Cartels Enforcement, Appeals & Damages Actions

Ninth Edition

Contributing Editors: Nigel Parr & Euan Burrows Global Legal Insights Cartels Enforcement, Appeals & Damages Actions

2021, Ninth Edition Contributing Editors: Nigel Parr & Euan Burrows Published by Global Legal Group GLOBAL LEGAL INSIGHTS – CARTELS 2021, NINTH EDITION

Contributing Editors Nigel Parr & Euan Burrows, Ashurst LLP

Head of Production Suzie Levy

Senior Editor Sam Friend

Production Editor Hollie Parker

Publisher James Strode

Chief Media Officer Fraser Allan

We are extremely grateful for all contributions to this edition. Special thanks are reserved for Nigel Parr and Euan Burrows of Ashurst LLP for all of their assistance.

Published by Global Legal Group Ltd. 59 Tanner Street, London SE1 3PL, United Kingdom Tel: +44 207 367 0720 / URL: www.glgroup.co.uk

ISBN 978-1-83918-110-8 ISSN 2050-7593

This publication is for general information purposes only. It does not purport to provide comprehensive full legal or other advice. Global Legal Group Ltd. and the contributors accept no responsibility for losses that may arise from reliance upon information contained in this publication. This publication is intended to give an indication of legal issues upon which you may need advice. Full legal advice should be taken from a qualified professional when dealing with specific situations. The information contained herein is accurate as of the date of publication.

Printed and bound by TJ Books Limited, Trecerus Industrial Estate, Padstow, Cornwall, PL28 8RW April 2021 CONTENTS

Preface Nigel Parr & Euan Burrows, Ashurst LLP

Angola Ricardo Bordalo Junqueiro & Cláudia Coutinho da Costa, VdA 1

Australia Dennis Miralis, Jasmina Ceic & Phillip Gibson, Nyman Gibson Miralis 7

Belgium Hendrik Viaene & Karolien Van der Putten, McDermott Will & Emery 17

Canada Randall Hofley, Cassandra Brown & Gillian Singer, Blake, Cassels & Graydon LLP 30

China Zhan Hao & Song Ying, AnJie Law Firm 49

Denmark Olaf Koktvedgaard, Søren Zinck & Frederik André Bork, Bruun & Hjejle Advokatpartnerselskab 65

European Union Irene Antypas, Jessica Bracker & Marie Florent, Ashurst LLP 76

Finland Ilkka Aalto-Setälä & Henrik Koivuniemi, Borenius Attorneys Ltd 103

Germany Dr. Ulrich Schnelle & Elisabeth S. Wyrembek, Haver & Mailänder Rechtsanwälte Partnerschaft mbB 114

India Anu Monga & Rahul Goel, AnantLaw 127

Japan Daiske Yoshida, Tomohiko Kimura & Kazuyasu Yoneyama, Morrison & Foerster LLP 141

Portugal Ricardo Bordalo Junqueiro & Leonor Bettencourt Nunes, VdA 152

Romania Mihaela Ion & Vanessa Nistor, Popovici Nițu Stoica & Asociații 163

Russia Alla Azmukhanova & Anastasia Sidorenko, ALRUD Law Firm 178

Singapore Lim Chong Kin & Corinne Chew, Drew & Napier LLC 192

Spain Pedro Moreira, SCA LEGAL, S.L.P. 203

Switzerland Michael Tschudin, Frank Scherrer & Urs Weber-Stecher, Wenger & Vieli Ltd. 223

Turkey Gönenç Gürkaynak & Öznur İnanılır, ELIG Gürkaynak Attorneys-at-Law 235

United Arab Belinda S Lee, Meaghan Thomas-Kennedy & Ariel Rogers, Emirates Latham & Watkins LLP 249

United Kingdom Giles Warrington & Richard Snape, Pinsent Masons 256

USA Jeffrey J. Amato, Sofia Arguello & Molly M. Donovan, Winston & Strawn LLP 270

PREFACE

e are delighted to present the ninth edition of Global Legal Insights – Cartels. This edition covers the most significant Wdevelopments in 21 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 free rein to determine the content of their chapter. By giving the authors the opportunity both to select the legal and policy issues 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 that 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 & Euan Burrows Ashurst LLP

Angola

Ricardo Bordalo Junqueiro & Cláudia Coutinho da Costa VdA

Overview of the law and enforcement regime relating to cartels As a consequence of the profound change in the Angolan administration in September 2017, with the current President of the Republic of Angola, João Lourenço, taking over from the 38-year-old presidency of President José Eduardo dos Santos, new policies started being implemented aimed at restoring macroeconomic stability, improving the business environment and attracting investment. Given that monopolies and oligopolies were historically dominating key sectors of the Angolan economy (e.g., telecommunications, cement), the government set as a priority the promotion of greater competition in domestic markets. As from 2018, significant reforms in the competition landscape of Angola started to be implemented with the objective of creating a market economy based on fair competition, morality, and ethics. The ongoing legal reforms, which included the adoption of a competition law framework and Private Investment Law, also intends to align the national legal and regulatory frameworks with international standards, and with the requirements laid out by the International Monetary Fund (“IMF”) in December 2018, in exchange for the USD 3.7 billion credit facility. In this context, the following legal framework is in force, with relevance for cartels: (i) Angolan Competition Act (Law 5/18, of 10 May, hereinafter “Competition Act”), which came into effect on 10 May 2018. (ii) Competition Regulation (Decree 240/18, of 12 October 2018). (iii) Bylaws of the Competition Regulatory Authority (“CRA”) (Presidential Decree 313/18 on 21 December 2018, modified by Presidential Decree 110/19, of 16 April 2019). (iv) Instructive No. 7/20 and Instructive 8/20, both of 25 September 2020, containing the Regulation of the Leniency Regime and the Form for Complaints on Restrictive Practices, respectively. The CRA is the authority that enforces the Competition Act and the Competition Regulation, invested with regulatory, supervisory and sanctioning powers. Although granted with administrative and financial autonomy, the CRA is overseen by the President of Angola through the ministerial department responsible for public finances. The Angolan competition framework is largely inspired by the European Union competition rules, and particularly by the Portuguese Competition Act. It is applicable to both private and public sectors as well as cooperatives and trade associations. Historic and linguistic ties between Angola and Portugal have possibly played a role in the considerable similarities of both competition legal frameworks and might also influence the enforcement of the Angolan legislation closer to the EU experience, notably with respect to cartel enforcement. Nevertheless, the Angolan legislation and enforcement will certainly

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© Published and reproduced with kind permission by Global Legal Group Ltd, London VdA Angola have its autonomous development and will present specific outcomes as a result of not only the Angolan culture but also of the evolution of its economy and legal system in other domains. The Competition Act and Competition Regulation prohibit restrictive practices which include: (i) anticompetitive agreements; (ii) abuse of a dominant position; and (iii) abuse of economic dependency. Undertakings engaging in these types of practices are exposed to substantial penalties, ranging from 1–10% of their turnover, as well as to ancillary sanctions. The Competition Act and Competition Regulation also provide for an ex ante merger control regime. With respect to agreements, the Competition Act prohibits horizontal and vertical agreements between undertakings, concerted practices, and decisions by associations of undertakings that substantially restrict competition in the Angolan market. The following practices are provided for in the competition act as prohibited: price-fixing and market-sharing agreements; output restrictions; resale price maintenance; and discriminatory pricing to equivalent customers or suppliers. The Competition Act provides for an unusual and somewhat surprising reversion of the burden of proof in relation to these horizontal and vertical practices, being up to undertakings or associations of undertakings to prove that their behaviour does not restrict competition. It is yet to be seen how the CRA will apply this provision in practice, and how it will balance this with the constitutional principle of presumption of innocence enshrined in the Angolan Constitution. Anti-competitive agreements may be subject to a temporary ex ante exemption granted by the CRA, provided that the parties demonstrate that: (i) the agreement contributes to improving the production or distribution of certain goods or services, or to promoting technical or economic progress; (ii) an equitable part of the benefits is passed on to the users of these goods or services; (iii) the agreement does not impose any restrictions which are not indispensable to the attainment of these objectives; and (iv) the agreement does not allow for the elimination of competition. Although there are no public decisions related to cartel investigation in Angola, the CRA is deemed to be a very proactive authority. Despite the challenges of the COVID-19 pandemic, in 2020 the authority has carried out eight investigations of anti-competitive practices, celebrated two cooperation protocols, received five merger control filings, issued three regulations (including the above-mentioned Instructions) and four guidelines. In addition, the CRA issued three recommendations, carried out three market studies and organised 12 competition advocacy events.

Overview of investigative powers in Angola In order to properly carry out an investigation for antitrust infringements, the CRA was invested with broad powers, which include powers to: (i) carry out dawn raids in the premises of companies and to seize documents; (ii) question legal representatives of the undertakings or associations of undertakings, or any other persons deemed relevant for the investigation; (iii) request documents and information from legal representatives of the undertakings or associations of undertakings concerned or any other person deemed relevant for the investigation; (iv) when empowered by an order of the competent judicial authority, seal off the premises of companies where relevant documents may be located; and/or (v) request assistance from any service that is part of the public administration, including the police, provided it is necessary for the attainment of its goals.

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Enforcement The CRA’s headquarters are in the Angolan capital, Luanda, and the law provides for the possibility of establishing provincial delegations throughout the territory of Angola. It is staffed with almost 60 officials at the time of writing (January 2021). The CRA is established as a public entity benefitting from administrative and financial autonomy being under the supervision of the President through the Ministry of Finance. Such supervision encompasses the power to appoint the members of the board, setting objectives and priorities for the CRA as well as exercise disciplinary power over the members of the Board. The CRA is composed by the Board of Directors and the Supervisory Board, each comprising three members. It is the responsibility of the Board of Directors to decide on the opening and closure of proceedings, and the responsibility of the Chairman of the Management Board to appoint and dismiss the Heads of Departments. The Supervisory Board is responsible for ensuring generic compliance and monitoring all financial or economic nature management affairs. The Board Members of CRA’s are appointed by the Angolan President of the Republic. Ms. Eugénia Pereira was appointed for a three-year renewable mandate as president in 2019, and Ms. Ana Ramalheira and Mr. Nelson Lembe are the current two remaining members of the authority’s Board of Directors. In its two years of activity, and despite the challenges of the COVID-19 pandemic, the CRA has carried out 13 investigations of anti-competitive practices in several sectors, (including one abuse of dominance, seven horizontal agreements and two vertical agreements) of which only three resulted in decisions to open proceedings. The CRA has an online presence, with an official website, and very active social networks (such as Linkedin and Instagram). Although it is obliged to publish all the information it considers relevant, including non-confidential versions of its decisions and economic studies, there is still poor access to information on enforcement.

Key issues in relation to investigation and decision-making procedures Whenever strong evidence of restrictive practices comes to the attention of the CRA, it is bound to open an investigation. In principle, an antitrust investigation should be closed within 24 months from the opening of proceedings, although compliance with this timeframe is yet to be confirmed in practice. Following the adoption of a statement of objections, the CRA has a maximum of 12 months to complete the investigation. Replies to the statement of objections must be presented within 20 working days from the statement of objections. Rights of access to the file by the investigated parties are provided in the Angolan Competition Act, without prejudice to the protection of business secrets.

Leniency/amnesty regime The Competition Regulation allows the CRA to adopt and regulate a leniency regime, allowing for a reduction of fines, if the collaboration results in the identification of other participants in the infringement and/or in the gathering of information and documents which ultimately prove an infringement.

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Although immunity is excluded, the first undertaking coming forward qualifies for a fine reduction of 50–70%, the second 30–50%, and the third 10–30%, provided that: (i) the CRA does not have enough evidence to sustain a fining decision; (ii) the applicant must admit to its participation in the infringement and cooperate fully and permanently with the investigation; and (iii) the applicant ceases immediately its participation in the infringement. The Leniency regime was published on 25 September 2020, through Instructive No. 7/20, which regulates the procedure for its application, namely the requirements for the fine reduction, how and where such application should be submitted as well as other procedural and substantial aspects.

Administrative settlement of cases The Angolan competition framework does not envisage the possibility of settlement of antitrust cases.

Third-party complaints The CRA is legally bound to open an investigation, whenever strong evidence of restrictive practices comes to its attention. On 25 September 2020 the CRA approved the instruction No. 8/20 – the Regulation on the Form of Complaints on Restrictive Practices (hereinafter “Complaints Regulation”). The above-mentioned Regulation regulates the preparation, registration and processing of complaints of potential restrictive practices, through a specific form. The complaints may be carried out by any individual or undertaking that is aware of a restrictive practice prohibited by the Competition Act and it shall have, inter alia, a detailed identification of its agents, an objective description of the facts supporting it and proof. After receiving the Form, the CRA shall register it in the proper platform and initiate a preliminary analysis to assess whether it should open proceedings or dismiss it. Thereafter, the complainant has the right to be informed of the CRA’s decision: (i) to either open proceedings or alternatively, to dismiss; or (ii) to close the case following the statement of objections. The identity of the complainant will be of restricted access, as well as the information it provides, except if it is injurious.

Civil penalties and sanctions The adoption of any of the above-referred restrictive practices exposes the infringing companies to fines ranging from 1% to 10% of their last annual turnover. Ancillary penalties may also apply should the CRA conclude that the infringement is particularly serious. This includes (i) publication in the national newspaper with the highest circulation of the extract of the decision imposing a fine, (ii) a ban on participation in up to three public tenders for up to three years, and (iii) structural measures such as the spin-off of an undertaking, transfer of control, disposal of assets, winding down of activities, or to take any other act or measure that it deems necessary to eliminate the harmful effects on competition. The Competition Act also allows the CRA to impose daily penalty payments on the infringing companies of up to 10% of their average daily turnover of the previous year, in case of failure to comply with the sanctions imposed by the authority.

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The Angolan Competition Act does not foresee the application of sanctions to individuals for participation on competition law infringements.

Right of appeal against civil liability and penalties Acts and decisions from the CRA are subject to appeal according to the applicable general rules. Angola does not have courts with special jurisdiction for competition matters.

Criminal sanctions Notwithstanding the application of Angolan criminal law, the Angolan legal framework does not provide for the imposition of specific criminal penalties for antitrust infringements.

Cooperation with other antitrust agencies On 21 December 2020, the CRA and the Portuguese Competition Authority signed a Memorandum of Understanding formalising the solid partnership between the two authorities. In this document, both authorities expressly reiterate their mutual interest in establishing a strong and stable cooperative relationship based on the exchange of relevant non-confidential information, the sharing of ideas, the transfer of technical knowledge and the mutual exchange of experience in the various areas of competition policy. The above-mentioned partnership aims for the development and promotion of joint studies and research on competition, the establishment of platforms for technical and institutional assistance, the promotion of training initiatives and exchange of personnel, the sharing of experience in the implementation of best practices in the field of promotion and enforcement, the exchange of publications, studies, or reports, as well as non-confidential information on legislative developments and cases, as well as the promotion of joint events for competition promotion and enforcement. The CRA has been a member of the International Competition Network since 10 December 2019.

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Ricardo Bordalo Junqueiro Tel: +351 21 311 3392 / Email: [email protected] Ricardo Bordalo Junqueiro rejoined Vieira de Almeida & Associados (VdA) in 2018. As Head of Practice Partner of the Competition & EU practice, Ricardo has been involved in various operations, particularly in the electronic communications, energy, pharmaceutical, financial, media and infrastructure sectors, as well as accompanying economic regulation matters in the electronic communications sector. Prior to joining the firm, he was a Partner at the Cuatrecasas law firm, which he joined in 2017. Between August 2013 and December 2016, he was Of Counsel at the law firm Cuatrecasas. Between 2002 and 2013, Ricardo joined VdA as a Lawyer at the Competition & EU practice.

Cláudia Coutinho da Costa Tel: +351 21 311 3392 / Email: [email protected] Cláudia Coutinho da Costa joined VdA in 2011. As the Managing Associate of the Competition & EU practice, she has worked actively in various national and transnational deals in several sectors, including the telecom, energy, civil aviation, retail, infrastructure, financial and insurance sectors. Before joining the firm, Claudia worked as an Associate at Morais Leitão, Galvão Teles, Soares da Silva & Associados (2005–2010). She has also worked as an advisor to the Minister of Culture of the XVIII Constitutional Government (2011), and interned at the General Court of the European Union (2008).

VdA Rua Dom Luís I, 28 1200-151 Lisbon, Portugal Tel: +351 21 331 3400 / URL: www.vda.pt

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Dennis Miralis, Jasmina Ceic & Phillip Gibson Nyman Gibson Miralis

Overview of the law and enforcement regime relating to cartels In Australia, corporate cartel conduct is governed by Part IV of the Competition and Consumer Act 2010 (Cth) (“CCA”). Under the legislation, a corporate cartel is determined to exist when actual or potential competitors agree to a cartel provision. According to s 45AD(2)–(3) of the CCA, a corporation must not make, or give effect to, a contract, arrangement or understanding with another corporation which contains a cartel provision. In order to be considered a cartel conduct, the purpose or effect of the condition must be to: a) price fix; b) prevent, restrict or limit production and capacity to supply; c) allocate customers, suppliers or territories; or d) bid rig. In determining whether a corporation has engaged in cartel conduct, it is first necessary to consider s 84 of the CCA. Under this section, it is necessary to establish the state of mind of the body corporate, in relation to the contravention. It must be shown that a director, employee or agent of the body corporate: a) engaged in the conduct; b) in engaging in the conduct, they acted within the scope of their actual or apparent authority; and c) they had that state of mind. If the above is satisfied, the body corporate is taken to have engaged in a contravention of the CCA. Similarly, in proceedings against a person other than a body corporate, it is essential to first establish the individual’s state of mind. Under s 85 of the CCA, the Courts are given discretion to determine whether the defence of “acting honestly and reasonably in the circumstances” is available. If a corporation or an individual have contravened a cartel provision, the Australian regime provides for both civil and criminal penalties. Civil matters are investigated by the Australian Competition and Consumer Commission (“ACCC”) and are determined “on the balance of probabilities”, while criminal matters are prosecuted by the Commonwealth Director of Public Prosecutions (“CDPP”) and must be determined “beyond reasonable doubt”. The difference in standards reflects the serious nature of the criminal provisions.

Overview of investigative powers in Australia The ACCC’s main investigatory powers are contained under Part XII of the CCA. S 155 of

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Nyman Gibson Miralis Australia the CCA enables the ACCC to issue a written notice requiring a person to furnish information, produce documents and appear before the ACCC to give evidence, which “constitutes, or may constitute, a contravention of…” the CCA. In June 2019, the ACCC produced a set of guidelines for the use of these powers, which confirm the first consideration should be the value of the information requested along with the burden of the notice on the recipient. This power does not override legal professional privilege (“LPP”); however, it does override an individual’s privilege against self-incrimination. The information cannot, however, be used in criminal proceedings. It is a contravention, under s 155 of the CCA, to “refuse or fail to comply with a notice…” issued by the ACCC and is punishable by way of a fine. For an individual, the fine is up to AUD$22,200.00 and for a corporation, up to AUD$111,000.00. Additionally, given the serious nature of non-compliance with compulsory evidence gathering notices, the ACCC can refer matters to the CDPP. If this occurs, a conviction is punishable by two years’ imprisonment. Recently, the defence of “reasonable search” under s 155(5B) was introduced to the regime. In order to be eligible for the defence, the individual must provide a written statement which includes details of the scope and limitations of the search. To determine what constitutes a reasonable search, s 155(6) stipulates the following may be taken into account: a) the number of documents involved; b) the nature and complexity of the matter to which the notice relates; c) the ease and cost of retrieving a document relative to the resources of the person who was given the notice; and d) any other relevant matter. Australia’s current regime also allows the ACCC to seize information by way of a search. Before the search can be executed, a warrant must be obtained from the Court.

Overview of cartel enforcement activity during the last 12 months After the introduction of new cartel laws in 2017, Australia’s enforcement activity has significantly increased. The ACCC now has a substantial team of specialist criminal cartel investigators which reflects this growth in enforcement activity. Since the publication of the 2020 Australia chapter in Global Legal Insights – Cartels, there have been a number of developments in cartel enforcement activity. Australia and New Zealand Bank, Deutsche Bank and Citigroup The financial sector has been a strong focus of the ACCC for some time, which ultimately resulted in cartel charges being brought against Australia and New Zealand Bank (“ANZ”), Deutsche Bank and Citigroup. A number of CEOs and senior executives have also been criminally charged as a result of JPMorgan’s immunity deal with the ACCC. In March 2019, the CDPP served the statement of facts on the accused, approximately 10 months after the initial charges were laid. Later, in early November 2019, a Local Court Magistrate ordered that both JPMorgan’s current and former executives and several ACCC senior officials be questioned in relation to the immunity deal. The basis for the questioning was in “the interests of justice”. The matter was temporarily suspended in March 2020 due to COVID-19. On 8 December 2020, the six senior banking executives were committed to the Federal Court of Australia for trial before a jury on the criminal cartel charges. The matter will be heard in the Federal Court at a later date.

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The Country Care Group Pty Ltd The Country Care Group Pty Ltd (“Country Care”) is an Australian company which supplies aged care goods such as wheelchairs, alarm systems and dementia products. In February 2018, charges were laid against Country Care, its managing director and one employee for breaches of the CCA relating to price-fixing. This represents the first criminal prosecution of an Australian corporation and the first prosecution of individuals for cartel conduct. While there were initially 140 charges, it is reported that the CDPP reduced this number for the indictment. Dates for this matter have changed on a number of occasions; it is currently listed for hearing on 9 February, or between 1 March–23 April 2021. J Wisbey & Associates Pty Ltd v UBS AG & Ors On 27 May 2019, a class action was filed by J Wisbey & Associates against UBS AG, Natwest Parkets PLC, JPMorgan Chase Bank NA, Citibank NA and Barclays Bank PLC for alleged cartel conduct in the foreign exchange market between 1 January 2008 and 15 October 2013. This is known as the Australian Foreign Exchange Cartel Class Action. The charges relate to manipulation of foreign exchange benchmark rates, foreign currency spreads and the triggering of client stop-loss and limit orders. The matter was listed for hearing on 8–9 October 2020. It is unclear from the available sources whether this took place. BlueScope Steel Limited (“BlueScope”) In 2019 the ACCC has commenced civil proceedings against BlueScope and its former general manager of sales and marketing, alleging that between September 2013 and June 2014, they attempted to induce steel distributors in Australia and overseas manufacturers to enter agreements containing a price-fixing provision. On 16 December 2020, the former general manager was sentenced to eight months’ imprisonment for inciting the obstruction of the ACCC investigation. In imposing a sentence, the Local Court Magistrate emphasised the seriousness of the conduct, and said: “[I]n all dealings [with the ACCC] a person needs to allow investigations to run properly, without any attempt to hinder investigations by officials.” This was the first time an individual had been charged with, and convicted of, inciting the obstruction of an ACCC investigation.

Key issues in relation to enforcement policy One of the biggest challenges facing the ACCC is the covert nature of corporate cartels. Both corporations and individuals go to great lengths to hide their wrongdoings in order to retain the maximum financial benefit possible. The fact that the conduct is illegal only adds to its covert nature. With today’s rapid technological advancement, cartels are able to operate digitally and collude through the use of mathematical algorithms. As previously reported, there has been recent development in the detection of such algorithms. Experts, however, are divided as to the degree of assistance artificial intelligence can provide in detecting such convert behaviour. A further challenge to enforcement is the ability to impose an appropriate financial penalty. Although Australia can and does impose substantial penalties, the most recent report published by the Organisation for Economic Co-operation and Development indicates that the maximum penalties imposed in Australia are significantly lower than those in comparable jurisdictions.

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Key issues in relation to investigation and decision-making procedures While the ACCC has extensive investigative powers under the CCA, there are also some safeguards in place to ensure the rights of those involved are respected. For example, although the ACCC may search premises, perform telephone intercepts and replicate important information, they must first apply for and receive a warrant from the Court. The Court thoroughly reviews any such applications to ensure these individual rights are preserved. In addition, the ACCC does not have the power to override LPP. The ACCC may only recommend corporations to the CDPP for prosecution if they have gathered enough evidence to do so. On 15 November 2014, the ACCC and the CDPP signed a Memorandum of Understanding (“MOU”) which allows the ACCC to refer any serious breach of the CCA for prosecution wherever possible. The MOU states that if one or more of the following apply, the conduct is to be considered “serious”: a) the conduct was covert; b) the conduct caused, or could have caused, large-scale or serious economic harm; c) the conduct was longstanding, or had significant impact on the mark; d) the conduct caused or could have caused significant detriment to the public; e) one or more of the alleged participants have previously been found by a Court to have participated in cartel conduct either criminal or civil; f) senior representatives within the relevant corporation(s) were involved in authorising or participating in the conduct; g) the government and, thus, taxpayers were victims of the conduct; and/or h) the conduct involved obstruction of justice or other collateral crimes committed in connection with the cartel.

