Comco. Concretely, the FAC criticised that the Comco’s decision on the merits containedexplanations,attributabletospecificairlines,regardingtheglobalbehaviourof airlines concerning certain routes which might violate foreign competition laws as well, but did not give rise to the sanctions imposed by the Comco since the Comco had no competence with regard to such conduct. Therefore, the FAC remitted the case to the Comco which has to draft a new version of the decision of the Comco to be published, taking into account the FAC’s guidelines.

• On14November2017,theFACupheldanappealfiledbyImmer AG (“Immer”), a distributor of mountings for doors (judgment B-552/2015 of the FAC of 14 November 2017 – Türbeschläge).Withthedecisiondated17November2014,Immerhasbeenfined by the Comco with CHF 5,500 for participating in a horizontal price fixingagreement in terms of article 5 § 3 of the Cartel Act concerning mountings for doors of the manufacturer “GLUTZ”. The Comco’s decision was directed against six distributors, of which Immer was the only one who has not agreed to enter into an amicable settlement. According to the Comco, the distributors met annually between 2002 and 2007 to discuss and agree on minimum margins on the wholesale of GLUTZ products to commercial customers. Immer undisputedly participated in one meeting only. Moreover, there was no proof that Immer actively participated in the discussion or disclosed any information regarding its own pricing strategy to the other distributors. According to the FAC, passively participating in one meeting only does not amount to an anti-competitive agreement in terms of article 4 § 1 of the Cartel Act, unless special circumstancesjustifysuchqualification.However,theFACcouldnotrecogniseanyindications which could justify the existence of an agreement. In that context, the FAC stated that the ordinary burden of proof is applicable with regard to the existence of an agreementsincetherearenocompetitionlawspecificdifficultiesrelatingtosuchproof.The FAC also denied that Immer had participated in a concerted practice in terms of article 4 § 1 of the Cartel Act. There was no proof that Immer engaged in a parallel behaviour with the other distributors or changed its conduct in the aftermath of the sole meeting it has attended, respectively. This, however, would be required to justify thefindingofaconcertedpractice.Thus,therewasnoanti-competitiveagreementinterms of article 4 § 1 of the Cartel Act and the FAC consequently annulled the decision againstImmer,includingthefine,infull.ThejudgmentoftheFACisfinalandbinding.Taking into consideration the new leading case Gaba (see below), it can be expected that proof of the existence of an agreement in terms of article 4 § 1 of the Cartel Act will become an even more important and controversial topic in future cases.

During the last 12 months, the Federal Supreme Court (FSC) rendered several judgments, mainly on the merits but also on procedural questions:• On 21 April 2017, the FSC published its written reasoning in the leading case Gaba,

which answers some of the most controversial questions regarding Swiss competition



law from the last few years (judgment 143 II 297 of the FSC of 28 June 2016 – Gaba). The public deliberation of the judgment had already taken place on 28 June 2016, meaning that it took the FSC about 10 months to publish its written reasoning. Gaba, themanufacturerofthetoothpaste“Elmex”,wasfinedbytheComcowithaboutCHF4.8m in 2009 for prohibiting its Austrian licensee Gebro Pharma GmbH from passively selling “Elmex” products outside the assigned territory (in the case at hand Austria). Upon appeal, the FAC upheld that decision in 2014. The three most important issues discussed and decided in the FSC’s Gaba reasoning can be summarised as follows: First, with regard to the (extra)territorial application of the Cartel Act, article 2 § 2 of the Cartel Act shall be interpreted in the sense that any practices which could have effects in Switzerland shall fall within the scope of application of the Cartel Act. It is neither necessary nor admissible to assess the intensity of such effects. Second, hardcore agreements within the meaning of article 5 § 3 and 4 of the Cartel Act, i.e., agreements which lead to the presumption of eliminated competition, “generally” amounttosignificantrestrictionsofcompetitionintermsofarticle5§1CartelActevenwhere the presumption of eliminated competition has been successfully rebutted. That meansthatsuchagreementsareadmissibleonlyiftheycanbejustifiedoneconomicefficiencygrounds(article5§2CartelAct).Itisnotnecessarytoassessanyactualeffectsofhardcoreagreementsoncompetition.Indeed,itisalreadysufficientifsuchagreements have a potential effect on competition, regardless of whether they have been effectively implemented. It remains, however, unclear whether a de minimis threshold may apply in exceptional cases (as suggested, e.g., in the later judgment B-552/2015 of the FAC of 14 November 2017 – Türbeschläge). Third, agreements covered by article 5§3and4oftheCartelActmayleadtodirectfinesintermsofarticle49aCartelActeven if the presumption of eliminated competition has been successfully rebutted.

• On the same day as the Gaba reasoning, the FSC published its judgment dated 4 April 2017 in the Gebro case (judgment 2C_172/2014 of the FSC of 4 April 2017 – Gebro), which relates to the same “Elmex” investigation as the Gaba matter mentioned above, andupheldthe(symbolic)fineimposedonGebrointheamountofCHF10,000.TheFSC refers in its Gebro judgment mainly to its reasoning in the Gaba case. The FSC further confirms its rather apodictic approach by emphasising that the contractualreality is irrelevant with regard to the question of whether a hardcore agreement exists. Themerefactthatsuchanagreementhasbeenconcludedissufficient.

• On 9October 2017, the FSC upheld appeals filed by the authorities and rescindedtwojudgmentsof theFACinwhichthelatterannulledfinesintheamountofaboutCHF 6.8m imposed on, amongst others, two dealers of mountings for windows and windowdoorsduetohorizontalpricefixingagreementsintermsofarticle5§3CartelAct (judgments 2C_1016/2014 and 2C_1017/2014 of the FSC of 9 October 2017 – Baubeschläge für Fenster und Fenstertüren). Several dealers of mountings for windows and window doors, including Siegenia-Aubi AG and KOCH Group AG Wallisellen, were found guilty by the Comco in 2010 of having agreed on the timing and the amount of price increases. In contrast thereto, the FAC held in 2014 that the Comco failed to sufficientlyestablishthefactsandthattherewerestillreasonabledoubtsregardingtheexistenceofhorizontalpricefixingagreementsandtheeffectsthereofonthemarket,thereby referring to the in dubio pro reo principle. The FSC remitted both cases back to the FAC and ruled that the FAC itself failed to establish the facts, emphasising that appealsbeforetheFACare“fullmerits”appealsonboththefindingsoffactandlaw.Therefore, it would have been up to the FAC to assess any additional evidence required.



Moreover, the FSC held that the FAC also erred in applying substantive competition law by arguing that it is necessary to prove the elimination of effective competition in casesofhorizontalpricefixingagreementspursuanttoarticle5§3CartelAct.Duetothe presumption of eliminated competition for hardcore agreements, not the absence but the existence of such effective competition must be proven. Moreover, even in the event that effective competition should exist, agreements in terms of article 5 § 3 Cartel Actgenerallystillamounttoasignificantrestrictionofcompetitionintermsofarticle5§ 1 Cartel Act, as has been decided in the leading “Elmex” toothpaste cases mentioned above. According to the FSC, it is now on the FAC to establish the facts and rule along the lines drawn in FSC’s judgment.

• On 24 October 2017, the FSC rejected an appeal brought by Bayerische Motoren Werke AG (“BMW”) against the judgment of the FAC dated 13 November 2015 and thereby confirmed theFAC’s andultimately theComco’s decision to impose afineintheamountofCHF156monBMWforrestrictingparallelimportstoSwitzerland(judgment 2C_63/2016 of the FSC of 24 October 2017 – BMW). BMW’scontractswith dealers located in the European Economic Area (“EEA”), in force since 2003, contained a provision stating that the dealers shall not be allowed, directly or through third parties, to sell new BMW vehicles and original BMW parts to customers incountries outside the EEA, nor to re-equip cars for that purpose. The Comco, which has received 16 complaints from customers who stated that they unsuccessfully tried toimportnewBMWvehicles,subsequentlytheFACandfinallyalsotheFSCcametothe conclusion that this clause amounts to an absolute territorial protection in terms of article 5 § 4 Cartel Act. The presumption of eliminated competition was successfully rebutted, in particular since it was shown that parallel imports were not entirely prevented. However, the FSC confirmed its position adopted in theGaba case by statingthatitwasneithernecessarytoassessnoradmissibletorequirespecificeffectson competition in cases of agreements falling under article 5 § 3 and 4 Cartel Act. These hardcoreagreementsaregenerallyunlawful,unlesstheycanbejustifiedonthegroundsofeconomicefficiencyintermsofarticle5§2CartelAct.BMWdid,however,notassertanysuchjustification.TheBMWjudgmentisthefirstmajordecisionpost-Gaba. TheFSCfurthermoreconfirmedthewide(extra)territorialscopeofapplicationoftheCartel Act, stating that agreements which could potentially have effects on competition in Switzerland shall be subject to competition law scrutiny in Switzerland pursuant to article 2 § 2 Cartel Act, without any requirements as to the intensity of such effects.


Proceedings under the Cartel Act can be two-staged. The Secretariat can initiate preliminary investigations on its own initiative, at the request of certain undertakings concerned (e.g. competitors) or based on third-party complaints. It is at the discretion of the Secretariat to open a preliminary investigation (see judgment 130 II 521 of the FSC of 13 July 2004 – Cornèr Banca).IftheSecretariatfindsindicationsofasignificantrestrictionofcompetition,it opens an investigation with the consent of a presidium member of the Comco. However, the Comco may open an investigation directly. The Secretariat must always open an investigation if asked to do so by the Comco or by the Federal Department of Economic Affairs, Education and Research. Also dawn raids and seizures of documents and electronic data require the opening of an investigation. These coercive measures are not possible in preliminary proceedings. In its annual press conference on 11 April 2017, the Comco stated that in the last year, it has already dealt with and will continue dealing with competition law related aspects of the



digital economy. Thereby, the Comco emphasised the complexity of these developments and warned of wrong assessments which could prevent innovation. Besides that, the priorities set by the Comco do not seem to have changed. Apart from combatting horizontal hardcore agreements, in particular, restrictions of parallel trade remain in the focus of the Comco. Indeed, in the last few years, the Comco has been acting effectively against restrictions of parallel trade. The above outlined decisions of the Comco and appellate courts, inter alia, intheEflare,GabaorBMWmatters,confirmthis.


In Switzerland, the Comco’s decision-making process is a subject of controversy. Formally, the Secretariat conducts the investigations, but the Comco itself issues the decisions. Accordingly, the investigating and decision-making bodies are separate, even though at least one of the presidium members of the Comco is involved in some of the investigatory actions. For instance, the opening of an investigation, or the approval to conduct a dawn raid and seize documents and electronic data, is subject to the consent of one presidium member of the Comco. And for its decision-making, the Comco also has the power to hold hearings, which it has frequently used in the past. Given this overlap, concerns were raised that Comco is biased and cannot exercise effective judicial control over the Secretariat’s work.Concerns were also raised as regards the Comco’s institutional autonomy, in particular sincedirectfinesareavailable.UnderSwisscompetitionlaw,finesareconsideredtobeof an administrative nature, but also qualify as criminal sanctions in the meaning of the European Convention on Human Rights (“ECHR”) and the International Covenant on Civil and Political Rights (“ICCPR”;seejudgment139I72oftheFSCof29June2012–Publigroupe). Hence, an investigation opened on the basis of alleged hardcore agreements thataresubjecttodirectfinesshouldinprinciplerespecttheproceduralrightstoafairtrialset forth in the ECHR and ICCPR. Pursuant to article 6 § 1 ECHR, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law. In light of the case law of the ECHR and of the functioning of the Comco and the Secretariat, the Comco cannot be considered as an independent and impartial tribunal. Therefore, an appeal on full merits with regard to both factual and legal aspects must be available against the Comco’s decisions to safeguard and respect the fundamental requirements of the right to fair trial. In the FSC’s view, the FAC does meet these requirements and its performed control is therefore the counterweight to the system established by the Cartel Act (see judgment 139 I 72 of the FSC of 29 June 2012 – Publigroupe).Procedural rights during the preliminary investigations and investigations can be outlined as follows: preliminary investigations aim to identify whether indications of illegal anti-competitive agreements exist which require an in-depth analysis with further investigatory actions. The decision to open an investigation is not a formal decision in terms of the Administrative Procedure Act (“APA”) and cannot be appealed. In fact, the parties concerned only have limited procedural rights. In particular, the parties have no right to access thecasefiles. By thesame token, thirdpartieshavenoright todemand that theSecretariat opens an investigation (see also section, “Key issues in relation to enforcement policy”, above).Incasethepreliminaryinvestigationrevealssufficientindicationsofillegalanti-competitiveagreements, in principle, the Comco must open an investigation and announce this by means



ofanofficialpublication.Suchannouncementmuststatethepurposeoftheinvestigationand the names of the parties involved. All parties subject to the investigation are vested with the usual procedural rights contained in the APA, unless the Cartel Act stipulates otherwise (article 39 Cartel Act). They particularly have the right to consult and comment on the case filesandtosuggestwitnesshearings,andtheyhavetherighttobeheardandtoparticipateinoral party and witness hearings. On the basis of the conducted investigation, the Secretariat brings forward a draft of a decision, which is comparable to the statement of objections in the EU. The parties may also comment on such draft decision. Affected third parties have the possibility to join the investigation. Third parties that qualify as a party have full legal standing and are vested with all procedural rights. According to the FSC’s practice, third parties shall not easily qualify as a party. Particularly with regard to competitors, aside from a close proximity to the subject matter, it is required that they suffer a clear economic disadvantage.Suchdisadvantagerequiresaspecificandindividualconcern,andisgivenif an illegal anti-competitive agreement or abusive conduct by a dominant undertaking has disadvantageous effects on the competitor, in particular diminished turnover. The requirements for the full legal standing have to be proven by the competitor that claims to be a party (see judgment 139 II 328 of the FSC of 5 June 2013 – Parteistellung in der Untersuchung Vertrieb von Tickets im Hallenstadion Zürich). Third parties without full legal standing must request their participation within 30 days of the announcement (article 43 Cartel Act) and their procedural rights (the minimum being the right to be heard) may be limited. The Comco and the appellate courts are not obliged to reach a final decisionwithin aspecifiedperiodoftime.Thequestionofwhetherstatutorytimebarsapplyiscontroversialand currently on appeal before the FAC. In Comco’s view, no statutory time bars exist exceptthatnodirectfinescanbeimposedifaninvestigationwasopenedonlylaterthanfiveyearsaftertherestrictionofcompetitionhasceased(article49a§3letterbCartelAct;seealsoRPW2016/1,p.128–Swisscom WAN-Anbindung). In any case, the parties can always lodge a separate appeal and claim undue delay (article 46a APA) or invoke the claim ofanundulylongproceedingintheappealagainstthedecisiononthemerits.Withregardto the length of investigations, the FAC has already pronounced once that a duration of four years and four months is at the upper bound of the legally allowed investigation duration (judgment B-2977/2007 of the FAC of 27 April 2010 – Publigroupe;seealso,e.g.judgmentB-7633/2009 of the FAC of 14 September 2015 – Preispolitik Swisscom ADSL).The approach of the Secretariat with regard to the seizure of documents and electronic data during dawn raids and the triage of legally privileged documents, particularly with regard to theattorney-clientprivilege,isreflectedinitsnoteonselectedinstrumentsofinvestigationfrom January 2016. The Secretariat therein, inter alia, endorses the law by explicitly stating that all documents exchanged with attorneys-at-law allowed to represent parties before the Swiss courts are legally privileged, irrespective of the location where the documents are kept in custody, but only to the extent they concern the professional (legal) advice and/or representation (article 40 Cartel Act in fine). Hence, in-house counsel cannot invoke attorney-client privilege with regard to their advice. If sealing of documents or electronic datatobeseizedisrequested,theSecretariatmayneverthelessbrieflyreviewthemtoverifythe invoked privilege. The Secretariat and the Comco are legally obliged to respect and protect business secrets suchasknow-how,clientlistsorfinancialaccountingdocumentsduringtheirproceedingsand in particular in all publications (article 25 Cartel Act). Typically, the Secretariat requests the parties to identify their business secrets. In case the Secretariat does not consider the



identifiedinformationtoconstitutebusinesssecrets,ittriestoreachanamicablearrangementbefore the Comco must render a formal decision in this regard (see judgment 142 II 268 of the FSC of 26 May 2016 – Nikon).Under specificcircumstances,proceduraldecisions (interimdecisions)maybe appealedevenbeforeafinaldecisiononthemeritshasbeentaken.Under Swiss law, there is no provision for procedural disputes to be dealt with by an independentofficer,akintotheHearingOfficerwithintheEUsystem.


LeniencyisanimportantaspectofcartelenforcementinSwitzerland.Alreadyinthefirst10 years after the entry into force of the leniency regime, the competition authorities had received about 50 leniency applications. However, as the leniency programme has been available since 1 April 2004, there are only a few decisions dealing with the leniency programme. In general, the Comco and the Secretariat are considered to be fair and proportionate, in particular with regard to the obligations imposed on a leniency applicant such as the obligation to fully cooperate with the authorities during the investigation.The leniency programme particularly applies to (horizontal and vertical) hardcore agreements (article 49a § 2 Cartel Act).Pursuanttoarticle8§1CASO,theComcograntsimmunityfromafineifanundertakingisthefirsttoeither:(i)provideinformationenablingtheComcoto open an investigation andtheComcoitselfdidnothave,atthetimeoftheleniencyfiling,sufficientinformationtoopenapreliminaryinvestigationoraninvestigation;or(ii)submitevidenceenablingtheComco to prove a hardcore agreement, provided that no other undertaking must already be consideredfirstleniencyapplicantqualifyingforfullimmunityandthattheComcodidnothave,atthetimeoftheleniencyfiling,sufficientevidencetoproveaninfringementoftheCartel Act in connection with the denounced conduct.However,immunityfromafinewillnotbegrantediftheundertaking:(i)coercedanyotherundertaking to participate in the infringement and was the instigator or ring leader (see e.g.RPW2017/2,p.284–Husqvarna);(ii)doesnotvoluntarilysubmittotheComcoallinformation or evidence in its possession concerning the illegal anti-competitive practice in question;(iii)doesnotcontinuouslycooperatewiththeComcothroughouttheinvestigationwithout restrictions or delay; or (iv) does not cease its participation in the CartelActinfringement voluntarily or upon being ordered to do so by the competition authorities (article 8 § 2 CASO).PursuanttotheCartelAct,fullimmunityislimitedtothe“firstin”.Asoutlinedabove,fullimmunityfromafineisalsopossibleforcooperationthatenablestheComcotoproveaCartel Act infringement and therefore when an investigation has already been opened and a dawn raid conducted. Therefore, it is important to decide immediately upon knowledge of an opened investigation and conducted dawn raid whether or not to cooperate with the competition authorities and, if such cooperation is desired, to submit a leniency marker or application to the Comco without delay (in writing, such as by facsimile, or orally by protocol declaration). In investigations with several leniency applicants, it may be a matter of days or even hours whether and which undertaking may qualify for full immunity from a fine(see,e.g.RPW2009/3,p.196–Elektroinstallationsbetriebe Bern).Applying for leniency second or later in the same investigation will only allow for partial immunity. A reduction of up to 50% is available at any time in the proceeding to



undertakingsthatdonotqualifyforfullimmunity.Further,thefineamountcanbereducedby up to 80% if an undertaking provides information to the Comco about other hardcore agreements that were unknown to the Comco at the time of their submission (article 8 § CASO;“leniencyplus”; see,e.g.RPW2017/2,p.284–Husqvarna). This reduction is withoutprejudicetoanypossiblefullimmunityorpartialreductionofafineforthenewlydisclosed infringements.The Cartel Act does not expressly regulate the possibility for the Comco to withdraw immunity after it has been granted in a final decision. However, general principles ofadministrative procedural law usually enable administrative authorities to withdraw or amendfinal decisions (includingfinal decisionswith regard to immunity) under certainexceptional circumstances, for example, if: (i) facts are discovered that justify withdrawal oramendment;and/or(ii)afinaldecisionisunjustified.Thereisnocartelspecificcaselawin that regard. However, the bar for immunity revocation has to be set very high.TheSecretariatwillconfirmreceiptofthenotificationandinformtheapplicantofthetimeof receipt. The Secretariat and the Comco conduct a full review of the leniency applications in chronological order of receipt (provided that they are valid) to determine precedence for full immunity. Therefore, the extent and timing of the cooperation are determining factors fortheamountofthefinereduction.Whenapplying for leniency, one shouldkeep inmind that leniency applicationsdonotprovide immunity from civil litigation following a decision by the Comco (follow-on litigation). However, the Comco is under no express legal duty to cooperate and provide judicial assistance to civil courts. It may thus refuse to grant access to documents produced by and detrimental to leniency applicants. To date, the Comco endeavours to protect information submitted by leniency applicants in order not to discourage undertakings to submit such applications in future cases and to thereby protect the leniency programme under the Cartel Act (see judgments A-6315/2014, A-6320/2014 and A-6334/2014 of the FAC of 23 August 2016 – Zugang zu Verfahrensakten). The Comco typically pursues this objective in its proceedings, inter alia, by granting the other parties of the proceeding the righttoconsulttheleniencyfiles,whichareseparatedfromtheothercasefilesonlyatthepremises of the Comco and without the right to make photocopies in any form or manner whatsoever. The Comco is also willing to implement use restrictions by decision before grantingaccesstoleniencyfiles.At an international level, the Agreement between Switzerland and the European Union concerning the Cooperation on the Application of their Competition Laws, which entered into force on 1 December 2014 (“Cooperation Agreement”), provides that information obtained under leniency or settlement proceedings cannot be exchanged without the consent of the undertakings concerned (see also section, “Cross-border issues”, below).


Amicable settlements are an important feature of the Swiss cartel enforcement regime. During preliminary investigations, the Secretariat may propose measures to eliminate or prevent restrictions of competition (article 26 § 2 Cartel Act). In the framework of an investigation, if the Secretariat considers that a restraint of competition is unlawful, it may propose to the undertakings involved in an amicable settlement concerning ways to eliminate future restrictions (article 29 § 1 Cartel Act). Hence, amicable settlements solely deal with an undertaking’s conduct in the future, meaning that a party can voluntarily undertake to terminate, respectively not to commit certain illegal conduct anymore. However, the



fineamounts tobe imposed for illegalconduct in thepastcannotbeagreedon–Swisscompetition law does not know any “plea bargaining”. This also means that an undertaking isallowedtoappealagainstaComcodecisionandtheimposedfineevenifithasenteredintoanamicablesettlement(see,e.g.RPW2016/3,p.652–Flügel und Klaviere, against which an appeal is pending before the FAC).Amicable settlements shall be formulated in writing and approved by the Comco, typically in its decision on the merits (article 29 § 2 Cartel Act). The Comco shall either approve the amicable settlement as proposed by the Secretariat, or refuse to do so and send it back to the Secretariat and suggest amendments. According to the Comco, it cannot amend the terms ofasettlementon itsown(see,e.g.RPW2016/3,p.722–Saiteninstrumente (Gitarren und Bässe) und Zubehör). However, it did so in one case, namely by setting a time limit to theamicablesettlement(RPW2006/1,p.115–Kreditkarten/Interchange Fee). Amicable settlements are binding on the parties and the Comco and may give rise to administrative and criminal sanctions in case of a breach of any of its provisions by the parties (article 50 and 54 Cartel Act).Asalreadymentioned,amicablesettlementsdonothindertheComcofromimposingfinesonthepartiesincasetheyhaveenteredintoillegalhardcoreagreementsinthepast.Yetconcluding an amicable settlement is generally regarded as cooperative conduct, and taken intoaccountasamitigatingfactorwhencalculatingthefine(article6CASO).Inrecentcases, reachinganamicable settlementhas led toa reductionof thefinesofabout10%to 20%. However, the Comco takes very much into account the moment of the amicable settlement. Inacaseof late settlement, theComcoonly reduced thefineby3%(RPW2010, p. 765 – Baubeschläge für Fenster und Fenstertüren), and indicated that it will not reducefinesanymoreifamicablesettlementsaresignedaftertheSecretariat’sseconddraftdecision.Since 2004, when the possibility to impose direct fines entered into force, numerousinvestigations were closed together with approved amicable settlement agreements (including dominance cases). In the past year, this namely concerned the cases: Eflare Corporation Pty Ltd; Swiss franc spread; LIBOR; EURIBOR (closed only with regard to some undertakings); Yen LIBOR/Euroyen TIBOR (closed only with regard to some undertakings); Husqvarna Schweiz AG; and Galvanizing Companies.


Third parties have two ways of complaining about suspected anti-competitive agreements. ThefirstwayistofileacomplaintwiththeSecretariat(article26CartelAct;seesections,“Key issues in relation to enforcement policy” and “Key issues in relation to investigation and decision-making procedures”, above).The number of third-party complaints submitted particularly increased in and after the summerof2011,inthecontextofthesignificantappreciationoftheSwissfrancagainstthe euro and the US dollar. However, in its preliminary investigation with regard to thepassing-onofcurrencygains, theSecretariatdidnotfindanyevidence forunlawfulagreementsoranabuseofadominantposition(RPW2013/4,p.488–Nichtweitergabe von Währungsvorteilen).A second option for a third party affected by allegedly illegal anti-competitive agreements is to claim damages before civil courts. Under article 12 Cartel Act, any person hindered from entering or competing in a market by an unlawful restraint of competition is entitled to requestfromthecourts:(i)theeliminationof,ordesistancefromthehindrance;(ii)damages



and reparation payment in accordance with the Swiss Code of Obligations (“CO”);or(iii)the surrender of unlawfully earned profits in accordancewith the provisions on agencywithout authority. Hindrances of competition include in particular refusal to deal, and discriminatory measures.Abasisforclaimsagainstcompetitionrestrictions–subjecttospecificpreconditions–canalso be found in article 28 of the Swiss Civil Code (“CC”), which protects personality rights, including economic rights, and the Swiss Federal Act against Unfair Competition (“UCA”).The civil actions should be brought before the higher cantonal civil courts. The Swiss Code on Civil Procedure (“CCP”) requires cantons to designate one court having sole cantonal jurisdiction for disputes related to the Cartel Act and to the UCA. The “single cantonal court” has exclusive jurisdiction to order interim measures. If the legality of a restraint of competition is disputed before a civil court, this question shall be referred to the Comco for an expert report. However, civil courts rarely refer such cases and the Comco’s opinion is not binding for the civil judge.


From a civil law point of view, the sanction for cartel activities lies in the total or partial nullity of the agreement in question (see judgment 134 III 438 of the FSC of 12 June 2008 – Abfallentsorgung)andcivilliabilityclaims(e.g.bycustomers)maybefiledwiththe competent courts, in particular under article 12 Cartel Act (see section, “Third-party complaints” above).From an administrative sanctions law point of view, any undertaking participating in an illegalhardcoreagreementorviolatingarticle7CartelActmaybechargedwithafineofup to 10% of the turnover cumulatively generated within Switzerland in the preceding three financialyearsbeforethedecisionisissued(article49a§1CartelAct). Thesefinesareadministrative sanctions, but considered as a criminal sanction in the meaning of article 6 and 7 ECHR and article 14 and 15 ICCPR (see judgment of the FSC of 29 June 2012, 139 I 72 – Publigroupe).Theamountofthefinedependsonthedurationandseverityoftheunlawfulconduct.Theturnover of the undertakings is calculated by analogy with the rules on the calculation of turnoverinmergercontrolcases(article4and5oftheMergerControlOrdinance;“MCO”) and encompasses the consolidated net turnover. The base amount is up to 10% of the consolidated net turnover generated on the relevant markets in Switzerland cumulatively in the preceding three business years before the illegal conduct has ended, depending on the typeandseverityoftheCartelActviolation(article3CASO).The“normal”profitsthatresulted from the unlawful conduct are taken into account in the base amount. The turnover relevantforthebaseamountofthefineiscalculatedbyanalogywiththerulesoftheMCO.Inrecentprice-fixingcases,absentspecificcircumstances,theComcoappliedapercentagebetween5%and10%for thebaseamount. It isnoteworthy that theFSCclarified thatlimited effects of hardcore agreements on competition in Switzerland must be taken into account when setting the percentage of the base amount (judgment 143 II 297 of the FSC of 28 June 2016 – Gaba). The base amount will then be increased by up to 50% if the Cartel Actviolationwasimplementedforuptofiveyears.Eachadditionalyearthereafterwilllead to an increase of another 10% or 0.833% for each month, respectively (see judgment B-7633/2009 of the FAC of 14 September 2015 – Preispolitik Swisscom ADSL). This interim base amount may increase by a certain percentage reflecting aggravatingfactors, such as recidivism, high cartel gains, obstruction of justice, ring-leading and



measures to enforce cartel discipline (article 5 CASO). The law is not exhaustive and other factorsmaybetakenintoaccounttoo.Inparticular,Swisslawdoesnotfixthepercentageof each aggravating factor but provides the Comco with wide discretion, depending on the circumstances of each particular situation.Forcalculatingthefine,mitigatingfactorsalsohavetobetakenintoaccountandtheinterimfineamountmaybereducedaccordingly.Examplesofmitigatingfactorsare:terminationoftheillegalconductbeforeorimmediatelyaftertheComcohastakenfirststeps;passiveroleinthecartel;ordesistingfromtakingcartelenforcementmeasures.Thelawdoesnotset the percentage of mitigation of each factor (article 6 CASO) and the Comco has wide discretion also in this regard. In recent cases, the reduction percentages have varied from 10% to 60% depending on whether the companies fully collaborated, immediately ceased theirunlawfulpractices,orconcludedanamicablesettlement(withregardtofineimmunityfor leniency applicants, see section “Leniency/amnesty regime” above). Inextraordinarycases,theComcomayalsoimposelumpsumfines–inparticularinthecaseofrathersmallfines(see,e.g.,thedecisionoftheComcoof19October2015–Volkswagen Konzessionäre,withfinesbetweenCHF10,000andCHF320,000).Thelegalentitiesliableforpaymentofthefinesarethedecision’saddressees.However,addressees can formpartof agroupof companies. In suchcases,decisive influence isthe pertinent criterion of demarcation, i.e. the question of whether the companies of this group can be and effectively are controlled by their parent company. If this is the case, thentheentiregroupofcompaniesqualifiesas“theundertaking”inthesenseoftheCartelAct, which is considered to be a functional term. In its landmark case Publigroupe, the FSC held that if a group of companies forms the undertaking in the sense of the Cartel Act,inprincipleeverycompany,i.e.everylegalentityofsuchgroup,qualifiesaspotentialaddressee of a decision. In the Publigroupe case, the FSC upheld the lower instances’ decisionsthatwereonlyaddressedtotheparentcompanyandtononeofthefivecontrolledsubsidiaries that were actively involved in the conduct in question (judgment 139 I 72 of the FSC of 29 June 2012 – Publigroupe).


The judgments of the upper cantonal civil courts, the only cantonal instance for civil competition law claims, rendered in civil actions may be ultimately challenged before the FSC.From an administrative sanctions law point of view, the Comco’s decisions and, to a limited extent, also its interim procedural decisions can be challenged before the FAC. An appeal canbelodgedonthefollowinggrounds:(i)wrongfulapplicationoftheCartelAct;(ii)thefactsestablishedbytheComcowereincompleteorwrong;or(iii) theComco’sdecisionwas unreasonable. Hence, the appeal before the FAC is a “full merits” appeal on both the findingsoffactandlaw.The addressees of the decision have the right to appeal, whereas it is still uncertain to what extent competitors, suppliers or customers have the same right. The decisive factor is whether and to what extent third parties are affected by the decision of the Comco. As outlined above, only competitors that suffer a clearly perceptible economic disadvantage as a consequence of an anti-competitive conduct shall be regarded as parties to an investigation and thus have the legal standing to appeal a decision (see section, “Key issues in relation to investigation and decision-making procedures”, above).The FAC can produce evidence such as hearing parties and witnesses and seeking expert reports.WiththeexceptionofinstructionhearingswiththepartiesandtheComco,thisis



rarely done in practice, as the FAC tends to render its judgments based on the existing case fileandbriefsexchangedduringtheappeal.Concerning effective judicial control, one must consider that the FAC has not rendered many competition-related judgments yet and numerous cases are still pending. In general, the FAC tends to exercise restraint with regard to Comco’s technical discretion such as economic and effects analyses. However, effective judicial control is, inter alia, shown by the fact that it does not hesitate to annul Comco decisions in full. It annulled, for example, thehighestfineeverintheamountofCHF333mthatwasimposedontheSwissincumbenttelecoms operator Swisscom in an abuse case. This annulment decision then was upheld by the FSC (see judgment 137 II 199 of the FSC of 11 April 2011 – Terminierung Mobilfunk). Other such examples exist such as in the recent judgment B-552/2015 of the FAC of 14 November 2017 – Türbeschläge (see above). However, the appellate courts also upheld importantdecisionsoftheComco,e.g.inparticularthelandmarkcasesPubligroupe,finallyupheld by the FSC (see judgment 139 I 72 of the FSC of 29 June 2012 – Publigroupe), and Gaba, also upheld by the FSC (see judgment 143 II 297 of the FSC of 28 June 2016 – Gaba).There is no specialised competition law (appeal) court in Switzerland. The second division of the FAC is basically in charge of all public economic law issues, of which competition law is just one part.The judgments of the FAC may be challenged before the FSC. In proceedings before the FSC,judicialreviewislimitedtolegalclaims,i.e.theflawedapplicationoftheCartelActor a violation of fundamental rights set forth in the Swiss Federal Constitution, or in the ECHR or other international treaties. The claim that a decision was unreasonable is fully excludedandclaimswith regard to thefindingof factsarebasically limited tocasesofarbitrariness.As outlined above, numerous Comco cases are currently still pending before the two appellate courts, in particular before the FAC. Some of these cases also raise fundamental questions, such as the questions of: whether and if so, what statutory time bars apply for CartelActproceedings;whatconditionsmustverticalnon-bindingpricerecommendationsmeettocomplywiththeCartelAct;andwhatrequirementsmustbeproventofindanillegalsingle overall infringement, i.e. a single overarching conspiracy.

Criminal sanctions

There are only limited criminal sanctions for cartel activities in Switzerland. Unlike in other states (such as the United States), the Cartel Act does not provide for imprisonment. However, there are administrative sanctions that are considered to constitute criminal sanctions in the meaning of article 6 and 7 ECHR and article 14 and 15 ICCPR (see section, “Administrative and civil sanctions” above). Anyonewhowilfullyviolates anamicable settlement, afinal andnon-appealable rulingofthecompetitionauthoritiesoradecisionoftheappellatecourts,isliableforafinenotexceeding CHF 100,000 (article 54 Cartel Act). Anyone who wilfully does not comply, or does not fully comply with a ruling of the competition authorities concerning the obligation to provide information, who implements a concentration that should have been notifiedwithoutfilinganotification,orwhoviolatesrulingsrelatingtoconcentrationsofundertakings,isliabletoafinenotexceedingCHF20,000(article55CartelAct).Bothofthese provisions mainly aim at persons who have the power to decide whether an undertaking shall commit a breach of the Cartel Act, such as board members or the management.If the Swiss Criminal Code prohibits the same conduct, aggrieved parties may raise a civil claim for damages within the framework of the criminal procedure or separately, based on



article 41 CO. In principle, the court in charge of the criminal proceeding also rules on civilclaims,exceptwherethedamagewasnotsufficientlysubstantiatedintherequestorthe damage calculation requires substantial efforts. In the latter case, however, the criminal court should at least render a judgment regarding the general obligation to pay damages, andreferthemattertothecivilcourtssolelyforthedamagespecification.Thejudgmentofa criminal court as to the guilt and to the determination of the damage, and the provisions of the criminal law concerning criminal responsibility, are generally not binding upon a civil court,thoughtheirinfluenceissomewhatstrong.

Cross-border issues

The Cartel Act applies to all concerted practices and agreements that potentially have effectsoncompetitionwithinSwitzerland(article2§2CartelAct;see judgment143II297 of the FSC of 28 June 2016 – Gaba). Therefore, agreements concluded abroad, or conduct that takes place outside Switzerland but may have effects in Switzerland, fall under Swissjurisdiction.InMay2012,theComcoimposedafineofCHF156monBayerische Motoren Werke AG,theultimateparentcompanyoftheBMWgroupwithregisteredofficesin Munich, Germany, for illegal restrictions of parallel trade, as the contracts with its authoriseddistributors in theEEAwereprohibiting them from sellingBMWandMINIbranded cars to customers outside the EEA, i.e. also to customers in Switzerland. The Comco found that these provisions had an economic effect in Switzerland and applied theCartelAct.TheFACaswellastheFSCupheldthisfinding(judgmentB-3332/2012of the FAC of 13 November 2015 – BMW and judgment 2C_63/2016 of the FSC of 24 October 2017 – BMW). TheFSC confirmed that the effects doctrine applies under theCartelActandhencethatitsterritorialscopemustbeinterpretedbroadly.Withthisfinding,thecourtconfirmeditspracticesetforthintheGaba judgment. Therefore, it is important for undertakings whose activities may produce effects in Switzerland to be fully aware of the potential implications of Swiss competition law rules for their agreements and business practices (see also the legally binding judgment B-581/2012 of the FAC of 16 September 2016 – Nikon). On 1 December 2014, the Cooperation Agreement with the EU entered into force, which is thefirst“secondgeneration”agreement,providingfortheexchangeofsomeinformationeven without the consent of the undertakings concerned. The aim of the Cooperation Agreement is to strengthen the collaboration between the Comco and the European Commission. By improving access to evidence, reducing administrative overlaps and ensuring due consideration of mutual interests, the Comco and the European Commission seek to combat cross-border anti-competitive practices more effectively. The core element of the CooperationAgreement is the possible exchange of specific,case-related information between the Comco and the European Commission. As a major contrast to the previous legal setting, under the Cooperation Agreement the exchange of information and documents between the competition authorities shall be possible even if the concerned undertaking does not consent thereto. An important statutory exception for the exchange of information and documents without the consent of the undertakings concerned applies to information previously submitted to the competition authorities under a leniency application. Moreover, as a precondition, the competition authorities must investigate the same or related conduct in order for the exchange to be admissible, and the use of any exchanged information is restricted to such same or related conduct and, additionally, limited to the enforcement of the competition laws of the EU and Switzerland.



The Cooperation Agreement must be taken into account particularly by the authorities in the preparation of dawn raids and – also by the undertakings – in the preparation and assessment of multi-jurisdictional leniency applications, i.e. whether or not to include Switzerland. For the purposes of implementing the Cooperation Agreement, a new article 42b § 3 has been inserted in the Cartel Act, laying down general requirements for sharing information with a foreign competition authority. Information may only be transmitted based on international agreements or with the consent of the undertakings concerned. The additional requirements mirror to a large extent those contained in the Cooperation Agreement. The new article 42b § 3 Cartel Act merely sets out that the undertakings concerned are to be consulted before the transmissionofinformation.Whetherornottheexclusionofex ante legal remedies against an unlawful transmission of information is compatible with the Swiss Federal Constitution and the ECHR remained untested yet and will be for the courts to decide. The Cooperation Agreement solely allows cooperation between the Comco and the European Commission, but not with national competition authorities of the EU Member States. The European Commission can, however, provide some information, e.g. regarding the coordination of enforcement measures, to the competition authorities of the EU Member States and the EFTA Surveillance Authority. Moreover, on an informal basis, the Comco and its Secretariat cooperate with various national antitrust authorities in Europe such as the German BundeskartellamtaswellaswiththeUSantitrustauthorities.Absentspecificfuture cooperation agreements, such cooperation, however, is not allowed to go beyond theexchangeofnon-confidentialinformation.TheCartelActprovidesinarticle42afora specific regimewith regard to investigations in the air transportation industry. Suchinvestigations are governed by the Agreement between the European Community and the Swiss Confederation on Air Transport of 21 June 1999. Accordingly, in this sector the Comco may cooperate with the European Commission on a formal legal basis. Investigations, decisions and sanctions issued by competition authorities abroad have no binding effect on the Comco. The FSC held that, in principle, Swiss competition law must beconstruedindependentlyfromthecompetitionlawoftheEU;itshall,however,beusedas an interpretative aid in case the legislator intended an alignment by setting corresponding rules (see judgment 137 II 199 of the FSC of 11 April 2011 – Terminierung Mobilfunk). In practice,however, theEUcompetition rulesandcase lawhavealwayshadasignificantimpact on the interpretation of the substantive provisions of the Cartel Act by the Comco. In its Altimum judgment, the FAC even went further and held that distribution agreements compliant with European competition law rules shall also be considered lawful under Swiss competition law (judgment B-5685/2012 of the FAC of 17 December 2015 – Altimum). The Altimum case, however, is currently under appeal before the FSC. In its landmark decision 143 II 297 of 28 June 2016 – Gaba, the FSC held that, despite the different regulatory backgrounds, the regulatory frameworks of Swiss and EU competition law shall be considered congruent.


In Switzerland, the third-party private enforcement level is still relatively low as regards follow-onclaimsaswellasstand-aloneclaims.Themostrelevantreasonisthedifficultyingathering evidence and the high costs related thereto. In comparison, lodging a complaint before the Comco leads to an administrative proceeding basically free of charge, in which the Comco will take care of “everything”. Another factor is that, according to the prevailing doctrine, consumers are not authorised to bring claims based on the Cartel Act. However,



consumers would have legal standing to bring a claim for damages under tort law. Finally, the short period of the statute of limitations for a claim for damages is an additional reason to explain this low level. Indeed, the limitation period for a civil claim for damages or reparations expires one year after the claimant is aware of both the complete damage and the identity of the injuring party, but in any case at the latest 10 years after the restriction of competition has ended (article 60 CO). The same rules apply regarding the claim for surrenderofunlawfullyearnedprofits.The legal standing of consumers’ associations as regards private enforcement actions based on the Cartel Act remains unclear. Trade or consumer organisations possess legal standing provided they are undertakings under the Cartel Act (which means that they exercise a commercial activity) and are hindered in the process of competition. However, the legal standing to protect their members’ interests remains disputed. The legal doctrine tends to recognise trade or consumer organisations’ active legal standing with regard to actions for injunctions to terminate a restriction of competition, but not with regard to actions for damages incurred by their members. The new CCP recognises the active standing of associations and other organisations of national and regional importance to bring actions in their own name against violations of the personality rights of their members under article 28 CC. In principle, personality rights also include economic rights and thus, at least in theory, trade or consumer organisations could claim for the prohibition of an existing or threatened violation of personality rights (for instance, prohibition of a refusal to deal). Beyond that, it is currently not possible for a representative body to bring a collective follow-on claim in Switzerland on behalf of consumers.Concerning the gathering of evidence, effective and practical pre-trial discovery is not available in Switzerland. Furthermore, an exchange of information between the Comco andthecivilcourtsdoesnot takeplaceingeneral. It is thereforedifficult toobtainanydocuments before the start of the proceedings. However, in recent judgments of the FAC, (conditional)fileaccessatleastformunicipalitieswasmadelessdifficult(seejudgmentsA-6315/2014, A-6320/2014 and A-6334/2014 of the FAC of 23 August 2016 – Zugang zu Verfahrensakten). Third parties with full legal standing in principle also have (conditional) fileaccess. Apotentialclaimantmightthereforebeinclinedtoinitiateanadministrativeproceeding first, and file a request for full legal standing. Important informationmay,however, qualify as business secrets and remain inaccessible. Preliminary measures, which also focus on avoiding or terminating restrictions of competition, are generally available under Swiss law, both in the investigation by the competition authorities (see judgment 130 II 149 of the FSC of 19 December 2003 – Sellita Watch Co SA vs. ETA SA (Vorsorgliche Massnahmen)) and in case of civil actions (article 261to269CCP).Whereaspreliminarymeasuresorderedbythecompetitionauthoritiesfocus on the protection of effective competition, preliminary measures in civil proceedings mainly aim at safeguarding an undertaking’s interests. All appropriate and reversible measures for such interim execution may be ordered, e.g. the interim obligation to contract or to grant admission to a trade fair. However, interim payments are not possible and therefore, interim awards of damages are not available in Switzerland.An example of the difficulties of private enforcement of the Cartel Act through civilproceedings in a stand-alone case can be found in a rather new decision of the FSC (see judgment 4A_449/2012 of the FSC of 23 May 2013 – L’Etivaz). At the request of the plaintiff(acheesemanufacturer),theFSCconfirmedthatthecompanymanagingacheese-maturing cellar with regard to the production of an AOC cheese (i.e. a cheese with a



protected designation of origin label) had abused its dominant position by preventing the plaintiff from being admitted to the cheese-maturing cellar. The said company was then forced to admit the cheese manufacturer to the cheese-maturing cellar and was compelled topaydamages. However, thedamageswere low,as theplaintiffcouldnotsufficientlyprove the link between the abuse of the dominant position and the suffered loss of earnings.

Reform proposals

The main reform proposals in Swiss competition law relate to controversial topics on how tofightSwitzerland’sstatusasthe“IslandofHighPrices”inEurope,asfollows:Firstly, the parliamentary initiative “Excessive Import Prices. End Compulsory Procurement on the Domestic Market”(14.449)ofHansAltherrof25September2014wasfiledandadmitted. Secondly, the federal popular initiative “Stop to the Swiss Island of High Prices – Pro Fair Import Prices (Fair-Price Initiative)”wasfiledwith(accordingtotheinitiativecommittee) about 108,000 signatures. Provided that there were indeed sufficient validsignatures, the Swiss government will submit the initiative together with its statement to the parliament for debate. Pursuant to the rules applicable to popular initiatives, it may, however, take up to more than three years until Swiss voters can indeed decide on the initiative. Both legislative attempts, the parliamentary and the popular initiative, aim to introduce new regulation with regard to abuses of undertakings with “relative market power” (a similar concept as already known in the national German competition law). According to the initiatives, subject to legitimate business reasons, undertakings shall particularly abuse their relative market power if they either refuse to contract with Swiss domestic customers willing to purchase products abroad to the corresponding foreign conditions or charge Swiss prices anyhow. Thirdly, the motion “For a More Effective Cassis de Dijon Principle” (15.3631) of Hans Hess of 18 June 2015 aims to ensure that manufacturers expressly permit in their distribution agreements with Swiss domestic distribution partners, inter alia, to carry out installation, maintenance or guarantee work for their products, irrespective of whether these products have been purchased directly in the EEA. The parliament has approved this motion. In the following, the Secretariat of the Comco conducted a quite extensive market enquiry, in the course of which no real evidence for the existence of the problems asserted by the author of the motion has been found. Therefore, the Swiss government now requested the parliament to formally consider the motion as redundant.Finally,amoresector-specificreformproposalconcernsonlinetravelagencies.InOctober2015, the Comco prohibited several booking platforms (inter alia, booking.com) the use of “wide” hotel rate parity clauses in their agreement with hotels. According to these clauses, hotels were not allowed to offer lower prices or larger quantities of rooms on, inter alia, otherbookingplatforms.However,duetoalackofsignificantempiricalvalue,theComco,decided not to prohibit “narrow” hotel rate parity clauses which solely prevented hotels from offering lower rates on their own websites as compared to the booking platforms. Instead, the Comco wanted to monitor the effects of such clauses on the markets. Notwithstanding the above, the motion “Prohibit Slave-Type Contract from Online Booking Platforms against Hotels” (16.3902) of Pirmin Bischof of 30 September 2016 aims at prohibiting any kinds of parity clauses in agreements between online booking platforms and hotels, i.e., also “narrow” hotel rate parity clauses. The Swiss parliament adopted the motion with a vast majority. It is now up to the Swiss government to prepare a legislative proposal.


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222 avenue Louise, 1050 Brussels, Belgium. Tel: +32 2 646 02 22 / Fax: +32 2 646 75 34URL: www.mll-legal.com / www.mll-news.com


Mario StrebelTel: +41 44 396 91 91 / Email: [email protected] Strebel is a partner and heads the Competition Law, Trade and Regulated Markets practice group of MLL in Zurich. Mario’s extensive experience covers all aspects of competition law, distribution law and matters arising at the interface of regulated network industries and competition law. He advises Swiss and international clients in all relevant areas of competition law and regulatory matters, as well as in distribution law matters and represents them before authorities and courts. Mario Strebel regularly publishes articles in his areas of expertise and gives presentations on these topics, including compliance seminars and dawn raid workshops. Mario Strebel was born in 1977. After graduating from the University of Zurich in law (lic.iur.) he obtained a LL.M. in competition law from Kings College London in 2003. He was admitted to the Bar of Zurich in 2008. His professional languages are German and English.

Christophe PétermannTel: +32 2 646 02 22 / Email: [email protected] Pétermann is counsel with MLL and specialises in European and SwisscompetitionlawwithintheBrusselsofficeofthefirm.Hewasbornin1972. After graduating from the University of Lausanne in 1994 he obtained two postgraduate degrees, the first from the University of Saarbrücken(LL.M. in EU law), and the second from the Facultés Universitaires Saint-Louis of Brussels in legal theory and philosophy. He was admitted to the Bar of Geneva in 2006 and to the Bar of Brussels in 2007. His professional languages are French and English.Christophe Pétermann has extensive experience on antitrust matters in all relevant areas of competition law, including distribution, cartels, technology transfer agreements, abuse of dominance, merger control, state aid, as well as competition enforcement proceedings before Swiss and European competition authorities.

Renato BucherTel: +41 44 396 91 91 / Email: [email protected] Renato Bucher is an associate with MLL and specialises in distribution and competition law. He was born in 1987 and graduated from the University of Fribourg (Bachelor of Law, 2010), University of Zurich (Master of Law, 2012) and Maastricht University (LL.M. in Corporate and Commercial Law, 2012).HealsoholdsaCertificateofAdvancedStudiesinForensicsfromtheUniversity of Lucerne (Prosecutors’ Academy). He was admitted to the Bar of Lucerne in 2015. His professional languages are German and English.Renato Bucher advises Swiss and international clients mainly in distribution law matters, including competition related aspects thereto, and represents them before authorities and courts.


TaiwanBelinda S. Lee, Christopher B. Campbell & Elizabeth H. Yandell

Latham & Watkins LLP


The governing law for competition enforcement in Taiwan is the Taiwan Fair Trade Act (“TFTA”). The TFTA was enacted in February 1991, and took effect in 1992. The most recent comprehensive amendments to the TFTA took place in February 2015. The stated purpose of the law is “maintaining trading order, protecting consumers’ interests, ensuring free and fair competition, and promoting economic stability and prosperity”.Article14oftheTFTAdefines“concertedaction”aswhen“competingenterprisesatthesame production and/or marketing stage, by means of contract, agreement or any other form of mutual understanding, jointly determine the price, quantity, technology, products, facilities, trading counterparts, or trading territory with respect to goods or services, or any other behavior that restricts each other’s business activities, resulting in an impact on the market function with respect to production, trade in goods or supply and demand of services”.Article14expresslydefinesthephrase“anyotherformofmutualunderstanding”to mean “other than contract or agreement, a meeting of minds whether legally binding or not which would in effect lead to joint actions”.Article 15 is the key provision of the TFTA regarding cartel activity. Article 15 prohibits any enterprise from engaging in “concerted action” unless that action is beneficial tothe economy as a whole, is in the public interest, and has been approved by the Taiwan Fair Trade Commission (“TFTC”) as falling under one of eight permissible categories: (1) standard-setting; (2) research anddevelopment; (3) specialisation; (4) exporting; (5)importing;(6)certainactionsrelatedtoaneconomicdownturn;(7)certainactionsrelatedtosmallandmedium-sizedbusiness;and(8)acatch-allcategorythatallowsforapprovalofcertainactionsaimedatdevelopment,innovation,andefficiency.PartiesengagedinpermissibleconcertedactionmayfileanapplicationforapprovalwithTFTC.Suchapplicationsarerelativelyrare,however.In2016,theTFTCreceivedjustfiveapplications for approval, down from 15 in 2015. See2016StatisticalYearbookofFairTrade Commission, at 52. The TFTC approved just one application for concerted action in 2016. Id. at 82. Historically, the TFTC approves concerted action most frequently pursuant to categories 2 (research and development) and 5 (importing). Id. at 88.