Leniency/amnesty regime Immunity and leniency are available to both corporations and individuals involved in cartel conduct. Each may apply for a marker, which has the effect of preserving the “first-in” status that is necessary for immunity. These options are available in both civil and criminal proceedings. The ACCC’s new immunity and cooperation policy commenced in October 2019, replacing the September 2014 policy. The new policy contains an updated criteria and comments on the need for a cooperation agreement to be in place prior to immunity being granted. Civil immunity Before a corporation can be eligible for immunity, they must satisfy the following criteria: a) they must admit to engaging in cartel conduct as either a principal or in an ancillary capacity, and that the conduct may contravene the CCA; b) they must be the first party to apply within the cartel; c) they must not have coerced others to participate in the cartel; d) they must have ceased or undertake to cease involvement in the cartel; e) the admissions must be a truly corporate act; f) they have provided full, frank and truthful disclosure and have cooperated fully and expeditiously during the process, including taking all reasonable steps to procure the assistance and cooperation of witnesses and to provide sufficient evidence to substantiate its admissions, and agrees to continue to do so; g) they have entered into a cooperation agreement; and h) they have maintained and agree to maintain confidentiality regarding the status of their immunity and the details of the investigation.

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Provided the ACCC is satisfied the above criteria are met, conditional immunity will be granted. In order to gain final immunity, a corporation must maintain eligibility and continue to provide full and frank disclosure. Conditional immunity becomes final immunity at the conclusion of any ensuing proceedings. If a corporation is eligible for conditional immunity, they may apply for derivative immunity for related corporate entities and/or current and former directors, officers and employees that were involved in the conduct. During the application process, the corporation must provide a list of all those seeking derivative immunity and must be able to demonstrate the necessary relationship at all relevant times. Furthermore, the ACCC will generally not grant immunity if they are already in possession of enough evidence that is likely to establish at least one contravention of the CCA. They also have the ability to revoke immunity at any time if, on reasonable grounds, they are satisfied the applicant has failed to meet the necessary conditions. Criminal immunity The ACCC must first be satisfied the corporation or derivative entity meets the criteria for civil immunity. If so, they are able to make a recommendation to the CDPP for immunity from prosecution. Once a recommendation has been made, the CDPP must then exercise independent discretion and consider whether immunity is appropriate in the circumstances. Provided they are so satisfied, the CDPP will provide a letter of comfort to the corporation. This letter recognises the “first-in” status and outlines the CDPP’s intention to provide immunity so long as they maintain eligibility and enter into a cooperation agreement. Before criminal proceedings commence, the CDPP will then issue a written undertaking which grants the immunity. Similar to the ACCC, the CDPP may revoke immunity based on recommendation or on their own belief that the corporation has not fulfilled the necessary requirements. Cooperation policy Given the extensive criteria, the reality is that not all parties are eligible for immunity. In these situations, cooperation is still encouraged by the ACCC and the courts afford more lenient treatment to persons who cooperate. Civil cooperation policy During the course of proceedings, the ACCC will make submissions to the Court that outline any cooperation received, specifying the extent and value of it. In some circumstances, the ACCC can invite parties to write their own submissions and provide evidence in support. To determine the extent and value of the cooperation, the ACCC will consider whether: a) the ACCC was approached in a timely manner seeking to cooperate; b) the party provided significant evidence which was previously unknown; c) the party provided full, frank and truthful disclosure and continued to cooperate; d) the party ceased or indicated they would cease involvement in the cartel; e) the party coerced others to participate in the cartel; and f) the party acted in good faith when dealing with the ACCC. In exceptional circumstances, the ACCC can use its discretion to grant full immunity to a cooperating party who otherwise would not be eligible. Criminal cooperate policy After the ACCC considers the above, they then have the ability to provide a recommendation to the CDPP. The CDPP can present the recommendation to the Court; however, it is ultimately for the Court to weigh these factors with general sentencing considerations to determine an appropriate outcome.

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Amnesty Plus Amnesty Plus is available to those parties who discover the existence of a second, unrelated cartel while cooperating in relation to the first. Generally, conditional immunity will be granted in relation to the second cartel, while “Amnesty Plus” is available in relation to the first. “Amnesty Plus” is essentially a recommendation to the Court, from the ACCC, for a reduction in penalty for the corporation’s participation in the first cartel. To increase the chances of receiving Amnesty Plus, parties should initially apply for a marker in relation to the second cartel.

Administrative settlement of cases In the ACCC’s October 2019 immunity and cooperation policy, they addressed the possibility of administrative settlement. When determining whether to reach an agreement on civil penalties or other relief and the terms of such agreements, the ACCC is to consider the following factors: a) the extent and value of the cooperation; b) whether the contravention arose out of senior management conduct or at a lower level; c) whether there is a corporate culture of compliance; d) the nature and extent of the contravening conduct; e) whether conduct has ceased; f) the amount of loss/damage caused; g) the circumstances in which the conduct took place; h) the size and power of the corporation; and i) whether the contravention was deliberate and the period over which it extended. After considering the above, the ACCC will then determine whether it is appropriate to settle the matter.

Third-party complaints Any person, or corporation who suspects a breach of the cartel provisions, may make a complaint to the ACCC and apply for immunity from prosecution. Under the current regime, the ACCC is not obligated to investigate based on such complaints. If the ACCC does investigate a matter and subsequently decides not to bring an action, the third party may bring a private action as discussed below.

Civil penalties and sanctions There are currently two civil prohibitions in the CCA against cartel conduct. S 45AJ, prohibits making a contract, arrangement or understanding that contains a cartel provision. It is also prohibited under s 45AK to give effect to such a provision. The current regime stipulates the penalties for each contravention are the same. Under the CCA, the maximum pecuniary penalty that can be incurred by a body corporate, per civil contravention, is the greater of the following: a) AUD$10 million; b) three times the benefit of the profits attributable to the offence; or c) if the benefit cannot be determined, 10% of the corporation’s annual turnover for the 12 months prior to the offending. An individual found in contravention of the above can be liable for a pecuniary penalty of up to AUD$500,000.00. The Court may also exclude individual eligibility for company management.

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Right of appeal against civil liability and penalties Initial proceedings are held before a single Judge in the Federal Court of Australia. If a matter is to be appealed, it is brought before the Full Federal Court and is heard before at least three Judges. Flight Centre utilised this right a number of times. Flight Centre was initially ordered to pay a fine of AUD$11 million for contravening the cartel provisions in the ACCC. They appealed the decision to the Full Federal Court which determined they had not participated in cartel conduct and ordered the ACCC to pay Flight Centre’s costs. Following this appeal, the ACCC were granted special leave to appeal to the High Court of Australia. In a majority Judgment (4-1), the High Court ultimately determined that Flight Centre had, in fact, lessened competition in the market and was in contravention of the CCA. The matter was sent back to the Full Federal Court for sentencing and Flight Centre was ordered to pay a fine of AUD$12.5 million.

Criminal sanctions There are two criminal offences in the CCA that involve cartel conduct. Under s 45AF, it is an offence to make a contract, arrangement or understanding that contains a cartel provision. It is also an offence, under s 45AG, to give effect to such a provision. The current regime stipulates the penalties for each contravention are the same. Corporations that are prosecuted face the same penalties as in the civil jurisdiction. Pursuant to s 79 of the CCA, individuals who: a) attempt to contravene; b) aid a contravention; induced or attempts to induce a person to contravene; or c) conspires with others to contravene, cartel provisions are punishable by a term of imprisonment not exceeding 10 years and/or a fine of AUD$444,000.00. The Federal Court also has the power to impose probation orders, injunctions, adverse publicity orders and community service orders. Since the reform proposals came into effect in November 2017, the defence of “joint ventures” is available when facing prosecution. Under s 45AO of the CCA, the contraventions do not apply if the defendant proves that: a) the cartel provision is: i) for the purposes of a joint venture; ii) reasonably necessary for undertaking the joint venture; and b) the joint venture is for any one or more of the following: i) production of goods; ii) supply of goods or services; iii) acquisition of goods or services; and c) is not carried out for the purpose of substantially lessening competition. The same defence also applies in the civil jurisdiction. In both jurisdictions, the defendant bears the onus of proof.

Cooperation with other antitrust agencies Australia is currently one of 64 countries that are part of the Cartel Working Group (“CWG”). The CWG’s members represent all six continents and the group itself forms part of the International Competition Network (“ICN”). The ICN attempts to address a number of issues

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Nyman Gibson Miralis Australia relating to enforcement such as the prevention, detection, investigation and punishment of cartel conduct. These “agencies” serve as an information sharing platform which facilitates international cooperation and assistance. The ICN released its priorities for 2019–2022. They are: a) to promote familiarity with, and use of, existing work product and projects; b) to expand existing work products; c) to develop new practical guidance and avenues for exchanging effective enforcement practices; d) to organise annual cartel workshops; e) to strengthen CWG working procedures; and f) to contribute to the broader work of the ICN. In addition to these collaborations, Australia and the People’s Republic of China (“China”) have signed a MOU to assist one another in relation to cartel conduct. The agreement allows each country to share relevant information and evidence.

Cross-border issues Given the global nature of corporate cartels, aside from the above, Australia’s legal regime captures conduct that occurs outside its typical jurisdiction. S 5 of the CCA extends the jurisdiction to conduct outside Australia by: a) bodies corporate incorporated or carrying out business within Australia; b) Australian citizens; c) persons ordinarily resident within Australia; d) New Zealand and New Zealand Crown corporations; e) bodies corporate carrying on business within New Zealand; f) persons ordinarily resident within New Zealand; or g) conduct outside Australia by any person in relation to the supply by those persons of goods or services to persons within Australia. In addition to the above, the conduct must be done by a person or corporation “in trade or commerce”. Trade or commerce is defined as trade or commerce “within Australia or between Australia and places outside Australia”; limiting cartel laws to conduct affecting competition in Australia. By transcending geographical borders, Australia attempts to combat cross-border issues such as the international nature of corporate cartels.

Developments in private enforcement of antitrust laws Any corporation or person who has suffered loss or damage as a result of cartel conduct has standing to bring a private claim in the Federal Court of Australia. Under s 82 of the CCA, the limitation period to bring such a claim is six years after the day on which the contravention occurred. There are obvious disadvantages to bringing a private claim or “stand-alone” action; for example, the lack of resources to investigate the matter fully. The current regime recognises this issue and has attempted to provide some reprieve. S 83 of the CCA operates to assist parties who seek to bring a “follow on” action. The legislation stipulates that a finding of any fact made by a court, or an admission of any fact made by the person in proceedings where they have been found to contravene Part IV of the CCA, is prima facie evidence of that fact. In the “follow on” proceedings, Court documents can be produced to prove such a fact.

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In addition, in the correct circumstances, private parties have the benefit of class actions under the Federal Court of Australia Act 1976 (Cth) (“FCAA”). Under s 33C of the FCAA, the following requirements must be met before a class action can be brought: a) seven or more persons have claims against the person(s); b) the claims of all those persons are in respect of, or arise out of, the same, similar or related circumstances; and c) the claims of all those persons give rise to a substantial common issue of law or fact. In Australia, there is currently an “opt out” regime. Those who meet the description of the “group” are automatically included and it requires positive steps to be removed. If damages are to be awarded, they are calculated based on the group as a whole. Although not private, under s 87(1B) of the CCA, the ACCC may bring representative proceedings on behalf of persons who have suffered or are likely to suffer as a result of cartel contraventions. The Australian Foreign Exchange Cartel Class Action is an example of these provisions at work.

Reform proposals In 2014, the mandate for fairer competition business practice led to an extensive review of legislation lead by Professor Ian Harper (“The Harper Review”). The Harper Review examined the legislative regime to determine whether it was still adequate given a number of economic changes that had occurred in the previous 20 years – the time since the last review. As a result of the review, the Competition and Consumer Amendment (Competition Policy Review) Act 2017 (Cth) was introduced. In short, the amendment extended the investigative powers given to the ACCC under s 155 of the CCA, increased fines for non-compliance, introduced the “reasonable search defence”, updated the “joint venture” defence and introduced the “in trade or commerce” requirement. Since there has been such recent reform in the area, there are currently no further reforms proposed.

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Dennis Miralis Tel: +61 2 9264 8884 / Email: [email protected] Dennis Miralis is a leading Australian defence lawyer who specialises in international criminal law, with a focus on complex multi-jurisdictional regulatory investigations and prosecutions. His areas of expertise include bribery and corruption, global tax investigations, proceeds of crime, anti- money laundering, worldwide freezing orders, cybercrime, national security law, Interpol Red Notices, extradition and mutual legal assistance law. Dennis advises individuals and companies under investigation for economic crimes both locally and internationally. He has extensive experience in dealing with all major Australian and international investigative agencies.

Jasmina Ceic Tel: +61 2 9633 4966 / Email: [email protected] Jasmina Ceic is an accomplished criminal trial advocate. She advises and acts in complex criminal law matters at all levels of the court system, with a specialist focus on serious matters that proceed to Trial in the Superior Courts, as well as conviction and sentence Appeals heard in the Court of Criminal Appeal. She has represented and advised persons and companies being investigated for white-collar and corporate crime, complex international fraud and transnational money laundering.

Phillip Gibson Tel: +61 2 9264 8884 / Email: [email protected] Phillip Gibson is one of Australia’s leading criminal defence lawyers with over 30 years of experience in all areas of criminal law. Phillip has significant experience in transnational cases across multiple jurisdictions often involving: white-collar and corporate crime; assets forfeiture; money laundering and proceeds of crime; extradition; mutual assistance; Royal Commissions; bribery and corruption; and ICAC and Crime Commissions matters. He has extensive experience in dealing with all major Australian and international investigative agencies.

Nyman Gibson Miralis Level 9, 299 Elizabeth Street, Sydney NSW 2000, Australia Tel: +61 2 9264 8884 / URL: www.ngm.com.au

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Hendrik Viaene & Karolien Van der Putten McDermott Will & Emery

Overview of the law and enforcement regime relating to cartels 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 in the relevant Belgian market, or a significant part thereof. It applies to both horizontal and vertical agreements. If such actions also affect trade between Member States, Article 101 TFEU can be applied simultaneously. Contrary to Article 101 TFEU, Article IV.1 CEL also contains an explicit prohibition for natural persons to conduct negotiations, agree, conclude or coordinate to fix prices, limit production or sales, or allocate markets in the context of the activities of an undertaking or association of undertakings. However, an infringement by a natural person can only be established when, in the same case, there is also a finding that the undertaking infringed Article IV.1 CEL. In 2019, the Law of 2 May 2019 reformed the Belgian competition rules included in the CEL to improve enforcement and to enhance the efficient operation of the Belgian Competition Authority (“BCA”). Competition law enforcement bodies Competition law in Belgium is enforced through an administrative and/or civil law procedure. The two main bodies responsible for enforcing competition law are the BCA and the national courts. The Minister of Economy likewise plays a (modest) role. 1. 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 is responsible 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 – if appropriate – impose a fine. It is also possible that the Competition College declares the parties’ proposed commitments binding, without formally ruling upon the existence of an infringement.

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2. Minister of Economy and Minister of Small Businesses Based on Article IV.39 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. Furthermore, the Minister of Small Businesses, an appropriate public institution or other public body responsible for the supervision or control of an economic sector can request the Auditor-General to open an investigation. 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. Within the Brussels Court of Appeals, a number of chambers have now been appointed to 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 infringements The Competition College can impose fines upon the undertakings concerned when ordering cessation of a restrictive competition practice, as well as accompany the cessation order with a periodic penalty payment (see infra). Under certain circumstances, individuals can also be fined by the Competition College. No criminal sanctions are available under Belgian 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. As discussed below, most cartels are discovered by an ex officio investigation following a leniency application. General investigative powers The prosecutors may request the undertakings, associations of undertakings or natural persons concerned for all necessary information, upon which the undertakings must 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, take written or oral statements, and to make the requisite findings on-site. They may also request and copy all documents or information deemed necessary in order to carry out their investigative duties. Dawn raids By far the most intrusive measure is a dawn raid. Prosecutors are empowered to carry out inspections in any premises, means of transport, or other areas of the undertakings concerned where the presence of data relevant for their investigation can reasonably be presumed.

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Inspections in the private homes of the undertakings’ directors, managers and other staff are also possible, and are 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 from either the Dutch-speaking or French-speaking Court of First Instance in Brussels. Furthermore, a warrant needs to be issued by the prosecutor in charge of the investigation and must specify the subject matter and purpose of the inspection. 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 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 persons and files possibly related to the subject matter. Subsequently, either key terms are used within copies of these files in order to facilitate the selection of individual documents relevant to the investigation, or the data is examined manually on-site. In the first scenario, 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’s representatives should be present during such selection. Unfortunately, the prosecutors seem to have developed a different practice where only the classification into three categories (“in-scope”, “out-of-scope”, or “legal-professional-privilege” (“LPP”)) is conducted in the presence of the undertaking’s representatives, 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 investigation Failure to comply with certain obligations during the investigation phase may lead to an additional fine of up to 1% of the worldwide turnover for undertakings. Fines can be imposed upon the undertaking when it deliberately or negligently: (i) provides inaccurate, misleading or incomplete information following a request for information; (ii) does not provide information following a request by reasoned decision on time; or (iii) prevents or impedes investigations.

Overview of cartel enforcement activity during the last 12 months During the last 12 months, the BCA was less active in the context of cartel enforcement compared to the year 2019. In 2020, the BCA took three decisions relating to cartels, two of which involved a joint venture between Proximus and Orange. According to publicly available information, the BCA did not conduct any dawn raids in 2020, due to COVID-19 measures. Back in 2019, the BCA took five decisions relating to cartels and carried out dawn raids in two separate investigations. Request for interim measures by Telenet against Proximus and Orange A first decision taken by the BCA in 2020 concerned the imposition of interim measures on telecommunication companies Proximus and Orange.1 Both companies announced that

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© Published and reproduced with kind permission by Global Legal Group Ltd, London McDermott Will & Emery Belgium they would share their mobile access networks through a 50/50 joint venture and concluded a Shareholders Agreement and a Radio Access Network (“RAN”) Sharing Agreement in November 2019. Telenet, a competitor, filed a complaint with the BCA and requested the BCA to impose interim measures. Having regard to the possible impact on competition, the Competition College imposed two interim measures on Proximus and Orange. Firstly, they needed to suspend the execution of their agreements with regard to the transfer of staff until 16 March 2020. The interim measure did not prevent Proximus and Orange from sending requests for proposal regarding the acquisition of network equipment. It also did not prevent the selection of staff to be transferred as far as this would not result in the conclusion of binding agreements. Secondly, Proximus and Orange needed to inform the Competition College and the Auditor by 9 March 2020 at the latest about their discussions with the Belgian Institute for Postal Services and Telecommunications (“BIPT”) held during the suspension, as well as the BIPT’s position. Furthermore, the Competition College held that disputes about the interpretation of the interim measures could be referred to the Auditor-General or to the President of the BCA. On 17 February 2020, Telenet made use of this possibility and submitted a request for interpretation with the Auditor-General regarding the implementation of the interim measures. The Auditor, in turn, requested the President to interpret the interim measures decision. In short, Telenet raised two questions: (i) whether a non-confidential version of the report of the discussions between Proximus, Orange and BIPT would be shared with them; and (ii) through which procedure the Competition College would assess the outcome of the discussions between Proximus, Orange and BIPT. The President of the BCA clarified that it does not follow from the interim measures decision that the report would be shared with Telenet or other parties.2 The Auditor-General is, however, free to share the (non-confidential version of the) report. The BIPT can also inform Telenet of their discussions held with the defendants. Secondly, the Competition College must only verify whether the report was timely filed to enable the Auditor-General to draw its conclusions. At the time of writing (March 2021), the BCA had not yet ruled on the substance of the complaint. There were also no interim measures applicable anymore, as the Competition College limited the duration of their application until 9 March 2020 (information obligation) or 16 March 2020 (suspension of agreements regarding transfer of staff). Infringement decision concerning Brussels Airlines and Thomas Cook On 1 July 2020, the Competition College took an infringement decision regarding Brussels Airlines and Thomas Cook.3 The Competition College held that both undertakings infringed Article IV.1 CEL/Article 101 TFEU by concluding a commercial service agreement that contained several anti-competitive clauses. In particular, their agreement resulted in: • customer foreclosure on the Belgian market for the wholesale supply of airline seats to tour operators by incorporating a non-compete clause with a duration of more than five years; • input foreclosure on the Belgian market for the wholesale supply of seats to tour operators caused by the rights granted to Thomas Cook to purchase seats on certain Brussels Airlines flights; and • the exchange of commercially sensitive information as a result of which Thomas Cook became aware of the commercial policy of competitors. Given that the clauses were never applied by Brussels Airlines and the agreement was terminated by Brussels Airlines following the bankruptcy of Thomas Cook, the Competition College decided not to impose a fine.

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Other decisions taken by the BCA In 2020, the BCA also took decisions which were analysed under both Article IV.1 CEL and Article IV.2 CEL: • The BCA imposed interim measures upon the Belgian Golf Billiard Federation concerning the golf billiard balls which may be used in competitions and matches.4 • The BCA imposed interim measures on the Royal Belgian Football Association (“RBFA”) upon the request of football club Royal Excelsior Virton.5 The BCA ordered that the football club could rejoin division 1B for the 2021–2022 season, after the RBFA first denied to grant Virton a professional licence. The BCA first refused to impose interim measures on the RBFA, but this decision was later annulled by the Market Court. • The BCA denied to reinstate football club Waasland-Beveren to division 1A, after the ProLeague decided to terminate the 2019–2020 season earlier due to COVID-19.6 The ProLeague’s decision resulted in the relegation of Waasland-Beveren to division 1B. Market Court On 8 January 2020, the Market Court annulled a fine of €1 million imposed by the Competition College on the Professional Body of Pharmacists (“PBP”).7 In 2019, the Competition College condemned the PBP for excluding MediCare-Market from the market for services provided by pharmacists and/or preventing the development of MediCare- Market’s model through a number of means which were considered to be a restriction of competition by object: legal proceedings; disciplinary actions; and defamatory actions, etc.8 The Market Court ordered the Competition College to recalculate the amount of the fine as it should be capped at 10% of the PBP’s turnover, excluding the turnover of its members. Finally, on 26 March 2021, the Competition College (differently composed) imposed a fine of €245,000 on the PBP. Expected developments On 20 November 2020, the Prosecution Service submitted a reasoned proposal for a decision concerning Caudalie.9 The Prosecution Service found that Caudalie imposed maximum discount levels on its selective distribution network and restricted active and passive sales by selective online distributors. The Competition College now needs to decide on the case. In 2019, the BCA conducted dawn raids at a number of supermarkets which were allegedly engaged in anticompetitive practices in the form of a buying group.10 In February 2021, Carrefour and the Louis Delhaize Group offered concessions to the BCA in order to settle the case. In 2019 the BCA also conducted dawn raids in the pharmaceutical sector.11 The BCA is still investigating alleged practices of restricting, impeding and hindering the access or expansion of biosimilar drugs. The BCA is also investigating a complaint against certain car insurance companies and INFORMEX, a company that, amongst other things, offers a digital claims platform for car insurance companies.12 In the context of this investigation, the BCA sent a request for information to car experts in 2019. According to press reports from 2020, the BCA is investigating whether a number of security companies (e.g. G4S, Securitas, Seris) have engaged in price fixing.13

Key issues in relation to enforcement policy As in most jurisdictions, the BCA has the discretionary power to decide whether it will pursue cases brought to its attention “in light of the available resources and priorities”.

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In order to provide more information on the BCA’s enforcement priorities, the BCA announces its priority policy for the following year in an annual document. For 2020, the BCA intended to undertake action within the following seven sectors (mainly coinciding with its priority policy in the preceding years): telecommunications; distribution, including its relationships with suppliers; provision of services to businesses and consumers; public procurement; pharmaceuticals; digital economy; and logistics.14 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. However, it is clear that the BCA looks at the pharmaceutical sector as evidenced by a dawn raid and a number of decisions against the PBP taken in 2019. Furthermore, on 22 July 2020, the BCA published a paper regarding its position on the application of merger control to locoregional hospital networks. This paper was issued in the context of the Law of 28 February 2019, which obliged hospitals to organise themselves into locoregional hospital networks. According to the BCA, hospitals qualify as undertakings within the meaning of competition rules and even in this highly regulated sector, there may still be some competition between hospitals in terms of offering care services. The BCA considered that hospitals should not be excluded from merger control. However, on 18 March 2021, a new law was adopted which excludes logoregional clinical hospital networks formed pursuant to the Law of 28 February 2019 from merger control by the BCA. Nevertheless, the BCA still remains responsible for enforcing anti-competitive practices by hospitals with hospitals which do not belong to the same hospital network, as well as abuses of a dominant position. In October 2019, the BCA issued a guidance paper on information exchanges in the context of associations of undertakings. The guidance paper states that it should be read in conjunction with the decisional practice and the Guidelines of the European Commission on the applicability of Article 101 TFEU to horizontal cooperation agreements. The guidance covers sections such as periodic overviews of markets, price comparisons, information on the anticipated development of markets and formula for the calculation of costs and pricing structures.

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 and modified by the Law of 2 May 2019, 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 Market Court 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 College review decisions of the Public Prosecution Service regarding confidentiality. 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

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© Published and reproduced with kind permission by Global Legal Group Ltd, London McDermott Will & Emery Belgium 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.90 §1 CEL (former 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 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 former 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.15 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.16 It remains to be seen how case law will evolve on this matter. In another ruling from the Court of Cassation in 2019, the court held that, in case of an appeal against a decision from the BCA, concerning the utilisation of information that was seized during a dawn raid, the Court of Appeals is not obliged to examine the seized information anew.17 It may restrict its assessment to questions of compliance with the rules of procedure, the adequacy of the statement of reasons, the correctness of the facts and the absence of a manifest error of assessment. Criticism has been voiced 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). The Law of 2 May 2019 brought about a number of improvements. First of all, it extended the time period in which the parties concerned may reply to a statement of objections from one month to two months. Moreover, this law introduced another important change concerning the submission of additional documents, which were not submitted during the investigation phase. Before, parties were not permitted to submit such additional documents to the Competition College (subject to certain exceptions). This led to inequality, as the Public Prosecution Service was not subject to any time limit to formulate its grievances, while the undertakings were expected to submit all necessary documents within a short period of time after the grievances were communicated. This rule has now been modified. Article IV.49 §3 provides that in case parties file additional documents, the president of the Competition College determines a time period in which the auditor can submit written observations regarding those additional documents. The president will also determine a time frame during which the parties can reply to these written observations. Finally, it is worth mentioning that Belgian case law accepts LPP for Belgian in-house counsel. Indeed, the Court of Cassation confirmed18 that advice provided by in-house counsel (members of the Belgian Institute for in-house counsel) is confidential, as a result of 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.

Leniency/amnesty regime 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 it would normally risk, if it contributes to proving the prohibited practice and in identifying its participants, either by providing intelligence the BCA did not

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© Published and reproduced with kind permission by Global Legal Group Ltd, London McDermott Will & Emery Belgium yet possess or by proving a prohibited practice of which the existence was not yet established. On the basis of the Law of 2 May 2019, it is no longer possible for an undertaking to obtain immunity by acknowledging the existence of such practice. The specific conditions in order to qualify for immunity for, or reduction of, the fine are set out in the BCA’s recently amended leniency guidelines and are identical to those of the European Commission. The reduction of the fine is 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 their fines, under similar conditions as undertakings. Based on the Law of 2 May 2019, a private individual can – contrary to undertakings – obtain immunity if he/she acknowledges his/ her involvement in a prohibited practice. As immunity may also be granted to individuals 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. In 2020, the BCA updated its leniency guidelines, mainly to ensure consistency with the Law of 2 May 2019. A novelty under this law and the guidelines is that leniency decisions are taken by the President instead of the Competition College. The leniency regime can be considered a relatively important aspect of cartel enforcement in Belgium. Over several years, 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 cases). Similarly, a total number of four complaints were lodged in 2015, compared to eight leniency applications. 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 their contribution and timing. Now the trend appears to have shifted, with complaints being more often at the source of an investigation. In 2018, three leniency applications were submitted and three investigations were pending following a complaint. In 2019, only one leniency application was submitted, whereas the BCA investigated seven cases following a complaint or a specific request. In 2020, the BCA received four leniency applications and four complaints.

Administrative settlement of cases In 2020, no cartel decisions were concluded through the settlement procedure. In 2019, two settlement decisions were taken. From 2015 to 2017, all cartel decisions were concluded with a settlement, however, no settlement decisions were taken in 2018. 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 settlement talks. If so, the auditor can open a settlement procedure vis-à-vis the parties concerned and will communicate which objections could be substantiated against them. The parties concerned are given access to all non-confidential versions of the documents and information to which the auditor refers or intends to refer in the grievances, as well as an inventory of the investigation file. If a settlement turns out to be a possibility, the auditor will draw up a draft settlement decision. The undertakings in question can then file a statement of settlement, wherein they admit their involvement, assume responsibility for the quoted infringement and accept the proposed fine. The settlement is “rewarded” by

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© Published and reproduced with kind permission by Global Legal Group Ltd, London McDermott Will & Emery Belgium a reduction of 10% of the initially calculated fine. The settlement procedure ends with a settlement decision of the Public Prosecution Service, against which no appeal is possible (see supra). The Competition College is therefore not involved in the procedure. The settlement decision determines the infringement and fine, and takes note of the settlement submissions. The settlement procedure is clearly distinct from the leniency procedure, both in law and in practice. They may also be combined, as a result of which the relevant fine reductions will be combined.

Third-party complaints According to Articles IV.39 and IV.43 CEL, complaints can be submitted to the Auditor- General by anyone who demonstrates a legitimate interest. There is no obligation to initiate a formal investigation procedure, but a formal dismissal decision nonetheless must 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. When the Public Prosecution Service is considering dismissing a complaint, it may decide to hear the complainant. In case of dismissal, the complainant is notified and provided with the possibility to consult the procedural file and bring an appeal before the President of the Competition 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 an informal complaint, a request for information will be sent to the undertakings without necessarily indicating the specific reasons for its sudden interest. Undertakings can therefore be tempted to be less careful in responding to such requests.

Civil penalties and sanctions As stated above, the Competition College can impose a fine upon the undertakings concerned when ordering cessation of a restrictive competition practice, capped at 10% of their respective worldwide turnovers. Furthermore, the Competition College can accompany the cessation order with a periodic penalty payment, capped at 5% of the average daily worldwide turnover. According to the BCA Guidelines on the calculation of fines, the Competition College will follow the “2006 Guidelines on the method of setting fines” of the European Commission, with a few (evident) alterations. In 2020, the BCA updated its guidelines, mainly to ensure consistency with the Law of 2 May 2019. The aggravating or mitigating circumstances that might increase or decrease the fine are 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 or the United Kingdom, are taken into account. The draft decision, including the fine claimed by the Public Prosecution Service, is sent to the parties simultaneously with its submission to the Competition College. In case parties are prepared to settle, the potential amount of the fine the Public Prosecution Service is considering to propose is communicated earlier, along with the grievances that could be substantiated against them.

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In relation to the imposition of administrative fines upon individuals, a fine of €100 to €10,000 can be imposed for negotiating, agreeing, concluding or coordinating, on behalf of an undertaking with one or more of its competitors, to fix prices, limit production or sales, or allocate markets. As stated above, no criminal sanctions are available under Belgian law.

Right of appeal against civil liability and penalties Parties can lodge an appeal against a cartel decision taken by the Competition College, including against the fines imposed therein. Such an appeal must be lodged with the Market Court 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, based on the investigation file and formulated grievances of the Public Prosecution Service. 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, including a negative statement that no infringement is present. When the Court comes 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, in relation to an appeal against the fines imposed, it can be inferred that the Court is free to decrease the fine based on reasons of expediency, proportionality or legitimacy. However, it can be inferred that if it considers the fine too low, its only option is to annul the decision of the Competition College. With regard to interim measures, the Court held that it cannot substitute itself for the Competition College ordering such measures, even if it considers that the latter has committed an error of law or a manifest error of assessment of the facts in finding that there was noprima facie infringement.19 In the case at hand, the Virton case (see supra), the Court verified the extent to which the facts and elements relied on by the Competition College were correct, i.e. whether the elements of the file did not contradict the grounds of the decision. The Court found that the Competition College had not adequately reasoned its decision and ordered the Competition College, composed differently, to re-examine Virton’s request for interim measures. An appeal cannot be lodged against a settlement decision (see supra). As a result, and given that cases are often concluded through a settlement procedure, there is not a lot of case law on this matter. Two appeals in relation to the fine calculation are worth mentioning. In 2014, the Court of Appeal ruled that the principle of ne bis in idem might be relevant if another national competition authority has already imposed a fine, taking into account the Belgian turnover. In those cases, the BCA is in principle not precluded from imposing a fine in relation to the effects on the Belgian market. The Court nonetheless stated that the BCA had to calculate the fine in relation to the Belgian market, and could not therefore impose a lump sum penalty.20 In 2020, concerning the PBP case (see supra), the Court of Appeal clarified how the maximum amount of the fine should be calculated with regard to associations of undertakings. The maximum amount should relate to the association’s own turnover, excluding the cumulated turnover of its members. As the BCA took into account the total turnover of the PBP’s members, the Court ordered the BCA to recalculate the amount of the fine. As a consequence, the Competition College (differently composed) ultimately imposed a fine of €245,000 on the PBP. 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

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Prosecution Service illegitimate, primarily because no prior authorisation of an investigating judge was required under the previous legislation, and means of appeal were uncertain.21 In 2020, the Court confirmed that the invalidity of an investigation (which in this case was conducted on the basis of the previous legislation) does not automatically lead to the full or partial annulment of the decision.22 The origin of the data relied on should be in this case considered. If the data could have only been obtained through the illegal investigation, the data must be removed from the case file. Previously, the Court – as confirmed by the Court of Cassation23 – also ruled on the illegitimacy of seizing documents containing advice of in-house counsels or based on a “fishing expedition” without predetermining their relevance to the subject matter.24

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. In the Caudalie investigation (supra), the BCA requested the French Competition Authority to carry out an inspection on its behalf at the premises of Caudalie in Paris and Saint-Jean-de-Braye. Otherwise, the BCA rarely seems to ask assistance of other national authorities itself. Regardless, cartels have already been successfully prosecuted in the past, (partly) based on information provided by the European Commission.25

Developments in private enforcement of antitrust laws As in most EU jurisdictions, private enforcement is still a developing area rather than a significant source of competition law cases. Private enforcement of Belgian or European competition 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).26 By the Act of 6 June 2017, Belgium finally transposed the EU Directive on antitrust damages actions (“Damages Directive”). The Act entered into force on 22 June 2017. Any procedural rules introduced by this Act will not be applied to claims for damages filed before 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 the fine calculation by the BCA; and the fact that the definition of a cartel also included hub-and- spoke cartels.

* * *

Endnotes 1. BCA Decision of 8 January 2020, Case MEDE-V/M-19/0036, No. BMA-2020-V/M-03. 2. BCA Decision of 4 March 2020, Case MEDE-V/M-19/0036, No. BMA-2020/V/M-12. 3. BCA Decision of 1 July 2020, Case MEDE-I/O-17/0027, No. BMA-2020-IO-25. 4. BCA Decision of 23 January 2020, Case MEDE-V/M-19/0041, No. BMA-2020-V/M-04.

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5. BCA Decision of 19 November 2020, Case CONC-V/M-20/0012, No. ABC-2020- V/M-36. 6. BCA Decision of 2 July 2020, Case CONC-VM-20/0012, No. ABC-2020-V/M-26. 7. Brussels (Market Court), 8 January 2020, 2019/MR/3. 8. BCA Decision of 28 May 2019, Case CONC-I/O-16/0011, No. ABC-2019-I/O-14. 9. BCA Press Release of 20 November 2020, No. 41/2020. 10. BCA, Press Release of 20 May 2019, No. 15/2019. 11. BCA, Press Release of 8 October 2019, No. 32/2019. 12. https://www.bma-abc.be/nl/over-ons/actualiteit/verzoek-om-inlichtingen-auto-experts/. 13. https://www.vrt.be/vrtnws/nl/2020/06/16/maakten-beveiligingsfirma-s-onderling- prijsafspraken-in-ons-land/. 14. BCA, 26 February 2020, Priority Policy 2020. 15. Constitutional Court, 10 December 2014, No. 179/2014. 16. Brussels Court of Appeal, 9 July 2015, No. 2014/MR/1, TBM 2016, vol. 1, p. 48, §31. 17. Court of Cassation, 12 September 2019, C.18.0250.N. 18. 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, vols 1–2, p. 73. 19. Brussels Court of Appeal, 23 September 2020, 2020/MR/1. 20. In relation to the flour cartel, see Brussels Court of Appeal, 12 March 2014, No. 2013/ MR/6. 21. Court of Cassation, 22 January 2015, AR C.13.0532.F. 22. Brussels Court of Appeal, 7 October 2020, 2009/MR/3-8. 23. Court of Cassation, 22 January 2015, AR C.13.0532.F. 24. Brussels Court of Appeal, 5 March 2013, 2011/MR/3, not published. 25. See, e.g., BCA Decision of 30 August 2013, Case CONC-I/O-05/0075 – Cimenteries, No. 2013-I/O-24. 26. 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.

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Hendrik Viaene Tel: +32 2 282 35 93 / Email: [email protected] Hendrik Viaene is a partner at McDermott Will & Emery. 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 has published various contributions relating to the application of European and Belgian competition law. He is an editor of the EU Competition Law Handbook. He also teaches competition law in the framework of the Brussels Bar Association.

Karolien Van der Putten Tel: +32 2 282 35 91 / Email: [email protected] Karolien Van der Putten is an associate at McDermott Will & Emery and focuses her practice on European law and competition law. She assists clients on various aspects of European and Belgian competition law. In particular, she focuses on anti-competitive agreements, abuse of dominance, merger control and state aid. Furthermore, she has experience with litigation, dawn raids and investigations carried out by the Belgian Competition Authority.

McDermott Will & Emery Avenue des Nerviens 9–31, 1040 Brussels, Belgium Tel: +32 2 230 50 59 / URL: www.mwe.com

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Randall Hofley, Cassandra Brown & Gillian Singer Blake, Cassels & Graydon LLP

Overview of the law and enforcement regime relating to cartels Statutory regime Cartel conduct is a serious criminal offence in Canada, attracting the highest penal and financial penalties of any “corporate crime” in Canada. Canada’s cartel prohibitions are set out in Part IV 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 The main prohibition is set out under section 45, which criminalises agreements between competitors or potential competitors to fix or control prices or output, or to allocate sales, territories, customers or markets for the supply of any good or service. Section 45 is a per se offence, such that proof of anti-competitive effects is not required to establish culpability. Given the provision’s reference to supply, the Canadian Competition Bureau (the “Bureau”) has indicated in its guidelines that section 45 does not apply to agreements which relate only to the purchase of products, i.e., joint purchasing agreements, which will instead be assessed under the civil competitor collaboration provisions of the Act.3 A corporation is also prohibited under section 46 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 “in a position to direct or influence the policies of the corporation”. 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, where notice of the joint bid is not provided to the party requesting the bid. As with the conspiracy provision, bid rigging is per se a criminal offence. Section 49 prohibits federal financial institutions from entering into certain agreements related to interest rates, loans, and other services. 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. As with other criminal offences, Canadian constitutional law affords protections to firms and individuals 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 Federal Court Trial Division, contested cartel cases in Canada are uncommon and more typically, prosecutions are resolved by way of a plea agreement submitted to a provincial superior

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Blake, Cassels & Graydon LLP Canada 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 in Canada, 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 outlining the competition issues that may arise from collaborations.7 As discussed in greater detail below, in July 2020, the Bureau released a draft of the revised Competitor Collaboration Guidelines for public consultation. The draft guidelines, which have not been formalised as at the time of writing, propose a number of changes that signal broader enforcement discretion for the Bureau should the proposed changes be implemented.8 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 to use, a certification letter for employees, and a due diligence checklist.9 The Bureau also released its Competition and Compliance Framework bulletin in November 2015, which explains the outreach, enforcement and advocacy instruments the Bureau utilises to promote compliance with the Act.10 The Bureau recently updated its Immunity and Leniency Programs to reflect the Bureau’s current approach to the administration of these programmes. In September 2018, the Bureau released a revised version of its Immunity and Leniency Program bulletin, which is discussed in greater detail below.11 Penalties The penalties for a violation of the cartel provisions are potentially quite severe. A violation of section 45 (conspiracy) or section 47 (bid rigging) carries a possible term of imprisonment of 14 years. Maximum fines for conspiracy are CAN$25m per count (and a person may be convicted on multiple counts), and there is no maximum fine for bid rigging (or the implementation of a foreign directive). A plea agreement may contemplate sanctions other than those prescribed by the Act, including the disqualification of individuals from holding certain offices within a 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 sentencing guidelines 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 the absence of the conspiracy. The Bureau will normally recommend that the fine be greater than the overcharge to ensure that the fine is not “simply a cost of doing business” and to ensure that an appropriate level of punishment and deterrence is achieved. In most cases it is difficult to quantify the overcharge resulting from cartel behaviour. 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 allowable fine); this is said to be made up of 10% for the assumed overcharge and 10% for deterrence.

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In a conspiracy matter involving multiple counts, the resulting fines may exceed the statutory 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 to become satisfied that a sentence arrived at by plea agreement is in the public interest and 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 are not always submitted as a matter of course, including the amount of illegal profits attributable 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, there does not appear to have been a significant change in the number or type of cases resolved 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, provincial asset forfeiture statutes allow for the confiscation by the Crown of proceeds of crime 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 that provides procurement services to the Canadian Federal Government.16 These requirements prohibit any bidder from bidding on a contract where it or its affiliates have been convicted of certain offences, including criminal offences under the Act and even equivalent foreign offences. These requirements are part of the Government of Canada’s Integrity Regime, which outlines requirements for suppliers contracting with the Federal Government.17 Administrative settlement Convictions 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 certain offices, etc.), but will not result in a criminal conviction or criminal record. The Bureau typically will not seek prohibition orders in lieu of plea agreements. The introduction of remediation agreements in Canada following recent amendments to the Criminal Code has resulted in increased attention on the possibility of resolving cartel matters without a guilty plea. Though offences under the Act are not eligible offences under the new remediation agreement regime, at least one company was subject to a prohibition order for bid rigging in 2020 but did not plead guilty. The 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 an agreement or arrangement between competitors. Responsibility for enforcing section 90.1 lies exclusively with the Commissioner and a decision to commence proceedings under

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Blake, Cassels & Graydon LLP Canada section 90.1 bars the PPSC from prosecuting the conduct criminally.18 The Tribunal may issue a prohibition order where it finds that an agreement prevents or lessens, or is likely to prevent or lessen, competition substantially in a market. The Tribunal may not, however, impose other penalties (e.g., fines or imprisonment) and no private right of action for damages exists with respect to conduct governed by section 90.1.19

Cartel investigations Fact-gathering tools Cartel 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 can investigate the complaint using its many information-gathering powers. When cartel investigations 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.20 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. Under this section, the court must be satisfied that there are reasonable grounds to believe a criminal 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. Warrants are not subject to appeal, but can be reviewed and set aside (quashed) where there has been material non-disclosure or misrepresentation in the affidavit supporting the Commissioner’s ex parte application. Targets may also request a retention or privilege hearing. The Bureau can 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, at least for the initial stage of the investigation. Section 11(2) of the Act also provides that the Bureau may seek on an ex parte basis, and the courts may issue, a production order in respect of a foreign affiliate of a Canadian corporation when: (i) the Bureau has sought a similar order in respect of the domestic subsidiary; and (ii) the Bureau can establish that the foreign affiliate has records that are relevant 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

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Blake, Cassels & Graydon LLP Canada to a production order; specifically, he explained that the Commissioner’s information requirements should be 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 order to produce all information over a lengthy time period, would be sufficient to prove the Commissioner’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 confidential any information provided by informants under the search and seizure powers of the Act. In international cartel cases, the Bureau will often 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. In September 2020, the Bureau signed the Multilateral Mutual Assistance and Cooperation Framework for Competition Authorities (“MMAC”) with competition authorities from the other “Five Eyes” countries (Australia, New Zealand, the United Kingdom and the United States). The MMAC enables its signatories to cooperate more effectively on investigations and encourages parties to enter into bilateral enforcement cooperation agreements.25 The MMAC is an addition to the Bureau’s existing MLATs and competition cooperation agreements, which it has in place with over 16 jurisdictions, such as the Brazil, China, EU, India, Japan, Mexico and others. Immunity and Leniency Programs Canada’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”, or first to request immunity, often called the “immunity applicant”. Where a party does not qualify for immunity (i.e., the party is not “first-in”) but the party cooperates with the Bureau, often called the “leniency applicant”, the Bureau typically recommends that the prosecution grant some form of leniency, in the form of a reduced financial penalty and/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 warrant 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 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 will confirm the continuation of the marker, usually for a period of 30 days, in order for the applicant to provide a proffer. If the proffer is not provided on a timely basis, the marker may be lost. Once the Bureau has concluded that the applicant has demonstrated its capacity to provide full cooperation, it will provide the Director of Public Prosecutions (the “DPP”) with a recommendation regarding the applicant’s eligibility. Under the revised Immunity and Leniency programme released in September 2018, the DPP will then decide whether it wants to grant the applicant a Grant of Interim Immunity (a “GII”).26 The GII is a conditional immunity agreement that sets out the applicant’s ongoing obligations it must fulfil before the DPP will finalise an immunity agreement. All identified current

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Blake, Cassels & Graydon LLP Canada directors, officers or employees will be included under the GII if they admit their knowledge of or participation in the unlawful conduct and provide full cooperation. Former directors, officers and employees may qualify on the same terms, though the Bureau will decide on a case-by-case basis. This is a departure from the previous programme, where all directors, officers and employees received automatic immunity. The DPP may revoke the GII if the applicant does not comply with its terms. Once the applicant has satisfied its obligations under the GII, such that the applicant’s assistance is no longer required, the Bureau will make a recommendation for a final grant of immunity. The GII system is also a departure from the previous programme, which involved a single and final grant of immunity. Participation in the Immunity and Leniency Programs is voluntary, confidential, and on 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 permitted to accommodate the Crown’s duty to disclose relevant evidence to a defendant in a criminal proceeding.27 The revised Immunity and Leniency Programs also introduced a protocol for identifying, reviewing and adjudicating privilege claims by applicants. After the GII stage, the applicant must provide notice to the Bureau of its privilege claims. The Bureau will then refer the information to the DPP. If the DPP is not persuaded by the applicant’s privilege claim, it will either agree to appoint an independent counsel to resolve the claim or ask a court to rule on the matter. Immunity is granted only to the first participant involved in a conspiracy to come forward. Under the Immunity and Leniency Program, all subsequent leniency applicants are eligible for a cooperation credit for up to a 50% reduction in the fine that would otherwise have been recommended by the Bureau to the prosecution. Rather than providing credit on a first-come, first-served basis, the amount of credit awarded will be based on the value of the applicant’s cooperation. This is a significant change from the previous programme where only the first leniency applicant received a 50% credit and subsequent applicants would be granted a reduced credit. As with immunity applicants, current directors, officers or employees must admit knowledge of or participation in the unlawful conduct and provide full cooperation to receive the benefit of a company’s leniency application. Former directors, officers or employees may also qualify under the same conditions, though the Bureau will decide on a case-by-case basis. In addition, the length of the offence period is typically a matter of negotiation with the authorities where the party cooperates with the investigation; the period determined to 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 when assessing a fine against a firm charged with a cartel offence. “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

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Blake, Cassels & Graydon LLP Canada 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 to civil actions for immunity and leniency applicants; however, once guilty pleas are entered, leniency applicants are readily exposed to third-party actions for damages. The information provided by immunity and leniency applicants is subject to strict confidentiality agreements 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.28 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 Bureau files and information obtained during a criminal investigation. However, such access is limited by Canada (Attorney General) v. Thouin (discussed below), where the SCC held that in a price-fixing class action in which the government is not a party, Bureau investigators cannot be compelled to be examined for discovery. Duration of investigations The duration of time from the receipt of an immunity marker to the end of the immunity applicant’s cooperation obligations is highly case-specific. Indeed, the timing has ranged anywhere from one to 10 years following the initiation of an investigation through, for example, a dawn raid(s).29 This timing will depend on a number of factors including: the number of participants in the cartel; the duration of the conduct; the affected volume of commerce; the extent to which that commerce directly or indirectly affects Canadian consumers; the jurisdiction where the conduct occurred; the location of the principal witnesses and evidence; and the timing considerations of other enforcement agencies (principally, the US Department of Justice).