Overview of investigative powers in TaiwanInvestigatory Powers and ProceduresThe TFTC is the central authority in charge of competition policy and enforcement in Taiwan. The TFTA grants the TFTC the power to “investigate and handle any violation of the provisions of [the TFTA] that harms the public interest”. To accomplish this purpose, the TFTA provides that the TFTC may:


Latham & Watkins LLP Taiwan

• requirethepartiesandanyrelatedthirdpartytoappeartomakestatements;• require the parties and any related third party to submit books, records, documents, and

anyothernecessarymaterialsorexhibits;• dispatchpersonnelforanynecessaryonsiteinspectionoftheoffice,placeofbusiness,

orotherlocationsofthepartiesandanyrelatedthirdparty;and• seize articles obtained from the investigation that may serve as evidence, only as

necessaryfortheinvestigation,inspection,verificationorpreservationofevidence.The TFTC’s interviews of parties and witnesses typically take place in Taipei and can last anywhere from one hour to multiple days. Multiple entities under investigation may be interviewed on consecutive days. Interviews are not necessarily transcribed verbatim, but the TFTC does generate a summary of the questions and answers during the interview, whichisthenincludedinthecasefile.TFTC investigations can proceed quickly relative to investigations in other jurisdictions – a decision can be issued as soon as six months after the initial notice of investigation, particularly in cases where the TFTC has the assistance of a leniency applicant. Obviously, the pace will vary from case to case, but both counsel and clients should be prepared for the process to move quickly once an investigation is under way. NoSearchWarrantsorDawn-RaidsThe current TFTA does not grant the TFTC the power to conduct dawn-raids or otherwise apply for search warrants of target enterprises. Although the proposed 2015 amendments included a provision that would have granted the TFTC this power, the proposal did not pass. Various commentators expect that the dawn-raid power will be proposed during the nextroundofamendmentstotheTFTA,andDr.HuangMei-Ying,whoassumedtheroleofChairperson of the TFTC in February 2017, has stated that she hopes to add the search and seizure power to the TFTA. Granting the TFTC the power to conduct unscheduled search and seizures would bring its powers more in line with that of competition authorities in other jurisdictions, such as the United States, Japan, and China.


The TFTC’s most recent statistics cover enforcement activity in 2016. The TFTC reports that in 2016, it opened 2,311 new cases related to concerted action or mergers. Of those, 349 cases were self-initiated and 1,962 were reported. Roughly 81% of reported cases (1,588 cases) were initiated in the form of a complaint, and the large majority of new complaints targeted a business enterprise. The number of reported cases in 2016 represents a 17.8% increase over 2015. In 2016, the TFTC closed, by decision or otherwise, 1,909 of the pending cases (including some carried over from previous years), representing 15.6% more cases closed than in 2015. That number represents an overall 1.4% decrease in closure rate over 2015, however. Of the complaints closed by decision, only 24.3% were decided in favour of the enterprise. Only three of those cases involved concerted action investigations. In2016,theTFTCimposedatotalofNT$2.05billioninfinesagainstpartiesinvestigatedfor anticompetitive conduct. This represents an enormous decline from 2015, when the TFTCimposedtotalfinesofnearlyNT$5.8billionagainstthepartiesintheCapacitors case alone.


The 2015 amendments to the TFTA made several significant changes related to cartelenforcement. First, the amendments added a provision that allows the TFTC to presume



a mutual understanding of concerted action based on “market condition[s], characteristics of thegoodorservice,costofprofitconsiderations,andeconomicrationalisationof thebusiness conducts”. TFTA Art. 14. This addition, which effectively allows the TFTC to prove concerted action through circumstantial evidence, has been viewed by commentators as largely shifting the burden of proof of concerted action from the TFTC to the target enterprises. Second, the amendments increased the statute of limitations for the TFTC to impose sanctionsforviolationsoftheTFTAfromthreeyearstofiveyears.TFTAArt.41.Thischange provides the TFTC with more time to investigate and build a case against a target enterprise before imposing sanctions, and provides leniency applicants with more time to comeforward,whichcouldleadtoahighervolumeoffiledcasesinthecomingyears.Finally, the 2015 amendments made a significant change to the appeals process.Previously,theTFTArequiredpenalisedpartiestofirstappealadecisionoftheTFTCtotheAdministrativeAppealCommitteeoftheExecutiveYuan(“AAC”).Underthecurrentlaw,partiesmayskiptheappealtotheAACandappealfindingsofliabilitydirectlytotheadministrative courts. TFTA Art. 48.


The TFTC publishes flow charts that detail the procedures and steps taken duringinvestigations and applications for immunity in concerted action cases. See generally TFTC Regulations and Case Handling. Compared to other jurisdictions, however, such as the United States or the European Union, neither the TFTC nor the TFTA makes clear whether a party under investigation is entitled to details of the TFTC’s case theory or evidence. Because recent amendments to the TFTA appear intended to globalise and modernise the law, however, increased transparency could be the subject of future TFTA amendments.


The TFTA’s leniency programme was introduced in the 2011 amendments to the TFTA. Article35establishesaframeworkforleniencythatcanprovideeitherfineimmunityorfinereductiontoqualifyingapplicants.Theoptionsavailabletoaleniencyapplicantvarydepending on whether the applicant applies for leniency prior to or during the TFTC’s investigation, and based on the quality of information and evidence that the applicant provides to the TFTC. A. Application Prior to Investigation (Article 35, Subparagraph 1) Article 35, Subparagraph 1 provides for leniency if the applicant files a complaint

informing the TFTC of illegal conduct, submits evidence of the violation, and assists in the investigation “before the [TFTC] is aware of the said illegal conduct or initiated an investigation”. In such cases, the applicant must provide evidence that it is “able to assist the [TFTC] to initiate an investigation”. See Regulations on Immunity and Reduction of Fines in Illegal Concerted Action Cases (“Immunity Regulations”), Art. 3. This means that the applicant must provide “concrete details of the concerted action in which they have been involved” that the TFTC does not already possess (or that the TFTC is unaware of), an outline of the concerted action in question, the time and location of the mutual understanding, and the content of the mutual understanding. Id. Art.4.IftheTFTChasalreadyobtainedsufficientevidencetoinitiatetheinvestigationwhen the application is submitted, the TFTC may reject the application. Id. Art. 3.

B. Application During Investigation (Article 35, Subparagraph 2) Article 35, Subparagraph 2 permits leniency if the applicant reveals the illegal conduct,



submits evidence, and assists the investigation “during the period in which the [TFTC] investigatesthesaidillegalconduct”.Whenanentityappliesunderthisprovision,theevidence submitted must assist the TFTC to “establish that the involved enterprises have violated” Article 15 of the TFTA. This means the applicant must provide “a statement of concrete details of the concerted action in question, along with evidence that the applicant has already obtained at the time of application and is capable of proving the violation of the said concerted action” or a statement and evidence that “are able to assist the [TFTC] in the investigation on the concerted action in question”. See ImmunityRegulations,Art.5.Applicantsseekingfineimmunity must provide evidence that falls in the first category,while those applying for fine reduction may provide evidence that falls in the second category. Id. Similar to applications submitted prior to an investigation, the TFTC retains the right to reject an application submitted during an investigation if the TFTC has already obtained enough evidence to establish the named parties’ involvement. Id. Art. 3.

C. Conditions for Leniency Several conditions attach to a grant of leniency, including that the applicant withdraw

from the concertedaction immediatelyuponfilinganapplication,or at a later timewhichtheTFTCspecifies.Fromthetimetheapplicationisfiled,theapplicantmustfollow the TFTC’s instructions and provide “honest, full and continuous assistance” during the investigation. This includes turning over evidence, providing facts the TFTC may request, and allowing the TFTC to question employees. The applicant also must not conceal or misrepresent any information related to the concerted action, destroy or alter evidence, or disclose its application to any other parties before the case is concluded. See Immunity Regulations, Art. 6.

D. Fine Immunity Versus Fine Reduction Fine immunity is available both before and during a TFTC investigation if the applicant

isthefirsttoapply,meetstherelevantcriteria,agreestoallleniencyconditions,andnoother enterprise in the investigation has already been granted leniency. An otherwise qualifying applicant that applies during an investigation is eligible only for finereductioniftheapplicantiseithernotthefirstpartytoapplyorisnotabletosubmitevidence “capable of proving the violation”. Thefirst qualifying applicant for finereduction iseligible fora30%to50%reduction; thesecondqualifyingapplicant iseligiblefora20%to30%reduction;thethirdqualifyingapplicantiseligiblefora10%to20%reduction;andthefourthqualifyingapplicantiseligibleforareductionupto10%. See Immunity Regulations, Art. 8.

Enterprises intending to apply for immunity, but which do not yet have all of the required information,mayfile amarker application requesting preservation of theirpriority status. Id. Art. 11. After an application has been received and approved, the TFTCisrequiredtokeeptheidentityoftheapplicantconfidentialunlesstheapplicantagrees otherwise.

E. Related Amendment: The Antitrust Fund The 2015 amendments made an addition that could lead to an increase in leniency

applications to the TFTC. The amendment provides that the TFTC may develop an “AntitrustFund,”whichhascommonlybeenreferredtoasa“WhistleblowerFund”.The stated purpose of the fund is to “strengthen the investigation and sanction over concerted actions and promote the healthy development of market competition”. TFTA Art. 47-1. The TFTA provides for the fund to be capitalised by 30% of the finescollectedunder theTFTA,amongother sources,whichcanbeused to reward



parties that report illegal concerted action. If the potential of a monetary reward further incentivises cartel participants to come forward and apply for leniency as expected, the leniency programme could experience increased participation in the coming years.


The TFTC publishes guidelines that govern the administrative settlement of cases and investigations. The current guidelines went into effect in February 2012. Settlements may be proposed by either the TFTC or the target enterprise. Proposed settlements must be submitted by a Commissioner for review during a TFTC Commissioners’ Meeting. In deciding whether to approve a settlement, the commissioners consider “(1) the legality andappropriatenesswithregardtothemutualconcessionoftheFTCandcounterpart;(2)themaintenanceofpublic interest;and (3) thepotentialharm incurredby the interestedparty due to the constitution of settlement contract”. See Fair Trade Commission Disposal Directions on Handling Administrative Settlements, p.2. The TFTC reserves the right to “withdraworalter”aproposedsettlementpriortoitbecomingfinalduetoaparty’sviolationof the settlement’s terms, or when otherwise “necessary”. Id. p.7. Although the frequency of TFTC settlements is unknown (the TFTC does not publish statistics on the cases resolved by settlement), parties that do not qualify for leniency can consider settlement as another route to resolution of an investigation.


Third parties may report suspected violations of the TFTA to the TFTC. The TFTC is required to review a third party’s report to assess whether a formal investigation should be opened.

Punishment and finesCivil PenaltiesTheTFTCisempoweredtoimposeadministrativefinesonentitiesandindividualsfoundto be in violation of the TFTA. Any party found to have engaged in illegal concerted action maybeorderedtoceasetheconductortakecorrectiveaction,andmaybefinednolessthanNT$100,000andnotmorethanNT$50million.TFTAArt.40.The2011amendmentstotheTFTAaddedaprovisionthatprovidesforanadditionaladministrativefineifapartyisfound to have engaged in a “serious violation”. In the case of a serious violation, the TFTC may impose a penalty of up to 10% of an enterprise’s total sales income from the previous fiscalyear,ofwhichapenaltydoesnotcontributetothefinelimitsthatotherwiseapply.Id. InApril2012,theTFTCadoptedregulationsthatdefinetheterm“seriousviolation”underthe new law. The regulations, titled Regulations for Calculation of Administrative Fines for Serious Violations of Article 9 and Article 15 of the Fair Trade Act, describe a “serious violation” as “unlawful conduct that has seriously affected market competition and order”. The regulations set out factors that should be considered in determining whether a violation is “serious”: (1)thescopeandextentofthemarketcompetitionandorderaffected;(2)thedurationofthedamagetomarketcompetitionandorder;(3) the market status of the enterprise in violation and the structure of the corresponding

market;(4)the total sales and profits obtained from the unlawful conduct during the violation

period;and(5) the type of concerted action – joint product or service price decision, or quantity, trading

counterpart or trading area restriction.



Conduct may also constitute a serious violation if the total product sales achieved during the violationperiodexceedsNT$100million,orthetotalprofitsobtainedfromtheunlawfulconduct exceed the upper limit for administrative fines under the TFTA (i.e., NT$ 50million).Criminal PenaltiesArticle 34 of the TFTA provides that in certain circumstances, criminal penalties may be imposedinadditiontothecivilpenaltiesdescribedabove.Specifically,ifapartyisorderedto cease conduct or take corrective action, but fails to do so or repeats the violation, the TFTA provides for imprisonment of the responsible persons for not more than three years, and/orafineofnotmorethanNT$100million.

Right of appeal

Prior to the2015amendments,penalisedpartieswererequired tofirstappealadecisionoftheTFTCtotheAAC.IfthepartywasdissatisfiedwiththeAAC’sdecision,onlythencouldthepartyfileanappealwiththeHighAdministrativeCourt.The2015amendmentsrepealed the AAC requirement, and parties may now appeal a TFTC decision directly to the High Administrative Court. TFTA Art. 48. The High Administrative Court reviews TFTC decisions for errors of both fact and law. AftertheHighAdministrativeCourtissuesitsopinion,eitherpartymayfileanappealtotheSupreme Administrative Court. In contrast to the High Administrative Court, the Supreme Administrative Court reviews decisions only to determine if the lower court failed to apply, orwrongfullyapplied,thelaw.TheSupremeAdministrativeCourtcanaffirmoroverrulethe lower court, and can dismiss the appeal entirely. The value and efficacy of the appeals processwas demonstrated in theODD case. In that case, the TFTC initially found that several enterprises had committed violations of theTFTAbasedonallegedcartelactivity,andimposedfinesonseveralparties.OnepartychosetoappealtheTFTC’sdecision.Atthetime,thelawrequiredthepartytoappealfirstto theAAC,before furtherappeal to theadministrativecourts. After theAACaffirmedthe TFTC’s decision, the enterprise appealed to the High Administrative Court. Based on the enterprise-appellants’s arguments related to statute of limitations and lack of effects on the Taiwanese market, among others, the High Administrative Court reversed the AAC’s decision and ruled in favour of the enterprise-appellant. The TFTC then appealed the High Administrative Court’s judgment to the Supreme Administrative Court, which again ruled infavouroftheenterprise-appellant,andfinallydismissedthecase.TheTFTCwasrequiredto remit the finewhich the enterprise had previously paid. The time from theTFTC’sdecision until the Supreme Administrative Court’s judgment was just under three years. The TFTC reports that no cases were appealed in 2016. See2016StatisticalYearbookofFair Trade Commission, Table 23.


Private enforcement is authorised under the TFTA. Chapter V provides for damages or an injunction (“removal of infringement”) when a violation of the TFTA results in infringement of another’s “rights and interests”. TFTA Arts. 29, 30. Article 31 provides for punitive damages in cases of intentional violations, of which an amount cannot exceed three times the proven amount of damages. The statute of limitations for private actions is 10 years from the time the conduct occurs, or two years from the damaged party’s discovery of the conduct. TFTA Art. 32.


505 Montgomery St., Ste. 2000, San Francisco, CA 94111, USATel: +1 415 646 7802 / URL: www.lw.com

Latham&WatkinsLLP

Belinda S. LeeTel: +1 415 395 8851 / Email: [email protected] isa litigationpartner in theAntitrust&CompetitionPracticeGroupintheSanFranciscoofficeofLatham&Watkins.Ms.Leepracticefocuses on the defence of Asian-based companies in multi-jurisdictional cartel matters and civil class actions.

Christopher B. CampbellTel: +1 415 391 0600 / Email: christopher.campbell@lw.comChristopherCampbellisalitigationpartnerintheAntitrust&CompetitionPractice Group in the San Francisco office of Latham &Watkins. Mr.Campbell represents major U.S. and Asian-based companies in the technology, financial, and transportation industries in multi-jurisdictionalcivil and criminal antitrust litigation.


Elizabeth H. YandellTel: +1 415 391 0600 / Email: [email protected] is a litigation associate in theAntitrust & CompetitionPractice Group in the San Francisco office of Latham &Watkins. Ms.Yandell representsU.S. andAsian-based clients in the technology,music,and sports industries.


TurkeyGönenç Gürkaynak & Öznur İnanılır

ELIG, Attorneys-at-Law


The national competition authority for enforcing the cartel prohibition and other provisions of the Competition Law in Turkey is the Turkish Competition Authority (“Competition Authority”). TheCompetitionAuthorityhasadministrativeandfinancialautonomy. Itconsists of the Competition Board (“Board”), Presidency and service departments. There arefivedivisions,withsector-specificworkdistribution,thathandletheCompetitionLawenforcement work through over 130 case handlers. The other service units consist of the following: (i) the department of decisions; (ii) the economic analysis and researchdepartment; (iii) the information management department; (iv) the external relations,trainingandcompetitionadvocacydepartment;(v)thestrategydevelopment,regulationand budget department; and (vi) the cartel and on-site inspections support division(“Leniency Division”).The statutory basis for cartel prohibition and the enforcement regime is Law No. 4054 on the Protection of Competition of December 13, 1994 (“Competition Law”). The CompetitionLawfindsitsunderlyingrationaleinArticle167oftheTurkishConstitutionof 1982, which authorises the state to take appropriate measures to secure the functioning of the markets and to prevent the formation of monopolies or cartels. The Turkish cartel regime by nature applies administrative and civil (not criminal) law. The Competition Law applies to individuals and companies alike and even to public corporations if they act as an undertaking within the meaning of the Competition Law.Article 4 of the Competition Law is the applicable provision for cartel-specific casesand provides the basic principles of the cartel regulation. The provision is akin to and closely modelled on Article 101(1) of the Treaty on the Functioning of the European Union (“TFEU”). Article 4 prohibits all agreements between undertakings, decisions by associations of undertakings and concerted practices which have (or may have) as their object or effect the prevention, restriction or distortion of competition. Similar to Article 101(1) of theTFEU, the provision does not define the term “cartel” explicitly.However, Article 4 prohibits all kinds of restrictive agreements, including any form of cartel agreements. Unlike the TFEU, Article 4 does not refer to additional requirements such as “appreciable effect” or “substantial part of a market”, and consequently does not provide for any de minimis exception. Therefore, Article 4 applies even to violations with minor effects on any market. The practice of the Board has not recognised any de minimis exceptions either. However, the enforcement trends and proposed changes to the legislation are increasingly focusing on de minimis defences and exceptions.


ELIG, Attorneys-at-Law Turkey

Article 4 also prohibits any form of agreement that has the ‘potential’ to prevent, restrict ordistort competition. Again, this is a specific featureof theTurkishcartel regulationsystem, granting broad discretionary power to the Board. Additionally, Article 4 brings a non-exhaustive list which provides examples of possible restrictive agreements.The prohibition on restrictive agreements and practices does not apply to agreements that benefitfromablockexemptionoranindividualexemptionissuedbytheBoard.Verticalagreements are also caught by the prohibition laid down in Article 4, to the extent they are not covered by block exemption rules or individual exemptions.The Board’s general practice shows that horizontal restrictive agreements such as price fixing,marketallocation,collectiverefusalstodeal(groupboycotts)andbidrigging,haveconsistently been deemed to be per se illegal.The Turkish competition regime also condemns concerted practices. The Competition Authority may apply “the presumption of concerted practice” and thus can easily shift the burden of proof for the investigated parties in connection with concerted practice allegations too.SimilartotheEUCompetitionLawregime,aconcertedpracticeisdefinedasaformof coordination between undertakings which, without having reached the stage where a so-called agreement has been properly concluded, knowingly substitutes practical cooperation between them for the risks of competition. Therefore, this is a form of coordination, without a formal “agreement” or “decision”, by which two or more companies come to an understanding to avoid competing with each other. The coordination does not need to beinwriting;itissufficientifthepartieshaveexpressedtheirjointintentiontobehavein a particular way, perhaps in a meeting, via a telephone call or through the exchange of letters.

Overview of investigative powers in Turkey

The Competition Law provides vast investigative powers to the Competition Authority such as the power to conduct dawn raids and to apply other investigatory tools (e.g., formal information request letters). The Board only needs a judicial authorisation if an undertaking refuses to allow the dawn raid. The prevention or hindering of a dawn raid couldresultintheimpositionofanadministrativemonetaryfine.Article 15 of the Competition Law authorises the Board to conduct on-site investigations. Accordingly, the Board is entitled to:• examine the books, paperwork and documents of undertakings and trade associations,

and,ifnecessary,takecopiesofthesame;• request undertakings and trade associations to provide written or verbal explanations on

specifictopics;and• conduct on-site investigations with regard to any asset of an undertaking. Refusal to grant the staff of the Competition Authority access to business premises may leadtotheimpositionofafixedfineof0.5%oftheannualturnover.Itmayalsoleadtotheimpositionofafineof0.05%oftheturnoverforeachdayoftheviolation.Although the Competition Law obliges employees to provide a verbal testimony during the dawn raid, case handlers usually allow for providing an answer after the occurrence of the dawn raid. Therefore, in practice, employees can avoid providing answers on issues that are uncertain to them, provided that a written response is submitted in a mutually agreed timeline. Case handlers of the Competition Authority may fully examine computer records, including, but not limited to, deleted mail items.



Officialsconductingadawnraidmustbeinpossessionofadeedofauthorisationissuedby the Board. The deed of authorisation must specify the subject matter and purpose of the investigation. The inspectors are not entitled to exceed their authorisation. Hence, the inspectors must not exercise their investigative powers in relation to matters that do not fallwithinthescopeoftheinvestigationspecifiedinthedeedofauthorisation.Therefore,theCompetitionAuthorityofficialsmaynotcopydocumentsorrecordverbaltestimonieswhich are not related to or covered by the scope of the investigation. At the site of a dawn raid, the Competition Authority’s staff is not obliged to wait for a lawyer to arrive. However, the staff usually agree to wait for a short while for a lawyer to arrive, but mayimposecertainconditions(e.g.,tosealfilecabinetsordisruptemailcommunications).The Competition Authority may also request all information it deems necessary from all public institutions and organisations, undertakings and trade associations. Officials ofthese bodies, undertakings and trade associations are obliged to provide the necessary informationwithinafixedperiodoftime.Failuretocomplywithadecisionorderingtheproductionofinformationmayleadtotheimpositionofaturnover-basedfineof0.1%oftheturnovergeneratedinthefinancialyearprecedingthedateofthefiningdecision(ifthisisnotcalculable,theturnovergeneratedinthefinancialyearnearesttothedateofthefiningdecisionwillbetakenintoaccount).TheBoardmayimposethesameamountoffineifanundertaking provides incorrect or incomplete information in response to the Competition Authority’s request for information.

An overview of cartel enforcement activity during the last 12 months

Developments in cartel enforcement in Turkey may be illustrated with an overview of the most notable cartel cases that the Board has examined in the recent years. The Board is usually reluctant to identify a violation as a cartel and prefers to use terms such as ‘concerted practice’, ‘agreement’ or ‘information exchange’ instead. The reasons for this approach are nottotallyclear;however,itappearsthattheBoardmaybeaimingatavoidingtheriskofhavingtoimposeastronomicalmonetaryfineswhichcouldbedeemedasdisproportionatecompared to the respective case at hand.TheCompetitionAuthority’s annual report for 2016 provides that theBoardfinalised atotalof41casesrelatingtoanti-competitiveagreements;26ofwhichconcernedhorizontalagreements. TheBoard issuedmonetary fines amounting to a total ofTL 133.693.788(approximately €31.8million at the time ofwriting) for anti-competitive agreements in2016.Thisfigureshowsthattherewasanincreasein2016intermsofmonetaryfinesissuedfor anti-competitive agreements contrary to the remarkable drop in recent years. Therefore, the trend over the course of several years has shown that the Board does not hesitate to impose administrativemonetary fineswhen it comes to horizontal anti-competitive andcartel arrangements. In fact, although nomonetary fines for cartel arrangements wereissuedin2015,theBoardimposedmonetaryfinestotallingTL14,662,151(approximately€3.5millionatthetimeofwriting)in2014;andTL1,126,817,183(approximately€268million at the time of writing) in 2013. Ready mixed concrete manufacturers (16-05/117-52, February 18, 2016) is the most recent decision inwhich the Board imposed amonetary fine on the undertakings, whichwerealleged to have violated Article 4 of the Competition Law through a joint production and commercialisation agreement made between them. In this decision, the Board definedthe relevant market as “ready mixed concrete” and recognised two different geographical markets due to the fact that ready mixed concrete must be used within a maximum of two



hours after it is manufactured and that it is transportable only within a 50km radius of a manufacturing plant. In its assessments, the Board indicated that establishing a new ready mixed concrete manufacturer could not be considered as a “joint venture”, as executives of the undertaking have no joint control over the alleged joint venture. Therefore, the Board concluded that the relevant entity should not be considered a joint venture under the rules of Communiqué 2010/4 on Mergers and Acquisitions Requiring the Approval of the Competition Board (“Communiqué No. 2010/4”). The Board evaluated the newly formed commercial relationship between relevant undertakings as a “joint manufacturing and commercialisation agreement”. The Board stated that this agreement is within the scope of Article 4 of the Competition Law, considering that it may raise several competitive concerns, such as customer allocation, price-fixing and coordination. TheBoard furtherevaluated the agreement within the scope of Article 5 of the Competition Law. However, the Board decided that this activity cannot be subject to an exemption as it will not be in accordance with the “not eliminating competition in a significant part of the relevant market” requirement stated in Article 5 of the Competition Law. It concluded that the manufacturing and commercialisation agreement does not satisfy the requirements laid down in the Article 5 of the Competition Law and thus the relevant undertakings violated the Competition Law. Consequently,amonetaryfineattherateof0.2%overtheirannualturnoverwasimposedon each undertaking. That said, two Board members dissented the majority opinion, stating that the relevant market did not bear any entry barriers as it did not require high investment cost and that the agreement enabled undertakings to minimise equipment, workforce and fuelexpensesandreflectthecostdifferencetothepricesandcreateafavourableoutcomeforconsumers.Inotherwords,thedissentcentredonthefactthattheagreementfailedtofulfilthe requirements provided in Article 5 of the Competition Law. One of the most recent decisions of the Board concerned six cement-producing undertakings that allegedly engaged in market partitioning and constrained their distributors not to sell any brandsotherthantheirownbrands(16-02/44-14,January14,2016).TheBoarddefinedtherelevant product market as “grey cement” and, due to the high transportation cost of cement, the geographic market was designated as the Aegean cities of Turkey. The Board held that the undertakings violated Article 4 of the Competition Law and infringed the Competition Lawbyallocatingmarkets,fixingprices,pricingexcessivelyandpreventingmarketentry.ThedecisionispertinentinthattheBoardclassifiedthecaseas“cartel”anddefinedcartelsin a manner that encapsulates both agreements and concerted practices. In this case, a Board member dissented the majority opinion and stated that, although there was evidence to indicate that the undertakings raised prices in a parallel manner, secretive meetings or direct proof of aprice-fixingcartelwereabsent in thecase. Article4of theCompetitionLawstipulatesthat, where there is parallel behaviour between competitors but the existence of an agreement cannot be proven, the burden of proof shifts to the undertakings that need to prove the similar pricing does not stem from a concerted practice. In this case, however, the Board adjudicated on theexistenceofacartel and imposedamonetaryfineat the rateof3% to fourof theundertakings, and 4.5% to two of the undertakings over their annual turnover. The percentage amountofthefinehasbeendeemedquitehighincomparisontotheBoard’sjurisprudence.One of the Board’s most important decisions in the year 2014 concerns four undertakings operating in the market for fresh yeast. The Authority investigated whether Dosu Maya MayacılıkA.Ş.,MauriMayaSan.veTic.A.Ş.,ÖzMayaSanayiA.Ş.,andPakGıdaÜretimvePazarlamaA.Ş.violatedArticle4oftheCompetitionLawbycolludingtosetsalepricesof fresh bread yeast (14-42/783-346, October 22, 2014). Mauri Maya applied for a leniency (which is available only for cartelists). The Board resolved that the investigated companies



violatedArticle4andimposedadministrativemonetaryfinesonthreeoftheundertakingswhilegrantingfull immunity toMauriMayabyvirtueof theaddedvalueandsufficientcontent of its leniency application. Mauri Maya could otherwise have received a monetary fineof4.5%ofitsannualturnover.TheBoardimplicitlyopenedthedoorformoreleniencyapplications, even for those cases where a preliminary investigation is already initiated and dawn raids are conducted.The investigations that have been initiated by the Competition Authority so far clearly showthatitdoesnotfocusonanyspecificsectorswhenitcomestotheinvestigationofcartel behaviour but rather aims to tackle any conduct or practice which might point to a restriction of competition among competing undertakings. It is expected that the trend will continue in its future cases.

Key issues in relation to the enforcement policy

The Turkish Competition Authority places equal emphasis on all areas of enforcement. The significanceofthecartelenforcementregimeundertheCompetitionLawhasnonethelessbeen repeatedly underlined by the Presidency of the Competition Authority. Thereareneitherindustry-specificoffencesnordefenceswhichleadtoaparticularscrutiny.The Competition Law applies to all industries, without exception. In terms of cartel enforcement, cement, bread yeast, driving schools and bakeries have recently been under investigation for cartel and concerted practice allegations.It is fair to say that the Board may at times consider policies which are not directly related to the protection of competition in the markets. The Turkish paper sector investigation (13-42/538-238, July 8, 2013)marks one of the extremely rarefiles inTurkeywhere apolicy concern not directly related to the Competition Law (i.e. a policy concern relating tominimisingtradedeficit)mayhaveplayedaroleintheultimatedecision,togetherwitha state action defence of the parties concerned, as the parties’ collective behaviour was influencedbya setof rulesbroughtby the relevantministry tackling tradedeficit. TheBoard found that seven paper recycling companies had violated the competition laws by harmonising their commercial behaviours and colluding against waste paper producers that aimed to export waste paper. However, the Board did not levy turnover-based monetary finesagainstthedefendants,andgrantedthree-yearexemptionsunderobjectivecriteria.


As the competent body of the Competition Authority, the Board is responsible for, inter alia, investigating and condemning cartel activity. A cartel matter is primarily adjudicated by the Board. The Board may ex officio, or as a result of a notice or complaint, launch a preliminary-investigationpriortoinitiatingafull-fledgedinvestigation.Atthispreliminarystage,theundertakingsconcernedareusuallynotnotifiedthattheyareunderaninvestigation,unlessthe Competition Authority decides to conduct a dawn raid or apply other investigatory tools (i.e., formal information request letters). The Competition Authority experts submit a preliminary report to the Board within 30 days after the Board decides to launch a preliminary investigation. The Board then decides within10dayswhethertolaunchafull-fledgedformalinvestigation.IftheBoarddecidesto initiate an investigation, it sends a notice to the undertakings concerned within 15 days. The investigation is to be completed within six months. If deemed necessary, this period may be extended by the Board only once, for an additional period of up to six months.



Once the investigation notice has been formally served, the investigated undertakings have30days toprepareandsubmit theirfirstwrittendefences. Subsequently, themaininvestigation report is issued by the Competition Authority. Once this is served on the defendants, they have 30 calendar days to respond, extendable for a further 30 days (this is the second written defence). The investigation committee will then have 15 days to prepare an additional opinion concerning the second written defence. The defending parties will have another 30-day period to reply to the additional opinion (third written defence). WhenthisreplyisservedontheCompetitionAuthority,theinvestigationprocessistobecompleted (i.e., the written phase of investigation involving the claim/defence exchange will close with the submission of the third written defence). An oral hearing may be held upon the request of the parties. The Board may also ex officio decide to hold an oral hearing. Oral hearings are held between 30 and 60 days following the completion of the investigation process under the provisions of Communiqué No. 2010/2 onOralHearingsbeforetheBoard. TheBoardrendersitsfinaldecisionwithin15daysfrom the hearing, if an oral hearing is held. Otherwise, the decision is rendered within 30 daysfromthecompletionoftheinvestigationprocess.Itusuallytakesaroundthreetofivemonths(fromtheannouncementof thefinaldecision)for theBoardtoserveareasoneddecision on the counterpart.The Competition Authority’s administrative enforcement is also supplemented with private lawsuits. Accordingly, in case of private suits, cartel members are adjudicated before the courts. Due to a treble damages clause allowing litigants to obtain three times their loss as compensation, private antitrust litigations increasingly make their presence felt in the cartel enforcement arena. Most courts wait for the decision of the Competition Authority and build their own decision on the Board’s decision.


TheCompetitionLawunderwentsignificantamendmentsinFebruary2008.Thecurrentlegislationbringsaboutastricterandmoredeterrentfiningregime,coupledwithaleniencyprogramme for the undertakings. The secondary legislation specifying the details of the leniency mechanism is the Regulation on Active Cooperation for Discovery of Cartels (“the Regulation on Leniency”). The Guidelines on Explanation of the Regulation on Leniency werepublishedinApril2013.WiththeenactmentoftheRegulationonLeniency,themainprinciples of immunity and leniency mechanisms have been set. The Regulation on Leniency provides that the leniency programme is only available for cartelists.Itdoesnotapplytootherformsofantitrustinfringements.Adefinitionofacartelis also provided in the Regulation on Leniency for this purpose. Acartelistmayapplyforleniencyuntiltheinvestigationreportisofficiallyserved.Dependingontheapplicationorder, theremaybetotal immunityfrom,orreductionof,afine. Thisimmunity/reduction includes both the undertakings and its employees and managers, with theexceptionofthe‘ring-leader’whichcanonlybenefitfromaseconddegreereductionofafine.Theconditionsforbenefitingfromtheimmunity/reductionarealsostipulatedintheRegulation on Leniency. Both the undertaking and its employees and managers can apply for leniency. A manager or employee of a cartelist may also apply for leniency until the ‘investigationreport’isofficiallyserved.Suchanapplicationwouldbeindependentfromapplications by the cartelist itself, if there are any. Depending on the application order, there maybetotal immunityfrom,orreductionofafine,forsuchmanageroremployee. Therequirements for such individual application are the same as stipulated above.



The most recent Board decision where the Board granted full immunity is the case which concerned several suppliers of rail freight forwarding services for block trains and cargo train services (15-44/740-267, December 16, 2015). The Board initiated an investigation following the leniency application made by Deutsche Bahn Group of Companies against the relevant suppliers of rail freight forwarding services for block trains and cargo train servicesincludingSchenker&CoAG,SchenkerA.E.,SchenkerArkasNakliyatveTicaretA.Ş.,FertransAG(collectively“Deutsche Bahn Group of Companies”), Kühne+Nagel InternationalAG&Co,Kühne+NagelA.E.,RailCargoLogistics–AustriaGmbH,ExpressInterfracht Hellas A.E. and Raab-Oedenburg-Ebenfurter Eisenbahn AG, to determine whether they had violated Article 4 of the Competition Law through customer allocation. However, the Board’s decision concluded that the relevant customer protection agreements cannot be assessed under the provisions of the Competition Law. As explained in detail within the Board’s reasoned decision, in the event that the Competition Law violation takes place abroad, the application of the Competition Law rules would only be possible so long as the existence of effect(s) is proven in accordance with the general principles of public international law. In any event, the Competition Authority had granted full immunity to the relevant leniency applicant, subject to compliance with its duty of active cooperation.Oneof theBoard’snotabledecisionswhere itgranted full immunity is theYeastCartelcase (14-42/783-346, October 22, 2014). As summarised above, the Board launched an investigation against four fresh yeast producers to determine whether they had violated Article 4 of the Competition Law through colluding to set prices for fresh bread yeast. It resolved that the investigated companies violated Article 4 and imposed administrative monetary fines on three of the undertakings, with a total amount of TL 14 million(approximately€3.3millionatthetimeofwriting).Thefourthundertaking,MauriMaya,obtained full immunity, though it submitted its application for leniency after the preliminary investigation was initiated and following the dawn raids conducted at the premises of the undertakings. TheBoard considered the value and sufficient content ofMauriMaya’sleniency application. Overall, the Turkish leniency regime requires high standards for cooperation in the leniency procedure. For instance, in the Steel Ring Manufacturers case (12-52/1479-508, October 30, 2012), the Board stated that the undertakings, MPS Metal Plastik Sanayi Çember ve PaketlemeSistemleriİmalatTic.A.Ş.(“MPS”)andBEKAPMetalİnş.San.veTic.A.Ş.,fixedthepricesofsteelstrappingmaterialsandwereactingincollusionregardingcertaintenders, and decided that both undertakings had violated Article 4 of the Competition Law. TheBoardconsideredtheleniencyapplicationofMPSandimposedafineequalto1%ofitsannual gross income in 2011. The reason for the granting of partial immunity was that the documents gathered at the on-site inspection allegedly already proved a cartel. However, it could be said that in this case the Board set a high standard for cooperation within the context of the leniency programme. Another decision where the Board sent a negative message to the business community by showingthat leniencyapplicationsmightnotalwaysbebeneficialwasthe3Mcase(12-46/1409-461, 27.09.2012). In the 3M case, the investigation team recommended to the Board to revoke the applicant’s full immunity on the grounds that the applicant did not provide all the documents that could be discovered during a dawn raid. Unfortunately, the Board’s reasoned decision did not go into the details of the matter, as the case was closed without afindingofviolation. It remains tobe seenwhether theBoardwill apply thisapproach again in the future.



IntheSodiumSulphatecase(12-24/711-199,May3,2012),theBoardimposedfinesbothon the cartelists and the persons having a determining effect on the violation, but eventually offeredreductionsonthefinesafteronecartelistanditsgeneralmanagerfiledforleniency.Initsdecision,theBoardstatedthattheundertakings,OtuzbirKimyaandSodaşSodyum,fixedpricesofsodiumsulphateandsharedcustomersbetweentheyears2005and2011.Additionally,itisalsostatedthatAlkimAlkaliKimya,OtuzbirKimyaandSodaşSodyumcollectivelydeterminedthepricesofrawsalt.TheBoardimposedafineonSodaşSodyumequalto3%ofitsannualgrossincomeinthe2011fiscalyear,andsimultaneouslyimposedafineonSodaşSodyum’sgeneralmanager,whowasactivelyengagedintheinfringement,intheamountof3%oftheadministrativefineappliedtoSodaşSodyum.SodaşSodyumanditsgeneralmanagerfiledforleniencyandeventuallyreceivedreductionsattherateofone-thirdand50%,respectively,ofthefinestobeimposed.In the decision regarding Gaz Cartel (10-72/1503-572, November 11, 2010), the Board offered full immunity to a leniency applicant, in spite of the fact that the new evidence uncovered during the on-site inspection had shed light on the investigation. This constituted alandmarkdecision.BerkGaz,whoreceivedfullimmunity,wasthefirstapplicanttoapplyforleniency.Thatsaid,BerkGazmanagedtoconvincetheBoardthatitprovidedsufficientdocumentsandinformation,whilealsofulfillingtheotherconditionssetoutintheLeniencyRegulation.


The current Turkish Competition Law regime does not provide for a settlement procedure. However, a settlement process has recently been considered and is expected to be considered again, once the reform regarding the Competition Law is included in the government’s agenda.


A notice or complaint may be submitted verbally or through a petition. The Competition Authority has an online system in which complaints may be submitted by the online form on theofficialwebsiteoftheCompetitionAuthority.Inthecaseofanoticeorcomplaint,theBoard rejects the notice or complaint if it deems the complaint not to be serious. Any notice or complaint is deemed as rejected if the Board remains silent on the matter for 60 days. TheBoardwilldecidetoconductapre-investigationifitfindsthenoticeorcomplainttobeserious.Investigatedpartieshavearighttoaccessthefile(Communiqué No. 2010/3 on Regulation of Right to Access to File and Protection of Commercial Secrets (“Communiqué No. 2010/3”)). Therighttoaccessthefilecanbeexerciseduponawrittenrequestatanytimeuntiltheendof the period for submitting the last written statement. Complainants and other third parties may request access to file for follow-on actions(Law No. 4982 on the Right to Access to Information). The approach of the Competition Authority is to consider not only the interests of the person requesting information, but also the personal data of other natural and legal persons, public interest as well as all other individuals’ interests. This balance is regulated by way of exceptional provisions under Law No. 4982 on the Right to Access to Information. Most of the time, the Competition Authority is reluctant tograntaccess to thefileand justifies thedenialofaccesson thegrounds that the access concerns internal documents and business secrets. Based on that, the Competition Authority usually denies access to documents such as investigation reports or information petitions submitted by the investigated parties.



Arecentdecision(16-26/433-192,August4,2016)definesthepartieswhohavetherightto access thefile narrowly, stipulating thatCommuniquéNo. 2010/3 allows the accessrequest only of those who are being investigated. In this regard, the Competition Authority didnotgrantthecomplainantpermissiontoaccessthefile.Third parties can attend the oral hearing and be heard by submitting a petition and presenting information and documents that show their interest in the subject matter of the oral hearing.

Penalties and sanctions

Incaseofaprovencartelactivity,thecompaniesconcernedmaybesubjecttofinesofupto10%oftheirTurkishturnovergeneratedinthefinancialyearprecedingthedateofthefiningdecision(ifthisisnotcalculable,theturnovergeneratedinthefinancialyearnearesttothedateofthefiningdecisionwillbetakenintoaccount).Employees and managers of the undertakings or association of undertakings that had a determiningeffectonthecreationoftheviolationcanalsobefinedupto5%ofthefineimposedontheundertakingorassociationofundertaking.ThecurrentminimumfineissetasTL18,377(approximately€4,365atthetimeofwriting).The Competition Law makes reference to Article 17 of Law on Misdemeanours to require the Board to take into consideration factors such as: (i) the level of fault and the amount ofpossibledamageintherelevantmarket;(ii)themarketpoweroftheundertakingwithintherelevantmarket;(iii)thedurationandrecurrenceoftheinfringement;(iv)cooperationor driving role of the undertaking in the infringement; (v) the financial power of theundertaking;and(vi)compliancewiththecommitmentsindeterminingthemagnitudeofthefine.Inlinewiththis,theTurkishCompetitionAuthorityenactedtheRegulationonMonetary Fines for Restrictive Agreements, Concerted Practices, Decisions and Abuses of Dominance (“the Regulation on Fines”). The Regulation on Fines provides detailed guidelines regarding the calculation of monetary fines applicable in cases of antitrustviolations. The Regulation on Fines applies both to cartel activity and abuse of dominance, but illegal concentrations are not covered by the Regulation on Fines. AccordingtotheRegulationonFines,finesarecalculatedbydeterminingthebasiclevelfirst,whichinthecaseofcartelsisbetween2%and4%ofthecompany’sturnoverinthefinancialyearprecedingthedateofthefiningdecision.Aggravatingandmitigatingfactorsare then factored in. The Regulation on Fines also applies to managers or employees that had a determining effect on the violation (such as participating in cartel meetings and making decisions that would involve the company in cartel activity), and provides for certain reductions in their favour. In addition to the monetary sanction, the Board is authorised to take all necessary measures to terminate the restrictive agreement, to remove all de facto and legal consequences of every action that has been taken unlawfully, and to take all other necessary measures in order to restore the level of competition and status as before the infringement. Furthermore, such a restrictive agreement shall be deemed as legally invalid and unenforceable with all its legal consequences. Similarly, the Competition Law authorises theBoardtotakeinterimmeasuresuntilthefinalresolutiononthematter,incasethereisa possibility for serious and irreparable damages. The sanctions that could be imposed under the Competition Law are administrative in nature. Therefore,theCompetitionLawleadstoadministrativefines(andcivilliability)



but no criminal sanctions. That said, there have been cases where the matter had to be referred to a public prosecutor after the Competition Law investigation has been completed. On that note, bid rigging activity may be criminally prosecutable under sections 235 et seq of the Turkish Criminal Code. Illegal price manipulation (i.e., manipulation through misinformation or other fraudulent means) may also be condemned by up to two years of imprisonmentandacivilmonetaryfineundersection237oftheTurkishCriminalCode.The abovementioned sanctions may also apply to individuals if they engage in business activities as an undertaking. Similarly, sanctions for cartel activity may also apply to individuals acting as the employees or board members or executive committee members of the infringing entities in case such individuals had a determining effect on the creation oftheviolation.Therearenosanctionsspecifictoindividualsotherthanthosementionedabove.


The Board decisions can be submitted for judicial review before the administrative courts inAnkarabyfilinganappealcasewithin60daysuponreceiptofthejustified(reasoned)decision of the Board by the parties. Filing an administrative action does not automatically stay the execution of the decision of the Board. However, upon request of the plaintiff, the court,byprovidingitsjustifications,maydecideforstayoftheexecutioniftheexecutionof the decision is likely to cause serious and irreparable damages; and if the decisionis highly likely to be against the law (i.e., showing of a prima facie case). The judicial review period before the administrative court usually takes about 12 to 24 months. If the challenged decision is annulled in full or in part, the administrative court returns it to the Board for review and reconsideration. After the recent legislative changes, administrative litigation cases (private litigation cases as well) are subject to judicial review before the newly established regional courts (“regional courts”), creating a three-level appellate court system consisting of administrative courts, regional courts and the Council of State (the Court of Appeals for private cases). The regionalcourtswill(i)gothroughthecasefilebothonproceduralandsubstantivegrounds,and(ii)investigatethecasefileandmaketheirdecisionconsideringthemeritsofthecase.Theregionalcourts’decisionswillbeconsideredasfinalinnature.Thedecisionoftheregional court will be subject to the Council of State’s review in exceptional circumstances, which are set forth in Article 46 of the Administrative Procedure Law. In such cases, the decisionoftheregionalcourtwillnotbeconsideredasafinaldecisionandtheCouncilof State may decide to uphold or reverse the regional court’s decision. If the decision is reversed by the Council of State, it will be returned to the deciding regional court, which will in turn issue a new decision which takes into account the Council of State’s decision.

Criminal sanctions

The sanctions that could be imposed under the Competition Law are administrative in nature. Therefore, the Competition Law does not lead to criminal sanctions. However, cases might be referred to a public prosecutor after the Competition Law investigation is completed. On that note, bid rigging activity may be criminally prosecutable under sections 235 et seq. of the Turkish Criminal Code. Illegal price manipulation (i.e., manipulation through misinformation or other fraudulent means) may also be condemned by up to two years of imprisonment and a civil monetaryfineundersection237oftheTurkishCriminalCode.



Cross-border issues

Turkey is one of the ‘effect theory’ jurisdictions where the effect that a cartel activity has produced on Turkish markets is what matters, regardless of the nationality of the cartel members, where the cartel activity took place, or whether the members have a subsidiary in Turkey. The Board refrained from declining jurisdiction over non-Turkish cartels or cartel members (e.g., the suppliers of rail freight forwarding services for block trains and cargo trainservices,15-44/740-267,December16,2015;GüneşEkspres/Condor,11-54/1431-507,October27,2011;ImportedCoal,10-57/1141-430,September2,2010;RefrigeratorCompressor,09-31/668-156, July1,2009;Şişecam/Yioula,07-17/155-50,February28,2007;GasInsulatedSwitchgear,04-43/538-133,June24,2004)inthepast.Itshouldbenoted,however,thattheBoardhasyettoenforcemonetaryfinesorothersanctionsagainstfirmslocatedoutsideofTurkeywithoutanypresenceinTurkey,asthisismostlyduetotheenforcementhandicaps(suchasdifficultiesofformalservicetoforeignentities).


The most distinctive feature of Turkish Competition Law regime is that it allows for lawsuits for treble damages. Hence, administrative enforcement is supplemented with private lawsuits. Articles 57 et seq. of the Competition Law entitles any person who may be injured in his business or property by reason of anything forbidden in the antitrust laws to sue the violators for three times their damages plus litigation costs and attorney fees. The case must be brought before the competent general civil court. In practice, courts usually do not engage in an analysis as to whether there is an actual condemnable agreement or concerted practice, and wait for the Board to render its opinion on the matter, thereby treating the issue as a prejudicial question. Since courts usually wait for the Board to render its decision, the court decision can be obtained in a shorter period in follow-on actions. Due to a treble damages clause allowing litigants to obtain three times their loss as compensation, private antitrust litigations increasingly make their presence felt in the cartel enforcement arena. In 12 banks decision (March 8, 2013, 13-13/198-100), the Board had launched an investigation to determine as to whether 12 banks violated Article 4 of Law No.4054 by a reconciliation to harmonise their trade terms for cash deposit interests, credits, andcredit card fees. TheBoard imposedadministrativefines rangingbetween0.3% and 1.5% to investigated undertakings involved. Moreover, the Board ruled that courts shall have absolute discretion to award treble damages in Competition Law-based damages claims, establishing a strong deterrent from cartel activity. Recently, in light of the abovementioned Board decision, Istanbul 12th Consumer Court on May 9, 2017 awarded single damages up to an intimidating total of TL 11,479.73 to a single plaintiff (approximately€2,732.64atthetimeofwriting).Turkishprocedurallawdeniesanyclassactionorprocedure.Classcertificationrequestswould not be granted by Turkish courts. WhileArticle 25 of Law No. 4077 on theProtection of Consumers allows for class actions by consumer organisations, these actions are only limited to violations of Law No. 4077 on the Protection of Consumers, and do not extend to cover antitrust infringements. Similarly, Article 58 of the Turkish Commercial Code enables trade associations to take class actions against unfair competition behaviour, but this has no reasonable relevance to private lawsuits provided under Article 57 et seq. of the Competition Law.



Reform proposals

The major development expected in the Turkish Competition Law regime is the adoption of the draft law amending Law 4054 on the Protection of Competition. To that end, the draft lawwasofficiallysubmittedtothepresidencyoftheTurkishParliamentonJanuary23,2014 and was reviewed by a parliamentary sub-committee. However, the parliamentary sub-committee could not conclude its work on the necessary changes within the relevant parliamentary legislative year. Therefore, at present the draft law is statute-barred. In order to re-initiate the parliamentary process, the draft law must again be proposed and submitted to the presidency of the Turkish Parliament. Although it is impossible to say when this will happen, it is likely that a draft reform law will remain on the Competition Law agenda.The draft law aims to achieve further compliance with the EU competition regime, on which it is closely modelled. It adds several new dimensions and changes which should resultinaprocedurethatismoreefficientintermsoftimeandresourceallocation.Thedraftlawproposesseveralsignificantchangesintermsofmergercontrol:• Thesubstantivetestforconcentrationswillbechanged.TheEUsignificantimpediment

of effective competition test will replace the existing dominance test. • In accordance with EU Competition Law, the draft law will adopt the term ‘concentration’

as an umbrella term for mergers and acquisitions. • The draft law will eliminate the exemption for acquisition by inheritance. • The draft law will abandon the Phase II procedure (which was similar to the

investigation procedure) and provide a four-month extension for cases requiring in-depth assessments. During in-depth assessments, parties can deliver written opinions to the Competition Board, which will be akin to written defences.

• The draft law will extend the appraisal period for concentrations from the existing period of 30 calendar days to 30 business days, which equates to approximately 40 days in total. As a result, the period in which to obtain a decision on a preliminary review is expected to be extended.

Further,thedraftlawproposestoabandonthefixedturnoverratesforcertainproceduralviolations,includingfailingtonotifyaconcentrationandhinderingonsiteinspections;andtocapthemonetaryfinesimposedfortheseviolations.Thisnewarrangementgivestheboarddiscretiontosetfinesbyconductingcase-by-caseassessments.Another significant anticipated development is theDraft Regulation onAdministrativeMonetary Fines for the Infringement of Law on the Protection of Competition, which will replace the Regulation on Monetary Fines for Restrictive Agreements, Concerted Practices, Decisions and Abuse of Dominance. The draft regulation is heavily inspired by theEuropeanCommission’sguidelinesonthemethodofsettingfinesimposedpursuantto Article 23(2)(a) of Regulation 1/2003. Thus, the introduction of the draft regulation clearly demonstrates the authority’s intention to bring the secondary legislation into line with EU Competition Law during the harmonisation process. The draft regulation was sent to the Turkish Parliament on January 17, 2014, but as yet no enactment date has been announced.


ELIG, Attorneys-at-LawÇitlenbikSokakNo.12,YıldızMahallesi,Beşiktaş,34349,İstanbul,Turkey

Tel: +90 212 327 17 24 / Fax: +90 212 327 17 25 / URL: www.elig.com

Gönenç GürkaynakTel: +90 212 327 17 24 / Email: [email protected]. Gönenç Gürkaynak is a founding partner and the managing partner of ELIG,Attorneys-at-Law,aleadinglawfirmof87lawyersbasedinIstanbul,Turkey. Mr. Gürkaynak graduated from Ankara University, Faculty of Law in 1997, and was called to the Istanbul Bar in 1998. Mr. Gürkaynak receivedhisLL.M.degree fromHarvardLawSchool, and is qualified topractise in Istanbul,NewYork,BrusselsandEnglandandWales. Beforefounding ELIG, Attorneys-at-Law in 2005, Mr. Gürkaynak worked as an attorneyattheIstanbul,NewYorkandBrusselsofficesofagloballawfirmfor more than eight years. Mr. Gürkaynak heads the competition law and regulatory department of ELIG, Attorneys-at-Law, which currently consists of 45 lawyers. He has unparalleled experience in Turkish competition law counselling issues with more than 20 years of competition law experience, starting with the establishment of the Turkish Competition Authority. Mr. Gürkaynak frequently speaks at conferences and symposia on competition law matters. He has published more than 150 articles in English and Turkish by various international and local publishers. Mr. Gürkaynak also holds teaching positions at undergraduate and graduate levels at two universities, and gives lectures in other universities in Turkey.

Öznur İnanılırTel: +90 212 327 17 24 / Email: [email protected].ÖznurİnanılırjoinedELIG,Attorneys-at-Lawin2008.ShegraduatedfromBaşkentUniversity,FacultyofLawin2005andfollowingherpracticeatareputablelawfirminAnkara,sheobtainedherLL.M.degreeinEuropeanLaw from London Metropolitan University in 2008. She is a member of theIstanbulBar.Ms.İnanılırbecameapartnerwithinthe“RegulatoryandCompliance” department in 2016 and has extensive experience in all areas of competitionlaw,inparticular:compliancetocompetitionlawrules;defencesininvestigationsallegingrestrictiveagreements;abuseofdominancecases;andcomplex merger control matters. She has represented various multinational and national companies before the Turkish Competition Authority. Ms. İnanılırhasauthoredandco-authoredarticlespublishedinternationallyandlocally in English and Turkish pertaining to her practice areas.