Overview of cartel enforcement activity during 2020 Cartel enforcement activity can be measured in terms of new charges laid, convictions obtained, number of investigations under way, and international efforts. Convictions obtained and charges laid In 2020, the PPSC obtained guilty pleas against at least two companies based on public information; it did not obtain guilty pleas from any individuals in 2020 (compared to a total of four guilty pleas against individuals in 2019). The Bureau also reached settlements with two other companies, at least one of which was subject to a prohibition order but did not plead guilty. The Bureau obtained financial settlements from all four companies, each of which stemmed from an investigation into bid rigging on municipal infrastructure contracts

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Blake, Cassels & Graydon LLP Canada in Québec between 2002–2012. The Bureau had previously reached settlement agreements with two other engineering firms for their involvement in the same bid rigging scheme, for a total of six firms subject to financial penalties for their involvement. It also obtained guilty pleas against four individuals pertaining to the same scheme in 2019. Of the four engineering firms that reached settlement agreements with the Bureau in 2020, Norda Stelo Inc. paid a $750,000 financial penalty, Génius Conseil Inc. (which participated in the Bureau’s Leniency Program) paid $300,000, SNC-Lavalin paid $1.9 million and CIMA+ paid $3.2 million.30 Three of the four firms were also required to maintain corporate compliance programmes to prevent future anticompetitive harm. To date, the six engineering firms that have reached settlements with the Bureau for the Québec bid rigging scheme have paid a total of $12,050,000 in financial penalties. Investigations The Bureau’s investigation into price-fixing of fresh commercial bread, which became public in October 2017, remains ongoing.31 At the time of writing, the Bureau has yet to lay charges. In January 2021, the Bureau also closed its investigation into Postmedia and Torstar following allegations that the parties had contravened criminal conspiracy provisions of the Act when they entered into a swap transaction in 2017. Following closing, the parties shut-down some of the assets they had swapped. In closing its investigation, the Bureau concluded that no further action was warranted.32 International efforts In July 2020, the Bureau assumed its current role as President of the International Consumer Protection and Enforcement Network (“ICPEN”).33 The Bureau will serve as ICPEN President until 30 June 2021. ICPEN is an international organisation made up of consumer protection authorities from over 65 countries that aims to encourage coordination amongst agencies. In its Annual Plan for 2020–2021, the Bureau noted its objective of continuing its leadership role in multilateral organisations such as ICPEN and deepening its relationships with key international partners, including with regard to the COVID-19 pandemic and related issues.34 As noted, in September 2020, the Bureau signed onto the MMAC, along with competition authorities from the other Five Eyes nations to improve cooperation with respect to investigations of alleged anti-competitive conduct, amongst other things.35

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.36 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. The SCC recently clarified that limitation periods apply to section 36 actions based on the discoverability principle, such that the limitations clock will not run until the plaintiff knew or ought to have known the facts underlying the cause of action.37 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 the Bureau’s Leniency 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

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Blake, Cassels & Graydon LLP Canada 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 In 2019, the SCC released its highly anticipated decision in Pioneer Corp. v. Godfrey,38 which provided important clarifications on several hotly debated issues relating to the private enforcement of cartels under section 36, including (i) the nature of harm that indirect purchasers must demonstrate to be certified as a class, (ii) whether umbrella purchasers are able to bring claims against price-fixing conspirators, (iii) whether the Act is a complete code intended to displace concurrent common law conspiracy causes of action, and (iv) the application of limitations and the discoverability principle to section 36 of the Act. The Godfrey decision effectively resolves these issues, which had raised significant confusion in courts across the country for years. Indirect purchaser actions In October 2013, the SCC issued a trilogy of important decisions regarding competition law related private actions, which allowed indirect purchasers to bring civil cases against upstream suppliers.39 In these decisions, the SCC noted that in bringing their actions, indirect purchasers assume the burden of establishing that they have suffered loss. Whether they have met their burden of proof is a factual question to be decided on a case-by-case basis. In Godfrey, the SCC settled an ongoing debate regarding the requirements for establishing common loss at the certification stage. The Court ultimately decided that in order to be certified as a class, plaintiffs are required to present a methodology capable of showing that direct purchasers and indirect purchasers experienced over charges, without having to show loss to each and every class member. Instead, it held that proof of loss to individual class members is a matter reserved for trial. If, after obtaining discovery and proceeding through trial, the plaintiffs ultimately cannot prove that a portion or all members of the class suffered losses, the trial judge can dismiss the claim. As a result, while it is sufficient to show that overcharges were passed on to the indirect purchaser level for the purposes of certifying a common issue relating to loss, before damages are awarded to all class members or subsets of class members, plaintiffs will be required to demonstrate actual loss to those class members.40 In a recent decision, Ewert v. Nippon Yusen Kabushiki Kaisha, the British Columbia Court of Appeal (“BCCA”) addressed the requirement to demonstrate a methodology for identifying common harm at the certification stage. The BCCA held that plaintiffs need only show “some basis in fact” that there is a credible or plausible methodology capable of establishing loss on a class-wide basis. It clarified that the plaintiffs need to present a methodology that is “realistic but not compelling”, and that they do not need to actually build an economic model or identify specific data that will be required to show common harm.41 Finally, the court emphasised that the certification stage is not to become a battle of the experts.42 Together, Godfrey and Ewert create a low standard for class action certification for indirect purchasers. Umbrella purchasers The SCC in Godfrey also confirmed that the ability to bring civil cases under section 36 of the Act extends 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 drove market prices up, including the prices they paid to non-conspirators. The SCC interpreted the provision as providing a cause of action to any person who suffered a loss as a result of the conduct contrary to section 45, which it held included umbrella purchasers. However, the SCC also emphasised that it is still necessary to prove at trial that umbrella

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Blake, Cassels & Graydon LLP Canada purchasers suffered a lossas a result of a proven conspiracy.43 Moving forward, losses that are too remote will therefore be precluded at trial, rather than at the certification stage. Though section 36 extends to umbrella purchasers, these plaintiffs are still required to demonstrate commonality of harm in order to be certified as a class. In Ewert, the BCCA upheld the trial judge’s finding that the scope of the proposed methodology did not extend to umbrella purchasers and therefore concluded that a class proceeding was not the preferable procedure for resolving the claims of the umbrella purchasers in that case.44 Complete code The Godfrey decision also settled an ongoing debate regarding whether the conspiracy provisions of the Act remove the plaintiffs’ ability to seek damages under common law for violations of the Act’s criminal provisions. At the heart of the debate was whether Parliament intended the Act to be a complete code, ousting other bases of civil liability. In Godfrey the SCC decided that the Act was not intended to be a complete code, and that section 36 does not bar other common law or equitable claims. In its ruling, the SCC specified that a breach of section 45 of the Act can supply the “unlawful” element required for the tort of civil conspiracy.45 Limitations on civil liability The 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 thereto were finally disposed of. The way the limitation period is defined has historically produced 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. 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. The SCC in Godfrey held that where a limitation period is linked to an element underlying a cause of action, the discoverability principle will apply, such that the limitations clock will not run until the plaintiff knew or ought to have known the facts underlying the cause of action. The SCC also noted that it would be inconsistent with the overall objects of the Act to promote competition and consumer protection, if section 36(4) were interpreted to bar plaintiffs from recovery where a conspiracy was concealed for longer than two years. To do so would effectively encourage the concealment of conspiracies until the limitations period had expired.46 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.47 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 lessening of competition due to acts that are no longer occurring would not be sufficient to extend the limitation period.48 The Alberta Queens Bench (“ABQB”) later applied Garford in Dow Chemical Canada ULC v. NOVA Chemicals Corporation.49 The court concluded that the agreement in question required ongoing acts by both parties, so an analysis of whether the agreement breached section 45 of the Act was not restricted to the time that the agreement was formed. In that case, the defendant had entered the agreement with another party. The plaintiff (which happened to be the defendant’s largest competitor) later purchased the original party to the agreement, such that the agreement became a contract between two

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Blake, Cassels & Graydon LLP Canada competitors. The court ultimately decided that (under the defendant’s interpretation of the agreement) certain provisions contravene section 45. Though the agreement was valid when executed, it became illegal following the plaintiff’s acquisition.50 The ABQB’s conclusions regarding section 45 of the Act were recently upheld on appeal.51 Pre-trial delay In 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.52 The court permitted 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).53 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 a superior court, beyond which delay is presumptively unreasonable.54 The finding that the bid rigging prosecution was more complex than a typical murder trial suggests that defendants in criminal prosecutions under the Act may face difficulty obtaining Charter relief for lengthy pre-trial delays. Information flow Controlling the flow of information to and from the Bureau can have important implications for 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 on section 29 of the Act to maintain confidentiality of any information voluntarily disclosed during 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 the information they produce to the accused, notwithstanding the confidentiality assurances that were given when the information was originally provided.55 In June 2018, the Bureau released a bulletin on its general approach to requests for access to confidential information in its possession from persons involved in private actions under section 36 of the Act.56 The 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 and maintain the confidentiality of information the Bureau receives. The 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.57 The case involved a gasoline price-fixing class action in which the plaintiffs attempted to get an order permitting them to examine the Bureau’s chief investigator in its investigation into gasoline price-fixing. The court held that the Crown’s immunity from discovery was not 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,58 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

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Blake, Cassels & Graydon LLP Canada 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 been disclosed to the accused in the criminal proceedings. The SCC found that the specific circumstances 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 together with the consideration of confidentiality rights, privacy rights and the efficiency of the 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 office in Canada, the Bureau may invoke its authority under section 11(2) of the Act to issue production orders to the Canadian branch office for records or information, even if those records 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 public record and the accompanying affidavit from the Bureau will set out, typically in great detail, the alleged criminal conduct being investigated and the involvement of the company being investigated. These affidavits have formed a roadmap for class counsel, even if a conviction has yet to be secured from the company. Legislative and policy changes Unsurprisingly, the Bureau has been highly focused on responding to the COVID-19 pandemic over the past year. On 20 March 2020, the Commissioner released a statement indicating that the Bureau would focus on preventing anti-competitive conduct aimed at taking advantage of consumers and businesses during the COVID-19 crisis, including by colluding with competing businesses.59 However, in April 2020, the Bureau released a subsequent statement recognising that certain competitor collaborations may be required to ensure the supply of products and services that are critical to Canadians during exceptional times. The Bureau stated that it will generally refrain from scrutinising competitor collaborations of a limited duration and scope during the crisis, “where there is a clear imperative for companies to be collaborating in the short-term to respond to the crisis, where those collaborations are undertaken and executed in good faith and do not go further than what is needed”. To assist businesses in obtaining greater legal certainty before collaborating with competitors, the Bureau created a team to assess proposed collaborations and assist the Commissioner in providing parties with informal guidance.60 In October 2020, the Commissioner also noted that the Bureau had proactively reached out to all levels of the Canadian government to raise awareness and facilitate detection of anti-competitive conduct and provided outreach sessions to the Canadian procurement community throughout the pandemic.61 In 2020, the Bureau also continued its focus on cartel and competition issues in relation to the

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Blake, Cassels & Graydon LLP Canada digital economy. In February 2020, the Bureau released it Strategic Vision for 2020–2024, which is intended to guide the agency’s efforts to become a world-leading competition agency at the forefront of the digital economy. In it, the Bureau commits to using new intelligence-gathering tools, such as advanced analytical models, algorithms, automated processes and artificial intelligence capabilities.62 Throughout October and November 2020, the Bureau hosted a virtual Digital Enforcement Summit comprising several panels to discuss Competition Act investigations in the digital era. The panels focused on the role of digital intelligence in the pre-investigation stage, advances in the process of evidence gathering, competition enforcement adaptation to digital investigations, the rise of new technical solutions to support enforcement, and the challenges created by the rapid pace of change in the digital economy and evolving evidentiary burdens in court.63 These efforts follow on the Bureau’s white paper on big data, innovation and competition policy, which touches on the impact of emerging technologies on cartel enforcement, including the potential for technology to facilitate conspiracies by increasing the ease with which competitors can communicate,64 as well as the Bureau’s recent establishment of a Criminal Intelligence Unit designed to provide tactical and strategic intelligence support to the Bureau through an intelligence-led approach to enforcement.65 In July 2020, the Bureau released draft revised Competitor Collaboration Guidelines (“Draft Guidelines”) for public consultation. As at the time of writing, the Draft Guidelines have not been formalised. The Draft Guidelines propose changes that signal broader enforcement discretion for the Bureau. For example, the Draft Guidelines specify that a non-compete that amounts to a standalone restraint may be examined under the criminal or civil competitor collaboration provisions of the Act, not only under the Act’s merger review provisions. The Draft Guidelines also specify that consortium bids may be subject to review under the Act’s civil competitor collaboration provision and indicate that an agreement between parties may be subject to review under section 90.1 where the parties are competitors with respect to any product, even if that particular product is not the subject of any collaboration.66 Finally, in November 2020, the Bureau issued guidance regarding the application of the Act to no-poaching and wage-fixing agreements between employers. The Bureau clarified that no-poaching, wage-fixing and other types of buy-side agreements between purchasers are not criminalised under section 45 of the Act. However, the Bureau may assess buy-side agreements under the Act’s civil competitor collaboration provisions.67 As a result, buy- side agreements will only contravene the Act where they substantially prevent or lessen competition.68 * * *

Endnotes 1. 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 sufficient that harm was suffered in B.C. and that the defendants knew or should have known 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 order for an offence to be subject to the jurisdiction of Canadian courts, it is sufficient that there exist a “real and substantial link” between the offence and Canada. See alsoGoogle Inc.

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v. Equustek Solutions Inc., 2017 SCC 34, where the Supreme Court of Canada upheld a lower court decision to issue an interlocutory injunction with extraterritorial effect requiring Google to globally deindex certain websites, confirming that where conduct even has effects in Canada, territorial jurisdiction can be established. 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; Competition Bureau, “Competition Bureau statement on the application of the Competition Act to no-poaching, wage-fixing and other buy-side agreements” (27 November 2020), online: https://www.canada.ca/en/competition-bureau/news/2020/11/competition-bureau- statement-on-the-application-of-the-competition-act-to-no-poaching-wage-fixing-and- other-buy-side-agreements.html. However, note that 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 discussions in future prosecutions against the firm or individuals making the admission. 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 often hear cases concerning matters of cartel enforcement. 6. Competition Bureau, “[t]hirteenth guilty plea concludes auto parts bid rigging investigations with fines totalling over $86 million” (19 October 2018), online: https:// www.canada.ca/en/competition-bureau/news/2018/10/thirteenth-guilty-plea-concludes- auto-parts-bid-rigging-investigations-with-fines-totalling-over-86-million.html/. 7. Supra note 3. 8. Competition Bureau, “Competitor Collaboration Guidelines – Draft for Public Consultation” (29 July 2020), online: https://www.ic.gc.ca/eic/site/cb-bc.nsf/eng/04543.html. 9. Competition Bureau, “Corporate Compliance Programs – Bulletin” (3 June 2015), online: http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03942.html. 10. Competition Bureau, “Competition and Compliance Framework – Bulletin” (10 November 2015), online: http://www.competitionbureau.gc.ca/eic/site/cbbc.nsf/eng/03999.html. 11. Competition Bureau, “Immunity and Leniency Programs under the Competition Act” (27 September 2018), online: http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/ eng/04391.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. SPC, “Government of Canada’s Integrity Regime” (11 October 2018), online: https:// 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 Act offences) in the past five years. The

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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 supplier may be disqualified from provincial procurement for a period of up to five years if convicted of a cartel offence under the Competition Act as well as offences under five other federal statutes. 18. Competition Act, supra note 1, section 45.1. 19. Private parties could try to frame a section 90.1 matter as a conspiracy and seek damages on that basis. 20. For example, in March 2018 the Competition Bureau initiated an investigation into an alleged conspiracy between newspaper companies Postmedia and Torstar, shortly after a transaction between the companies that was followed by the closing of several community newspapers. However, the Bureau closed the investigation in January 2021 after concluding that no further action was warranted following its investigation. See Competition Bureau, News Release, “Competition Bureau obtains court order to advance ongoing investigation of Postmedia and Torstar” (4 December 2018), online: https://www. canada.ca/en/competition-bureau/news/2018/11/competition-bureau-obtains-court-order-to- advance-ongoing-investigation-of-postmedia-and-torstar.html; Competition Bureau, News Release, “Competition Bureau closes investigation of Postmedia and Torstar” (7 January 2021), online: https://www.canada.ca/en/competition-bureau/news/2021/01/competition- bureau-closes-investigation-of-postmedia-and-torstar.html. 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. Competition Bureau, “Competition Bureau strengthens relationship with five foreign counterparts to enhance cross-border enforcement” (2 September 2020), online: https:// www.canada.ca/en/competition-bureau/news/2020/09/competition-bureau-strengthens- relationship-with-five-foreign-counterparts-to-enhance-cross-border-enforcement.html. 26. Supra note 11. 27. R. v. Nestlé Canada Inc., 2015 ONSC 810 at paras 69, 83 [Nestlé]. 28. Middlekamp v. Fraser Valley Real Estate Board, [1992] BCJ No 1947, 96 DLR (4th) 227 (“BCCA”). 29. 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, “SEC Carbon Pleads Guilty to Conspiracy” (9 November 2007), online: https://www.canada.ca/en/ news/archive/2007/11/sec-carbon-pleads-guilty-conspiracy.html. 30. Competition Bureau, “Third engineering firm to pay $750,000 in settlement for Quebec bid-rigging” (5 March 2020), online: https://www.canada.ca/en/competition-bureau/ news/2020/03/third-engineering-firm-to-pay-750000-in-settlement-for-quebec-bid- rigging.html; Competition Bureau, “Génius Conseil Inc. to pay $300,000 in fifth Quebec bid-rigging settlement” (19 June 2020), online: https://www.canada.ca/en/

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competition-bureau/news/2020/06/genius-conseil-inc-to-pay-300000-in-fifth-quebec- bid-rigging-settlement.html; Competition Bureau “SNC-Lavalin to pay $1.9 million in fourth Quebec bid-rigging settlement” (19 June 2020), online: https://www.canada.ca/ en/competition-bureau/news/2020/06/snc-lavalin-to-pay-19-million-in-fourth-quebec- bid-rigging-settlement.html; Competition Bureau, “CIMA+ to pay $3.2 million in latest Quebec bid-rigging settlement”, online: https://www.canada.ca/en/competition-bureau/ news/2020/12/cima-to-pay-32-million-in-latest-quebec-bid-rigging-settlement.html. 31. CTV News, “Top court won’t hear bread price-fixing witness case” (12 September 2019), online: https://www.ctvnews.ca/business/top-court-won-t-hear-bread-price-fixing- witness-case-1.4589967. 32. Competition Bureau, “Competition Bureau closes investigation of Postmedia and Torstar” (7 January 2021), online: https://www.canada.ca/en/competition-bureau/news/2021/01/ competition-bureau-closes-investigation-of-postmedia-and-torstar.html. 33. Competition Bureau, “Canada’s 2020–2021 presidency of the International Consumer Protection and Enforcement Network (ICPEN)”, online: https://www.competitionbureau. gc.ca/eic/site/cb-bc.nsf/eng/h_04535.html. 34. Competition Bureau, “2020–2021 Annual Plan: Protecting competition in uncertain times” (6 July 2020), online: https://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/ eng/04533.html. 35. Supra note 25. 36. 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, ultimately finding they could not due to the lack of any jurisdiction of the court over foreign 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. See Airia Brands v. Air Canada, 2015 ONSC 5332. In the 2020 case of Ewert v. Höegh Autoliners, the BCCA added that companies that participate in international cartels but do not distribute their product into Canada may nonetheless be found liable under s.36 where the conspiracy caused harm within Canada. See Ewert v. Höegh Autoliners AS, 2020 BCCA 181 at para. 79. 37. Pioneer Corp. v. Godfrey, 2019 SCC 42 [Godfrey]. 38. Godfrey, supra note 37. 39. Pro-Sys Consultants Ltd v. Microsoft Corporation, 2013 SCC 57; Sun-Rype Products Ltd v. Archer Daniels Midland Company, 2013 SCC 58; Infineon Technologies AG v. Option consommateurs, 2013 SCC 59. 40. Godfrey, supra note 37 at paras 107–109 and 118–121. 41. Ewert v. Nippon Yusen Kabushiki Kaisha, 2019 BCCA 187 [Ewert]. However, in a 2020 Ontario Superior Court decision, Mancinelli v. Royal Bank of Canada (a class certification decision regarding an alleged price fixing conspiracy between financial institutions to fix the prices of currency traded on the foreign exchange market) the certification judge refused to certify a class made up of indirect investor purchasers that had purchased an interest in various investment vehicles. The plaintiffs argued that these investors may have been affected by purchases from the defendants on the foreign exchange market, but the judge held that the harm was too remote, referring to the indirect investor purchasers’ claim as a “meta-claim, which is to say a claim about somebody else’s claim”. See Mancinelli v. Royal Bank of Canada, 2020 ONSC 1646, at paras 206–208 [Mancinelli]. 42. Ewert, supra note 41 at paras 9–10 and 104.

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43. Godfrey, supra note 37 at paras 64 and 74. 44. Ewert, supra note 41 at paras 137–138. This approach was also taken in Mancinelli, where the certification judge refused to certify an action for umbrella purchasers on the basis that the proposed class members could not demonstrate whether individually negotiated transactions with non-defendant financial institutions were impacted by the alleged wrongdoing, particularly because the alleged conduct was “episodic” in nature. See Mancinelli, supra note 41 at para. 202. 45. Godfrey, supra note 37 at para. 89. 46. Godfrey, supra note 37 at paras 46–50. 47. Garford Pty Ltd. V. Dywidag Systems International, 2010 FC 996 [Garford]. 48. Garford, supra note 47 at paras 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. 49. Dow Chemical Canada ULC v. NOVA Chemicals Corporation, 2018 ABQB 482 [Dow]. 50. Dow, supra note 49 at paras 1370–1371. 51. Dow Chemical Canada ULC v. NOVA Chemicals Corporation, 2020 ABCA 320. 52. Industries Garanties limitée c. R., 2017 QCCS 1504 [Industries Garanties]. 53. Industries Garanties, supra note 52 at paras 78–82. 54. R. v. Jordan, 2016 SCC 27 at para. 49. 55. Nestlé, supra note 27. 56. Competition Bureau, “Information requests from private parties in proceedings for recovery of loss or damages” (11 June 2018), online: http://www.competitionbureau. Gc.ca/eic/site/cb-bc.nsf/eng/04314.html. 57. Canada (Attorney General) v. Thouin, 2017 SCC 46 [Thouin]. 58. Imperial Oil v. Jacques, 2014 SCC 66, [2014] SCJ No 66. 59. Competition Bureau, “Statement from the Commissioner of Competition regarding enforcement during the Covid-19 coronavirus situation” (20 March 2020), online: https://www.canada.ca/en/competition-bureau/news/2020/03/statement-from-the- commissioner-of-competition-regarding-enforcement-during-the-covid-19-coronavirus- situation.html. 60. Competition Bureau, “Competition Bureau statement on competitor collaborations during the Covid-19 pandemic” (8 April 2020), online: https://www.canada.ca/en/competition- bureau/news/2020/04/competition-bureau-statement-on-competitor-collaborations- during-the-covid-19-pandemic.html. 61. Remarks by Matthew Boswell, Commissioner of Competition at the CBA Competition Law Fall Online Symposium, “Supporting competition on the road to economic recovery” (21 October 2020), online: https://www.canada.ca/en/competition-bureau/ news/2020/10/supporting-competition-on-the-road-to-economic-recovery.html. 62. Competition Bureau, “The Competition Bureau’s Strategic Vision for 2020–2024” (11 February 2020), online: https://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/ eng/04513.html. 63. Competition Bureau, “Digital Enforcement Summit 2020” (18 December 2020), online: https://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/h_04551.html. 64. Competition Bureau, “Big data and innovation: key themes for competition policy in Canada” (19 February 2018), online: http://www.competitionbureau.gc.ca/eic/site/cb-bc. nsf/eng/04342.html. 65. Competition Bureau, Speech by Matthew Boswell (Commissioner of Competition), “No River too Wide, No Mountain too High: Enforcing and Promoting Competition in the Digital Age” (7 May 2019), online: https://www.canada.ca/en/competition-bureau/ news/2019/05/no-river-too-wide-no-mountain-too-high-enforcing-and-promoting- competition-in-the-digital-age.html.

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66. Competition Bureau, “Competition Bureau invites feedback on updated Competitor Collaboration Guidelines” (29 July 2020), online: https://www.canada.ca/en/competition- bureau/news/2020/07/competition-bureau-invites-feedback-on-updated-competitor- collaboration-guidelines.html. 67. However, the Draft Competitor Collaboration Guidelines propose a change clarifying that buy-side agreements may still contravene the Act’s criminal provisions if their purpose is to fix or control price or production, or allocate markets for the supply of a downstream product. 68. Competition Bureau, “Competition Bureau statement on the application of the Competition Act to no-poaching, wage-fixing and other buy-side agreements” (27 November 2020), online: https://www.canada.ca/en/competition-bureau/news/2020/11/ competition-bureau-statement-on-the-application-of-the-competition-act-to-no- poaching-wage-fixing-and-other-buy-side-agreements.html.

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Randall Hofley Tel: +1 416 863 2387 / Email: [email protected] Randall is a trusted advisor and advocate for leading Canadian and global companies on all aspects of competition law and the federal regulation of business, with a focus on contentious matters before the Canadian Competition Bureau and Competition Tribunal, as well as before all levels of Canadian courts and federal administrative tribunals. Randall is one of the most sought- after and experienced competition lawyers in Canada. He brings both private- sector and public-sector experience, most recently serving as General Counsel and Senior Enforcement Advisor, Competition Bureau Legal Services. As General Counsel and Senior Enforcement Advisor over 2018–19, Randall played a lead counsel role in numerous high-profile enforcement matters related to mergers, abuse of dominance, and deceptive marketing, in addition to a senior advisory role in (criminal) cartel matters.

Cassandra Brown Tel: +1 416 863 2295 / Email: [email protected] Cassandra advises on all aspects of competition law, including mergers and acquisitions, joint ventures, distribution practices, criminal and civil investigations, compliance, as well as foreign investment transactions under the Investment Canada Act. Her clients span a variety of industries, including energy, mining, technology, pharmaceutical, consumer products, agricultural, telecommunications, transportation, aviation, financial services, manufacturing, automotive and real estate.

Gillian Singer Tel: +1 416 863 6273 / Email: [email protected] Gillian advises on all aspects of competition law, including merger review, joint ventures and strategic alliances, cartel investigations, unilateral conduct matters and advertising/marketing matters. She also advises on foreign investment merger review under the Investment Canada Act.

Blake, Cassels & Graydon LLP 199 Bay Street, Suite 4000, Commerce Court West, Toronto, Ontario M5L 1A9, Canada Tel: +1 416 863 2400 / Fax: +1 416 863 2653 / URL: www.blakes.com

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Zhan Hao & Song Ying AnJie Law Firm

Overview of the law and enforcement regime relating to cartels Statutory bases for challenging cartel behaviour In China, the Anti-monopoly Law (“AML”), which entered into force on August 1, 2008, delineates the legal framework for the prohibition of cartels. Article 13 of the AML is considered as the statutory basis for challenging cartel behaviour in China. Although not specifically provided in the AML, bid rigging is also a type of cartel recognisable by the AML and was identified as price fixing and sales market splitting by the National Development and Reform Commission (“NDRC”, the former AML enforcer) in the roll-on roll-off shipping cartel case in 2015. According to Article 13 of the AML, competing undertakings are prohibited from entering into the following monopoly agreements: 1. fixing or altering the prices of commodities; 2. restricting the production or sale volume of commodities; 3. dividing the sales market or procurement market of raw materials; 4. restricting the procurement of new technologies and new equipment or restricting the development of new technologies and new products; 5. boycotting transactions jointly; and 6. any other monopoly agreements as determined by the anti-monopoly enforcement agency of the State Council. It should be noted that on June 26, 2019, the State Administration for Market Regulation (the current AML enforcer, “SAMR”) officially released the Interim Provisions on Prohibiting Monopoly Agreements (“the New Provisions”), which further clarify the rules on monopoly agreement. The New Provisions came into force on September 1, 2019, and replaced the Provisions of the National Development and Reform Commission on Anti-Price Monopoly and the Provisions of the State Administration for Industry and Commerce on Prohibiting Monopoly Agreements. In the interim, the Provisions of the State Administration for Industry and Commerce on Prohibiting the Abuse of Intellectual Property Rights to Exclude or Restrict Competition continues to be valid until it is superceded by new regulations from SAMR. In addition, the AML and the New Provisions also provide basic rules on the investigation procedures and sanctions by China’s antitrust enforcement agencies against cartels. Meanwhile, the AML is currently undergoing review, and a draft amendment of the AML was released in January 2020 for public comment. The antitrust enforcement authority for cartels The SAMR and its provincial branches became China’s public enforcement agencies in 2019, following the consolidation of three bureaus’ former antitrust elements. Under the previous

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© Published and reproduced with kind permission by Global Legal Group Ltd, London AnJie Law Firm China regime, these three bureaus were the former State Administration for Industry and Commerce (“SAIC”, for non-price-related enforcement), the NDRC, (for price-related enforcement), and the Ministry of Commerce (“MOFCOM”, for merger control), respectively. The Anti- monopoly Bureau under SAMR is responsible for enforcing the AML and comprises 10 divisions: three divisions responsible for merger review; one for monopoly agreements; one for abuse of market dominance; one for administrative monopoly; one for supervision of conditionally cleared mergers and the guidance of Chinese undertakings in dealing with overseas antitrust challenges; one for general affairs; one for rulemaking and international exchange; and one for the daily work of the State Council’s Anti-monopoly Committee. Antitrust enforcement achievements in numbers in 2020 Many achievements have been made in 2020 in China. The SAMR has investigated to completion nine cases of monopoly agreements and eight cases of abuse of market dominance. The SAMR has approved 458 concentrations and handed out penalties for eight cases of abuse of administrative power to exclude or restrict competition. These accomplishments have helped prevent anticompetitive practices. Regulations issued by enforcement agencies reinforce the regime relating to cartels After the establishment of the SAMR, the existing regulations issued by the three former antitrust agencies have been streamlined and harmonised, enhancing antitrust enforcement consistency and predictability. The relevant rules and regulations related to cartels include: 1. Interim Provisions on the Prohibition of Monopoly Agreements. 2. Provisions on the Prohibition of Abuse of Intellectual Property Rights to Eliminate or Restrict Competition. 3. The Guidelines for Industry Association Pricing Behaviour. 4. The Guidelines on Active Pharmaceutical Ingredients (“APIs”) and Drugs Prone to Shortages. 5. Guidelines on the Field of Intellectual Property. 6. The Guidelines for the Application of the Leniency Programme to Cases of Horizontal Monopoly Agreements. 7. The Guidelines for the Automotive Industry. 8. The Guidelines on Undertakings’ Commitments in Anti-Monopoly Case (not applicable to cartels, including hard-core restrictions). The following draft guidelines and regulations are long awaited, and are expected to be finalised and adopted soon: 1. The Draft Guidelines for Anti-monopoly in the Platform Economy (Exposure Draft). 2. The Draft Guidelines on the General Conditions and Procedures for Monopoly Agreement Exemption. 3. The Draft Guidelines for the Calculation of Fines and Determining Illegal Gains. Possible sanctions against cartels Currently, cartels are not punishable under criminal law, even though some experts call for reforming the AML to include criminal penalties. China instead adopts an administrative enforcement approach, whereby agencies levy administrative sanctions against cartels. Such sanctions include cessation of violation, confiscation of illicit gains, and fines. According to Article 46 of the AML, business operators and industrial associations can be subject to these penalties. If a business operator is found to have reached a monopoly agreement, a penalty ranging from 1% to 10% of their turnover from the previous year may be imposed. In antitrust civil proceedings, the court may also impose civil liabilities, including behavioural injunctions and compensation for damages. For more details, please see the section titled “Civil penalties and sanctions”.

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However, it should be noted that, on January 2, 2020, the SAMR released a draft amendment of the AML for public comment. In the draft amendment, Article 50 provides that if the monopolistic conduct at issue constitutes a crime, criminal liability shall accordingly attach. That means cartels may be subject to criminal liabilities if this provision is included in the final version of the AML in future.

Overview of investigative powers in China The Anti-monopoly Bureau of SAMR and its provincial branches have the power to start an antitrust investigation and punish infringers, in accordance with the relevant laws and regulations. The investigative powers generally include and allow for the following practices: • enter the business premises of the business operators who are under investigation or any other relevant place to investigate; • inquire with the business operators who are under investigation, interested parties, or other relevant entities or individuals, and request them to disclose relevant information; • review and duplicate the relevant business documents, agreements, accounting books, business correspondences, electronic data, files, or documentations of the business operators who are under investigation, interested parties, or other relevant entities or individuals; • seize and detain the relevant evidence; and • inquire about the bank accounts of the business operators who are under investigation. For most companies in China, the greatest threats come from the antitrust authorities’ policing power, which is carried out by the Anti-monopoly Bureau of the SAMR and SAMR’s provincial branches. Even though the antitrust authorities can initiate a formal investigation by serving a notice of investigation, many targets only learn that they are under investigation when investigators show up at their offices demanding information. These “dawn raids” are increasingly common among regulators, having now used them to collect information from investigative targets such as, Micron, SK Hynix, Samsung, and Ericsson, just to name a few. Regulators are partial to using such raids because they preserve the element of surprise, thereby preventing companies from disposing of evidence. Moreover, dawn raids in China are relatively simple to initiate since antitrust authorities do not need to get a warrant from a judge or advance approval from any other third-party agency. Targets of investigative raids are allowed to consult with their lawyers After a dawn raid, regulators will review the documents collected and sometimes demand additional documents where necessary. Usually at this stage the regulators will reveal what issues they are investigating. They will also permit the investigated targets to submit explanations and defences in writing. When the parties under investigation refuse to submit requested materials and information, submit fraudulent materials or information, conceal, destroy or remove evidence, or resist investigation by enforcement authorities, the authorities may impose a fine of up to RMB 1 million upon non-cooperative entities or up to RMB 100,000 upon individuals, according to Article 52 of the AML. In April 2020, SAMR issued such a penalty against individuals for refusing to cooperate in antitrust investigations. In that case, three calcium gluconate drug distributors abused their dominant market position. Two of the distributors exhibited non-cooperative behaviour, in response to which SAMR imposed fines of 1 million yuan against said distributors, and fined 14 non-cooperative employees and executives involved in the case, respectively, which is rare in China. There is no limit on how long an investigation can last, so probes can drag on for months or years. For instance, the Milk Powder case was closed within six months of commencement

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© Published and reproduced with kind permission by Global Legal Group Ltd, London AnJie Law Firm China of the investigation, while the Tetra Pak case investigated by the previous SAIC lasted for more than three years. In another example, one of the former antitrust agencies, the SAIC, commenced an investigation against Microsoft in 2014, a case which remains open to this day.

Overview of cartel enforcement activity during the last 12 months Antitrust law enforcement continued to grow stronger in 2019 and 2020. The enforcement priorities rested on anticompetitive conduct in markets directly linked to people’s everyday lives, such as construction materials, automobiles, public utilities, and internet services. Due to the COVID-19 outbreak, no cartel enforcement case was published until April 2020. Since May 2020, a total of eight cartel enforcement notices have since been issued, and the number of such notices amounted to the same as that in 2019. Cartel cases concluded by SAMR from November 2019 to December 2020

Case Name Penalised Undertakings Date of Investigating Total Penalty Decision Authority (RMB) Twelve concrete enterprises, including Haining Hangzhou Concrete Zhongsheng Building SAMR December Enterprises Cartel Materials, Hangzhou Zhejiang 4,150,000 23, 2019 Case Dingyuan Building Materials, Branch Hangzhou Huajiang Building Materials, etc. Southwest Guizhou Seventeen driving schools, SAMR Xinyi Driving including State driving school, December Guizhou 3,300,000 Training Industry Jingsen driving school, 31, 2019 Branch Cartel Case Xingchang driving school, etc.

Huizhou Vehicle Detection Industry Association and Guangdong Huizhou SAMR thirty-one vehicle detection May 6, Vehicle Detection Guangdong 1,766,857 enterprises including Huidong 2020 Industry Cartel Case Branch Guoshun, Huidong Yuanlai, Huizhou Gexin, etc.

Guangdong Nineteen concrete enterprises, SAMR Maoming Concrete including Maoming Jianke, June 1, Guangdong 7,649,834 Enterprises Cartel Gaozhou Jinshan, Gaozhou 2020 Branch Case Xingzhan, etc. Hunan Zhongmin Hunan Zhongmin Gas Co., Gas Co., Ltd. and Ltd. Huaihua Railway SAMR Huaihua Railway Economic June 5, Economic Hunan 1,758,101 Technology Development Co., 2020 Technology Branch Ltd (the latter was offered Development Co., immunity from punishment) Ltd Cartel Case Three Companies Three second-hand Including Hubei vehicle vendors, including SAMR Huanggang Lantian July 27, Huanggang Lantian., Hubei 195,175 Second-hand 2020 Huanggang Aojie, and Branch Vehicle Trade Market Huanggang Fada Co., Ltd. Cartel Case

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Case Name Penalised Undertakings Date of Investigating Total Penalty Decision Authority (RMB) Five second-hand vehicle Zhejiang Huzhou trade enterprises including SAMR Second-hand Huzhou Jiangnan Second- November Zhejiang 415,258.18 Vehicle Trade hand Vehicle Trade Market 2, 2020 Branch Market Cartel Case Co., Ltd, Anji Dazhong, Deqing Shunda, etc. Four Driving Schools including Four driving schools, Driver Training including Chuzhou Branch of Chuzhou Automobile Transport Co. November SAMR Anhui 1,438,027.94 Automobile Ltd’s Driver Training Branch, 2, 2020 Branch Transport Co., Ltd. Dingyuan Nanfang, Dingyuan of Anhui Jiaoyun Qingfeng, etc. Group Cartel Case

Key issues in relation to enforcement policy The internet industry has been under close scrutiny by the SAMR since 2020 In 2020, the internet industry became an object of increasing concern for China’s antitrust enforcement authorities. On July 17, 2020, the SAMR held a meeting on “Maintaining Good Market Order in Platform Economy and Promoting Healthy Industry Development”. In the meeting, 20 major internet platform enterprises, including Baidu, JD, Kwai, Qihoo 360, Sogou, Meituan, 58.com, Sina Weibo, ByteDance, Gome, Trip.com, Pinduoduo.com, Xiaohongshu, Suning.com, Alibaba, Yunji, Mocu Street, Beibei.com, VIP.com and Tencent signed the Commitment of Internet Platform Enterprises on Maintaining Good Market Order and Promoting Healthy Industry Development, a public commitment on conducting business legally and competing fairly. On November 10, 2020, the SAMR published the The Draft Guidelines for Anti-monopoly in the Platform Economy (Exposure Draft) to clarify anti-monopoly issues in the platform economy. More specifically: 1. Horizontal monopoly agreements: competitors in the platform economy industry are prohibited from concluding and implementing horizontal monopoly agreements, including price fixing, market allocation, restricting production quantity or sales volume, restricting new technologies or products, and jointly boycotting transactions through the following methods: (i) collecting or exchanging sensitive information across platform, such as pricing and sales information; (ii) communicating with other competitors by technical means; and (iii) coordinating the use of data and deployment of algorithms, among other arrangements. 2. Vertical monopoly agreements: enterprises in the platform economy industry are prohibited from reaching vertical monopoly agreements including fixing resale prices and restricting minimum resale prices with their trading parties through the following methods: (i) setting prices automatically by technical means; (ii) harmonising prices through platform rules; (iii) restricting prices directly or indirectly through the use of data and algorithms; and (iv) restricting other trading conditions by technical means, platform rules, or through the use of data and algorithms, to eliminate or restrict competition. 3. Most favoured nation (“MFN”): MFN terms are specified for the first time. The following factors can be considered when identifying a term as MFN: operators’ commercial motivation for entering into the clause; their ability to control the market; and the impact of the implementation of such terms on market competition, consumers’ welfare and innovation.

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4. Specifying hub-and-spoke agreements for the first time: competitors sometimes enter into a hub-and-spoke agreement, which brings about the effects of a horizontal monopoly agreement, through vertical relationships with a platform operator or through the organisation and coordination of a platform operator. In order to identify whether such agreements are regarded as monopoly agreements regulated by the AML, the following factors can be considered: whether competitors may reach and implement a monopoly agreement by means of technical means, via platform rules; or through the use of data and algorithms to eliminate or restrict competition in the relevant market. 5. Non-price vertical monopoly agreements: a non-price vertical monopoly agreement between platform operators and their trading parties may be prohibited by Article 14(3) of the AML. In general, the AML enforcement agency can take the following factors into account when identifying whether such agreements have the effect of eliminating or restricting competition: the market power of platform operators; the competition landscape in the relevant market; and the restrictive effect of such agreement on other business operators from entering the relevant market, etc. On December 21, 2020, the People’s Political Consultative Daily quoted the interpretation and analysis of members of the National Committee of the Chinese People’s Political Consultative Conference, pointing out that in light of successive policies and statements made by the CPC Central Committee, the era of “strict supervision” has arrived in antitrust law.

Key issues in relation to investigation and decision-making procedures In relation to cartel investigation and decision-making under the AML, the protection of the undertakings’ procedural rights is a key issue. Rights of the concerned undertakings Article 43 of the AML stipulates that the investigated undertakings and other stakeholders have the right to express their opinions to the administrative enforcers of the AML. The administrative enforcers will then verify the facts, reasons and proofs provided both by undertakings being investigated and interested third parties. In addition, Article 53 grants the investigated undertakings the right to apply for administrative review or file an administrative lawsuit if they disagree with the investigation decision made by the agency. The rights of the investigated undertakings are stipulated by the Administrative Punishment Law of the People’s Republic of China, under which said rights include: 1. The investigated parties have the right to be informed before issuance of a penalty decision. 2. The investigated parties have the right to defend themselves before the administrative enforcer. 3. The right for the law to provide a relatively detailed hearing procedure. 4. After the investigation, if the administrative enforcer decides to impose a sanction, the concerned parties must be informed in writing. 5. The investigated parties have the right to apply for administrative review or file an administrative lawsuit if they disagree with the investigation decision made by the agency. Rights of the concerned parties in practice In practice, principal questions raised by the parties concerned (especially foreign entities) focus mainly on the lack of transparency during antitrust enforcement. The parties are most worried about the possibility of unfair treatment during investigations or unfair decision- making procedures under which their rights cannot be fully exercised. For instance, the SAIC, a predecessor of SAMR, did not always disclose its case proceedings, especially at

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© Published and reproduced with kind permission by Global Legal Group Ltd, London AnJie Law Firm China its provincial level. It is notable that there is no explicit right by law to access the enforcers’ file or the legal professional privilege during antitrust investigation, although those rights are provided for in both EU and US antitrust enforcement regimes. Administrative litigation brought by the investigated party: The investigated party is entitled to bring antitrust administrative litigation against the antitrust authority. During the year 2020, there occurred an increasing number of such administrative litigation cases. For example, an industry association, Heze Automobile Trade Association, disagreed with the administrative penalty decision issued by the Shandong AMR and thus filed an administrative proceeding before the People’s Court of Lixia District, Jinan City, Shandong Province (the “Court”) on March 19, 2020. After the trial, the Court issued a judgment in September 2020 and found that (i) the plaintiff’s claim should be rejected, and (ii) the defendant’s administrative penalty decision is illegal. Specifically, the Court held that the form and content of the Commitment on Auto Show in the spring of 2018 made by the plaintiff and signed by association members on February 28, 2018 indeed had the effect of eliminating and restricting competition. The defendant had considered relevant factors when determining the penalty, including the nature, procedure and duration of the illegal behaviour, hence the decision of imposing a fine of RMB 300,000 yuan on the plaintiff was not improper. Nevertheless, the Court also held that the defendant failed to follow the provisions of Article 34 of the Administrative Litigation Law and submit certain evidence during the hearing, which constitutes a minor procedural violation. Although the violation did not incur an essential impact on the rights of the plaintiff, it still should be considered as procedurally illegal.

Leniency/amnesty regime The Interim Provisions on Prohibition of Monopoly Agreements took effect on September 1, 2019, and generally lay out rules for the leniency regime. Specifically, full immunity or a fine reduction can be granted if the undertaking (i) voluntarily reports the relevant information on monopoly agreements, and (ii) provides important evidence to the authority. The foregoing “important evidence” refers to evidence that is crucial for the authority to launch an investigation or to determine the conclusion of monopoly agreements, such as evidence on the identity of companies involved in the monopoly agreement, the scope of products involved, the content of the monopoly agreement and the way in which the agreement was reached and the implementation of the agreement. In addition, differential treatment exists for leniency applicant across various situations, and are detailed in the Interim Provisions on Prohibition of Monopoly Agreements: 1. For the first leniency applicant, punishment may be fully exempted or the applicant may receive a fine reduction of no less than 80%. 2. For the second leniency applicant, a fine reduction of 30% to 50% may be granted. 3. For the third leniency applicant, a fine reduction of 20% to 30% may be granted. In sum, the authority shall base its leniency decisions on the time sequence of leniency applications, the significance of the evidence provided, and the relevant information regarding conclusion and implementation of monopoly agreements.

Administrative settlement of cases Legal basis for administrative settlement of antitrust cases In China’s antitrust regime, there is no administrative settlement as in the US or the EU.

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However, 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 a timeline acceptable to the authority, the authority may decide to suspend the investigation. SAMR published the Guidelines on Undertakings’ Commitments in Anti-Monopoly Case on September 18, 2020 which further regulated specific provisions on suspended and terminated monopoly investigations under the framework of the AML. Where the antitrust authority decides to suspend an investigation, it shall supervise the implementation of the commitments offered by the undertakings under investigation. 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: 1. the undertaking fails to implement the commitment; 2. significant changes have taken place to the facts on which the decision to suspend the investigation was based; or 3. the decision to suspend the investigation was made on the basis of incomplete or inaccurate information submitted by the undertaking under investigation. The antitrust regulator shall not accept applications for suspension of investigation from business operators on the basis that the relevant monopolistic agreement has already been verified in an investigation. The antitrust regulator shall not accept the application for suspension of investigation if a case involves horizontal agreements on: (1) price-fixing; (2) production or sales restriction; or (3) division of the sales market or raw material procurement market. Administrative settlement in practice A most recent case involves Lenovo (Beijing) Company Limited (“Lenovo Beijing”), where the SAMR suspended and finally terminated the investigation after it found the undertakings had fulfilled their commitments during the supervision period. Lenovo Beijing was investigated for forcing their authorised brand service stations to comply with the minimum resale prices of certain accessories and service products set by them. Lenovo Beijing submitted proposals that would rectify the restrictions on minimum resale pricing, and the SAMR then suspended its investigation on September 16, 2019 and finally terminated the probe on March 3, 2020 after Lenovo Beijing had fulfilled its remedial commitments under the SAMR’s supervision. Below is a summary of administrative settlement cases released in the past 12 months:

See overleaf

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Undertaking Conduct Investigating Commitments Suspension Termination under under Authority Date Date Investigation Investigation Lenovo Resale price SAMR Modify the contract September March 3, (Beijing) maintenance Beijing template to correct 16, 2019 2020 Company (“RPM”) Branch the terms which Limited were incompatible with the Jiangsu Gas Management Regulations. Post notices of correcting illegal acts in business halls and accept public supervision. Further sign Supplementary Agreements with customers to change the terms which were incompatible with the Jiangsu Gas Management Regulations. Publish an announcement about its commitments in the newspaper and accept social supervision. Yancheng Abuse of SAMR Modify the contract February July 8, 2020 Xin’ao Gas market Jiangsu template to correct 20, 2019 Company dominance Branch the terms which Limited were incompatible with the Jiangsu Gas Management Regulations. Post notices of correcting illegal acts in business halls and accept public supervision. Further sign Supplementary Agreements with customers to change the terms originally incompatible with the Jiangsu Gas Management Regulations. Publish an announcement regarding commitments in the newspaper and accept social supervision.

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Third-party complaints Article 38 of the AML provides the general principle of third-party complaints, namely, “all units and individuals shall have the right to report to the authority for enforcement of the AML against suspected monopolistic conduct and the latter shall keep the information confidential. If the report is made in writing and relevant facts and evidence are provided, the authority for enforcement of the AML shall conduct necessary investigation”. A notable recent development is that on November 19, 2019 SAMR published so-called whistleblowing rules for public comment – the draft Interim Measures for Rewarding Reports on Serious Illegal Conduct in Violation of Market Regulation, which significantly increases the previous reward to 5% of the penalty imposed (capped at RMB 1 million in a single case or RMB 2 million for reporting illegal conduct that has systemic consequences). Reports on infringements of competition law are also covered by the whistleblowing rules. Article 2 of 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 also provides that “[a] people’s court shall accept a civil lawsuit directly filed by a plaintiff, or filed by a plaintiff after a decision by the Anti-monopoly enforcement agency has become legally effective which affirms the relevant act as constituting monopolistic conduct, as long as such lawsuit satisfies other case acceptance conditions prescribed by law”. Generally speaking, under the principle that the party who raises the claims bears the burden of proof, the burden of proof on the plaintiff is relatively heavy in terms of showing that the defendant has entered into and implemented the monopoly agreement. For the defendant’s burden of proof, where the alleged monopolistic act falls under any type of monopoly agreement prescribed in Article 13 (horizontal monopoly agreement) of the AML, the defendant concerned shall bear the burden of proof to show that the relevant agreement has no effect on excluding or restraining competition.

Civil penalties and sanctions According to Article 46 of the AML, the enforcement agencies may impose cease and desist orders, confiscate the illegal gains, and/or impose fines between 1% and 10% of a firm’s annual turnover in the preceding year for reaching and implementing cartel agreements. Based on antitrust enforcement practice, the preceding year usually refers to the year prior to when the investigation was initiated. According to the AML, if a firm has reached but has not implemented the cartel, it will be imposed a fine of no more than RMB 500,000. However, it should be noted that the Draft Amendment of the AML released in January 2020 proposed to change the statutory fine, increasing the ceiling to RMB 50,000,000 if the firm reached but had not yet implemented the cartel. In addition, before the establishment of SAMR, the fine was usually calculated based on the turnover generated by the products involved, However, since the establishment of the SAMR, the basis to calculate the fine has been the entire turnover of the company in the preceding year, not the sales value generated by the products involved. In China, published sanctions on horizontal monopolistic behaviours include the following cases from recent years: 1. RMB 1.4m – in 2020, a fine totalling RMB 1.4m was imposed on four driving schools in Dingyuan County, Chuzhou City for reaching a horizontal monopoly agreement. 2. RMB 5.5m – in 2020, a fine totalling RMB 5.5m was imposed on five companies in the second-hand car market in Huzhou City for reaching a horizontal monopoly agreement. 3. RMB 0.2m – in 2020, a fine totalling RMB 0.2m was imposed on three companies in the second-hand car market in Huanggang City for reaching a horizontal monopoly agreement.

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4. RMB 1.76m – in 2020, a fine totalling RMB 1.76m was imposed on two bottled LPG companies in Huaihua City for reaching a horizontal monopoly agreement. 5. RMB 7.65m – in 2020, a fine totalling RMB 7.65m was imposed on 19 concrete companies in Maoming City for reaching a horizontal monopoly agreement. 6. RMB 1.7m – in 2020, a fine totalling RMB 1.7m was imposed on Huizhou Motor Vehicle Inspection Industry Association and 31 vehicle inspection companies for reaching a horizontal monopoly agreement. 7. RMB 3.3m – in 2020, a fine totalling RMB 3.3m was imposed on 17 driving schools in Guizhou City for reaching a horizontal monopoly agreement. 8. RMB 4.15m – in 2020, a fine totalling RMB 4.15m was imposed on 13 concrete companies in Hangzhou City for reaching a horizontal monopoly agreement. 9. RMB 0.4m – in 2019, a fine totalling RMB 0.4m was imposed on seven bottled LPG companies in Zhangjiajie City for reaching a horizontal monopoly agreement. 10. RMB 0.3m – in 2019, a fine totalling RMB 0.3m was imposed on an automobile industry association for organising members in reaching a horizontal monopoly agreement. 11. RMB 0.25m – in 2019, a fine totalling RMB 0.25m was imposed on five concrete suppliers for reaching a horizontal monopoly agreement. 12. RMB 4.92m – in 2019, a fine totalling RMB 4.92m was imposed on 10 concrete suppliers for a price cartel. 13. RMB 3.87m – in 2019, a fine totalling RMB 3.87m was imposed on nine sintered brick manufacturers for a price cartel. 14. RMB 0.65m – in 2019, a fine totalling RMB 0.65m was imposed on a dining industry association and four catering enterprises for concluding a horizontal monopoly agreement. This is the first catering industry antitrust case in China. 15. RMB 7.71m – in 2019, a fine totalling RMB 7.71m was imposed on eight concrete suppliers for concluding a horizontal monopoly agreement. 16. RMB 1.19m – in 2019, a fine totalling RMB 1.19m was imposed on three vehicle safety technology testing companies for a price cartel. According to Article 51 of the Interim Provisions on Administrative Penalty Procedures in Market Regulation, the investigated party gets to know the likely amount of a fine when the antitrust enforcement agency issues the Pre-notification on Administrative Penalty. After receipt of the pre-notification, the target of the investigation is entitled to submit a written statement or application for 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 lessen the fine or disgorgement if the defences proposed by the investigated party before formal issuance of the administrative penalty prove to be appropriate and reasonable. The auto parts case is a good example of this, in which Sumitomo received a fine reduction of around RMB 50m after 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 received a fine reduction of RMB 0.3m after presenting a convincing line of reasoning in a written 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) based on a uniform price of RMB 330 per device. Following further review and study, Anhui provincial market regulator adopted Sunyard System Engineering Co., Ltd. assertion.