UkraineSergey Denisenko, Yevgen Blok & Anna Litvinova

AEQUO Law Firm


Themain legislative acts in the cartel field are the following: theLawofUkraine “OnProtectionofEconomicCompetition”(the“CompetitionLaw”);theLawofUkraine“OnProtectionAgainstUnfairCompetition”(the“UnfairCompetitionLaw”);andtheLawofUkraine“OnAntimonopolyCommitteeofUkraine”,Recommendationsonfinescalculationfor violations of competition law adopted in September 2015 (the “Recommendations on Calculation of Fines”).Investigation, prosecution, decision-making and the imposition of sanctions are all conducted solely by the Antimonopoly Committee of Ukraine (“AMC”) and its regional departments. There is no separate term in Ukrainian legislation for “cartel”. Ukrainian competition law rather applies the notion “anticompetitive concerted actions”.Concertedactionsdefinedasagreementsandanyotherconcertedcompetitivebehaviouror omission by undertakings engaged in commercial activities as well as any governmental agencies. The notion of concerted actions covers both horizontal and vertical concerted actions. Article 6 of the Competition Law contains a prohibition of anticompetitive concerted actions, which “have led or may lead to prevention, restriction or distortion of competition”. The prohibition of concerted practices does not distinguish between horizontal and vertical conduct. The Competition Law provides for a non-exhaustive list of anticompetitive practices that constitute potential violations. The list covers price-fixing,marketdivision,limitingofoutputsandinputs,tying,bidrigging,boycottsandotherconduct-restraining market entry or exit, and actions designed to impede the competitive ability of other companies “without an objective basis”.Articles 7, 8 and 9 of the Competition Law create conditional exemptions from the prohibition in Article 6 to protect concerted actions of small and middle-size enterprises, contracts concerning the supply and use of commodities that do not substantially restrict competition andthatenhancethecompetitiveabilityoftheparticipatingfirms,andagreementsforthetransfer of intellectual property rights. In some circumstances, the Competition Law allows the AMC to permit conduct that would otherwise violate Article 6, and issue individual exemptions that excuse the participants in the specified conduct from liability. The criteria for excuse are: improvement in theproduction or distribution of goods, or promotion of technology or economic progress;developmentofsmallandmiddle-sizeenterprises;optimisationofexportorimporttrade;developmentandapplicationofuniformstandards;and“rationalisation”ofproduction.Atthesametime,suchactionsshouldnoteliminatecompetitiononthemarketoritssignificantpart.


AEQUO Law Firm Ukraine

Certain exemptions are stipulated by the effective legislation. In particular, with respect to horizontal concerted actions, the parties may be generally exempted if their aggregate market shareisbelow5%oftherespectivemarket(withexceptiontosomespecificcategoriesofconcertedactions).Withrespecttotheverticalconcertedactions,on5th of December 2017 the Vertical Block Exemption Regulation (the “Regulation”) came into effect. Pursuant to the Regulation, the following vertical agreements are exempted:• vertical agreements are exempted if the market shares of the supplier and the buyer on

the market where they, respectively, sell and buy the contract goods or services, do not exceed30%;and

• vertical agreements between an association and its members or suppliers if (i) all members of the association are retailers, and (ii) no member of such association had annualturnoverinUkraineinexcessofEUR25millionintheprecedingfinancialyear.

Except for certain cases, the Regulation also exempts agreements related to intellectual property rights as well as agency agreements. The Regulation does not apply to competing undertakings. Furthermore,theRegulationsetsforththe“hard-core”restrictionswhichmaynotbenefitfrom the block exemption regulation. Such “hard-core” restrictions include:• restrictionsonresaleprice(exceptformaximumorrecommendedprices);• restrictionsbyterritoryorbycustomers(withsomeexceptions);• restrictions of sales to end users by members of a selective distribution system operating

atretaillevel;• restrictionsofcross-supplieswithinaselectivedistributionsystem;• restrictions of the supplier’s ability to sell the components as spare parts to end-users or

torepairers;• non-competeobligations,thedurationofwhichexceedsfiveyearsorisindefinite;• obligations causing the buyer, after termination of the agreement, not to manufacture,

purchase,sellorresellgoodsorservices;and• obligations causing the members of a selective distribution system not to sell the brands

of particular competing brands.Inaccordancewithpart2ofarticle52oftheCompetitionLaw,afineforanticompetitiveconcerted actions may constitute up to 10% of income (revenue) of an undertaking from salesofproducts(goodsandservices)forthelastfinancialyear.Still, it is worth mentioning that in practice the AMC tends to apply the Recommendations on the Calculation of Fines. Respective document provides for transparent principles of finescalculation,i.e.criteriafortheAMCtodeterminethebasicfineamountthatmaybeadjusted depending on aggravating or mitigating circumstances applicable to a particular case.TheRecommendationssetupbasicfineamountsforeachtypeofantitrustlawviolations.In termsoffines for anticompetitive concerted actions, theRecommendationsprimarilydistinguish between: (i) the most severe anti-competitive actions between competitors (price-fixing,allocationofmarkets,consumers,suppliers,territorialrestraints,bidrigging,restrictions to market entry); and (ii) severe anti-competitive actions (other than thosequalifiedasthe‘mostsevere’violations).Although the Recommendations on Calculation of Fines is not a legally binding document, over the last two years the AMC has shown its adherence to use the said document for calculating thefines for competition lawviolations (please refer to ‘Civil penalties and sanctions’ sections below for detailed information).Another noteworthy detail in enforcement regime relating to cartels is publication of



information on undertakings who engaged in bid rigging. Undertakings included on this list will not be eligible to participate in public procurement procedures for three years from the date of the AMC decision on bid rigging.

Overview of investigative powers in Ukraine

The AMC is the single state body vested with the powers and authority to investigate competition law infringements. The AMC has the authority to request information in writing, conduct inspections (dawn raids) of businesses and seize evidence located on the premises. TheAMChasalsopowerstoexamineofficepremisesandtransportvehiclesbelongingtothe undertakings. In order to exercise these powers, the AMC can ask for the assistance of the police, customs and other law enforcement authorities in the investigation. In the course of inspection, the AMC has powers to request statements from the undertaking’s employees andofficials.According to the Competition Law, non-cooperation and obstruction of inspection (dawn raid)mayentailastatutorymaximumfineintheamountofupto1%ofincome(revenue)ofanundertakingfromsalesofproducts(goodsandservices)forthelastfinancialyear.Nevertheless, pursuant to the Recommendations on Calculation of Fines, the sanctions for non-cooperationandobstructionofinspectioncouldbesignificantlylower.


In 2017, the majority of cartel cases in Ukraine related to collusion in pharmaceutical markets. For example, in November 2017, theAMC imposed the aggregate fines onmanufacturer/importer of medicines and several of its Ukrainian distributors in the amount of approximately EUR 4.1 million for alleged anticompetitive concerted practices.Furthermore, there are ongoing court proceedings in relation to alleged anticompetitive concerted actions in the fuel retail sector. In particular, in October 2016, the AMC imposed oneofthelargestfinesonsevenoiltraders–approximatelyEUR6millionfortheallegedanticompetitive concerted practices. Some of the oil traders brought the case to the court to invalidate the AMC decision. However, the results of the respective court proceeding are so far not in favour of the oil traders. Anotherground-breakingcaseforUkrainianlegalenvironmentinvolvesallegedprice-fixingbetween food retailers including by means of information exchange through Ukrainian office of internationalmarket researchfirm. TheAMCdecision adopted in the allegedcartel case has been challenged in Ukrainian courts for more than two years.


The AMC may commence an investigation (i) on its own initiative, (ii) in response to complaints received from business entities and individuals, and (iii) at the request of governmental or local authorities. The AMC shall consider the complaint within 30 days. If needed, this term may be extended up to an additional 60 days. Overall, in no later than 90 days from the date of complaint, the AMC shall either dismiss the complaint or initiate the formal investigation. Once investigation is commenced, a notice is sent both to the defendant and the complainant.Unfortunately, there are no clear legislative guidelines in respect of the clear timeframe within which an investigation must be accomplished, and the AMC can repeatedly request documents and information, and reconsider the evidence collected. In practice, investigations of alleged concerted actions usually last more than a year.



As a result of the investigation, the AMC issues a decision that either terminates the investigation or declares the violation and directs various actions such as termination of unlawful actions, remediation of the consequences of violation, cancellation of concerted actionspermitortheimpositionoffines.TheAMChasbeenspecificallyactiveinenergy,fuel,pharmaceuticalandfoodretailsectors.As the practice shows, the AMC pays special attention to the cases involving exchange of information between competitors. The exchange of information between competitors mayserveasasolidgroundfortheAMCtoimposeafineonundertakingsfor“parallelbehaviour”(thatisqualifiedasanticompetitiveconcertedactions),unlesstheundertakingsprovide the AMC with plausible explanation for such “parallel behaviour”.


Investigation, prosecution, decision-making and the imposition of sanctions are all integrated into a single body – the AMC and its subordinated bodies. The AMC has the authority to request information in writing, conduct inspections (dawn raids) of businesses and seize evidencelocatedonthepremises.TheAMCalsohaspowerstoexamineofficepremisesand transport vehicles belonging to the undertakings. In order to exercise these powers, the AMC can ask for the assistance of the police, customs and other law enforcement authorities in the investigation. In the course of inspection, the AMC has powers to request statements fromanundertaking’semployeesandofficials.Decisions adopted by the AMC’s subordinated bodies and territorial branches may be re-examined by the AMC headquarter through its internal appeal procedure. Such re-examination may be commenced by the AMC’s own initiative or application of a party to the proceeding. In the case where a decision is issued by the AMC headquarters, it may not be further re-examined through internal AMC appeal procedure. In such case, parties may challenge the AMC’s decision in the commercial court only. Decisions by the AMC or its subordinated bodies and territorial branches may also be challenged directly to commercial courts. Both re-examination and challenging the AMC decisions in commercial courts may be accomplished on procedural and substantive matters within two months of the AMC’s decision date.In certain exceptional cases, decisions adopted by the AMC or its subordinated bodies and territorial branches based on inaccurate, incorrect information or in absence of informationregardingsufficientcircumstancesofthecase,maybereviewedbytheAMCitself. Respective review may be initiated by the AMC’s own initiative or application of an interested party.

Leniency

The leniency programme in Ukraine covers any anticompetitive concerted practices. The programmegrantsimmunityfromthefinesthattheAMCmayimposeonanundertaking.In order to obtain immunity in a cartel case, the party has to comply with all of the following conditions:• TobethefirsttoprovidetheAMCwiththeinformationonviolation.• To address the AMC voluntary and before the AMC issues preliminary conclusions in

the relevant investigation case.• To submit information which has essential importance for adoption of the decision in

the case.



• To take effective measures to cease its participation in cartel.No immunity can be granted if the applicant: (i) was initiator of the anticompetitive arrangements; (ii) was in charge of the anticompetitive arrangement; or (iii) failed toprovide all essential information related to the alleged infringement.The Leniency Programme came into force in October 2012, but the relevant practice is very scarce and vague. To our best knowledge, there are still no signals of its successful implementation in Ukraine. This may be principally explained by the following reasons: (i) fullimmunityisgrantedonlytotheundertakingtobethefirsttonotifytheAMCwhilethereare no any encouragement mechanisms for other undertakings that also decide to cooperate withtheAMC;and(ii)practicalapplicationoftheprioritysystemforleniencynotificationsandthemeansofensuringconfidentialityinsuchnotificationsraiseconcerns.


Ukrainian laws do not provide for any administrative settlement procedures.


The case on violation of competition legislation may be initiated by a third-party complaint. In such case, the AMC shall consider the complaint within 30 days. If needed, this term may be extended up to an additional 60 days. Overall, the AMC shall either dismiss the complaint or initiate the formal investigation no later than 90 days from the date of complaint.Procedural rights of the parties in the investigation process are governed by a Temporal Rules on Investigations of the Competition Law Violations adopted in 1994. The said document is seen as one of the most outdated documents of the AMC which does not meet the standards of the developed jurisdictions (please refer to ‘Reform proposals’ below for detailed information).Practically,thepartiesmayaccesscertainnon-confidentialdocumentsoftheinvestigationbased on the provisions of the Law of Ukraine “On Access to Public Information”.According to the Competition Law, third parties who suffer damages as a result of anticompetitiveconcertedactionsmayseekcompensationbyfilingarespectiveclaimtothe commercial court.


ThestatutorymaximumoffinethattheAMCmayapplyamountsupto10%oftheannualrevenueofeachpartyofanticompetitiveconcertedactions.Theamountoffineiscalculatedbasedontheresultsofthefinancialyearprecedingtheyearoffineimposition.However, as it was mentioned above, in September 2015, the AMC adopted Recommendationsonthecalculationoffinesandfurtherofficiallycommittedtoapplythedocumentinitsactivity.Thedocumentsetsuptheinitialfineamountsforanticompetitivepractices depending on the graveness of the violations:• 15% of revenue of an undertaking from sales of products (goods and services) related to

the violation – for the most severe (“hard–core”) violations, i.e. price setting, allocation of markets, consumers, suppliers, territorial restraints, bid rigging, restrictions to market entry;or

• 10% of revenue of an undertaking from sales of products (goods and services) related to the violation – for the other concerted actions, than those qualified as the ‘most



severe’ violations, i.e. for applying different conditions to equivalent agreements, agreements providing supplementary obligations to other undertakings, restriction of the competitive ability of other undertakings, etc.

The initial fine amount may be further adjusted following application of modifyingcoefficients(varyingfrom0.05to2dependingonthesensitivityofthemarketsinvolved,effectofviolationoncompetitionandprofitabilityof thecommercialactivityassociatedwithsuchviolation).Thereafter,thebasicfinemaybefurtherdecreasedorincreased(byup to 50%) depending on aggravating and mitigating circumstances, as defined in theRecommendations on Calculation of Fines. It should be noted that the list of mitigating circumstances provided in the document is not exhaustive. Although the Recommendations on Calculation of Fines contains a rather transparent approach tofine calculation. TheAMCdoesnotdisclosehow thefinal amountoffinehas been calculated in each particular case. Practically, the market players still may not technicallychallengetheamountoffineappliedbytheAMC,thepartiesmayonlychallengedecision of the AMC entirely. However, this has been a matter of vast discussion in recent years, which has even led to some legislative initiatives.


Decisions adopted by the AMC’s subordinated bodies and territorial branches may be re-examined by the AMC headquarter through its internal appeal procedure. Such re-examination may be commenced by the AMC’s own initiative or application of a party to the proceeding. In the case where a decision is issued by the AMC headquarters, it cannot be re-examined through internal AMC appeal procedure and may be further challenged in a commercial court only. Decisions by the AMC or its subordinated bodies and territorial branches may also be challenged directly in commercial courts. Both re-examination and challenging the AMC decisions may be accomplished on procedural and substantive matters within two months of the AMC’s decision date.As a matter of practice, the courts do not examine material competition issues which are referredtoexclusivecompetenceoftheAMC(e.g.marketdefinitionissues)andtendtodeferto the assessment of the AMC in such issues. There is a presumption that the AMC shall by itselfprovethefactswhichconfirmtheconcertedactionsofthepartiesandsubstantiatethedirectinfluenceofsuchactions(omissions)onthecompetitionenvironment.In the case that the AMC’s decision is successfully challenged by the parties, the court usually sets aside the decision of the AMC. According to currently available statistics, approximately 15% of the AMC’s decisions have been appealed in court in 2016 (for reference,10%in2015).TheabsolutemajorityofsignificantfinesappliedbytheAMCarefurther appealed by the parties in courts.In certain exceptional cases, decisions adopted by the AMC, its subordinated bodies and territorial branches based on inaccurate, incorrect information or in the absence of information onsufficientcircumstancesof thecase,maybereviewedbytheAMCitself. Respectivereview may be initiated by the AMC’s own initiative or on application of an interested party.

Criminal sanctions

No criminal sanctions are provided for cartel infringements by applicable legislation of Ukraine.



Cross-border issues

Ukrainian competition legislation is applicable to relations which affect or may affect economic competition in Ukraine. Therefore, in a case where certain practices of foreign undertakings affect Ukrainian competition, the AMC makes no distinction between national and foreign market players. However, the AMC is not able to collect evidence or conduct effective cartel investigation outside the territory of Ukraine.Currently the AMC is a party of a number of inter-agency agreements with competition authorities of other jurisdictions as well as some agreement at intergovernmental level. According to the relevant documents, AMC and other competition authorities may cooperate to promote effective competition, including by way of information exchange. Thus, the AMCmayrequestexchangeofinformation,includingconfidentialdata,withcompetitionauthorities of other countries. However, recently the AMC has not reported any examples of such interaction with foreign jurisdictions concerning investigation or termination of anticompetitive concerted actions.The AMC tends to take into consideration the practice of the European Commission as a supportive argument in cases. However, the decisions of the European Commission are not binding to the AMC.


According to Competition Law, third parties who suffer damages as a result of anticompetitiveconcertedactionsmayseekcompensationbyfilingarespectiveclaimtothe commercial court.Damages caused as a result of anticompetitive concerted actions shall be reimbursed in double the amount of the actually sustained damages. Considering the rather burdensome procedure of substantiating damages in court and absence of practical guidelines on this matter, there have been a rather limited number of successful cases on damages compensation. However, court practice of recent years demonstrates a gradual increase of such types of cases. Moreover, in view of the introduction of the judicial reform in Ukraine and adoption of the new procedural codes, the number of successful complaints and private antitrust actions is expected to further increase.

Reform proposals

The main vector of reform in recent years has been focused on the implementation of Association Agreement with the EU in respect of competition rules. Amongtherecentdevelopmentsinthefieldofanticompetitiveconcertedactionsregulationsare (i) the adoption of the Vertical Block Exemption Regulation (the “Regulation”), which came into effect on 5th December 2017 (please refer to ‘Overview of the law and enforcement regime relating to cartels’ section above for detailed information), and (ii) the adoption by the AMC of Recommendations on Calculation of Fines, which provides fortransparentapproachtocalculationoffines(please refer to ‘Overview of the law and enforcement regime relating to cartels’ and the ‘Civil penalties and sanctions’ sections above for detailed information). Further, the special regulation regarding agreements for technology transfer is expected to be adopted in 2018.Besides, the Draft Law No. 6746 (the “Draft”) passeditsfirstreadingin2017.TheDraft



Law provides for amendments to the main legislative acts on protection of economic competition in part of procedural rules. In particular, the Draft, inter alia, provides for:• establishmentoffixedtermswithinwhichaninvestigationmustbeaccomplishedby

theAMC;• ensuring the right of the person participating in the case, including third parties to

access the materials of the case and the evidences on which the AMC decisions are based;

• improvementstotheLeniencyProgramme;• establishmentoftherulesforintroductionofsettlementproceduresincartelcases;and• ensuring the conditions for the effective implementation of the right to appeal against

the AMC’s decisions in court.


AEQUO Law FirmVector Business Centre, 52 Bohdana Khmelnytskogo St, Kyiv 01030, Ukraine

Tel: +38 044 233 65 99 / URL: www.aequo.com.ua

Sergey DenisenkoTel: +38 050 694 73 70 / Email: [email protected] Sergey advises clients on various competition issues, including those related to unfair commercial practices, competition compliance, merger control and abuse of dominance. He has extensive experience of representing the firm’sclientsincompetition(includingcartel)investigationsinitiatedbytheAntimonopoly Committee of Ukraine including some of the most recent and significantcasesinitiatedbytheregulator.Sergey Denisenko is recognised by Chambers Europe for his active presence in the competition arena and his strong market feedback: “practical and very easy to work with”. Best Lawyers lists Sergey among the leading Ukrainian experts for Competition / Antitrust. Ukrainian Law Firms: A Handbook for Foreign Clients mentions Sergey Denisenko as one of the notable practitioners in Antitrust and Competition.

Yevgen BlokTel: +38 044 233 65 99 / Email: [email protected] YevgenhasovernineyearsofexperienceintheAntitrustandCompetitionarea.Yevgenadvisesonvariouscompetitionissues;inparticular,onmergercontrol, concerted actions and unfair competition practices. He also has experience in conducting antitrust due diligence, competition compliance trainings and representing clients before the Antimonopoly committee of Ukraine in unfair competition cases. According to Ukrainian Law Firms: A Handbook for Foreign Clients 2017,Yevgenis“bringingsignificantinput”inantitrustandcompetitionpractice.BeforejoiningAEQUO,YevgenworkedasacompetitionlawyerinleadingUkrainianlawfirms.


Anna LitvinovaTel: +38 044 233 65 99 / Email: [email protected] Anna advises on competition compliance and unfair commercial practices. ShehassignificantexperienceinrepresentingclientsbeforetheAntimonopolyCommittee of Ukraine in merger control, concerted actions procedures, as well as various investigations initiated by the regulator on pharmaceutical and retail markets. Anna regularly provides assistance and advice to clients on a wide range of competition compliance and regulatory matters.


United KingdomGiles Warrington & Tim Riisager

Pinsent Masons LLP


Cartel activity in the UK may be punished using both civil and criminal law. The civil enforcement regime is contained in Chapter I of the Competition Act 1998 (CA98) and closely reflects its EU equivalent,Article 101 of theTreaty on the Functioning of theEuropean Union (TFEU). Chapter I CA98 prohibits agreements or concerted practices between two or more undertakings which have the object or effect of preventing, restricting or distorting competition and which may affect trade within the UK (the Chapter I Prohibition).The Chapter I Prohibition is enforced in the UK by the Competition and Markets Authority (CMA). The regulators for the gas and electricity, water, broadcasting, electronic communications, postal, healthcare, rail, civil aviation, financial services and paymentsystems sectors have concurrent civil enforcement powers with the CMA in their respective sectors. The CMA and the sectoral regulators also have powers to enforce EU competition law where the activity/conduct may affect trade between Member States.The following sanctions are available to the CMA (and the sectoral regulators) if they establish a civil law infringement of the Chapter I Prohibition (and/or Article 101 TFEU). They may:• imposeafineofupto10%ofworldwideturnover;• declaretheoffendingagreementvoid;• imposebehaviouralundertakings;and• apply to the Court for an order to disqualify directors from the infringing companies for

up to 15 years.The Courts also have a role in enforcing the Chapter I Prohibition. Third parties (such as customers of cartel participants) may bring private actions for damages arising from a breachoftheChapterIProhibition(orEUcompetitionlaw).TheCourtsmayalsofindanagreement which breaches competition law to be void (in whole or in part) and/or order a cessation of any breach.The civil regime also contains a prohibition on an abuse of a dominant position, modelled on the EU equivalent (Article 102 TFEU), which is enforced by the same bodies, and generally subject to the same procedures and penalties as the Chapter I Prohibition. The criminal regime sits alongside the civil regime. Any individual convicted of implementing,orcausingtobeimplemented,arrangementsforprice-fixing,market-sharing,bidriggingorlimitingsupplyorproduction,mayreceiveamaximumfive-yearcustodialsentenceand/oranunlimitedfine.Thecriminalcarteloffenceismorerestrictivethanitscivil counterpart. The offence is designedtocatch‘hard-core’cartelactivity;foracarteltobe criminal, it must be a reciprocal horizontal agreement which is knowingly entered into.


Pinsent Masons LLP United Kingdom

The CMA has jurisdiction to investigate and prosecute alleged criminal cartels in England, Wales andNorthern Ireland. TheSeriousFraudOfficemay seekprosecutionswith thepermissionoftheCMA.TheCrownOfficeandProcuratorFiscalServicehaveresponsibilityfor enforcement in Scotland. Sectoral regulators do not have powers to enforce the offence.

Overview of investigative powers in the UK

Before opening a civil investigation, the CMA must have reasonable grounds for suspecting an infringement (the following civil powers apply to the sector regulators where relevant).Once the CMA has started an investigation, it may acquire information through:• dawn raids on businesses where, depending on the authorisation it has, it may: access

dataheldelectronically(suchasonlaptopsandmobilephones);review,copyand/orremovesoft-copyandhard-copydocuments;askforfactualexplanationsofdocumentsrelevanttoaninvestigation;andinterviewindividuals.Inpractice,itsdawnraidsofteninvolvetakingcopiesofelectronicserversandreviewingtheseatalaterstage;and/or

• formalmandatoryrequestsinwritingforinformationandforcategoriesof,orspecificdocuments.

The CMA may formally require individuals connected with a company (including ex-employees, suppliers and customers) to answer questions.In criminal investigations, the CMA may also obtain evidence through surveillance and covert human intelligence sources. Obstruction of the CMA whilst it exercises any of these powers, or failure to comply with any requirements (such as response deadlines) may lead to civil or criminal proceedings against undertakings and individuals.