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Right of appeal against civil liability and penalties Article 50 of the AML stipulates that a business operator that caused damages to others by engaging in monopolistic conduct shall bear the applicable civil liability. However, unlike in the US where treble damages can be sought, civil damages for antitrust infringements in China are limited to the actual damages suffered by the plaintiff and the reasonable costs incurred by the plaintiff in investigating and restraining anticompetitive conduct. A civil defendant that has been found to be liable under the antitrust law has the same right of appeal as defendants in other civil lawsuits. Under Article 164 of the Civil Procedure Law, a party has the right to file an appeal with the appellate court within 15 days of being served the first instance judgment. Regarding the administrative decision with penalties and sanctions, after the administrative penalty is officially issued, the investigated party can apply for an administrative review or bring an administrative lawsuit before the court. According to the Administrative Review Law and the Administrative Procedure Law, the subject may apply for administrative review within 60 days from the date on which it receives the official administrative penalty, or directly bring an administrative lawsuit before the court within six months from the date on which it receives the official administrative penalty. In addition, the investigated party can bring an administrative lawsuit before the court or apply to the State Council for adjudication where it does not agree with the result of the administrative review. When applying to the State Council for adjudication, the State Council shall give a final ruling in accordance with the provisions of the Administrative Review Law. In practice, however, administrative reviews or lawsuits challenging the decision of the antitrust enforcement agency remain limited in number. In 2020, two pharmaceutical distribution companies sued SAMR, challenging its penalty of RMB 325m in an abuse of market dominance abuse before the Beijing First Intermediate People’s Court. The cases are still under trial. 2017 also saw a fodder company sue the Hainan Price Bureau, challenging its penalty of RMB 200,000 in a vertical monopoly agreement case. Seven other franchisers were together punished by the agency. The penalty decision was overturned by the court of first instance, the Haikou Intermediate Court, because it found that the plaintiff lacked sufficient market influence as to restrict competition. However, the court of second instance, the Hainan High Court, reversed the lower court’s ruling and upheld the decision of the Hainan Price Bureau. In December 2018, the Supreme People’s Court rejected the plaintiff’s petition for a retrial by reasoning that enforcement authorities are not required to prove anticompetitive effects before finding an RPM agreement illegal. Instead, to invoke the exemption under Article 15 of the AML, it is the private entity’s burden to prove that the agreement at issue does not restrict competition. Nevertheless, an investigated party still has a chance of success. For instance, Henan Juyou Net Service Company filed a lawsuit asking the court to revoke the penalty decision imposed by the Zhengzhou AIC in 2015. While the first instance court dismissed the case on the same grounds as the Shandong court, as previously mentioned, in April 2017, the Zhengzhou Intermediate Court vacated the lower court’s judgment and ordered the Zhengzhou AIC to revoke its decision. A notable development in the past year is that starting in 2019, appeals from first-instance civil and administrative judgments in antitrust cases are directly heard by a newly established affiliate of the Supreme People’s Court, the Intellectual Property Tribunal, whose judgments are deemed to be Supreme Court decisions. Previously, appeals in antitrust cases were mostly

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© Published and reproduced with kind permission by Global Legal Group Ltd, London AnJie Law Firm China heard by the 30-plus provincial-level higher people’s courts. The move is interpreted as an attempt to unify the standards for adjudicating antitrust cases across the nation and commit specialised judges to hearing complex antitrust disputes.

Criminal sanctions Even though there are no criminal sanctions available under the AML for antitrust infringements in China, obstruction of justice during the antitrust investigation may result in criminal liability. Article 52 of the AML provides that, “[w]here, during the review or investigation conducted by the authority for enforcement of the AML, an entity or individual refuses to provide relevant materials and information, or provides false materials and information, or conceals, destroys, or transfers evidence, or resists and obstructs investigation in any other manner [...]; and if a crime is committed, criminal liability shall be prosecuted in accordance with relevant laws”.

Cooperation with other antitrust agencies The SAMR attaches great importance to international information exchange and cooperation with the agencies of other antitrust regimes. The SAMR and its predecessors, MOFCOM, NDRC and SAIC, have signed memorandum of understandings (‘MOUs’) MOUs with the enforcement authorities in the US, EU, UK, South Korea, Russia, Australia, and Brazil, putting in place the institutional framework for international cooperation and coordination. In 2019, SAMR reached MOUs with the competition authorities of Japan, South Korea, Serbia, Russia and Belarus. From October 19 to 22, 2020, the SAMR and European Commission Directorate-General for Competition attended the 20th EU-China Competition Week workshop. Said Competition Week provided a platform for both sides to address their priorities and challenges in the field of competition policy. Officials and experts discussed a broad range of topics, including the Fair Competition Review System, merger review, antitrust, and international cooperation in cartel investigations. From October 19 to 23, 2020, the SAMR attended the 8th United Nations Conference on Competition and Consumer Protection in which the implementation of The Set of Multilaterally Agreed Equitable Principles and Rules for the Control of Restrictive Business Practices was reviewed and combating cross-border cartels was discussed. On December 1, 2020, at the invitation of the Competition and Markets Authority of Britain (“CMA”), Xu Lefu, deputy director of the Anti-monopoly Bureau of the SAMR, held a video conference with Sam Scott, director in the CMA’s Policy and International Directorate. In the conference, Xu Lefu and Sam Scott expressed their hope to further strengthen the cooperation between China and Britain in the areas of competition policy and antitrust and to initiate the negotiation of a new MOU regarding antitrust cooperation.

Cross-border issues Article 2 of the AML provides a general principle that the law applies not only to monopolistic acts in the domestic market, but also to acts committed outside of China that have an anti- competitive effect within China. Thus, China’s antitrust regime includes extraterritorial aspects. However, since the enactment of the AML, neither China’s legislature nor its enforcement agencies have promulgated any specific regulations on the interpretation or implementation of the law’s extraterritorial provisions. In the past, China’s antitrust authorities have investigated and penalised extraterritorial conduct that impacted the Chinese market, such as in the LCD panel case in 2013, the auto

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© Published and reproduced with kind permission by Global Legal Group Ltd, London AnJie Law Firm China parts and bearings case in 2014, and the maritime cargo shipments case in 2015. However, the eventual fines were based on the penalised entities’ turnover in the Chinese market only.

Developments in private enforcement of antitrust laws Article 50 of the AML provides that, “business operators that engage in monopolistic conduct causing damages to others shall bear the civil liability in accordance with relevant laws”. Thus, the AML authorises individuals and entities to bring antitrust claims before the courts. The most prominent legal actions focus on abuse of dominant position, such as YingDing v. SINOPEC, Qihoo 360 v. Tencent, and Huawei v. IDC. A number of cases have involved vertical agreements, such as Beijing Ruibang Yonghe Technology & Trade Co., Ltd. v. Johnson & Johnson, and Rijing Electric v. Panasonic. However, private litigation against cartels is still rare. A prominent cartel lawsuit in the past year is the litigation filed by Wuhan Hanyang Guangming Trading Co., Ltd., against Shanghai Hankook Tire Sales Co., Ltd. (“Hankook Tire”). The claimant in this case alleges reaching vertical monopoly agreements in order to maintain resale prices. In the second instance, the Shanghai High People’s Court held that the conduct alleged against Hankook Tire does not constitute a violation of the AML. The admissibility of documents submitted in leniency application Although no specific rule currently in effect specifies whether documents submitted in leniency applications may be admitted as evidence in private enforcement actions against cartels, according to the Guidelines for the Application of the Leniency Regime to Cases of Horizontal Monopoly Agreements, such materials may not be made public without the consent of the leniency applicant; neither may they be accessed by any other agencies, organisations or individuals, or be used as evidence in civil proceedings. However, considering that the guidelines, even once formally issued, are not binding on courts, uncertainties still linger in this regard.

Reform proposals Enforcement actions against cartels in China are evolving towards a deeper level of market penetration. The enforcement agency has and is encouraged to implement the following reforms: • Enhanced transparency. Article 44 of the AML stipulates that where the enforcement authority makes a decision that a suspected conduct constitutes monopolistic conduct, said authority may make the matter known to the public. The newly adopted Interim Provisions on Prohibition of Monopoly Agreements takes this a further step by stipulating under Article 30 that “the anti-monopoly law enforcement agency shall, upon making an administrative handling decision, announce to the public pursuant to the law. Therein, the administrative punishment information shall be announced to the public through the National Enterprise Credit Information Publicity System pursuant to the law”. This provision is a giant step forward in increasing the transparency of antitrust enforcement actions. • More specific and clear regulations. It has been more than 10 years since the AML took effect in 2008. Compared with the US and EU, China’s antitrust regime is still in its early stages. Implementing comprehensive and explicit rules and regulations represent the first steps towards maturity. There is a clear need for the authorities to provide additional details on their enforcement activities and more procedural guidelines. • Enhance private enforcement. The Supreme People’s Court amended the Provisions of the Supreme People’s Court on Certain Issues Relating to the Application of Law in

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Hearing Cases Involving Civil Disputes Arising out of Monopolistic Acts in 2020, in which provisions across 16 articles clarify issues such as prosecution, case acceptance, jurisdiction, distribution of the burden of proof, evidence in litigation, civil liability and limitations periods. While the judicial interpretation sets up an antitrust litigation framework, it should be noted that it is necessary to further detail how to calculate damages and the grounds for imposing a higher liability on cartels. Furthermore, the heavy burden of proof on the plaintiff and a lack of class action and punitive damages mechanisms may dilute private enforcement efforts. • Establishment of an exemption application system. Article 15 of the AML can be seen as a general exemption article which lists six exemptible monopoly agreements for the purpose of maintaining social public interests. However, there are no specific rules concerning the exemption application system. While 2020 has seen the economic repercussions brought by the COVID-19 pandemic, it is necessary to establish an exemption application system in order to ensure a more effective exemption mechanism. • More guidelines for newly emerging industries. The national economy gains a lot from newly emerging industries, but these industries usually lack guidelines in terms of how to meet regulatory requirements. More clear guidelines would help these industries to develop in a more sustainable way.

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Zhan Hao Tel: +86 10 8567 5966 / Email: [email protected] A leading competition lawyer in the PRC since the early days of Chinese competition law, Zhan Hao has extensive experience in the fields of antitrust private litigation, antitrust administrative litigation, government investigation, concentration filing, and corporate compliance. He has represented clients in high-stakes litigations, including Sinopec in the first antitrust litigation in China’s petroleum sector and Panasonic in a case brought by its distributors. Currently, Zhan is assisting clients in several multinational internet, telecommunication and intellectual property-related cases, such as the Hitachi Metals rare earth case. Zhan also specialises in counselling clients for antitrust investigations, including China’s first antitrust investigation against a price cartel where he obtained investigation suspension, China’s first follow- up investigation into LCD price cartels, a NDRC investigation involving a Japanese auto parts maker where he successfully obtained a significant fine reduction, and NDRC investigations against PVC manufacturers and port companies. Zhan has also assisted multinational and state-owned enterprises in concentration filings in China and secured approvals for all transactions he represented.

Song Ying Tel: +86 10 8567 5988 / Email: [email protected] Song Ying specialises in antitrust and anti-unfair competition law, providing a wide range of services, including antitrust investigation, private antitrust litigation, merger filing, and competition compliance. Song has accumulated abundant experience in handling high-profile cases when she represented Sinopec, Panasonic, and Hitachi Metals in complicated antitrust litigations involving standard essential patents, refusal to deal and distribution management. She has also handled a number of investigation cases in sectors including LCD, PVC, food, internet, etc. She is also a veteran attorney with regard to merger filings. For instance, Song filed the concentration notification for the ChemChina/Syngenta deal with MOFCOM, the biggest deal of state- owned enterprises in 2016, and successfully obtained unconditional clearance for the clients.

AnJie Law Firm 19/F, Tower D1, Liangmaqiao Diplomatic Office Building, No. 19 Dongfangdonglu, Chaoyang District, Beijing 100600, P.R. China Tel: +86 10 8567 5988 / URL: www.anjielaw.com

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

Overview of the law and enforcement regime relating to cartels Danish competition law is to a large extent equivalent to EU competition law. Sections 6 to 8 of the Danish Competition Act (“the 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 https://www.kfst.dk (it must be noted that the translations do not always include the latest legislative amendments). 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 Danish competition authorities consist of: (i) the Danish Competition and Consumer Authority (“the DCCA”); (ii) the Danish Competition Council (“the Council”); 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 the first instance. Decisions from the Council may be appealed to the Appeals Tribunal, and in turn to the ordinary courts. In March 2021 an important amendment of the Danish Competition Act was adopted. With the implementation of the EU Directive 2019/1 of 11 December 2018 (“the ECN+ directive”), a civil fine regime has been introduced in Danish competition law in relation to undertakings. According to the new rules, the competition authorities have the power to investigate undertakings and to decide whether agreements and concerted practices are in violation of Danish competition law. Subsequently, if an undertaking is found to infringe the competition rules intentionally or negligently, the competition authorities may request the courts to impose civil fines in accordance with the Danish civil procedure, cf. Sections 23–24 of the Act. The competition authorities may also, with the acceptance of the State Prosecutor for Economic and International Crime (“the State Prosecutor”), offer undertakings a finein lieu of prosecution. If the undertaking accepts the fine and pleads guilty, the undertaking can thereby avoid trial proceedings. Individuals who participate in, or contribute to, infringements of Danish competition law are subject to criminal prosecution, cf. Section 23 (4) and (6) of the Act. The competition authorities do not have the power to impose sanctions on individuals but must forward such cases to the State Prosecutor who investigates the suspected individuals and decides whether criminal prosecution should be initiated. Criminal prosecution is led by the State Prosecutor and brought before the courts in accordance with Danish criminal procedure. The competition authorities cannot offer individuals a finein lieu of prosecution.

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The Danish competition authorities increasingly bring charges against involved management members and other senior employees where possible. In recent years, management members have been fined in approximately half of the cases where undertakings have been sanctioned. In 2012, an extensive amendment of the Danish Competition Act implying stricter sanctioning was adopted. Effective as of 1 March 2013, the level of fines was raised 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 only be imposed if the necessary specific intent can be proven and the other conditions for imposing a criminal sanction under Danish law are satisfied. Custodial sentences are expected to be used primarily against members of the board and members of the management. All cases where sanctions are imposed are published on the website of the DCCA. Names of any individual(s) are omitted in published decisions.

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, cf. Section 18 of the Act. Further, the authority may request employees to present the contents of their pockets and briefcases and may access company vehicles. The DCCA can also demand that the company’s employees answer questions of a factual nature, e.g., where specific documents are stored, and request oral statements from employees. However, individuals are not obliged to answer questions involving any acceptance of guilt. Up until now, the DCCA has, as opposed to the European Commission, not been permitted to search other premises than the premises of undertakings. As a consequence of the implementation of the ECN+ directive, the DCCA will however, going forward, also be authorised to conduct dawn raids on other premises, e.g. private homes, if there is reasonable suspicion that proof of the undertaking‘s suspected competition violation is kept in such premises. Prior to inspecting any premises, the DCCA must obtain court approval and present proper identification,cf. Section 18 (3) of the Act. If there is reasonable suspicion that an individual has contributed to an undertaking’s violation of the competition rules and proof thereof is being kept in premises accessible to this individual, e.g. private home, the Danish State Prosecutor (the police) will conduct the inspection, provided certain conditions are met and subject to court approval. The DCCA may be present during such inspections, but only the police are authorised to carry out investigations with the purpose of criminal prosecution of individuals, cf. Section 18 a (3) of the Act. 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. Subject to court orders, these powers include: the possibility of wiretapping; searches at the premises of individuals not suspected of participating in a cartel; monitoring (including filming persons at non-public locations and registration of individuals’ locations based on mobile phones); and the installation of “sniffer programs” on computers. There is at present no public information on whether these new measures have been used.

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Overview of cartel enforcement activity during the last 12 months During the last 12 months, the following decisions on horizontal agreements have been published by the Danish competition authorities. In a judgment from January 2020, the High Court of Eastern Denmark found that the construction companies Jorton A/S and H. Skjøde Knudsen A/S had violated the Competition Act by exchanging information on prices and coordinating offers on several contracting assignments. After the DCCA had conducted dawn raids at Jorton A/S and H. Skjøde Knudsen in spring 2016, the case was reported to the State Prosecutor, who initiated prosecution of the companies. The Court found that the companies had coordinated offers with regard to three contracts on public construction projects in the period from January 2012 to August 2013 and imposed fines on both companies, respectively, DKK 3 million and DKK 2 million. In addition, two senior executives were fined, respectively, DKK 75,000 and DKK 50,000. The Competition Council has had an increased focus on digital platforms over recent years as they have become of significant importance in the growing market for online advertising, etc. Accordingly, a variety of cases involving digital platforms have been settled in the past year. In June 2020, the Competition Council decided that a digital platform, Ageras, where users can get different offers, e.g. on auditing services, violated the competition rules. Among other things, the platform informed submitters with low bids on “estimated market prices” and provided the submitters with the opportunity to raise bids accordingly. Since the price mechanism advising submitters on “market price” was found incompatible with the Competition Act’s prohibition of restrictive agreements, the case has been reported to the State Prosecutor for criminal prosecution. Further, the Competition Council closed two cases in August 2020 regarding minimum pricing on digital platforms by receiving commitments from the undertakings concerned to remove the prices. The undertakings in question were Happy Helper and Hilfr, two online platforms where independent companies can offer cleaning services. Both Happy Helper and Hilfr required the providers of cleaning services to demand a minimum hourly rate. The providers of the cleaning services were not directly employed by Happy Helper or Hilfr but rather independent companies who communicated with customers through the platforms. The Council found the practice to be restrictive of competition, as it prevented free pricing between independent, competing companies. In their press release, the Council stressed that employees on platforms are permitted to organise and enter collective agreements on working conditions, etc., but that independent companies are competitors who are prohibited to agree on minimum prices, which is one of the most anti-competitive behaviours. Both platforms pledged to remove their requirement of minimum prices. Several cases have been closed by a fine in lieu of prosecution, inter alia, the Camping Rådet case. In January 2020, the organisation, Camping Rådet, had adopted the requirement of specific camping passes (CKE camping pass) and agreed to sell the passes at a fixed price. In addition, they implemented a rule in which competing camping passes should be rejected. Almost 90% of Danish campsites were involved in the illegal activity. In May 2017, the Competition Council decided that Camping Rådet had violated the Competition Act by fixing prices. The decision was subsequently upheld by the Danish Competition Appeals Tribunal in 2018 and the bankruptcy estate after Camping Rådet agreed to pay a fine of DKK 400,000. In March 2020, the trade association Economic Association for Passenger Transport agreed to pay a fine in lieu of prosecution of DKK 400,000 for violation of the Competition Act.

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Offers on assignments had been coordinated between the members of the trade association, which were found incompatible with the prohibition in Section 6 of the Act. The sector of retail clothing was under scrutiny in two cases from June 2020, where the Competition Council found that competing dealers had illegally exchanged information on prices, discounts and/or quantities in connection with future sales. The illegal activity had taken place between, on one hand, the manufacturer of clothing, Hugo Boss, and on the other, the clothing retailers Kaufmann and Ginsborg, respectively. The cases are interesting, seeing as Hugo Boss manufactures and supplies products to Kaufmann and Ginsborg, but, at the same time, distributes products directly to consumers, and is thus active in the same downstream market for menswear as its retailers. Hence, Hugo Boss has a vertical as well as a horizontal relationship with Kaufmann and Ginsborg. Naturally, as a supplier, Hugo Boss need to maintain an ongoing contact with its dealers. However, as competitors, the undertakings concerned must remember to act independently on the market and refrain from entering into any anti-competitive agreements, e.g. by providing information in advance on sale range, sale prices, discounts in connection with future sales, etc. Following the Council’s decisions, the DCCA has sent six injunctions/enforcement notices to undertakings in the clothing industry, thereby emphasising the illegality of exchanging information that may impede competition. The two cases were subsequently appealed to the Danish Competition Appeals Tribunal and reported by the Council to the State Prosecutor for criminal prosecution. Two cases on market sharing were also closed in 2020. In a case from May, MediaCenter Danmark had agreed with a competitor, MPE Distribution, that the two companies would share the market for distribution of bulk mail between them. Such agreements – on market sharing and/or partitioning of markets – is a clear violation of the Competition Act. However, only MediaCenter Danmark was fined since MPE Distribution applied for leniency and assisted with the investigation as required. Hence, MPE Distribution was dismissed of all charges by receiving total immunity from the imposition of any fines. MediaCenter Danmark has accepted to pay a fine of DKK 2.25 million. In a case from December, the City Court of Roskilde found that Sydkystens Automatik P/S had violated the Competition Act by agreeing to share the market with a competitor, Findan El-anlæg A/S. In particular, the companies had agreed to stay away from each other’s customers in the period from November 2016 to February 2017. The City Court imposed a fine on DKK 400,000 on Sydkystens Automatik P/S. Further, the City Court imposed a fine on DKK 100,000 on a senior employee, as the Court considered that it must have been clear to the senior employee that the agreement divided the market and thereby potentially limited competition. The judgment has been appealed by Sydkystens Automatik P/S and the separate case against Findan El-anlæg A/S is still pending.

Key issues in relation to enforcement policy Given the low number of published decisions by the DCCA on cartel enforcement, it is difficult to point to key issues in relation to enforcement policy. However, the DCCA has for 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, or whether data on individual competitors can be identified. Collusion will be less likely if only aggregated data is provided. Information of a less recent date is also less likely to have an impact

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Bruun & Hjejle Advokatpartnerselskab Denmark 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 in 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 also displayed an increased focus on consortia and the distinction between a legal consortium and an illegal cartel. In 2014, the DCCA issued the first guidelines on consortia, which were followed up by specific cases in 2015. Following requests from trade associations for guidelines providing more legal certainty and increasing political interest, the DCCA published revised guidelines on how to assess joint bidding under competition law in April 2018 and again in October 2018. Moreover, the DCCA has had an increased interest in the growing market for digital platforms in recent years. The above-mentioned case regarding Happy Helper’s and Hilfr’s use of minimum prices was, for example, brought to the Council’s attention due a general sector investigation of the market in 2019. In addition, the DCCA has issued a number of guidelines, analyses and surveys that deal with or are otherwise connected with securing a well-functioning market due to the growing use of digital platforms. Finally, the DCCA regularly carries out sector inquiries and publishes their findings in an article 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. Sector inquiries 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.

Key issues in relation to investigation and decision-making procedures Similar to 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 within the undertaking. Though the exact delimitation of the legal privilege under Danish law may in specific cases give rise to discussions with the DCCA, the limits have 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). The entry into force of the ECN+ directive of 11 December 2018 will undoubtedly have a rather significant impact on the DCCA’s investigation and decision-making powers going forward. The directive is designed to empower the national competition authorities of the Member States to be more effective enforcers and to ensure the proper functioning of the internal market. The ECN+ directive supplements the Council Regulation 1/2003 by providing a common toolkit with regard to means and instruments by which national competition authorities must ensure enforcement of the EU competition rules alongside

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Bruun & Hjejle Advokatpartnerselskab Denmark national competition rules. To ensure implementation of the directive, the Danish Parliament adopted an amendment to the Danish Competition Act which entered into force on 4 March 2021. Most notably, the amendment has entailed the DCCA with powers to (i) request the courts to impose fines on undertakings in civil proceedings, (ii) conduct investigations in private homes, (iii) actively assist other competition authorities in the European Union, and (iv) impose structural remedies (in addition to the currently available behavioural remedies).

Leniency/amnesty regime 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 in 2007 until the end of 2011, only 11 leniency applications, of which five were summary applications in cases where the applicants had originally applied for leniency to the European Commission. We have seen no statistics on the development subsequent to 2012. However, a number of published decisions on the DCCA’s website involve leniency applicants, e.g. the above-mentioned case regarding MediaCenter Danmark and MPE Distribution, where all charges against MPE Distribution was dismissed. Under the Danish leniency regime, the first leniency applicant may obtain total immunity from fines, whereas subsequent applicants may only have their fines reduced provided they submit new, relevant information. Following a recommendation from the OECD, an amendment to the Danish Competition Act was introduced with effect as of 1 January 2018, permitting preliminary leniency applications (“markers”). The amendment makes it possible for a cartel participant to “reserve” its place in the queue while putting together a final leniency application. Leniency from custodial sentences is possible, but full immunity can only be obtained by the first applicant. Any subsequent applicant may only receive a reduction of the penalty. Plea bargaining as such does not exist under Danish law, thus any reduction in custodial sentences to those who report a cartel subsequent to the first report will be decided by the courts.

Administrative settlement of cases Undertakings may accept a finein lieu of prosecution before either the State Prosecutor or the DCCA, and thereby avoid criminal trial in open court (penalty notices issued by the DCCA are subject to approval by the State Prosecutor). Undertakings that contact the DCCA in order to settle will generally be granted a reduction of the fine.

Third-party complaints 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 whistleblower. The DCCA has not published information on the actual use of the system. In 2019, the DCCA launched an app, which also makes it possible to inform the DCCA of cartel activities anonymously. 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.

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Civil penalties and sanctions Administrative fines may only be imposed directly by the DCCA in cases, where the alleged undertaking pleads guilty. If the undertaking accepts the notice and pleads guilty, the case will be closed without court proceedings, and a fine will be issuedin lieu of prosecution. As of 4 March 2021, due to the implementation of the ECN+ directive, the competition authorities may request the courts to impose fines in civil proceedings if an undertaking intentionally or negligently infringes the competition rules. As such, cases regarding the imposition of fines onundertakings are brought before the courts in accordance with Danish civil procedure. The civil fine regime does, however, not apply to individuals. Thus, the imposition of sanctions on individuals for intentionally or negligently participating in, or contributing to, breaches of competition law are decided solely by the courts in accordance with Danish criminal procedure. The criminal prosecution is initiated and led by the State Prosecutor, who also investigates the individuals in question prior to trial proceedings. A substantial increase in the level of fines and an introduction of custodial sentences for cartel offences were introduced with effect for infringements committed after (or, as regards continuous crimes, extending beyond) 1 March 2013.

Right of appeal against civil liability and penalties The Council’s decisions may be appealed to the Competition Appeals Tribunal, who conducts a full and thorough review and may substitute the Council’s decisions. Decisions from the Appeals Tribunal may, under strict time limits, be challenged before the courts. Hence, civil fine cases regarding the imposition of fines on undertakings will be brought to court either after the Tribunal has confirmed the Council’s decision or immediately after the Council’s decision provided that the undertaking concerned does not appeal the decision to the Tribunal. The courts will not be bound by the parties’ claims regarding the amount of the fine, but may, among other things, set a higher fine than claimed by DCCA. If a company is fined, the company must also pay legal costs, including reasonable legal costs and court fees. Nevertheless, cases involving fines or imprisonment of individuals will continuedly and only be investigated and initiated by the State Prosecutor, who, in accordance with the rules on criminal prosecution, brings the case to court. In practice, the DCCA will report such cases to the State Prosecutor at an early stage, or in more complicated matters, upon a decision on the substance from the Council (with possible appeals to the Appeals Tribunal and on to the courts). Such decisions are neither formally binding for the courts in criminal trial but will have a substantive persuasive effect. The courts seem to be moving towards a more rigorous review and seem more willing to substitute the authorities’ decisions if the courts find it necessary. In relation to subsequent actions for damages, a final Danish decision on the existence of a cartel from either the competition authorities or a court is deemed to have irrefutably established the infringement for purposes of actions for damages, just as such final decision will generally be considered evidence that the participating undertakings have acted negligently and thus constitute a basis for liability.

Criminal sanctions In 2012, the Danish Parliament passed a new Act on sanctions for competition law violations. The object of the new Act was to increase the fines for undertakings and individuals and to introduce custodial sentences in cartel cases.

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The change entered into force on 1 March 2013; the rules apply both to incidents after 1 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. Increased fines Regarding the increased fines, the following table shows the changes in the basic amounts from 1 March 2013:

Gravity Examples Previous New indicative Indicative level indicative level level of fines for individuals Less Exclusive purchase Up to DKK Up to DKK 4 million Minimum DKK grave obligations lasting more 400,000 (approx. EUR 50,000 than five years. (approx. EUR 540,000) (approx. EUR 54,000) 6,700) Grave Resale price DKK 400,000 to DKK 4 million to 20 Minimum DKK maintenance. 15 million million 100,000 Non-compete clauses (approx. EUR (approx. EUR (approx. EUR in joint production 54,000– 2m) 540,000–2.7m) 13,400) agreements. Very Coordination of prices, More than DKK More than DKK Minimum DKK grave production, customers 15m 20m 200,000 or bids. Certain types of (approx. more (approx. EUR 2.7m) (approx. EUR abuse of dominance. than EUR 2m) 26,900)

The above-listed basic amounts may be adjusted depending on (i) the duration of the infringement, and, for legal entities, and (ii) the worldwide turnover of the legal entity. According to the explanatory notes to the Act, a fine issued to a legal entity should generally not exceed 10 per cent of the entity’s worldwide turnover. Under current Danish law, there is no parent company liability. Imprisonment In addition to increased fines, custodial sentences in cartel cases were introduced. Participation in cartel agreements (or attempts to enter into such agreements) are punishable by imprisonment for individuals, 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 management and members of the board. The State Prosecutor has unofficially stated that it will, 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 the crime (e.g. a price-fixing cartel) is more than DKK 10,000, (approx. EUR 1,300), 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 remains yet to be seen what level of sanctions the State Prosecutor will ask for in the specific cases and whether the courts will follow the views of the State Prosecutor.

Cooperation with other antitrust agencies Denmark is part of the European Competition Network (“ECN”) and thereby participates in

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Bruun & Hjejle Advokatpartnerselskab Denmark the cross-border cooperation between the European Commission and the national competition authorities of the other EU Member States. The DCCA may conduct dawn raids to grant assistance to the European Commission and other competition authorities of the European Union or the EEA area in connection with these authorities’ application of TFEU Articles 101 and 102 or Articles 53 and 54 of the EEA agreement in accordance with Section 18 (9) of the Act. On a Nordic level, the Danish competition authorities cooperate with Norway, Sweden, Finland, Iceland, Greenland and the Faroe Islands. An annual meeting is held, the purpose of which is to exchange legislative experiences and discuss cases and subjects of common interest. The DCCA may conduct dawn raids to grant assistance to the competition authorities in Sweden, Norway, Iceland, Finland, Greenland and the Faroe Islands in respect of the application of national competition rules by these authorities in accordance with Section 18 (10) of the Act. Furthermore, Denmark has entered into a formal agreement with the national competition authorities in Sweden, Norway, Finland and Iceland on the exchange of confidential information. Under Section 18 c (3) of the Act, the DCCA may also in general, subject to reciprocity, disclose information covered by its duty of confidentiality to other competition authorities if such information is necessary to assist in the enforcement of the competition rules by these authorities, and if the DCCA thereby fulfils Denmark’s bilateral and multilateral obligations. Finally, as another consequence of the implementation of the ECN+ directive, the DCCA will be authorised to request information, carry out inspections and interviews on behalf of and for the account of other national competition authorities within the European Union. The duty to actively assist other national competition authorities within the union is implemented in Section 18 b of the recently amended Act.

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. As stated, Denmark as part of the ECN, participates in the cross-border cooperation between the national competition authorities of other Member States and the European Commission and cooperates extensively with the other Nordic competition authorities. The DCCA will, going forward, also be obliged to actively assist other national competition authorities within the union due the adoption of the ECN+ directive, e.g. by requesting information and by carrying out inspections and interviews on behalf of and for the account of other competition authorities.

Developments in private enforcement of antitrust laws 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 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 Damages Act entails a number of changes to Danish law, including (i) an extension of the limitation period to five years, whereas the general statute of limitation for damages in Denmark is only three years, (ii) the burden of proof is reversed as cartel infringements are now presumed to

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Bruun & Hjejle Advokatpartnerselskab Denmark 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 Damages 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 Damages Act apply to actions for damages brought before a court after 25 December 2014. In our view, the general 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 An amendment to the Act entered into force on 1 January 2018. The amendment introduced, inter alia, the following alterations: (i) a change in the Danish de minimis thresholds from being turnover-based to being market share based; (ii) the addition of a rule permitting preliminary leniency applications; and (iii) a limitation on the right to “own access” (the right to obtain access to files in cases mentioning an individual’s or an undertaking’s name) in the DCCA’s cases. Furthermore, the above-mentioned ECN+ directive on empowering national competition authorities have entailed a significant number of changes to Danish competition law, cf. above. However, the implementation of the new civil fine regime has been the most notable amendment from a Danish perspective. Up until now, the imposition of fines for violations of the competition rules have been a matter solely under criminal law (and thus in accordance with the rules of Danish criminal procedure). As such, the new civil fine regime is a rather significant deviation of Danish legal tradition. The amendments implementing the ECN+ directive came into force on 4 March 2021.

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Olaf Koktvedgaard Tel: +45 30 18 87 24 / Email: [email protected] Partner and competition practice head at Bruun & Hjejle, Olaf Koktvedgaard advises 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.

Søren Zinck Tel: +45 51 21 19 34 / Email: [email protected] Partner Søren Zinck renders specialist advice within all aspects of competition law. His experience includes merger filings, some of the most well-known abuse cases in EU and state aid issues. He regularly litigates before the European Court of Justice and the Danish courts, and in recent years he has litigated several of the major, leading Danish competition cases.

Frederik André Bork Tel: +45 29 90 15 03 / Email: [email protected] Partner Frederik André Bork provides specialist advice on all aspects of EU and Danish competition law. His experience includes cartel investigations, merger filings, major abuse cases and several very large and multi-jurisdictional follow-on damages cases. He is the former Head of Division at the Danish Competition Authority and has a comprehensive insight into the authorities’ administrative and business procedures.

Bruun & Hjejle Advokatpartnerselskab Nørregade 21, 1165 Copenhagen, Denmark Tel: +45 33 34 50 00 / URL: www.bruunhjejle.dk

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Irene Antypas, Jessica Bracker & Marie Florent Ashurst LLP

Overview of the law and enforcement regime relating to cartels 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 27 Member States (since the United Kingdom (“UK”) left the EU on 31 January 2020) 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 the most serious forms of horizontal infringement. 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 in Article 101(3) TFEU are met (i.e. the efficiencies generated by the agreement outweigh the restriction of competition), in practice, it is extremely rare for cartel-type arrangements to be justifiable and fulfil the exemption conditions. 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 including ordering that the illegal agreement be brought to an end. It also has powers to fine an infringing business up to 10% of its aggregate worldwide group turnover. Jurisdiction to enforce Article 101 TFEU is shared between the Commission and the national competition authorities (“NCAs”) as well as the courts of the Member States. In broad terms, the Commission tends to handle cartels with a significant cross-border element and international cartels stretching beyond the EU borders, leaving cartels with a narrower geographic reach to 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 (“RFIs”): The Commission may request information either by formal decision or (more commonly) by an informal request. RFI 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.

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• 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: • enter any premises, land and means of transport used for the business; • examine business books and records; • 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 (software or hardware) to collect, search and copy relevant data; • seal business premises and books or records where the dawn raid lasts more than one day; 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 usually assisted by officials from the NCA of the Member State in which 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. Where the person consents, the Commission has a further power to take a statement 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 terms of product/service, geographic area and timeframe. This is a significant protection for businesses in practice, as it prevents “fishing expeditions” beyond the scope of the Commission’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 EU qualified lawyer, provided that it is closely linked to the subject matter of investigation. 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 the business as an employee. Advice from an external lawyer who is not qualified in one 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

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Ashurst LLP European Union should be disclosed. Thirdly, individuals and legal persons subject to the investigation benefit from the privilege against 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. It should be noted in this context that confidentiality does not provide grounds for refusing to disclose information to the Commission. Confidential information may be reviewed and 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. The COVID-19 health crisis has accelerated the digitalisation of the Commission’s investigative tools with an increased focus on digital evidence collection. This is expected to raise important new legal questions in the coming years. In October 2020, for instance, the General Court (“GC”) for the first time required the Commission to put in place appropriate procedural safeguards for the treatment of sensitive personal information in investigations (Orders in Cases T-451/20 R and T-452/20 R Facebook (ECLI:EU:T:2020:516)). 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 time limit may be punished with financial penalties of up to 1% of worldwide aggregate group 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-operation as an aggravating factor when it is calculating the fine to be imposed for the substantive infringement, increasing the fine accordingly. Further details about the law, procedure and policies applied by the Commission to cartel enforcement are set out in the sister publication to this book, the ICLG – Cartels and Leniency 2021, at chapter 6.

Overview of cartel enforcement activity in 2021 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 two cases involving suspected cartel activity in 2019 (multiple dawn raids are often carried out simultaneously on various parties in respect of the same case, so many more than two businesses will have been raided). No press releases were issued in 2020 reporting on the conduct of unannounced inspections by the Commission, which is most likely due to the COVID-19 health crisis. Number of ongoing investigations: Publicly available information indicates that, as at 29 January 2021, there are at least 19 ongoing Commission investigations into alleged cartel activity. This figure may omit newer cases which are not yet in the public domain. Number of final cartel decisions and total value of fines imposed: In 2020, the Commission concluded two settlement decisions in the Ethylene and Closure Systems cartel cases and re-adopted a cartel decision against one party in the Retail Food Packaging case (following the Court’s partial annulment of the initial decision for insufficient reasoning). A total amount of €288 million in fines was imposed in 2020, more than 90% of which can be attributed to the Ethylene cartel which accounts for €260 million. This represents a significant decrease from the 2019 cartel fine level which amounted to €1,485 million. In 2018, four cartel decisions were issued with total fines of €800 million (less than half of the total for 2017, year during which the fines imposed amounted to a total of €1,946 million).

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Level of individual fines imposed: In 2020, the highest individual cartel fine of €155.8 million was imposed on Clariant for its involvement in the Ethylene cartel. This is lower than the highest individual cartel fine imposed in 2019 which was a fine of €310.8 million imposed on Citigroup for its involvement in the Foreign exchange spot trading cartel. The 2016 fine of €1,008.8 million on Daimler is still the highest fine ever imposed by the Commission, with the second highest being €880.5 million imposed on Scania and the third highest being €752.7 million imposed on DAF, all resulting from the Trucks cartel. Previously, the highest fine was €715 million, imposed on Saint Gobain in 2008 for its part in the Car Glass cartel (reduced from €880 million on appeal in 2014).

Key issues in relation to enforcement policy Most of the key issues which have arisen in the last years regarding cartel enforcement in the EU relate to investigation and decision-making procedures and fining policy, as discussed in other sections of this chapter. However, there are several wider “policy” issues which practitioners should be aware of. Cartel enforcement in the time of COVID-19 In the wake of the COVID-19 health crisis, the Commission rapidly took steps to clarify the application of EU competition rules in these exceptional circumstances. In April 2020, it issued a Temporary Framework Communication (the “Temporary Framework”) setting out guidance for companies temporarily co-operating to address a shortage of supply of essential products and services during the outbreak. The document also foresees the possibility of issuing “comfort letters” and informal guidance on specific co-operation projects. At the same time, the Commission made very clear that competition law continues to apply and that there will be no tolerance for “crisis” cartels. Hence, it indicated in its Temporary Framework that it will actively and closely monitor market developments and explicitly encouraged companies and citizens to report cartels and other anti-competitive conducts through the tools at their disposal (namely complaints, whistle-blower tool and leniency programme). Equally, the European Competition Network (“ECN”) stressed in a Joint Statement issued on 23 March 2020 that products considered essential to protect the health of consumers in the current situation (such as masks and sanitising gel) should remain available at competitive prices and stated its intention to take action against companies taking advantage of the health crisis notably by cartelising. In the context of the Temporary Framework, the Commission published on 29 April 2020 its first “comfort letter” in 20 years to Medicines for Europe concerning a co-operation project aimed at avoiding situations of shortages of COVID-19 medicines. It explicitly carved out from the permitted co-operation any discussion on prices or any other possible co-ordination on issues which are not strictly necessary for effectively addressing the risk of shortage. On the basis of Article 222 of Regulation 1308/2013 on the common organisation of markets in agricultural products, the Commission also adopted in April and July 2020 exceptional derogations from EU competition rules for the milk, live plants and flowers, potatoes and wine sectors (Commission Implementing Regulations 2020/593, 2020/594, 2020/599 and 2020/975). While these regulations allow collective measures to stabilise the market (notably to address overcapacity) for a maximum period of six months, they explicitly exclude agreements leading directly or indirectly to market partitioning and/or price fixing. Competition law and sustainable development Against the backdrop of the European Green Deal, which aims to make Europe the first climate-neutral continent by 2050, sustainability is high on the agenda of European

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Ashurst LLP European Union competition authorities, as a consensus is building around the role of competition policy in addressing climate change and environmental harm. Guidance on acceptable forms of co-operation in pursuit of sustainability policy objectives is currently limited, but the Commission is considering amendments to its Guidelines on Horizontal Cooperation in this respect. The Commission’s comfort letter to Medicines for Europe in the context of the COVID-19 crisis suggests that it may also be willing to use comfort letters to provide guidance more broadly. In addition to the Commission, NCAs are also actively contributing to the debate on how to deal with sustainability initiatives and “green” co-operating agreements under competition rules. For instance, the Dutch competition authority issued its Draft Guidelines “Sustainability Agreements” in July 2020. Competition enforcement in digital markets The digital sector and the importance of data is another key policy area for the Commission and NCAs. The Commission’s enforcement activities in this sector focuses on digital platforms, including testing of novel theories of harm, through formal investigations into Amazon (Amazon Marketplace, in which a statement of objections has been issued, and Amazon Buy Box) and Apple (App Store Practices and Apple Pay). It is also investigating how Google and Facebook collect data and use it to generate advertising revenue. In parallel, the Commission is developing new tools designed to deal with digital platforms. In December 2020, the Commission proposed a Digital Markets Act, which, if enacted, will impose unprecedented and far-reaching ex ante obligations on digital “gatekeepers”, and will provide the Commission with extensive investigatory powers and the ability to impose fines and structural measures on these gatekeepers. In July 2020, the Commission also launched a sector inquiry into the Internet of Things. As with the e-commerce sector inquiry, its findings, which are expected in 2022, could lead to further investigations in this area. The Commission and NCAs are also mindful of the growing use of AI and pricing software by businesses, particularly in online markets, which increases the risks of firms colluding in a way which may breach competition law. In 2019, the French and German Competition authorities published their joint Algorithms and Competition study. Lastly, the Commission’s review of the EU rules on online sales is ongoing, in particular, through the review of the EU Vertical Block Exemption Regulation which is due to expire in 2022. The revision of the Commission’s rules on horizontal agreements, which started in November 2019, will also give an opportunity to address certain challenges of the digital economy (e.g. in the field of data pooling). Focus on enforcement in the automotive sector and purchasing cartels The Commission’s interest in the automotive sector has continued in 2020. Following the record-breaking fines imposed for the Trucks cartel in 2016 and 2017 as well as the Alternators and Starters cartel in 2016, the Spark plugs, Braking systems and Maritime car carriers cartels in 2018, and the Occupant Safety Systems II cartel in 2019, in September 2020, the Commission fined Brose and Kiekert a total of €18 million for taking part in two cartels for the supply of closure systems for cars. The Commission has fined car parts cartels almost €2.2 billion since 2013. The Commission’s investigation into possible collusion between car manufacturers on the technological development of passenger cars is still ongoing. In April 2019, the Commission sent Statement of Objections to BMW, Daimler and VW for restricting competition on emission cleaning technology (Case number AT.40178 – Car Emissions). The Commission’s enforcement in 2020 has continued to target purchasing cartels. In July 2020, the Commission fined ethylene purchasers Orbia, Clariant and Celanese a total of €260

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Ashurst LLP European Union million for participating in the Ethylene cartel aimed at purchasing ethylene at the lowest possible price. It is the first settlement decision involving a purchasing cartel in the chemicals sector. Cartelists more commonly seek to collude to increase their own selling prices. In purchasing cartels, however, competitors collude to coordinate their purchasing behaviour to artificially lower the price paid for raw materials. The Commission has sanctioned very few purchasing cartels in the past, such as the Car Battery Recycling cartel (2017) and the Italian raw tobacco cartels (2004/5). The Commission’s investigation of possible anticompetitive practices in the styrene monomer purchasing sector is still ongoing following its 2018 inspections. The Commission is also investigating the possible collusion by two large French supermarket chains (Alliance Casino and Intermarché) which had set up a joint venture for the joint procurement of products. Continued co-operation with NCAs and other regulators Many cartels are cross-border in nature, which means that effective enforcement increasingly requires co-operation between regulators around the world. The ECN provides a very useful forum for the exchange of information between the Commission and NCAs. In 2018, as part of the co-operation within the ECN, the German Bundeskartellamt, for instance, referred its ongoing cartel proceeding concerning metal packaging to the Commission since the suspected anticompetitive behaviour may have extended to markets outside Germany, affecting several Member States. In 2019, the GC dismissed an application for annulment under Article 263 TFEU filed by one of the companies targeted by the Commission’s decision to open a probe into the metal packaging sector, on the grounds that the decision to initiate proceedings against a company does not affect its legal position (Case T-410/18 Silgan v Commission (EU:T:2019:166)). Another judgment of the GC is still awaiting on the legal proceeding brought by Silgan against the Commission’s decision on the grounds that it was based on information provided to the Bundeskartellamt in the context of the undertaking’s co-operation in national proceedings (Case T-415/18 Silgan Closures and Silgan Holdings v Commission, judgment awaiting). On 11 December 2018, Directive 2019/1 (“ECN+ Directive”) was adopted and is designed to empower NCAs to be more effective enforcers. The Directive aims to ensure that, when applying the EU competition rules, NCAs have the appropriate enforcement tools in order to bring about a genuine common competition enforcement area. To that end, the Directive provides for a set of minimum standards with which Member States must ensure their national legislation complies by February 2021 (e.g. safeguards for the right of defence, minimum investigative powers, etc.). 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. Following the United Kingdom’s withdrawal from the EU, the Commission entered into a Trade and Cooperation Agreement with the UK, which notably includes provisions related to the co-operation and coordination between the Commission and NCAs, on the one side, and the UK’s competition authority, on the other side, with respect to competition law enforcement. Between 2017–2019, the Commission contributed to surveys launched by the International Competition Network (ICN) regarding the efficiency and effectiveness of leniency programmes, which resulted in a report published by the ICN on “Good practices for incentivising leniency applications”. In 2020, the ICN issued a Guidance on Enhancing Cross-Border Leniency Cooperation, providing practical advice for competition agencies on matters involving multi-jurisdictional leniency applicants.

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Key issues in relation to investigation and decision-making procedures Scope of Commission’s information-gathering powers The scope of the Commission’s information-gathering powers under Regulation 1/2003 has over the years 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: • the legality of broadly drafted RFIs; • the legality of broadly drafted inspection decisions; • the legality of using information obtained in one dawn raid to justify further dawn raids; • the Commission’s powers to take away forensic copies of entire computer hard drives for subsequent review at the Commission’s premises and the protection of personal data; • the timing of a possible judicial challenge of the Commission’s conduct of inspections; • the Commission’s ability to rely on evidence transmitted by national authorities, including non-competition authorities; and • the authenticity of the evidence relied on by the Commission. Each of these is discussed further below. • Legality of broadly drafted RFIs When making a written 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 RFI is justified but also to enable companies to judge the scope of their duty to co-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 and unequivocally, set out the suspicions which justified their adoption, and did not make it possible 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 out a precise market definition, or the exact legal nature, or period of, the infringement, as this 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. In this respect, the GC confirmed that the Commission could send a new RFI to a company after the Statement of Objections (“SO”), provided that it is justified for the purposes of the investigation, necessary and proportionate (Case T-371/17 Qualcomm v Commission (EU:T:2019:232)). Indeed, since the SO is a purely preparatory document setting out the Commission’s provisional findings, which it is entitled to amend until its final decision, the Commission may continue with its fact-finding after having issued the SO and decide to withdraw or add objections as appropriate. The ECJ recently confirmed on appeal that the Commission may legitimately take the view that it is necessary to request further information to better define the scope and duration of the infringement, or to identify the circle of undertakings involved (Case C-466/19 P Qualcomm v Commission (EU:C:2021:76)). • Legality of broadly drafted inspection decisions The Commission is required to restrict its searches during a dawn raid to activities relating

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Ashurst LLP European Union 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 go on a “fishing expedition”, and the scope of the suspected cartel indicated in the inspection decision must be limited to what is supported by the Commission’s case file at the time of the inspection (Case C-583/13 P Deutsche Bahn AG v Commission (EU:C:2015:404)). In the 2012 Nexans judgment (Case T-135/09 Nexans v Commission (EU:T:2012:596)), the 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. In June 2018, the GC partially upheld the Czech national rail operator’s appeals against one of two Commission inspection decisions (Case T-325/16 České dráhy v Commission (EU:T:2018:368)). The GC confirmed that reasonable grounds to suspect one type of infringement could not constitute a valid reason for extending the purpose of the inspection to other forms of infringement. The Commission’s inspection decision was thus too broadly drafted insofar as it related to infringements “including” that for which it possessed evidence. The Commission’s decision was equally annulled insofar as it related to routes “including, without limitation” the specific route to which its evidence related. The importance for Commission’s inspection decisions to be sufficiently reasoned and underpinned by sufficiently serious indicia to suspect the company’s involvement in an alleged offence was re-emphasised last year. In 2020, the GC issued three judgments partially annulling the Commission’s 2017 decisions ordering inspections at the premises of the French food retail chains ITM and Casino (Case T-249/17 Casino, Guichard-Perrachon and AMC v Commission ((EU:T:2020:458)); Case T-254/17 Intermarché Casino Achats v Commission (EU:T:2020:459); and Case T-255/17 Les Mousquetaires and ITM Entreprises v Commission (EU:T:2020:460)). The inspection decisions were based on suspicions of illegal anticompetitive exchanges of sensitive information on (i) supplier discounts and prices of services to suppliers, and (ii) future commercial strategies. The GC found that the inspection decisions were not supported by sufficient evidence in relation to the suspected information exchange on future commercial strategies and, on that basis, partially annulled the decisions. Appeals are currently pending before the ECJ (Case C-690/20 P, C-693/20 P and C-682/20 P). • Legality of using information obtained in one dawn raid to justify further dawn raids There is an exception to the general rule against “fishing expeditions”, in that Commission inspectors 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 in Deutsche Bahn that this exception must be narrowly interpreted and is only applicable in cases of genuine coincidence. Having confirmed the legality of the first of two inspection decisions addressed to the Czech national rail operator (as discussed above), the GC confirmed that the Commission was entitled to use legally obtained materials in the context of a first inspection into alleged infringements of Article 102 as the basis for a decision to conduct an inspection relating to suspected infringements under Article 101 TFEU (Case T-621/16 České dráhy v Commission (EU:T:2018:367)). • Powers to take forensic copies of entire computer hard drives The Commission’s dawn raid powers are considerable and in practice extend to removing and copying entire computer hard drives for subsequent review at the Commission’s premises.