InJuly2017,AndreaCoscelliwasappointedastheCMA’snewChiefExecutiveOfficer,afterfulfillingtheroleinanactingcapacityforayear.Hehasmadeclearhisdeterminationto remove the suggestion that the CMA is ‘too timid’, citing the US Department of Justice and the European Commission as the ‘top’ enforcers he wished the CMA to emulate. In2017,theCMAreachedfivedecisionsinwhichitimposedfinesforinfringementsoftheChapter I Prohibition (and Article 101, TFEU). This compares with six in 2016. The 2017 cases involved:suppliersofdrawerwraps/fronts in the furniture industries (price-fixing,market-sharingandinformationexchange–totalfinesof£2.8million);lightfittingssector(minimumpricesforonlinesales–£2.7million);localestateagents(fixingofcommissionrates–£370,084);golfequipment(Ping)(onlinesalesban–£1.45million);andsuppliersof‘cleanroom’laundryservices/productssector(market-sharing–£1.71million).A notable feature of the ‘cleanroom’ laundry services case is that the market-sharing arrangement arose in the context of a long-running joint venture between the parties, and the focus of the CMA was on reciprocal trademark licences containing wide non-compete arrangements. In announcing its decision, the CMA emphasised the need to conduct checks on long-running trading arrangements for compliance with competition law. The CMA’s investigation in this case also arose from two merger cases it considered, showing that, as with the European Commission, merger cases can be a source of information or a trigger for cartel cases. Whilsttheleveloffinesimposedinthesecasesarenotsignificantrelativetopreviousyears,this reflects theCMA’sdrive to balance its case load across both smaller cases (which,



despite their size, are considered to have major impacts on individual consumers and small businesses) and cases involving larger businesses. It is unlikely to represent a trend of lowerfinesgenerally.Forexample,in2016,theCMAimposedfinesof£44.9millioninrespectof‘pay-for-delay’arrangementsinthepharmaceuticalsector(andfinesofjustunder£90millionontwopharmaceuticalcompaniesforexcessivepricing).Finesofthissortofmagnitude (or higher) might be expected in future years. Other investigations concluded by the CMA during 2017 included two cases settled by commitments These were investigations into the use of most-favoured nation (MFN) and certain exclusionary clauses in online auction platform services by the UK’s largest provider of live online bidding platforms and into the restrictive rules of an association representing the travelling funfair sector.The CMA’s long-running criminal investigation into the supply of precast concrete drainage products came to an end in September 2017. After pleading guilty to agreeing with others todividesupply,fixpricesanddividecustomersbetween2006and2013,theformerchiefexecutive of Stanton Bonna was sentenced to two years’ imprisonment suspended for two years (as well as receiving a six-month curfew order from 6pm to 6am). He was also disqualified from acting as a company director for seven years. TheCMA’s civilinvestigation into the arrangements remains ongoing at the time of writing.The CMA carried over six ongoing civil investigations from previous years (into solid fuel products, precast concrete drainage products (noted above) and pharmaceutical products). Two of these investigations involve allegations of anti-competitive agreements only, two involve allegations of abuse of dominance only, and one involves both prohibitions. The CMA also opened nine new investigations in 2017. These include: four relating to pharmaceuticals (a mix of agreements and dominance cases); three agreements casesrelatingtoconstruction(roofingmaterials;design,constructionandfit-out;andprovisionofproducts/servicestotheconstructionsector);onerelatingtofacilitiesatairports(Chapter1);andonerelatingtoMFNclausesbyapricecomparisonwebsite(PCW) in the motor insurance sector. The CMA’s recent/current enforcement activity is, to a certain extent, concentrated on a number of areas/themes. For example, on top of two major enforcement decisions in the pharmaceuticals sector in 2016 (one for ‘pay-for-delay’ and one for excessive pricing), the sector accounted, at the end of 2017, for just over 50% (8 out of 15) of the CMA’s current enforcement cases. The cases range from excessive pricing to cases alleging forms of market-sharing, and, whilst details of the ongoing investigations are not available, these investigations may be expected to raise fundamental issues around the extent of application of competition law in the sector (both 2016 cases are on appeal – decisions awaited).Construction and online/digital markets also represent a material portion of the CMA’s current/recent caseload sectors. The year 2016 saw a number of cases relating to online sales restrictions imposed on dealers/retailers, as well as a CMA concerted education/compliance campaign on the topic. Thesemade up twoof theCMA’sfining decisionsin 2017. One of these (the Ping case) is on appeal. The current investigation into MFNs requiredbyaPCWinthehomeinsurancesectorisconsistentwithafocusbyotherNationalCompetitionAuthoritiesontheuseofMFNsbyPCWs(albeitothershavetendedtofocuson online hotel booking), and continues the focus on digital markets.The CMA recognised in its Annual Concurrency Report (April 2017) that the number of new cases opened by sectoral regulators ‘remains below the level that we would like to see’. Following a number of dawn raids, thefinancial services regulator, theFinancial



Conduct Authority (FCA), launched an investigation into aviation and aerospace insurance brokers, although the investigation was transferred to the European Commission in October. TheFCA also issued its first Statement ofObjections in relation to the alleged sharingof confidential information by four asset management firms on share IPOs or placingprocesses. The energy regulator, Ofgem, has two current investigations into the energy sector (one relatively minor Chapter I investigation, and a dominance investigation opened in 2017 into supplies of services to the energy industry). Competition law enforcement activity by other regulators has been limited in 2017.


The CMA is not obliged to open a formal investigation into all allegations of anti-competitive conduct which it receives. Indeed, it investigates only a small proportion of these allegations. It assesses its priorities for investigation against its published prioritisationcriteria:theseassesslikelyconsumerimpact,strategicsignificance(e.g.interms of deterrence), likelihood of success and cost of investigation.Asnotedinlastyear’sedition,2016sawasignificantgrowthintheCMA’senforcementactivity, which continued throughout 2017. The CMA concluded seven cases formally, eitherthroughfinesorcommitments.Itclosedafurthercase(onlinesalesrestrictionsinrelation to mobility scooters) on administrative priority grounds, following compliance assurances by those under investigation. It has also continued to issue warning and advisory letters to businesses in lieu of formal enforcement action. This represents a major increase in activity compared with an annual average of less than three infringements decisions between2010and2015(fortheCMAanditspredecessor,theOfficeofFairTrading).The number of new cases opened also continues to rise. The opening of nine new cases comfortably exceeds the CMA’s target of six (set out in its Annual Report for 2017/2018). WithasmallbudgetaryincreaseawardedintheUK’sAutumn2017Budget inorderforthe CMA to ‘take on more cases against companies that are acting unfairly’, it looks likely that the throughput of cases will continue. This trend has not, however, carried over into enforcement in the criminal sphere, where the CMA closed one investigation without apparently commencing any new enquiries (at least no new enquires noted in the public domain) – see further below. The CMA’s ambitions in its Draft Annual Plan for 2018/2019 are to commence at least six new civil investigations (it has not set any targets in respect of criminal investigations).This growth in enforcement has arrived at a time when the prevailing economic view that the competition is one of the best ways to secure the interests of consumers has arguably come under increased scrutiny. Running on a manifesto which pledged to nationalise/renationalise a number of industries, such as Royal Mail and railway companies, the Labour Party increased both its vote share and number of seats in the UK general election in June 2017. This could lead to pressure on a minority Conservative Government for populist measures which cut across the consensus of the importance of competition. For example, the Government has introduced draft legislation to cap standard/default tariffs in the energy market, despite the CMA having not imposed such caps following an in-depth market review concluded in 2016.Leading voices of the CMA have responded by highlighting the importance that competition plays in securing outcomes for consumers. However, the political climate is likely to be relevant in the coming year, in particular in terms of playing a part in the CMA’s decision as to which cases to prioritise. The CMA also increasingly considers its competition



enforcement powers to be only one of a number of tools, alongside its consumer protection powers in particular, needed to achieve the desired outcomes for consumers. E-commerce has been highlighted as a particular challenge for the CMA, in terms of regulatingartificialintelligencesoftwarewhichspontaneouslycoordinatesprices,datausewhich permits personalised pricing or online retailers ‘free riding’ on the pre-sale service of physical shops. The CMA has therefore continued to develop its electronic capabilities with the creation of a new digital, data and technology team. The team will focus on developing understandingofhowalgorithms, artificial intelligenceanddatacanenablecompetitionbreaches.


The issue of robustness remains a priority for the CMA. It has implemented a number of procedural measures in order to improve the procedural robustness of its decisions. This has included the use of case decision groups, who are separate from the case team investigating an alleged breach/issuing the statement of objections, and the possibility of access toaproceduralofficer,also independentfromtherelevantcase team,forparties/thirdpartiestoescalateproceduraldisputes.Forexample,in2017,theproceduralofficerconsidered an application by a third party in the online auction investigation about the operationofaconfidentialityring.Itdidnotupholdthisapplication,butthePhenytoincaseof2016(inwhichapartysuccessfullyusedtheproceduralofficerroutetoobtainanextensionoftime)showsthattheproceduralofficercanhelppartiessubjecttoaninvestigation.The Chief Executive of the CMA has warned that stricter, and wider-ranging, enforcement may equate to a higher risk of appeals. Encouragingly for the CMA, it successfully defended an appeal by Balmoral Tanks against its 2016 decision in the galvanised steel watertanksinvestigation.ThisdecisionimposedafineonBalmoralTanksforparticipationin a single meeting (which was being recorded by the CMA) at which pricing information on galvanised steel tanks was exchanged. Balmoral had, however, refused (at the same meeting) toparticipate ina long-runningpricefixingcartel,but theCompetitionAppealTribunal (CAT)agreedwiththeCMAthattheexchangeofinformationwassufficientfora breach.The Government’s Autumn 2017 budget suggested that the CMA would able to use some of thefinesitraisesinordertodefenditsinvestigationsonappeal(thefinestheCMAimposesare not generally retained by the CMA). Detail on this measure is limited, but it may encourage the CMA to pursue a larger number, and wider range, of cases.Balanced with robustness is the speed of enforcement. Last year, we noted that there appears to be a general trend towards faster enforcement, and the CMA has continued to pick up the pace. Of the cases closed with commitments and/or subject to infringement decisions in 2017, three cases took less than a year from opening of the investigation (with two others taking not much more than a year). No case closed this year took longer than 22 months to complete. The speed of enforcement has been helped by the extensive use of commitments and settlements.A corollary of the emphasis on quicker enforcement is the burden this imposes on the parties to an investigation. The CMA has shown its willingness to use its civil powers to impose penalties on companies for failure to comply with information requests and related timetables.In2016,itimposeda£10,000fineonPfizer(forsubmittingitsresponsetoaninformationrequestfivedayslate);in2017,itimposedafineonaparty(albeitinamerger



case) for not answering an information request fully. Information requests from the CMA can be wide-ranging, and timetables very tight. This can be a concern to parties, when the threat of sanctions is real.


The CMA operates leniency/amnesty programmes for individuals and undertakings in relation to both the criminal and civil regimes. Under the civil regime, leniency is not limited merely to ‘hard-core’ cartel activity: it is also available for resale price maintenance (this approach differs from other regulators, such as the European Commission).Thepotentialbenefitsofasuccessfulleniencyapplicationincludecompleteimmunityfromfines for undertakings, immunity fromprosecutionunder the criminal cartel offence forindividualemployees/directorsandimmunityfromdirector’sdisqualificationfordirectors(subject to conditions). A successful leniency application does not protect a company from damages actions.The CMA imposes stringent conditions on leniency applicants (including a requirement for full cooperation and an acceptance of breach), both at the time of the application and throughout the investigation. This includes detailed requirements concerning the gathering and preservation of evidence even before any approach has been made to the CMA. The CMA is expected to monitor compliance with leniency conditions very closely (with the possibility of leniency being withdrawn as a real possibility).The timing of a leniency application is of paramount importance: the sooner it is made, thegreaterthebenefittotheapplicant.LeniencywillbeunavailabletoacompanyonceaStatement of Objections has been issued, or to an individual once he/she is charged.Applicantsmaybenefitfromoneofthreecategoriesofimmunity:• Type A immunity is only available where no investigation has been opened and the

applicantisthefirstmemberofacarteltocomeforward.Ifsuccessful,theundertaking,all employees and directors will receive blanket immunity from civil and criminal penalties in respect of the breach.

• Type B immunity is available if an investigation has commenced and the applicant is thefirsttoseekleniency.SuccessfulTypeBapplicantscanreceivethesamebenefitsasa successful Type A applicant, although this is within the CMA’s discretion.

• Type C immunity is available to undertakings that provide evidence of the cartel activity(butfailtoobtainTypeAorBimmunity;forexample,becausetheyarenotthefirstleniencyapplicant).Anundertaking’sfinemaybereducedbyupto50%andanindividual may receive immunity, but again this is discretionary.

Individuals whose employers have taken part in cartel activity may also approach the CMA directly in exchange for a no-action letter, granting immunity from prosecution in respect of the criminal cartel offence. The leniency regime remains an important method of discovery of potential breach for the CMA, but is by no means the only method (as noted above, information gained on merger reviews can, for example, lead to investigations). The CMA is determined to become more intelligence led. For example, none of the civil investigations leading to a 2017 decision were initiated by a leniency application (although, in two cases, companies secured 100%immunityfromfinesthroughanapplicationforleniencyaftertheinvestigationhadcommenced, demonstrating the value of cooperating following the commencement of an investigation).




There are two forms of administrative settlement available to parties: a settlement procedure (involvinganearlyadmissionofbreachinreturnforareductioninfine);andtheprovisionof commitments (a binding commitment to cease and desist conduct, and/or behave in a particular way, in lieuofan infringementdecisionandafine). Botharediscretionaryprocesses, and are discrete from leniency.The CMA has said that it is unlikely to accept commitments in the case of a secret, hard-core cartel (or a serious abuse of dominance). However, they can be a useful tool in other cases. As noted above, the CMA accepted commitments in two cases in 2017. Under the settlement process, an undertaking under investigation can admit that it has breached competition law and accept that a streamlined administrative procedure will govern the remainder of the investigation. Settlement will only be available once the CMA hassufficientevidencetosupportaninfringementdecision,butpriortoafinaldecision.In order to reach a settlement, an undertaking must make a clear and unequivocal admission ofliabilityfortheallegedinfringingbehaviour,endtheinfringementandconfirmitwillpayanyfineimposedbytheCMA.Case-specificconditionsmayalsobeimposed.In exchange for settlement, the undertaking will receive a reduction in its penalty of up to 20% (or 10% if the settlement occurs after the Statement of Objections has been issued). ThreeofthefiveChapterIinfringementdecisionsissuedthisyearfollowedasettlement.


Complaints/information received directly from third parties represent an important source ofintelligence.Forexample,the2017investigationleadingtofinesinrespectofonlinesalesrestrictionsinthelightfittingssectorstemmedfromcomplaintsmadebyresellers.Information-gathering exercises by the CMA also provide a route for third parties, such as competitors or customers of the parties under investigation, to participate in an investigation.If the CMA opens an investigation, third-party complainants may elect to be designated as formal complainants. All formal complainants must be offered the opportunity to comment onaStatementofObjectionsand,dependingontheconfidentialityofdocuments,athirdpartymayalsobegrantedaccesstoall,orsomeofthecasefile.Alternatively,acomplainantmay choose to be designated as an interested third party. An interested third party has no right to receive information, but may be asked for views on, for example, the Statement of Objections.TheCMA’sprioritisationprinciples, in practice, represent a significant hurdle for third-partycomplainants.Manycomplainantsareunabletogathersufficientevidencetosatisfythese principles (in particular, relating to prospects of success), and even those complaints which are supported by strong evidence can be rejected as not constituting a priority for the commitment of investigatory resource. The CMA’s draft 2017/18 Annual Plan has a clear (albeit not exclusive) focus on cases directly affecting consumers (in particular, vulnerable consumers), online/digital markets and markets of strategic importance to economic growth andproductivity.Suchafocus,combinedwiththeactivefilteringofcases,cansignificantlyconstrain its willingness to take up cases not falling into these categories brought to them by complainants (unless there is strong evidence at the outset of a serious breach).Given the costs and evidential burden involved in pursuing a complaint through the courts, it is still generally the preferred option for a complainant to approach the CMA. However, the increasing understanding of the Courts of competition actions, and the active application



of the CMA’s prioritisation principles, means that recourse to the Courts is becoming an increasingly attractive option.TheCMAdoeshavethepowertoimposeinterimmeasures,pendingthefinaloutcomeofanyinvestigation. The threshold for the application of interim measures was lowered in 2014 (toarequirementtoshow‘significantdamage’),buttheseremainararelyusedtool.2017saw an application for interim measures in the online bidding platforms case noted above, but the commitments closing the case were agreed before the interim measures application wasdecidedupon.TheCMA’sdraft2018/19AnnualPlanreaffirmsitscommitmenttotheuse of interim measures where appropriate, but the relative lack of use of these measures remains a potential weakness of the regime.


As far as possible, the CMA tries to ensure that liability for penalties follows responsibility forthebreach.TheUKrulesonparentalandsuccessorliabilityforfinesgenerallyreflectthose of EU law.Theoverarchingpolicygoalsindeterminingthelevelofafinearetoreflecttheseriousnessof the offence and to deter future infringements. The CMA has published guidance applyingsixstepsinthecalculationofafine.TheguidancerequirestheCMAtoidentifya startingfigure,whichmaybeup to30%of theundertaking’s turnover in the relevantmarket. The precise level chosen will depend on the seriousness of the offence, with cartels typically towards the upper end of this scale. Through the remaining steps, the CMA makes adjustmentstothestartingpointtoreflectthedurationofbreach,aggravatingormitigatingfactors, settlement agreements and leniency applications. The CMA must also ensure that thefinedoesnotexceedthestatedmaximumof10%oftheundertaking’stotal,worldwideturnover.IftheCMAintendstoimposeafine,itmustissueaDraftPenaltyStatement,whichmustshow how these six steps are followed. The parties to the investigation must be given a reasonableperiodoftimetomakerepresentationsontheDraftStatement.Thefinalpenaltycalculation will be included in the decision.TheCMAmayalsousecivilpowerstoapplytothecourtfordisqualificationofdirectorsof companies implicated in an infringement from acting as a director for a period of up to 15years(ormayagreeadisqualificationundertakingwiththedirectorconcernedin lieu of a court order).The CMA remains committed to pursuing enforcement against individuals as a deterrent to anti-competitive behaviour. This includes enforcing the criminal regime (see further below),andpursuingdirectors’disqualification,whereappropriate.Inrespectofthelatter,thedisqualificationofadirectorinthepre-castconcretepipescase(notedabove)followsonfromthefirstdisqualificationofadirector lastyear(inaprice-fixingcaserelatingtoposters). The Consumer Rights Act 2015 (CRA15) sets out a voluntary redress scheme applicable to Chapter I/Article 101 TFEU infringements. The legislation provides for businesses which arethesubjectofacompetitionlawinvestigationorinfringementfindingtoenterintoaredress scheme, under which they voluntarily compensate parties which have suffered a loss due to the anti-competitive conduct in question. The intention is that such a scheme will enable parties to receive compensation without resorting to expensive and drawn-out litigationthroughthecourts.Itmayalsoleadtoareductioninanyfineimposedfortheinfringement. However, the infringing business is not protected from subsequent private



actions, and third parties are not obliged to apply for compensation from a redress scheme where one is available.


UK law contains extensive rights of appeal against infringement decisions.First instance appeals are made to the CAT, a specialist body with expertise in competition law matters and independent from the CMA. The CAT has the power to conduct a full merits hearing and may quash a CMA decision (in whole or in part). This includes both infringement decisions and no-grounds-for-action decisions (which interested third parties may appeal). If an appeal is successful, the CAT may also remit the decision to the CMA for reconsideration or reach its own decision, which supersedes that of the CMA. The CAT may also hear appeals on penalties alone. Decisions of the CAT may also be appealed to the Court of Appeal.The appeal system has been heavily used, and is considered to be a success.

Criminal sanctions

TheCMAhas thepower topursuefinancialandcustodialsentencesagainst individuals,although these must be imposed by a court. Undertakings and individuals may also be subjecttoconfiscationorders.Whilstthepossibilityofsignificantcustodialsentenceshasexistedforanumberofyears,there are very few examples of successful prosecutions.In 2017, the CMA secured its latest custodial sentence in the precast drainage products case. This is the third example of successful prosecutions in respect of the criminal cartel offence (in addition to the Marine Hose and Galvanised Steel Tanks cases), all after guilty pleas. As each of the cases concerned arrangements which existed prior to 1 April 2014, the offence involved a requirement to show that the defendants acted dishonestly. In practice, thispresentedasignificantbarriertosuccessfulprosecutions.TheCMAisyettosecuretheconviction of an individual who has not pleaded guilty.The dishonesty requirement was removed with effect from 2014. In recognition of the loss of this requirement provided and in the light of the fact that the criminal regime is designed to cover ‘hard-core’ cartels only, a number of exclusions apply. These include an exclusionrelatedto:advancenotificationofthecartelagreementtocustomers;andadvancepublication. Three new statutory defences were also introduced. These apply where: there wasnointentiontoconceal thearrangementfromcustomersor theCMA;orreasonablesteps were taken to seek prior legal advice.As these reforms only apply to conduct post-dating 1 April 2014, it could conceivably be some time before an investigation under these rules is completed and the exclusions/defences are tested.

Cross-border issues

The CMA values connections with other National Authorities and such relationships are of particular importance in relation to the cartels. For example, the CMA has entered into a network of bilateral agreements with other domestic Authorities. It is actively involved in international networks including the International Competition Network and the European Competition Network.



There are a number of examples of successful cooperation with other Authorities (most notably in the Marine Hose Investigation which involved active cooperation with the US, EUandJapaneseauthorities;theCMAalsoliaisedwithitscounterpartsinFranceandItalyin relation to the Modelling Agencies investigation in 2016). The CMA’s plans also take accountofinternationaltrendsinenforcement;forexample,inrelationtoonlinepricingandPCWs,andnotetheneedtoensureconsistentinternationalenforcement.Clearly, the Brexit vote has introduced considerable uncertainty as regards the future cooperation within the European Competition Network. However, the CMA has stated itself to be keen on international cooperation following the implementation of Brexit, and there is unlikely to be any change in the near term at least.


Private enforcement of competition law is well established in the UK. The UK remains an attractive forum for damages actions due, largely, to the fact that English law disclosure rules are broader than other Member States, giving claimants greater access to defendants’ documentary evidence than in other EU jurisdictions. Claimantsmaybringprivateactionsfordamagesfollowinganinfringementfindinginrespectof EU or UK competition law by the European Commission or the CMA, respectively, in either the High Court or the CAT – a ‘follow-on’ damages claim in which the claimant can rely on the infringement decision as binding evidence of liability. ‘Standalone’ civil actions, where there is no pre-existing infringement decision such that the claimant must prove liability, may also be brought in the High Court and the CAT. As well as introducing a number of procedural changes, the CRA15 brought in a regime for collective actions in the CAT which permits a representative to bring a collective damages claim on behalf of a class of claimants. Importantly, a collective action can be on an ‘opt out’ or ‘opt in’ basis. ‘Opt out’ means that the relevant class of claimants is, by default, deemed to be all UK customers who might have been affected by the competition law breach (unless such customers actively ask to be excluded or ‘opt-out’ from the action). An application must be made to the CAT for a Collective Proceedings Order (CPO),andthiswillbedeterminedatacertificationhearing.The CRA15 also brought in a new ‘fast track’ procedure, aimed at encouraging and facilitating competition claims by SMEs which might otherwise not be brought at all. Under the ‘fast track’ procedure, a claim is expedited so that the hearing takes place within six months and the CAT has the power to impose caps on the parties’ costs.There have been a number of important recent developments. First, in Sainsbury’s Supermarkets Ltd v MasterCard Incorporated & Others [2016] CAT 11 (one of the many sets of proceedings regarding MasterCard’s multilateral interchange fee rates), the CAT awarded damages to Sainsbury’s in an Article 101 TFEU/Chapter I claim. Not only was thisthefirstjudgmentfromtheCATina‘stand-alone’competitionclaim,itwasalsothefirsttimethataUKcourthasgivenjudgmentonthequestionofthepassing-on‘defence’andthefirsttimeinacompetitioncasethatcompoundinteresthasbeenawarded(although,at the time of writing, the judgment is the subject of an appeal).Second, thefirst full ‘fast track’ claimhas been successfully conducted through to trialand judgment (a number of other ‘fast track’ claims have been commenced, but almost all have settled at a very early stage). In Socrates Training Ltd v The Law Society of England & Wales [2017] CAT 10, Socrates successfully argued that the Law Society had abused its dominant position in requiring members of its Conveyancing Quality Scheme to obtain training courses in Anti-Money Laundering and Mortgage Fraud exclusively from the Law Society. The CAT rigorously case-managed the proceedings to maintain a tight timetable up



to and including the trial, and also imposed costs caps on the parties. Notwithstanding that the judgment ultimately took a further six months, the case demonstrates the effectiveness of the ‘fast track’ procedure. In practice, this option may well incentivise some complainants to resort directly to the CAT, rather than raising complaints with the CMA.Finally, there have now been two applications for an ‘opt out’ CPO in the CAT: Dorothy Gibson v Pride Mobility Products Limited[2017]CAT9(concerningmobilityscooters);and Walter Hugh Merricks CBE v Mastercard Incorporated & Others [2017] CAT 16 (concerningMasterCard’smultilateralinterchangefeerates).Whilstneithersucceeded,thecasesstillofferhelpfulguidanceastotheapproachthattheCATwilltaketocertificationgoing forward. In both cases, the CAT was comfortable that the proposed representative was suitable. In Pride, however, the case had been presented as a ‘follow on’ claim, but theapplicant’sexpertevidencehadincorrectlystrayedbeyondtheconfinesof theactualinfringement decision. The application was ultimately withdrawn. In Merricks, where the proposed class was 46 million consumers, the CAT focused heavily ontheexperteconomicevidenceandwasultimatelynotsatisfiedthattheproposeddamagesmodel complied with the general principle that damages should be compensatory. The CAT did not consider that the proposed distribution of an award of damages would bear any relation to each individual’s actual loss (at the time of writing, this is subject to applications forappeal).TheCATconfirmedthattheapproachoftheCanadianSupremeCourtinIn Pro-Sys Consultants Ltd v Microsoft Corp. [2013] SCC 57 is the applicable test in CPO applications when assessing the validity of an applicant’s proposed damages methodology (ratherthanthemorestringentapproachintheUS).Specifically,theCATconfirmedthatthe expert methodology ‘must be sufficiently credible or plausible to establish some basis in fact for the commonality requirement’ and ‘offer a realistic prospect of establishing loss on a class-wide basis’.These two cases show that there are a number of obstacles which must be overcome before a CPO will be granted, especially regarding the mechanics of calculating loss and distributing damages. A new CPO application is currently being prepared by the Road Haulage Association on behalf of hauliers affected by the European Commission decision in the trucks cartel, which will be worth watching over the next 12 months.

Reform proposals

There are no substantial outstanding proposals for reform to the domestic civil or criminal cartel regime.The Government’s white paper on its long-term Industrial Strategy to boost productivity and earning power across the UK outlined the need to build on the UK’s reputation for having a ‘world-leading’ competition regime. Among other things, the white paper also proposes to publish a review of the existing competition regime by April 2019 to ensure it is working to support an enterprising economy.From an institutional perspective, the Final Report of the Industrial Strategy Commission, published in November 2017, proposed consolidating the sector regulators for the network industries (i.e. rail, energy, water as well as the regulation of BT) with the CMA to create a new super regulator.

The impact of the Brexit vote

Itremainsverydifficulttoaccuratelypredicttheoutcomesforcompetitionlawfollowingthe UK’s exit from the EU.



From the CMA’s perspective, Andrea Coscelli has already stated that he anticipates that the CMA will receive much more responsibility for international investigations, which the UK would run in parallel to investigations by the European Commission (as well as an increased merger control workload due to the repatriation of merger cases from the Commission to the CMA).Itisgenerallyacknowledgedthatasignificantincreaseinbudgetwouldberequiredin order to meet this increased workload. If this is not the forthcoming, the CMA’s ability to pursue the sort of cases it has during 2017 (in particular, some of the smaller cases) may be compromised.A group of leading UK Competition law lawyers and academics have grouped together undertheauspicesoftheBrexitCompetitionLawWorkingGroup(BCLWG).TheBCLWGpublished a report in 2017 which drew provisional conclusions and made recommendations on the implications of Brexit for UK competition law and policy. The report proposes a number of amendments to UK primary legislation, including that UK courts should continue to ‘have regard’ to parallel EU jurisprudence.WhilstthereportseekstostartadebateonmoresubstantialreformstotheUK’sregime(suchas a prosecutorial model for antitrust infringements), it acknowledges that policymakers must focus on the challenges which will be posed by the Brexit transition before systemic issues are considered further. The prevailing view is that, given the very close parallels between the UK and EU competition regimes at present, the UK regime will continue to mirror that of the EU, at least in the short term following exit from the EU, with opportunity for change over the longer term. This is not certain, however.

Acknowledgment

The authors would like to thank their colleagues Ben Lasserson, Hannah Furness and Halimah Sadiah, for their invaluable help in drafting this chapter.


Pinsent Masons LLP30 Crown Place, Earl Street, London EC2A 4ES, United Kingdom

Tel: +44 20 7418 7000 / URL: www.pinsentmasons.com

Giles WarringtonTel: +44 121 260 4037 / Email: [email protected] is a Partner in Pinsent Masons’ International Competition, EU and TradeGroup,specialisinginUK&EUcompetitionlaw.Hehasextensiveexperience of cartel/anti-trust investigations by the UK/EU authorities, as well as EU/UK and international merger control, market investigations and competition appeals. For example, he acted for a number of contractors in the UK construction industry investigation, and a further company on its successful appeal of the penalty imposed. He recently acted for a company on an Ofgem dawn raid. He has represented clients in three major Phase II UK market investigations in the local bus, aggregates/cement and energy sectors.

Tim RiisagerTel: +44 121 629 1602 / Email: [email protected] advises clients on all aspects of behavioural and non-contentious competition law across various sectors including healthcare, utilities, financialservicesandtransport.Tim has extensive experience of Competition Act investigations, including whilst working as a legal advisor at the water regulator Ofwat, where he was responsible for carrying out initial assessments of Competition Act complaints and led the legal team on an abuse of dominance investigation. He has also recently acted for clients who are the subject of anti-trust investigations by the CMA and Ofgem. Tim’s experience includes advising clients in relation to the Energy and Investment Consultancy market investigations.



USAPeter K. Huston

Sidley Austin LLP


The key U.S. federal anti-cartel statute – Section 1 of the Sherman Act (15 U.S.C. §1) –deems “every contract, combination…or conspiracy…in restraint of trade” to be illegal. The law was enacted in 1890, making the United States the world’s most mature cartel enforcement regime. The regime is also one of the world’s most complex. The complexity arises because the laws are enforced criminally by the federal government (and in rare cases by state governments), and civilly by the federal government, state governments, and private parties. Cases by private parties can be further subdivided into those brought by direct purchasers and those by indirect purchasers, and on a different axis, between class actions and individual actions. In addition, plaintiffs can pursue cases under Section 1 or under analogous state laws. Cartel enforcement in the U.S. takes place within an adversarial system, with government enforcers or private plaintiffs on one side, and defendants on the other. An independent judiciary presides over trials and other disputes. At the federal government level, the Antitrust Division of the Department of Justice (DOJ) enforces Section 1 of the Sherman Act. It is the agency that brings criminal actions, sometimes working in conjunction with other components of the DOJ where other violations, such as wire and mail fraud, are implicated. Criminal enforcement is reserved for “hard core” violationsofSection1:pricefixing;bid rigging; andmarket allocation schemesamonghorizontal competitors. The DOJ can also pursue less manifestly anticompetitive cases civilly. Section 4 of the Clayton Act provides for a private right of action to enforce Section 1 of the Sherman Act. The Clayton Act entitles successful antitrust plaintiffs to treble damages, typically calculated based on the amount of overcharge the plaintiff paid as a result of the cartel activity, and also to compensation for their attorneys’ fees and associated costs of litigation. The Clayton Act does not allow successful defendants to recover their costs of litigation. According to the U.S. Supreme Court, “by offering potential litigants the prospect of a recovery in three times the amount of their damages, Congress encouraged these persons to serve as ‘private attorneys general’”.1 Defendants in private civil suits face jointandseveralliability,meaningthatasingledefendantcouldfinditselfresponsibleforthe total damages for the entire cartel, trebled, plus attorneys’ fees and costs. The prospect of an enormous damage award leads most cases to settle before trial if they survive dispositive motions. Contingent fee arrangements – in which the plaintiff’s attorney receives a percentage of whatever money is paid to the plaintiff to resolve the case, but receives no fees absent a monetary award to the plaintiff – are common in private antitrust cases.


Sidley Austin LLP USA

The Supreme Court’s holding in Illinois Brick Co v Illinois, 431 U.S. 720 (1977), bars indirect purchasers from asserting federal antitrust claims based on claims that direct purchasers “passed on” the overcharge. Many states, however, have enacted “Illinois Brick repealer statutes”, to provide standing for indirect purchasers to bring claims pursuant to state antitrust and unfair competition laws. This allows indirect purchasers to bring cases in either federal or state court. The Supreme Court in Associated General Contractors of California, Inc. v California State Council of Carpenters, 459 U.S. 519 (1983), established a balancing test to determine standing of indirect purchasers to assert antitrust claims. The test considers: thedirectnessofaplaintiff’s injury; theexistenceofmoredirectvictimsof the antitrust violation; the potential for duplicative recovery; and the likelihood thatapportionment of damages would be overly complex or speculative.When aDOJ criminal investigation becomes public knowledge, follow-on private civillitigation is a near certainty. It is often the case that a single set of facts will spawn a criminal case, a direct purchaser class action, an indirect purchaser class action, and several actions by individual plaintiffs who have opted out of the class actions. The DOJ will often ask the court to stay discovery in the civil cases for a period to allow their criminal investigation to proceed unfettered.States have the same rights as private parties to sue under Section 1 for damages when they are the victims of cartels. State attorneys general can also sue on behalf of the state’s citizens in what are called parens patriae actions.All states have some type of antitrust or unfair trade practice statute, most of which are based on and/or interpreted consistently with the federal antitrust laws. Most states provide for some form of criminal liability for such violations, although criminal enforcement is not common in most states and sanctions tend to be less severe than under federal law. State attorneys general are responsible for the public enforcement of these laws and nearly all states permit private civil damage actions, most for treble damages, although some states limit recovery to actual or double damages.Although the Federal Trade Commission (FTC), an independent agency, does not technically enforce the Sherman Act, it does enforce the FTC Act (15 U.S.C. § 41-58), which prohibits “unfair methods of competition” and “unfair or deceptive acts or practices”, allowing the FTC to challenge conduct civilly that would also violate the Sherman Act. Additionally, the FTC can use the FTC Act to challenge coordinated conduct that does not meet all of the elements of a Sherman Act violation, such as invitations to collude that do not lead to actual collusion. Criminal litigation is commenced by prosecutors presenting evidence they have gathered during their investigation to a grand jury – a group of citizens – which determines whether sufficientevidenceexiststoindictthetargetedcompanyorindividuals.Anindictmentissimplyafindingofsufficientevidencetoproceedtotrial,notafindingofguilt.Priortoindictment, the DOJ will identify certain targets of the investigation whom it considers potential defendants based on the existence of substantial evidence linking the target to the crime. The DOJ typically affords targets one or more meetings to allow them the opportunity to try to avoid indictment through a proffer of cooperation and testimony or by offering their own version of events. Targets also have the right to testify on their own behalf before the grand jury, though in practice this is uncommon, in part because their lawyers are not allowed to accompany them during questioning by prosecutors.Before the DOJ can try a criminal defendant, it is required to disclose evidence or information favourable to the defendant, including exculpatory evidence, evidence that



would permit impeachment of government witnesses, or mitigating evidence that would tend to reduce a criminal sentence.2 In general, the DOJ provides to defendants the majority of its investigative materials. Under certain circumstances, the government must also disclose any statements of its witnesses that relate to the subject matter on which the witness testified.3 Criminal cases under Section 1 that proceed to trial are heard in federal court, where the defendant may demand trial by jury. Prosecutors must prove criminal violations “beyond a reasonable doubt”, the highest standard of proof in the U.S. Civil plaintiffs commence cases by filing a complaint in federal or state court. Civilplaintiffs must meet the lower “preponderance of the evidence” standard.The majority of cartel cases are resolved prior to trial. Criminal cases are often resolved by way of a plea agreement (discussed below). Civil litigation is often resolved by way of a dispositive motion or settlement. The statutes prohibiting cartels are brief and general. The nuance and boundaries of the law, and guidance as to how the law applies to various fact patterns, comes from judge-made case law in a system of stare decisis. A central element in all cartel cases is proof of an illegal agreement. Unilateral conduct does not violate Section 1 of the Sherman Act (though it may violate Section 2 (monopolisation), the FTC Act or other laws). Satisfying the “agreement” element does not require a formal written document. Illegal agreements may be reached informally, orally or even with a “telling nod or wink”. In criminal cases, the DOJ’s practice is to establish the existence of an agreement through direct evidence – eyewitnesses and/or documents which explicitly demonstrate an agreement. In civil cases, where plaintiffs may rely on circumstantial evidence of an agreement, the U.S. Supreme Court has held that the evidence must tend “to exclude the possibility of independent action” and establish that the defendants “had a conscious commitment to a common scheme designed to achieve an unlawful objective”.4 Because parallel behaviour is common among competitors in oligopolistic markets, proof that defendants engaged in parallelconductisinsufficient,standingalone,toshowsuchanillegalagreement.Plaintiffsmust also allege certain “plus factors” to give rise to an inference of an agreement. The plus factors requirement ensures that courts punish concerted actions as opposed to unilateral, independentcompetitorconduct.Thereisnodefinitivesetofplusfactors.The DOJ does not prosecute mere information exchanges among competitors criminally. However, evidence that competitors exchanged competitively sensitive information, such as pricing, production levels, capacity, margins, bidding, or customer negotiation information may constitute circumstantial evidence of an underlying cartel. Civil plaintiffs may challenge such exchanges by arguing that the anticompetitive effects of the exchanges outweightheirprocompetitivebenefits.WhileSection1of theShermanAct, read literally,wouldseemtoprohibitall restraintsof trade, the Supreme Court in 1911 held that it only prohibits “unreasonable” restraints of trade.5Subsequentdecisionsheldthatagreementsamongcompetitorstofixprices(orany component of pricing), restrict output, rig bids, or allocate customers or geographic territories lack any redeeming competitive value and are thus per se illegal. In other words, the law provides for an irrebuttable presumption that such agreements are unreasonable and have an anticompetitive effect on the market. For several decades now, the DOJ has reserved criminal prosecutions to per se cartel offences.In order to come under the purview of Section 1, the challenged conduct must involve interstate commerce or trade with foreign nations. Most commercial activity occurring



within the United States will have an interstate effect. The Foreign Trade Antitrust Improvements Act (FTAIA) (15 U.S.C. § 6a) (discussed below) covers foreign commerce.

Overview of investigative powers in the United StatesCriminal enforcement: The DOJ Antitrust Division, working in conjunction with the Federal Bureau of Investigation (FBI), other federal law enforcement agencies, and grand juries, has a significantarrayoftraditionalinvestigativepowersatitsdisposal.Thesetoolsallowitto compel production of documents, question witnesses under oath and, with appropriate judicial approvals, raid private property to seize evidence. PerhapstheDOJ’smostinfluentialinvestigatorytool,however,iscooperationfromcartelinsiders.Whilesometimesoverlookedasaninvestigatorytool,andwhilenotasdramaticas an FBI dawn raid, cooperation is probably the DOJ’s most fruitful method of gathering informationandevidence.InordertoreapthebenefitsoftheAntitrustDivision’scorporateleniency programme (discussed in more detail below), corporations must provide the DOJ with full cooperation, including documents, attorney proffers, and witness interviews and testimony. Companies and individuals who are not eligible for leniency but who agree to plead guilty also typically provide full cooperation to the government in return for the DOJ’s agreement to recommend a lower sentence. In some cases, witnesses cooperating with the DOJ agree to gather evidence against coconspirators during the covert phase of an investigation into an ongoing conspiracy, for example by recording conversations. (Under Title III of the Omnibus Crime Control and Safe Streets Act of 1968, communications can be legally intercepted if there is consent of one of the parties.) Even for witnesses not covered by the Antitrust Division’s leniency programme or the cooperation obligation of a plea agreement, the DOJ will seek cooperation from witnesses by“droppingin”onthemforunannouncedinterviews,oftenattheirhomesfirstthinginthemorning.WitnessesapproachedbyDOJlawyersandFBIagentsinthismannerarenotcompelledtocooperate,butoftendo.Witnesseswhoareuntruthfulduringtheseinterviewsexpose themselves to obstruction of justice charges. In the case of witnesses located outside the U.S., the DOJ may initiate a border watch. Whenan individualon aborderwatch list voluntarily enters theU.S., immigration andborder control authorities will notify the DOJ and may detain the individual or serve him or her with a grand jury subpoena for documents or testimony. There is no requirement of a warrant or showing of probable cause to place an individual on a border-watch list, which is not public and not disclosed to a defence counsel. If the individual enters the U.S. and is not detained, the DOJ may conduct a drop-in interview with government lawyers and agents appearing unannounced at the person’s hotel or workplace. Individuals on a border watch also may have physical evidence, such as documents and electronic devices, searched at the U.S. border, where border control authorities enjoy extensive investigative powers. To help incentivise foreign-based cartel insiders to submit to U.S. jurisdiction and cooperate, the Antitrust Division, in 1996, reached a Memorandum of Understanding (MOU) with U.S.immigrationofficialsallowingsuchindividualstotraveltotheU.S.eveniftheyhavepleadedguilty.BecauseU.S.immigrationofficialsconsiderantitrustoffencestobecrimesinvolving“moralturpitude”,absenttheMOU,suchofficialswouldnormallypermanentlyexclude foreign offenders from the United States, even if they agreed to plead guilty and cooperate with the government’s investigation. When theDOJcannot relyoncooperation, ithasanumberofother investigatory tools. Withagrandjurysubpoena,theDOJcancompeltestimonyanddocumentsfromindividuals



and corporations throughout the U.S. The DOJ also asks subpoena recipients to produce documents located outside the United States on a voluntary basis. Grand jury subpoenas for testimony compel individual witnesses to be questioned under oath by DOJ lawyers beforethegrandjury.Witnesses’lawyersarenotallowedinthegrandjuryroomduringtestimony, although witnesses are permitted to take breaks to confer with their counsel. WitnessescanrefusetotestifybyassertingtheirrightundertheU.S.Constitutionagainstself-incrimination. The DOJ can overcome this assertion by supplying the witness immunity for his or her testimony. Additionally,uponafindingofprobablecausebyafederaljudgeormagistrate,theDOJmay obtain warrants permitting it, through the FBI, to search for and seize physical evidence located on private premises, including documents and electronic devices. Civil enforcement: Civil investigations by federal or state enforcement agencies can issue civil investigative demands (CIDs) or civil subpoenas to obtain documents or sworn written or oral testimony from targets of the investigation, as well as from third parties. The evidence resulting from CIDs or civil subpoenas may form the basis of a civil lawsuit in federal court (brought by the DOJ, FTC or state authority) or an FTC administrative proceeding before an administrative law judge.Private plaintiffs do not have the ability to use grand jury subpoenas or CIDs. Once they fileacomplaint,however,privateplaintiffscanuse thecivildiscovery toolsset forth inthe Federal Rules of Civil Procedure or state discovery statutes – document requests, interrogatories, requests for admission and depositions – to further investigate a matter. Plaintiffs can target civil discovery to the defendant(s) and to third parties. Prior to the filingofthecomplaint,privateplaintiffscanlooktopublicsourcesofinformation,oruseprivate investigators to investigate cases.


The Department of Justice has had notable successes in many of its ongoing matters in the past year, notching guilty pleas in its auto parts, capacitors, packaged seafood, real estate bid rigging, heir location services, promotional products, foreign currency exchange, international ocean shipping, and generic drug matters. All parts of the Antitrust Division’s criminal programme– the two sections inWashington (Criminal I and II) and thefieldoffices in San Francisco, Chicago and NewYork – took part. Aggregate cartel fines,however,continuetobesignificantlyofflevelsthattheDOJroutinelyreachedinthefirsthalf of the decade. Specifically,whiletotalfinesexceeded$1billionineachofthefiscalyears6 2012, 2013, 2014and2015,thefinesdroppedoffdramaticallyto$399millionin2016.WhiletheDOJhasnotyetpublishedofficialfiguresforFY2017,thefinesfor2017willbelesseventhanfor2016. Lowerfine totals,however,donotnecessarilycorrelatewith lessvigorousorsuccessfulcartelenforcement.Foronething,finelevelssufferwhenenforcementeffortsfocus more on individuals because sentences for individuals are tilted toward prison time withrelativelylowfines.Moreover,thecorporatefinestheDOJisabletoimposedependgreatly on the industry that is in the DOJ’s cross hairs. Rightly or wrongly, the United States SentencingGuidelines,which theDOJuses to calculate recommendedfines, are drivenbythedollarvalueofcommerceaffectedbyacartel. Inaddition,finesarenotimposedevenlyacrossthemulti-yeararcofacartelinvestigation.Nofineswillbetalliedduringtheinvestigatory and plea negotiation phases of a matter, but only once the court imposes the



sentences. In later phases, resources are often devoted to individual prosecutions, which, as notedabove,generaterelativelylowfines.While thesignificanceof the loweraggregatefinesover the last twoyears isdebatable,the DOJ faced some objective setbacks in individual cases in the last year. For example, a federal court in the District of Utah ruled that the DOJ’s prosecution of a defendant in the heir location service matter was subject to the defendant-friendly rule of reason standard, rather than the per se standard. For decades the DOJ has, as a matter of prosecutorial discretion, reserved criminal prosecution for per se violations where the court and jurors by-pass inquiry into the reasonableness of the restraint and presume the anticompetitive effect of the agreement. Consistent with its historical practice, the DOJ charged the heir location case as a per se market allocation violation, alleging that the defendants and their competitors developed and implemented a set of written guidelines that governed how the participants would allocate potential customers that had been contacted by multiple competitors. The defendant, however, persuaded the court that the restraint was different enough from standard customer allocation agreements that it should not be analysed under the per se standard. The court also ruled that the statute of limitations barred the DOJ’s claim. Intheelectrolyticcapacitorspricefixingmatter,theDOJfaceddifferentchallenges.Severalparties sought to settle their cases by pleading guilty, but Northern District of California judge James Donato erected roadblocks that the DOJ is not used to facing. In May 2017, when Matsuo Electric Company sought to enter a guilty plea, the judge balked, calling the plea agreement a “sweetheart deal” for the company. In June, when it was Elna Company’s turn, the judge again rejected the plea deal as too lenient. In August, he rejected a plea deal for Holy Stone Holdings Co. In September, he rejected a second plea effort between the DOJ and Elna. Such rejections are unusual because judges typically defer to the DOJ when it comes to adequacy of plea arrangements. Judge Donato, however, clearly felt that the DOJ was not being tough enough. In a more serious setback for the DOJ, the Second Circuit Court of Appeals threw out convictions of two former London-based Rabobank traders, Anthony Allen and Anthony Conti, for rigging the London interbank offered rate (Libor) benchmark. United States v. Conti, 864 F.3d 63 (2d Cir. 2017). The court found that the defendants’ testimony to the U.K Financial Conduct Authority had been improperly used against them in their U.S. criminal trial in violation of the U.S. Constitution’s Fifth Amendment right against self-incrimination. Under U.S. law, the government cannot force a defendant to testify without safeguards to insure that it will not use the testimony against the defendant. The case demonstrates the friction created when enforcement agencies around the world bump into each other on parallel investigations. The decision could have wide-ranging implications for other cross-border cases, especially if other circuits adopt the Second Circuit’s reasoning. As the court stated, “[t]he practical outcome of our holding today is that the risk of error in coordination falls on the U.S. government (should it seek to prosecute foreign individuals), rather than on the subjects and targets of cross-border investigations”. The defendant in a related case, a Deutsche Bank Libor trader, immediately requested a hearing to investigate whether the government’s case against him had problems similar to those in the Allen/Conticase.TheSouthernDistrictofNewYorkjudgenotedthat“[t]heimplications for this case are huge”, saying “[i]t’s like uncharted waters. It’s like we’ve sailed off the edge of the map”.Civil price-fixing plaintiffs also suffered a setback involving friction between differentjurisdictions.TheU.S.CourtofAppealsfortheSecondCircuitvacatedaUS$147million



districtcourtjudgmentagainsttwoChinesecompaniesaccusedoffixingthepriceofvitaminC. In re Vitamin C Antitrust Litig., 837 F.3d 175 (2d Cir. 2016). The appellate court ruled thattheChinesegovernmenthadcompelledtheChinesecorporatedefendantstofixpricesfor the vitamin sold to U.S. companies and that the defendants could not have complied both with Chinese law and U.S. antitrust law simultaneously. Applying principles of international comity, the court held that Chinese law should prevail when the conduct involves Chinese companiesactingonChinesesoil.China’sMinistryofCommerce(MOFCOM)filedamicusbriefs in the case and the Second Circuit noted that the briefs were “historic” because “it is thefirsttimeanyentityoftheChinesegovernmenthasappearedamicus curiae before any U.S. court”. Moreover, the court noted that the “Chinese government has repeatedly made knowntothefederalcourts,aswellastotheUnitedStatesDepartmentofStateinanofficialdiplomatic communication relating to this case, that it considers the lack of deference it received in our courts, and the exercise of jurisdiction over this suit, to be disrespectful and that it ‘has attached great importance to this case’”. It is clear from these and other passages of the opinion that MOFCOM’s decision to participate directly in the litigation and present its position on the proper interpretation of Chinese law directly to the U.S. courts was pivotal to the outcome. The Supreme Court has agreed to hear the case. In Valspar Corp. v. E. I. DuPont De Nemours and Co., 873 F.3d 185 (3d Cir., 2017), the Third Circuitheldthatevidenceofmereparallelconductinoligopolisticmarketsisinsufficient,withoutmore,toestablishaprice-fixingconspiracy.TheThirdCircuit’sopinionappearstohold plaintiffs to a higher standard to come forward with clear, compelling circumstantial evidencewhenallegingpricefixinginanoligopolisticmarket.StateAttorneysGeneral flexed their anti-cartelmuscles this yearwith 45 of them plusofficials from theDistrictofColumbiaandPuertoRico joining in a federal civil actionalleging widespread market allocation and price fixing behaviour by manufacturers ofgeneric pharmaceuticals.


U.S. antitrust enforcement is in the midst of a changing of the guard, which may, or maynot, effect cartel enforcement policy going forward. TheSenatefinally confirmedMakan Delrahim, a lawyer, lobbyist, former Senate staffer, and alumnus of the Antitrust Division during theGeorgeW.Bush presidency, as PresidentTrump’s pick to lead theDOJAntitrustDivisionandhetookofficeonSeptember28,2017,afteraseveral-monthdelay. Under the division’s current organisation chart, his deputy in charge of criminal enforcement is considered a career position and thus does not automatically change with a new administration. However, because Brent Snyder left the criminal deputy post in June 2017tobecometheChiefExecutiveOfficeroftheHongKongCompetitionCommission,theoccupantofthatspotwillalsobechanging.Asofthiswriting,theDOJhasnotyetfilledthe position. It remains to be seen whether there will be any noticeable changes in cartel enforcement under the new leadership. Most observers are predicting relative continuity with respect to cartel enforcement.Once the DOJ puts the new criminal Deputy Assistant Attorney General in place, some of the issues that he or she will likely be addressing include: • ensuring that criminal cartel cases are not derailed by parallel investigations from other

jurisdictions(ashappenedintheLiborcase);• balancing allocation of resources between international cartels and more local or

regionaldomesticpricefixing,bidrigging,andmarketallocationschemes;



• balancingallocationofresourcesbetweencorporateandindividualaccountability;• making sure that the leniency programme remains viable and vibrant in light of

challenges(describedbelow);and• keeping abreast of new technologies that conspirators may rely on to accomplish their

schemes.


The Antitrust Division’s corporate leniency programme affords full immunity from prosecution to a corporation when applicants meet certain requirements. In 1993, the Antitrust Division redesigned the programme so that leniency was automatic for qualifying companies,andallcurrentofficers,directorsandemployeeswhocomeforwardalongwiththecompanyandcooperateareprotectedfromcriminalprosecution. With theredesign,the DOJ stressed transparency and objectivity. Following these changes, the success of the programme took off and leniency became the most important tool in the DOJ’s enforcement toolbox. The key requirements are that: (i) the DOJ has not yet learned of the conduct (Type A leniency)ordoesnotyethaveenoughinformationtopursueaconviction(TypeBleniency);and (ii) the corporation reports the misconduct fully and cooperates completely with the DOJ’s investigation.7 The DOJ keeps the identity of leniency applicants confidential.Depending on the nature of the cartel and the parties involved, however, the identity of the leniency applicant may become known, at least among the other defendants.In addition to immunity from criminal sanctions under the DOJ leniency programme, applicants may also be eligible for benefits in follow-on private civil cases, includingreduction from treble to single damages, and the elimination of joint and several liability by virtue of the Antitrust Criminal Penalty Enhancement and Reform Act (ACPERA) which Congress passed in 2004. The requirements under ACPERA include cooperation with plaintiffs in civil actions.Leniency is available only to the first-in applicant, and no formal leniency programmeexists for cooperating parties who come in later. The DOJ values cooperation, however, and cooperation is a mitigating factor under the Sentencing Guidelines that the DOJ points to in recommending sentences to the court. Earlier cooperation is likely to be more valuable totheDOJthanlatercooperationandismorelikelytoreceivealargerfinediscount.Therequirement thatacorporationbe thefirst toreport to theDOJtoqualifyunder theleniency programme is designed to create an incentive for those who uncover problematic conduct to rush to the DOJ or risk missing out in amnesty. If a company learns of some credible evidence of a criminal antitrust violation but does not have the complete picture of whether the conduct violated the antitrust laws the DOJ allows the company to obtain a “marker” to secure its place in line with the DOJ while investigating further whether a violation in fact occurred. Typically, the process begins with a phone call by counsel to the DOJ to see if a marker is available. Counsel usually shares some information regarding the nature of the illegal conduct and the evidence supporting it at this time, but merely putting in the marker does not require full details of the scope of the cartel and the applicant’s involvement. If the DOJ accepts the marker, the applicant must move quickly to conduct an internal investigation and prepare a formal proffer of evidence to the DOJ establishing thatthecompanysatisfiestheleniencyprogramme’srequirements.Successfulapplicantswill receive a conditional letter of amnesty, setting forth the requirements of cooperation by which the company must abide in order to maintain its immunity.



Under the leniency programme, the DOJ has created an “amnesty plus” programme designed to create an incentive for later cooperating parties to confess wrongful conduct outside the scope of the existing investigation. As part of amnesty plus, a company under investigation for one cartel offence that discovers another potential cartel offence may receive immunity forthesecondoffenceifitreportstheconduct(assumingitqualifiesforleniency),andmayalsoreceiveaconsiderablereduction infinefor theoriginaloffence. Conversely,undertheDOJ’s“penaltyplus”policy,thegovernmentwillseekfinesandprisonsentencesattheupper end of the range recommended by the Sentencing Guidelines if a company was aware of additional antitrust violations but chose not to report them.By most measures, the leniency programme has been dramatically successful. The DOJ hasbroughtaseriesofinternationalcartelstojustice,collectedbillionsofdollarsoffines,and imprisoned hundreds of executives. A huge percentage of DOJ cartel cases in recent decades have relied on information that came, directly or indirectly, from the leniency programmes. Following success in the U.S., many other jurisdictions have adopted leniency programmes. More than 80 jurisdictions now have them in one form or another. Prior to this global expansion, if a company discovered cartel activity the decision making process was straightforward. If the company moved quickly, it could secure complete immunity from cripplingfinesandprisonsentencesforexecutivesbyfullycooperatingwithauthoritiesinafewjurisdictions.Yetwithmorecountriesaddingleniencypolicies,thecalculushasshifted.The costs of securing leniency have skyrocketed. Leniency recipients must cooperate fully and transparently. Such cooperation entails: review, production and sometimes translation ofmillionsofpagesofdocuments;detailedattorneyproffers;andwitnessinterviewsandtestimony. Moreover, each country administers its programme differently. And because seeking leniency in only one or a few jurisdictions might leave you vulnerable to enforcement in others, seeking leniency anywhere means seeking it everywhere. But antitrust enforcers inone jurisdictionmight issuecooperationdemands that irreconcilablyconflictwith thedemands imposed by another. Companies also have to take into account the risks (now more dire than ever as more jurisdictions adopt private rights of action) of follow-on private litigation, which is virtually inevitable when a cartel becomes public knowledge. WhilehewasAntitrustDivisionActingAssistantAttorneyGeneral,AndrewFinch(nowPrincipal Deputy Assistant Attorney General ) stated in a keynote address to a conference on international antitrust law and policy that the DOJ was attuned to “the burdens that managing multiple leniency processes can impose on applicants”. He noted the need to makeinvestigationsmoreefficientforleniencyapplicants,andmadethreesuggestions: First, burdens can be reduced and unnecessary duplication minimised if agencies focus

investigations on harm in their own jurisdictions and tailor requests for documents and interviews with that in mind. Second, we can work to make document requests more targeted and be open to using advanced document collection tools, like predictive coding. Third, agencies can work to coordinate, where possible, on the logistics of interviews and searches. While witnesses will still need to be interviewed separately by each agency, interviews scheduled for the same time period and the same location can bring needed efficiency to the process.8

Asthecostsofapplyingforleniencyincrease,thereissomeworrythatthebenefitsseemtobe shrinking. Early in 2017, the DOJ published an amended version in its Frequently Asked Questions publication that explains the details of the leniency programme. Most observers interpreted the changes as eroding predictability, transparency, and certainty, and signalling the Division’s intent to cover fewer current and former executives and employees.



A consensus seems to be forming among lawyers who practise in the international cartel arena that leniency has lost some of its lustre. These lawyers and their clients are at least pausing before pulling the leniency trigger, if not turning away from leniency altogether. Asmentionedabove,overallcartelfinesin2017,like2016,continuetobesharplyofftherecord highs of just a few years ago. It is unclear whether any part of that reduction is a result of a diminished appetite for leniency programmes. The issue will continue to be debated.


Criminal settlementsIn criminal cases, the method for a target of an investigation to settle with the DOJ is for the target to admit guilt and agree to enter a guilty plea. The criminal justice system encourages resolution of criminal cases through plea agreements. Plea bargains can provide defendants with a number of benefits, including certainty, expedience, finality, and substantiallyreduced criminal penalties. Before proceeding with plea discussions, the government must besatisfiedthatithasaprosecutablecase.The Federal Rules of Criminal Procedure lay out different types of plea agreements, two of which comprise the vast majority of plea agreements in the cartel context. In an agreement under Federal Rule of Criminal Procedure 11(c)(1)(B) (known as a “B” deal), thegovernment’sattorneywillagreetorecommendaparticularpunishment;thedefenceisfree to oppose this recommendation and argue for a lesser sentence. However, a defendant subject to a “B” deal has no right to withdraw the guilty plea if the court rejects all or part of the recommendations. The defendant must accept the sentence imposed by the court irrespective of the government’s recommendation.The majority of the DOJ’s cases involving foreign corporations and individuals have been resolved as “C” deals (in reference to Federal Rule of Criminal Procedure 11(c)(1)(C)). The “C” deal is a mutual recommendation by the prosecutor and defendant to the court on the appropriate sentence and the application or non-application of certain factors or provisions of the Federal Sentencing Guidelines. If the court accepts the “C” deal, it is bound by the recommendation in the agreement. Some courts refuse to accept “C” deals because of the removal of the sentencing court’s discretion.Where a company agrees to a plea bargain, its directors, officers, and employees willsimilarly receive immunity from future prosecution, except for those who have been “carved out” of the non-prosecution provisions of the plea agreement. The DOJ’s practice is to carve out a number of targets of the investigation who it may later indict for wrongful conduct associated with the violations set forth in the plea agreement. The DOJ does not end up indicting all carved-out individuals and prosecutes fewer still. These carved-out individuals are often, though not always, higher-ranking executives who held pricing authority and actively promoted the cartel activity. The DOJ may also choose to carve out individuals who attended cartel meetings and entered into the agreements on behalf of the company, against whom the documentary evidence is often the strongest.In 2013, the DOJ announced that it would no longer publicly disclose the names of individuals “carved out” from the non-prosecution provision of company plea agreements. In putting anendtothispractice,thedivisionrecognisedthat“[a]bsentsomesignificantjustification,it is ordinarily not appropriate to publicly identify uncharged third-party wrongdoers”. The DOJ also announced that it would no longer carve out individuals from pleas merely for not cooperating in its investigation. Instead, the division will carve out only those individuals



who are “potential targets” of the investigation (i.e., only those whom the division has reason to believe were engaged in the criminal conduct at issue and targets for potential prosecution). During a plea negotiation for a corporate target, the DOJ typically interviews employees who may have been involved in the conduct (or receives attorney proffers from their counsel). The pleanegotiationsoftenfocuson:whowillbecarvedoutofthenon-prosecutionprovisions;theviolationsforwhichthedefendantmustadmitguilt;theproductsorservicescoveredbytheconspiratorialagreement;thedurationandgeographicscopeoftheconspiracy;thecooperationcreditthatthepartieswillsuggest;andthesentencingrecommendation.TheDOJ website contains a model corporate plea agreement9 and a speech by former Deputy Assistant Attorney General Scott Hammond which describes the plea agreement process.10

Civil settlementsThe settlement of civil antitrust cases brought by the DOJ or FTC is by consent decree. Through consent decrees, the agencies will seek to (1) stop the illegal practices alleged, (2) prevent their renewal, and (3) restore competition to the state that would have existed had the violation not occurred. Civil consent decrees by the DOJ (but not FTC) must comply with the Antitrust Procedures and Penalties Act of 1974 (15 U.S.C. § 16), also known as the Tunney Act. The Tunney Act subjectsDOJconsentjudgmentstopublicscrutinyandcommentandrequiresthefilingofa Competitive Impact Statement which sets forth the information necessary to enable the court and the public to evaluate the proposed judgment in light of the government’s case.


Third parties (and injured parties who do not want to bring their own private litigation) can report violations to the FBI, the Antitrust Division, the FTC, or state attorneys general. All of these agencies welcome public complaints (although they are likely to be sceptical of claims that appear designed to hobble a competitor). The DOJ and FTC are most likely to be interested in a public complaint if the alleged harm is widespread. If the harm is focused on victimswithin a specific state, theDOJmay refer thematter to that state’sattorney general. A complaining party should supply as much detail as possible about the alleged violation, the products, services, companies, individuals, organisations, and victims involved. Counsel familiar with cartel enforcement procedures and priorities can help package and present a complaint in a way that may increase the chances that the agencies will investigate.


The DOJ may seek equitable injunctive remedies for cartel activity via civil actions (15 U.S.C.§4),buthasnopowertoseekcivilfines.TheFTCissimilarlylimitedtoequitableremedies, including injunctive relief and disgorgement. Such actions rarely proceed to trial and the parties commonly resolve them by consent decree, with the government typically requiring the defendant to cease the problematic conduct or imposing other internal changes in response to the government’s concerns.

Right of appeal against liability and penalties

Criminal defendants have the right to appeal a guilty verdict following a trial. Convicted criminal defendants may also appeal their sentences. If the jury acquits a defendant, the



United States Constitution limits the government’s appeal rights. The 5th Amendment’s “double jeopardy” clause protects against multiple prosecutions for the same offence. Therefore, if the defendant is acquitted, the government cannot appeal. There are limited instances, however, when the government can appeal. The government may appeal court rulings which grant a defendant post-conviction relief (e.g., the reversal of a conviction). It may also appeal district court decisions on certain pre-trial motions (e.g., the suppression of evidence and sentencing issues). Criminal defendants who agree to plead guilty give up their right to appeal. In civil cases, both plaintiffs and defendants have the right to appeal adverse rulings. Appeals from the trial decision are taken to the federal circuit Court of Appeals for the geographic region in which the trial court sits. Appellate courts generally defer to trial courts’findingsoffact,overturningthemonlywhentheyareclearlyerroneous.Questionsof law, by contrast, are reviewed de novo, in other words the appellate court considers the lawasifforthefirsttime.Noticesofappealmustbefiledwithinarelativelyshortwindowoftimeortherighttoappealislost(muchmoretimeisallowedtofilesubstantiveappellatebriefs supporting the appeal). For civil litigants, the notice of appeal deadline is usually 30daysfromentryofthejudgmentororderappealedfrom;forcriminaldefendants,thedeadlineis14daysfromthedateofentryofjudgment,orfromthefilingofthegovernment’snotice of appeal, whichever is later. Parties wanting a review of a court of appeals ruling may apply to the U.S. Supreme Court. However, review is discretionary and the Supreme Court only grants review for a tiny percentage of cases.

Criminal sanctions

The sanctions for cartel activity under the U.S. antitrust laws can be severe for both corporationsandindividualdefendants,includinghighfinesand,forindividuals,prisontime.Section 1 of the Sherman Act has always been both a criminal and civil statute, although whenitwasfirstpassedin1890,aviolationwasamisdemeanourwithamaximumprisontermofoneyearandamaximumfineof$5,000.Thepenaltieshavesteadilyincreasedsincethen.In2004,CongressincreasedthemaximumcriminalfineforcorporationsundertheShermanActto$100million,whereitsitstoday.TheAlternativeFinesAct(18U.S.C.§3571)allowsprosecutorstoside-stepsuchstatutorylimitsandfinedefendantsupto“twicethe gross gain or twice the gross loss” from the offence. This provision gives prosecutors powerfulleverage, incertaincasesinvolvinglargemarkets, toextract largefinesinpleabargains.TheDOJhasnotbeenshyaboutexercisingthatleverage;ithascollectedcartelfinesabovethe$100millionmaximummanytimes.Todate,thelargestfinesleviedagainstacorporatedefendantforaShermanActviolationare$500million–theDOJobtainedthisfineamountintwoseparatecases,oneagainstF. Hoffman-La Roche, Ltd. and another againstAU Optronics Corporation. With theexceptionofthefineagainstAUOptronics,thefinesabovetheShermanAct’s$100millionmaximum have always been in the plea bargain context based on an agreed upon set of facts.TheAUOptronicsfinefollowedatrialwhichrequiredtheDOJtoprovetwicetheloss to a jury “beyond a reasonable doubt”. In addition to significant fines, companies that engage in cartel activity face debarmentand suspension from future government contracts. The Antitrust Division is required to report individual defendants qualifying for debarment to the Defence Procurement Fraud Debarment Clearinghouse. The DOJ also lists defendants in the debarment database known as the System for Award Management.



WhilethepotentialforprisontermshasalwaysbeenpartoftheShermanAct,significantprison terms only started being imposed in the late 1980s. Violation of Section 1 became a felony in 1974, when Congress increased the maximum prison term to three years. In 2004, Congress increased the maximum prison term from three years to its current 10-year term. In practice, prison sentences for individuals do not approach the statutory maximum of 10 years. They have averaged 22 months between 2010 and 2016. The DOJ uses the Federal Sentencing Guidelines to recommend the penalties to impose on corporations and individuals convicted of or pleading guilty to a cartel violation. The Federal Sentencing Guidelines consider a variety of factors for the recommended penalties, including the volume of commerce affected, prior criminal history, role in the offence, cooperationwith law enforcement, and compliance programmes, among others. Whilefederal courts are not required to impose sentences within the ranges provided in the Guidelines,11 they must still give “respectful consideration” to the Guidelines in connection with a wider range of factors set forth in the federal sentencing statute (18 U.S.C. § 3553).12

The DOJ’s view is that maximum deterrence is achieved, in both international and domestic cases, by holding culpable individuals accountable, not just their corporate employers. The DOJ has followed through on this belief, charging several hundred individuals over the last decade. The DOJ has also insisted that individuals facing charges spend time in prison, and has continued to seek incarceration in most cases. The pressure on line prosecutors to look hard at charging individuals in each case increased with the issuance in September 2015 of amemorandumfromDeputyAttorneyGeneralSallyQ.YateslayingouttheDOJ’smoreaggressive policy on individual accountability for corporate wrongdoing. In recommending the appropriate prison sentence for an individual defendant, the Guidelines assign a “base offence level” to a crime in a point system. For antitrust violations, the base offence level is 12, which results in a starting range of 10 to 16 months’ imprisonment. The Guidelinesfurtherrecommendincreasestothebaseoffencelevelwhenthespecificantitrustoffence is bid rigging, or when the affected volume of commerce exceeds certain thresholds startingatUS$1million.TheGuidelinesthenconsideraggravatingormitigatingfactorsin adjusting the points up or down, such as whether the individual abused a position of trustorparticipatedintheobstructionofjustice(Guidelines,§§3B1,3C1).Withrespecttoindividualcriminalfines,theGuidelinessuggestbeginningamountscorrespondingto1to5percentoftheaffectedvolumeofcommercebutnolessthanUS$20,000.Thejudgemaythenconsideraggravatingormitigatingfactorsinsettingthefine,consideringtheextentofthe defendant’s participation in the cartel and the role he or she played, and whether and to whatextentthedefendantpersonallyprofitedfromthescheme,includingthroughbonuses,promotions,orothercareerenhancements.Individualswholacktheabilitytopaythefineare sentenced to community service, which the Guidelines recommend should be “equally asburdensomeasafine”(Guidelines,§2R1.1,applicationnote2).For convicted corporations, the Guidelines recommend a “base fine” equal to 20 percentoftheaffectedvolumeofcommerce.Thisbasefineisthenmultipliedaccordingtoa “culpability score”,which is calculatedbasedon factors including thefirm’spreviouscriminal history, whether it has or will implement antitrust compliance programmes or policies, evidence of obstruction of justice, and self-reporting. The Sentencing Guidelines also provide that courts can impose probation on corporations or requirecorporations topay restitutionundercertaincircumstances,andDOJofficialshave increasingly considered, and in some cases requested and secured, court-supervised probation pursuant to the Guidelines as a means “to ensure an effective compliance



programme and to prevent recidivism”.13 The DOJ has echoed its commitment to corporate rehabilitationwhere“confidenceislowthatadefendantiscommittedtorehabilitatingitselfwith appropriate compliance measures”.14

Cross-border issuesOverseas reach of the Sherman ActThe statute that governs the overseas reach of the Sherman Act – the Foreign Trade Antitrust Improvements Act (FTAIA) (15 U.S.C. §6a) – is notoriously convoluted. The FTAIA generally removes foreign commerce from the reach of U.S. antitrust law, but then adds much of it back in through important exclusions and exceptions. For example, the FTAIA allows the Sherman Act to apply with full force to “import commerce”. In addition, the FTAIA allows the Sherman Act to apply to conduct involving foreign commerce if it has a “direct, substantial, and reasonably foreseeable effect” on domestic commerce and that effect “gives rise to” the plaintiff’s claims (the so-called “domestic effects” exception). The contoursoftheseexclusionsandexceptionshasbeenthesubjectofsignificantlitigation.Courts are split on the degree of “directness” required to satisfy the domestic effects exception. The Ninth Circuit has held that an effect is “direct” only if it “follows as an immediate consequence of [defendants’] activity”. Thus “[a]n effect cannot be ‘direct’ where it depends… on uncertain intervening developments”.15 The Second and Seventh Circuits and DOJ have interpreted directness more broadly, applying a “proximate cause” standard.16 Courtshaveyettodefinewhatcountsasa“substantiality”directeffect.Atleastonecourthas remarked, however, that Congress intended to permit antitrust claims only where the alleged, “anticompetitive conduct has… a quantifiable effect on the U.S. economy”.17 Finally, courts have held that plaintiffs must demonstrate that the requisite “direct effect” on U.S. commerce was “foreseeable” to an objectively reasonable person making practical reasonable judgments.18

Red Notices and ExtraditionWhentheDOJappliestheShermanActtooverseasconductitsnaresindividualsresidingabroad,someofwhomhavenotvoluntarilysubmittedtoU.S.jurisdiction.Whereprovidedfor by treaty, the DOJ may seek extradition of individuals from foreign jurisdictions. Most treaties contain a dual criminality requirement that permits extradition only for conduct that both countries consider criminal. This has hampered U.S. authorities’ efforts to extradite individuals for Section 1 violations because most other jurisdictions do not consider antitrust violations crimes (although the DOJ often pairs antitrust charges with fraud claims that are more likely to be criminal on both sides). The risk of extradition has increased as more jurisdictions around the world have criminalised cartel conduct. In 2014, DOJ successfully extradited an Italian national from Germany on a charge of participating in a conspiracy to rigbids,fixprices,andallocatemarketsharesforsalesofmarinehosesoldintheU.S.andelsewhere.The DOJ may place foreign individuals who have been indicted or are targets of a grand jury investigation on INTERPOL’s red notice list. Once placed on the red notice list the individual is at risk of being detained at the borders of the 190 participating countries. Obtaining a red notice requires the issuance of a valid national arrest warrant, but not proof that the individual is guilty of any crime. Red notice listings do not expire, so unless removedfromthelistanindividualcanbeessentiallyindefinitelyconfinedtotheirhomecountry. Some have criticised the use of red notices as a violation of civil and human rights because of the lack of due process protections.19



Charged individuals residing outside the U.S. are usually unable to have the charges dismissed in absentia due to something called the “fugitive disentitlement doctrine” which allows courts to deny rights to those who do not agree to appear and submit to the court’s jurisdiction. The court applied that doctrine in 2015 to a Swiss UBS trader charged in the LIBOR matter.


The U.S. has the world’s most established system of private antitrust enforcement, due in no small part to the availability of treble damages and class action treatment for antitrust claims. Plaintiffsfile hundredsof private antitrust cases eachyear. A largenumberofprivate civil cartel lawsuits are brought as class actions pursuant to Rule 23 of the Federal Rules of Civil Procedure. To qualify for class treatment under Rule 23, plaintiffs must plead and prove the following:• that the class is so numerous that a joinder of every individual plaintiff is impracticable

(numerosity);• thattherearequestionsoflaworfactcommontotheclass(commonality);• thattheclaimsordefencesoftheclassrepresentativesaretypicaloftheclass(typicality);

and• that the class representatives will adequately represent the interests of the class

(adequacy of representation).In addition, plaintiffs must prove that common questions of law and fact will predominate over any individual questions and that the class action device is a superior method for adjudicating the dispute. Certaincircuitcourtsofappealshaveheldthataclassmaynotbecertifiedunlesstheplaintiffalso demonstrates that the class is ascertainable, i.e.,definedsuchthatonecanobjectivelydetermine who is a class member, and whether there is an administratively feasible method to make that determination and provide notice to the class members as required by the Due Process Clause of the U.S. Constitution. Other circuits have held that this is not a relevant considerationatallattheclasscertificationstage.Giventhesplitinthecircuits,itseemsinevitable that the Supreme Court will eventually have to weigh in. Dependingontheindustry,purchasersofallegedlyprice-fixedproductsmayberelativelylargecommercialenterprises.Withincreasingfrequency,someofthesepurchasershavebeenelectingtoopt-outoftheclassprocedure,retaintheirownseparatecounsel,andfileindividual lawsuits alongside the class actions. As more jurisdictions around the world adopt private rights of action, procurement officials and in-house counsel atmany companieswho may have been victimised by cartels are evaluating whether this strategy makes sense. Someofthebenefitstofilingaseparateactionincludeapotentiallyhigherrecovery,non-contingency attorney fee arrangements (and potentially lower fees), more control over the litigation, and more control over the settlement process, including the possibility for creative win-winbusinessresolutions.Someofthedrawbackstofilingseparateindividualopt-outactions include potential harm to supplier relationships, time and effort requirements to develop cases and damage models, increased discovery burdens, increased demands on in house legal departments and business people, and likely having to pay some attorneys’ fees even if the case is unsuccessful.

Reform proposals

In the spring of 2017, the Criminal Antitrust Anti-Retaliation Act was introduced in the Senate. The bill, if it becomes law, would give whistleblower protection for employees who



provide information to the DOJ regarding conduct that violates the criminal antitrust laws by prohibiting employers from retaliating against such employees. In November of 2017, the bill passed the U.S. Senate. It would have to also pass the House of Representatives before it could be submitted to the President for signature into law, and it is unclear whether the House of Representatives will take up the measure. Some commentators have proposed that the law should go further than merely protecting whistleblowers from retaliation by their employers. For example, Robert Connelly, former ChiefoftheAntitrustDivision’sPhiladelphiafieldofficeandpartneratGeyerGorey,hassuggestedprovidingwhistleblowerswith afinancial reward for turning in a cartel. See “It’sTimeforanAntitrustWhistleblowerStatute”inConnolly’sblogCartel Capers, http://cartelcapers.com/blog/time-antitrust-whistleblower-statute-part/. The financial rewardwould help the whistleblower defray the (not insubstantial) legal costs of securing immunity and cooperating with the government. The suggestion is provocative and controversial and there is no indication that legislators are considering it, but it is an idea that is now in the public sphere.

* * *

Endnotes1. Hawaii v. Standard Oil Co., 405 U.S. 251, 262 (1972).2. See Brady v Maryland, 373U.S. 83 (1963);Giglio v. United States, 405 U.S. 150

(1972). 3. Jencks Act, 18 U.S.C. §3500. 4. Monsanto v Spray-Rite Service Corp., 465 U.S. 752 (1984).5. Standard Oil Co. of New Jersey v. United States, 221 U.S. 1 (1911). 6. Thegovernment’sfiscalyearendsonSeptember30.7. Further details about DOJ’s leniency programme may be found at www.justice.gov/atr/

leniency-programme.8. Keynote address by Acting Assistant Attorney General Andrew Finch at Annual

Conference on International Antitrust Law and Policy, reprinted at https://www.justice.gov/opa/speech/acting-assistant-attorney-general-andrew-finch-delivers-keynote-address-annual-conference.

9. https://www.justice.gov/atr/file/889021/download.10. https://www.justice.gov/atr/speech/us-model-negotiated-plea-agreements-good-deal-

benefits-all.11. United States v. Booker, 543 U.S. 220 (2005).12. Pepper v. United States, 562 U.S. 476, 501 (2011).13. “Prosecuting Antitrust Crimes”, remarks of Assistant Attorney General Bill Baer at

the Georgetown University Law Center Global Antitrust Enforcement Symposium, reprinted at https://www.justice.gov/atr/file/517741/download at 8.

14. “The Measure of Success: Criminal Antitrust Enforcement During the Obama Administration”, remarks of Acting Assistant Attorney General Renata Hesse at the 26th Annual Golden State Antitrust, UCL and Privacy Law Institute, reprinted at https://www.justice.gov/opa/speech/acting-assistant-attorney-general-renata-hesse-antitrust-division-delivers-remarks-26th.

15. U.S. v LSL Biotechnologies, 379 F.3d 672, 680-81 (9th Cir 2004).16. See Minn-Chem, Int v Agrium Inc, 683 F.3d 845, 860 (7thCir2014)(enbanc);Motorola

Mobility LLC v AU Optronics Corp, 775 F.3d 816, 819, 824-825 (7thCir2015);Lotes Co v Hon Hai Precision Indus Co, 753 F.3d 395, 410 (2d Cir 2014).



17. In re TFT-LCD (Flat Panel) Antitrust Litigation, 822 F. Supp. 2d 953, 964 (N.D. Cal. 2011).

18. Animal Science Products, Inc. v China Minmetals Corp, 654 F.3d 462, 471 (3d Cir. 2011).

19. SeeNinaMarinoandReedGrantham,“WantedbyInterpol”,ABACriminalJustice,vol. 30, No. 3, reprinted at https://www.americanbar.org/content/dam/aba/publications/criminal_justice_magazine/2015_cjfall15_ marino.authcheckdam.pdf.


Sidley Austin LLP555 California St., Suite 2000, San Francisco, CA, USA

Tel: +1 415 772 1200 / URL: www.sidley.com/en/us

Peter HustonTel: +1 415 772 1200 / Email: [email protected] K. Huston has over 25 years of experience in high-stakes civil and criminal antitrust litigation, trials, government investigations and merger clearance work, both in and out of government. Peter was acknowledged as one of the Top 100 Lawyers in California by the Daily Journal in 2012 and received a California LawyerAttorneyof theYear(CLAY)Awardforcorporate antitrust in 2013.Prior to joining Sidley, Peter served as Assistant Chief in the San Francisco OfficeoftheAntitrustDivisionoftheUnitedStatesDepartmentofJusticewhere he led and supervised both criminal cartel and civil merger matters. For his government service, Peter was awarded the Attorney General’s Distinguished Service Award and was twice awarded the Antitrust Division’s Award of Distinction.Peterwastheleadlawyeronmultiplehigh-profileantitrustinvestigationsandtrials, including the Antitrust Division’s successful prosecution of members of theLCDcartel,regardedbymanyasoneofthemostsignificantantitrustcasesin recent history. He also led other criminal matters, including investigations conducted in coordination with foreign competition authorities, and oversaw theworkoftheSanFranciscooffice’sprosecutors.


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