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This practice, also referred to as “continued inspections”, is laid down in the Commission’s Explanatory Note on its dawn raid procedures (paragraphs 12 and 14), and is increasingly applied in cases where it is not possible to complete the dawn raid at the undertaking’s premises within a few days. In July 2018, the GC confirmed that it was within the Commission’s powers to take a copy of all data stored on a hard drive for the purposes of indexing those data, so long as indexation was intended to facilitate the search for documents relevant to the Commission’s investigation (Case T-449/14 Nexans v Commission (EU:T:2018:456)). More recently, the ECJ confirmed that the Commission’s inspection powers are wide enough for it to examine either the original data at the company’s premises during a dawn raid, or to take a copy-image of the data (e.g. a computer hard drive, as an intermediate step in the examination of the data, with the actual review of the collected data to take place at a later stage at the Commission’s premises in Brussels, subject, however, to procedural safeguards. The ECJ considered that legitimate reasons may justify the Commission’s current practice of continued inspections, namely to ensure the effectiveness of the inspection (in particular in the case of large volumes of data) or to reduce excessive interference in the company’s operations caused by the inspection. The Commission is however required to ensure that the rights of the company under investigation are safeguarded and that, after completing its examination, it places on the file only documents which are relevant to the subject matter of the inspection (Case C-606/18 P Nexans v Commission (EU C:2020:571) and C-601/18 P Prysmian v Commission (EU:C:2020:751). The practice of continued inspections, and in particular the nature of the required safeguards to be put in place by the Commission, is expected to give rise to considerable debate in the coming years, 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. In October 2020, the GC for the first time called on the Commission to put in place appropriate procedural safeguards for the treatment of documents containing personal data, in particular those containing data which may be characterised as sensitive, the processing of which is a particularly delicate matter as regards the protection of privacy (“sensitive personal data”) (Orders in Cases T-451/20 R and T-452/20 R Facebook (ECLI:EU:T:2020:516)). • Timing of a possible challenge of the Commission’s conduct of inspections An undertaking can challenge the legality of an inspection decision as soon as it had been notified of it. However, the Commission’s conduct during the inspection (such as the copying of 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 (Case T-135/09 Nexans v Commission, discussed above). In 2020, the GC recognised that no specific judicial remedy exists for companies to contest the conduct of an inspection. Nevertheless, the GC found that an effective judicial review of the conduct of an inspection operation is possible, considering all the remedies available to an undertaking subject to such an inspection. In particular, a challenge to such conduct may be brought as part of an appeal against the final infringement decision or against the inspection decision. The GC (somewhat audaciously) suggested that an undertaking could also obstruct the Commission’s inspection, thereby prompting the Commission to issue a penalty decision, which would then be open to an immediate appeal. Further, a company may challenge the Commission’s decision explicitly or implicitly rejecting its request for the protection of documents that it considers protected by legal professional privilege. The same challenge should be open to any decision rejecting a company’s request for protection of the members of its staff on the basis of their private

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Ashurst LLP European Union life. A company may also choose to apply for interim relief under Article 278 TFEU which may lead to the suspension of the inspection operations. Finally, the GC evoked that a company may bring an action for damages where it considers that the Commission has acted illegally during the inspection and those illegalities caused it harm of such a kind as to render the Union liable. That possibility exists even before the adoption of a decision closing the infringement procedure and even where the inspection does not lead to a final decision: Case T-249/17 Casino, Guichard-Perrachon and AMC v Commission (EU:T:2020:458); Case T-254/17 Intermarché Casino Achats v Commission (EU:T:2020:459); and Case T-255/17 Les Mousquetaires and ITM Entreprises v Commission (EU:T:2020:460). • The Commission’s ability to rely on evidence transmitted by national authorities Article 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. The ECJ’s judgment in 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 and finance police. This is the case even if the information was obtained by that national authority for another purpose, as long as the transmission has not been ruled unlawful under the relevant national law. In July 2018, the American container-lid producer Silgan challenged a Commission inspection decision, inter alia, on the grounds that it was based on information provided to the Bundeskartellamt in the context of the undertaking’s co-operation in national proceedings, which, it argued, cannot be shared with the Commission under Article 12 (Case T-415/18 Silgan Closures and Silgan Holdings v Commission, judgment awaiting). • The authenticity of the evidence relied on by the Commission The ECJ clarified the burden of proof when challenging the authenticity of evidence used by the Commission. In Case C‑99/17 P Infineon Technologies v Commission(EU:C:2018:773), the ECJ confirmed that an undertaking challenging the authenticity of the Commission’s evidence must prove, to the requisite legal standard, both the existence of the circumstance alleged to affect the probative value of that evidence and the impact of that circumstance on the probative value of that evidence, unless the Commission’s own conduct prevents the undertaking from doing so. Infineon had provided the Commission with an expert report challenging the authenticity of an email relied on by the Commission. The applicant argued that, in light of its concerns, the Commission was required to request its own independent report to satisfy itself of the authenticity of the email in question. However, the ECJ confirmed that the Commission was not required to establish that the applicant’s concerns were unfounded; the burden of proving the inauthenticity of the Commission’s evidence rests on the undertaking. Access to the file and protection of confidential business information Access to the Commission’s administrative case file is granted to the parties (and their lawyers) as part of their rights of defence, prior to responding to the Commission’s 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 is set out in the Commission’s Access to File Notice. Access to the file generally includes access 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 and settlement submissions in cartel cases. However, access to the file may be restricted where documents contained in the file contain business secrets or other confidential business information (“CBI”) which the Commission is required to protect under its duty of professional secrecy (Article 339

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TFEU). In such circumstances, access will usually only be given to non-confidential versions of the relevant documents. Alternatively, a data room may be set up to provide limited access to the confidential information to a “confidentiality ring” (usually external counsels or the economic advisers of the party being granted access). In 2018, the Commission published two guidance papers on access to its files; one covering the use of confidentiality rings and the other updating the Commission’s 2012 guidance on confidentiality claims. • Rights of third parties Third parties do not benefit from rights of defence in this context (Case C-154/14 SKW v Commission (EU:C:2016:445)). Therefore, third parties are not entitled to access the case file under the same rules as addressees of the SO, 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, third parties may request access to the Commission’s case file under the general EU 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 requests from third parties for access to the file (confirmed by the ECJ in Case C-365/12 P Commission v EnBW (EU:C:2014:112)). This is evident from the GC’s rejection of Deutsche Telekom’s appeal under the Transparency Regulation against the Commission’s refusal to grant it access to third party and internal documents on the administrative file (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, investigations and audits; the Commission was not required to assess the documents individually. In 2018, the GC confirmed that these presumptions equally apply to documents relating to the case file such as the table of contents (Case T-611/15 Edeka- Handelsgesellschaft Hessenring v Commission (EU:T:2018:63)). Another possible route for complaints regarding access to the Commission’s file in cartel 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, discussed in more detail in the fifth edition of Global Legal Insights – Cartels). In 2018, the Ombudsman found that the Commission was entitled to refuse access to a document from the Commission’s investigation in the Trucks cartel. The request had been made by a law firm assisting hauliers seeking damages from truck manufacturers involved in the cartel. The Commission refused access arguing that documents in antitrust and cartel investigations are covered by general presumptions of non-disclosure, as established by the EU courts. The Ombudsman agreed with the Commission’s argument that disclosing documents provided under the leniency programme would undermine confidence in the programme and thus the effectiveness of future investigationsEuropean ( Ombudsman Case 1749/2018/RM).

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The EU Damages Directive (discussed later in this chapter) seeks to facilitate damages claimants’ access to evidence by ensuring national courts have powers to require disclosure of Commission infringement decisions and other information from the Commission’s case file. • Protection of confidential business information Article 8 of Decision 2011/695 on the functions and terms of reference of the Hearing Officer in 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 Officer who will determine whether the information constitutes CBI and, if so, whether there is an overriding interest in disclosing it. The Hearing Officer must examine any objection to disclosure based on the rules of EU law concerning the protection of confidential information 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)). Co-operation between the Commission and NCAs and access to their communications The Commission and 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 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 to have its case dealt with by a specific competition authority. Given the broad degree of 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. Developments in relation to legal classification of infringements in cartel cases • Developments in relation to object infringements Article 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 not cumulative, albeit the ECJ may consider that an infringement has both an anti-competitive object and effect (Case C-231/14 Innolux v Commission (EU:C:2015:451)). One of the significant advantages from a competition authority’s point of view of an “object” analysis is that there is no requirement to undertake a detailed economic analysis of the effects of the alleged restriction on competition. Important clarification of the 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), and subsequently in 2020, in its judgments of January 2020 in Case C-307/18 Generics and others (EU:C:2020:52) and of April 2020 in Case C-228/18 Budapest Bank and others (EU:C:2020:265). Importantly, the ECJ confirmed in these cases that the concept of a restriction “by object” should be interpreted restrictively. It 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 examine its effects. The expectation of a sufficient

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Ashurst LLP European Union degree of harm should be clear from the restriction itself (and essentially “robust and reliable” experience showing that such behaviour harms consumers), but seen also in “the economic and legal context of which it forms part”. Following Advocate General Kokott, the ECJ held in its Generics judgment that any pro-competitive effects of an agreement are “elements of the context of that agreement” and must be taken into account for the purpose of determining whether it can be characterised as a “by object” restriction. The ECJ confirmed this point in Budapest Bank and clarified that where there are “strong indications” that the agreement is capable of improving the conditions of competition that would otherwise have existed (e.g. in the absence of the relevant agreement, prices would have been higher), it cannot be classified as restrictive “by object” and an effects analysis is thus required. With respect to patent settlement agreements, the ECJ clarified the circumstances in which the provisions of these agreements may constitute a restriction “by object” in Case C-307/18 Generics and others (EU:C:2020:52). In line with the GC’s earlier judgments in Cases T‑691/14 Servier v Commission (EU:T:2018:922) and T-684/14 Krka v Commission (EU:T:2018:918), the ECJ confirmed that the mere presence of a value transfer from the originator to the generic company is not enough to characterise a patent settlement agreement as a restriction “by object”. To be restrictive “by object”, the agreement must involve a value transfer that has no other explanation (such as the perception of patent strength) than the commercial interest of the parties not to engage in competition on the merits. In this respect, the ECJ clarified that a value transfer can be considered unjustified even if it does not exceed the profits that the generic company expected to make by entering the market. The ECJ is expected to give further guidance in pending appeals (Cases C-176/19 P Commission v Servier; C-201/19 P Servier v Commission; C-151/19 P Commission v Krka; and C-591/16 P, Lundbeck v Commission). With respect to information sharing, the 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 GC found that both (i) the coordination of the JPY LIBOR panel submissions (which was intended to influence the extent of the payments due by, or to, the banks concerned), and (ii) the exchange of confidential information regarding panel banks’ future JPY LIBOR submissions (which gave the banks concerned a competitive advantage on the JPY derivatives market) constituted object restrictions. Equally, the ECJ’s judgment in Case C‑179/16 Hoffmann-La Roche (EU:C:2018:25) confirms that arrangements between competitors to disseminate misleading information may constitute a by object restriction. The arrangements at issue concerned the dissemination of misleading information, in a context of scientific uncertainty, relating to the adverse reactions resulting from the use of one of Roche’s products for the treatment of eye diseases. These arrangements had been entered into with a view to reducing the competitive pressure caused by the off-label use of Roche’s product on a competitor’s product marketed specifically for the treatment of eye diseases. • Developments in relation to the notion of concerted practice In 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

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Ashurst LLP European Union 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 a message may constitute sufficient evidence to establish that the 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 message constitutes sufficient evidence to establish that its addressees ought to have been aware 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 facilitator There 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 confirmed in Case C-194/14 P AC Treuhand v Commission (EU:C:2015:717), in which the ECJ set out two requirements: (i) that the undertaking concerned intended to contribute by its own conduct to the common objectives pursued by all the cartel participants; 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 ICAP case (Case T-180/15, discussed above), the GC restated this test and confirmed that, in circumstances where: (i) ICAP knew about the existence of collusion between two banks; and (ii) there was a complementary relationship between the conduct of the two banks concerned (i.e. manipulation of their own JPY LIBOR submissions) and ICAP’s conduct (i.e. attempts to manipulate the submissions of other panel banks). It followed that ICAP intended to contribute to the achievement of their common objective. However, the GC annulled the Commission’s finding in respect of ICAP’s participation in one 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. In 2019, the ECJ upheld the GC’s partial annulment of the Commission’s decision (Case C-39/18 P Commission v ICAP (EU:C:2019:584)). • Developments in relation to the concept of “single and continuous infringement” The concept of “single and continuous infringement” is used by the 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 has a common anti-competitive objective with a link of complementarity between the various actions, meaning that they all contribute to the same common objective. The concept has significant ramifications for liability since a party to one aspect of the cartel during one period of its duration can be treated as liable for the whole cartel. Also, it

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Ashurst LLP European Union impacts on the definition of the cartel since it allows, for example, more than one product to be covered by the cartel. It also impacts on the calculation of the fine because it drives the 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 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 a cartel member, the Commission must adduce evidence of facts “sufficiently proximate” 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 particular cartel: as ICAP’s participation related to the manipulation of the JPY LIBOR rates, which were 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. In the Campine case (Case T-240/17 Campine v Commission (EU:T:2019:778)), the ECJ considered that, in the absence of any direct evidence of Campine’s participation during two periods of 11 months each (amounting to a total of 22 months for an overall cartel’s duration of 36 months), in a context where collusive contacts took place with a certain regularity and at relatively close intervals, the infringement at stake could not be classified as “single and continuous”. This is important as the Commission cannot include the period of interruption in the duration of a “single repeated infringement” in its calculation of fines. Moreover, to impute the conduct of other participants to an undertaking under this concept, the Commission must show that the undertaking (i) intended to contribute to the common objective pursued by all the participants, and (ii) was aware of the offending conduct of the other participants or has been reasonably able to foresee it. The ECJ recently confirmed in Case C‑607/18 NKT v Commission (EU:C:2020:385) the strict requirement for the Commission to show awareness as regards the various elements of the infringement and made clear that this includes both “essential” and “non-essential” practices of the cartel. If the Commission does identify a single and continuous infringement, an undertaking participating in this infringement can be held liable for only parts of it. This point was confirmed by the ECJ in Case C‑99/17 P Infineon Technologies v Commission (EU:C:2018:773). Infineon was considered to have played a minor role in the smart card chip cartel giving rise to the litigation; its participation was based on 11 contacts, only five of which were confirmed by the GC on appeal. Accordingly, the undertaking was considered liable solely on account of those contacts and was not attributed liability for the infringement as a whole. 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 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 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 likely speed and efficiency benefits connected with the settlement procedure, 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). In

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March 2019, the GC had a further opportunity to assess the impact of the staggered procedure on an undertakings’ rights of defence in the context of the Commission’s steel abrasives cartel investigation (Case T-433/16 Pometon v Commission (EU:T:2019:201)). The Court rejected Pometon’s plea (the only company out of five targeted by the Commission’s investigation having chosen to waive the benefit of the settlement procedure), considering that the Commission had taken sufficient precautions when drafting the settlement decision against the settling parties and that, as a consequence, references to Pometon contained in such decision could not be considered as evidence of any lack of impartiality on the part of the Commission, nor a failure to respect the presumption of Pometon’s innocence – an appeal by Pometon is currently pending before the ECJ (Case C-440/19 P Pometon v Commission). In any event, 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 cases The EU judicature has a jurisdiction that empowers it to substitute its own appraisal for the Commission’s and, consequently, to cancel, reduce or increase any fine or periodic penalty payment 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 severe financial penalties. This structure raises important questions about an undertakings’ right to 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 of Global Legal Insights – Cartels, several 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 used by the Commission in support of its infringement finding and found it inadequate to 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 sufficiently intensive review of the Commission findings, referring to the principle of effective 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 finding under Article 101 TFEU is made out, the GC must undertake: “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 high level of Court scrutiny of Commission infringement decisions continues. In 2018, the ECJ set aside the GC’s judgment in Case T-758/14 Infineon Technologies (EU:T:2016:737) insofar as it related to the applicant’s claim for a reduction of the

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Commission’s fine. The GC had erred in law by failing to address the applicant’s argument on the proportionality of the fine, without providing reasoning to that effect, but also insofar as it confined itself to reviewing only five of the 11 alleged bilateral contacts on which the fine was based (Case C-99/17 Infineon Technologies v Commission (EU:C:2018:773)). After the case was referred back to it, the GC found in 2020 that the Commission had failed to demonstrate to the required legal standard the existence of one of the suspected contacts and that the fine should accordingly be reduced (Case T758/14 RENV Infineon Technologies v Commission (ECLI:EU:T:2020:307)). With respect to the evidence used by the Commission, the GC confirmed in Joined Cases T‑379/10 RENV and T‑381/10 RENV Keramag Keramische and others v Commission (EU:T:2018:400) that the GC is required, in the context of its overall assessment of the Commission’s evidence, to examine whether, taken as a whole, that evidence supports the Commission’s conclusions. On appeal (Case C‑613/13 P Commission v Keramag Keramische (EU:C:2017:49)), the ECJ had criticised the GC for failing to ascertain whether the evidence relied on by the Commission could be mutually supporting. An important trend is also the high level of Court scrutiny of the Commission’s reasoning underpinning the fine setting which must be adequate to allow companies to exercise their right of defence, especially where the Commission deviates from its own fining guidelines or adjusts certain parameters to reduce or increase the level of the final amount of the fine. The EU Courts have proceeded on several occasions in recent years to annul fines imposed by the Commission for insufficient reasoning. For instance, in 2019, the GC annulled the €33.6 million fine which the Commission had imposed on the HSBC group for anticompetitive practices in the interest rate derivatives sector. The GC found that, where the calculation of the basic amount of the fine is based on a figures-based model, in which the reduction factor plays an essential role, the Commission must provide sufficient explanation so that the companies concerned are in a position to understand the reduction rate applied and the Court in a position to carry out an in-depth review (Case T-105/17 HSBC v Commission (EU:T:2019:675)). An appeal is currently pending before the ECJ (Case C-883/19 P HSBC v Commission). In its 2019 ICAP judgment, the ECJ clarified that the Commission is required to provide sufficient reasons for the methodology specifically developed to calculate the fine for a cartel facilitator (Case C-39/18 P Commission v ICAP (EU:C:2019:584)).

Leniency/amnesty regime A general downward trend in leniency applications Although leniency remains the Commission (and NCAs) main investigative tool to uncover secret cartels, the absolute number of leniency applications has decreased over the last several years and this global trend has continued in 2020. It may be explained by several factors, but the threat of follow-on private damages actions is likely to be an important cause for the decline. Immunity applies only with regard to administrative fines, but at the same time opens the gate for private enforcement actions. Harmonisation of leniency regimes across the EU with the ECN+ Directive There is no one-stop-shop when it comes to leniency applications, which means that a successful application for leniency before an NCA or the Commission does not provide any guarantee as to its success before another authority. While the ECN+ Directive has not succeeded in imposing a one-stop-shop system, it requires all national leniency regimes to include a marker system allowing a company to secure a place in the queue and codifies the system of summary application, enabling companies which have submitted a full application

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Ashurst LLP European Union to the Commission to submit summary applications before NCAs, provided that more than three Member States are affected. Co-operation between the Commission and NCAs in relation to leniency applications The 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 ECN+ Directive 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 general conditions which reflect the conditions applied at EU level; • require NCAs to permit companies to apply for a “marker”, granting the applicant a place in the leniency queue; • ensure that companies that have applied to the Commission for leniency can file summary applications with NCAs in relation to the same cartel; 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 an 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. The system is now completed by Directive 2019/1937 which aims at protecting individuals who report breaches of Union law, including competition law. The adoption of this directive may be part of an approach to offset the possible decline of leniency, in particular, due to the threat of private actions. Access to the file/inclusion of information provided in leniency applications in infringement decisions The 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 to the inclusion of information in non-confidential versions of Commission infringement decisions 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’s investigation The 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, or because it uses its best endeavours to co-operate. A leniency applicant must provide the Commission with evidence which offers significant added probative value relative to the information which it already has at that time on its file. Whether the information offered by a business is of significant value to the investigation 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

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Switchgear cartel appeal, where the GC 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). However, the GC has ruled out the possibility that, where two companies have provided evidence with significant added value, the one which provided it second may take the place of the first if the co-operation of the latter proves to be unreliable and insincere. The “first come first served” rule remains strict (Case T-222/17Recyclex (EU:T:2019:356)). Online tool for cartel leniency and settlements For leniency applicants – and not whistleblowers – the Commission has adopted since March 2019 a new secure online tool called “eLeniency”, which allows companies and their lawyers to request leniency or initiate a settlement procedure without travelling to the Commission’s premises. It is designed to ensure the same confidentiality and legal protection afforded by the current oral procedure. The 2019 report on competition policy states that, since the launch of eLeniency, the Commission has received a high number of statements and documents. The introduction of this tool has been revealed itself useful, especially considering that due to the COVID-19 outbreak the Commission suspended the ability for leniency applicants to deliver oral statements.

Administrative settlement of cases Under the Commission’s 2008 Settlement Notice, cartelists may benefit from a modest 10% 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. This enables the Commission to adopt succinct decisions under a simplified and shortened procedure. 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). This is nicely illustrated by the large number of damages claims brought before national courts in several jurisdictions, including the UK, Germany and the Netherlands, seeking compensation from the truck manufacturers who settled with the Commission in July 2016 for a record €2.9 billion cartel fine. Since its introduction in June 2008, the use of the settlement procedure has increased over the years, with a total of 34 settlement decisions adopted to date. In 2020, the Commission concluded two settlements, Ethylene and Closure Systems. In July 2020, the Commission reached a settlement with three ethylene purchasers, fining them €260 million for colluding to buy ethylene at the lowest possible price (Case AT.40410 – Ethylene). In September 2020, the Commission also concluded a settlement fining car parts suppliers €18 million for their involvement in two separate cartels (Case AT.40299 – Closure systems). In 2019, the Commission issued settlement decisions in three cases. In September 2019, the Commission fined canned vegetable cartelists €31.6 million (Case AT.40127 – Canned vegetables). In May 2019, the Commission issued two settlement decisions fining five banks €1.07 billion for participating in a foreign exchange spot trading cartel (Case AT.40135 – Forex). Two months earlier, it fined two car safety equipment suppliers €368 million for taking part in two cartels for the supply of car seatbelts, airbags and steering wheels to European car producers (Case AT.40480 – Occupants Safety Systems II). In February 2018, the Commission reached a settlement with five maritime car carriers fining them €395 million for their involvement in a cartel in the market for deep sea transport of vehicles (Case AT.40009 – Maritime Car Carriers). On the same date, the Commission reached two further settlements with suppliers

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Ashurst LLP European Union of spark plugs (automotive electric devices built in petrol car engines) imposing a total fine of €76 million and with car part suppliers who were fined €75 million for their involvement in two cartels relating to braking systems (Case AT.40113 – Spark plugs). In 2017, the Commission had already settled four car parts cartel cases imposing a total amount of cartel fines of €284 million. As mentioned, in 2016, the Commission settled with five leading European truck manufacturers and imposed a record fine of €2.9 billion (Case AT.39824 – Trucks). The standard cartel procedure continued against Scania, the only truck manufacturer that decided not to settle. This resulted in a fine of €880 million for Scania in 2017 (the second highest cartel fine ever imposed on a single undertaking). Scania’s appeal against this decision is still pending before the GC (Case T-799/17 Scania and Others v Commission). The Commission enjoys a broad discretion in determining whether a cartel case is suitable for settlement. The Commission can also decide to discontinue settlement discussions, as it did in 2014 in the Smart Card Chips case (Case AT.39574 – Smart Card Chips). Parties have neither the right nor the duty to settle. The Commission generally seeks to agree settlement with all parties, and avoid so-called “hybrid” cases, where some but not all of the parties choose to settle. Such cases significantly reduce the benefit of settlement from the Commission’s perspective since, rather than conducting one pared-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 (Case AT.38866); Yen Interest Rate Derivatives (Case AT.39861); Euro Interest Rate Derivatives (Case AT.39114); Steel Abrasives (Case AT.39792); Canned Mushrooms (Case AT.39965); Trucks (Case AT.39824); and Alternators and Starters (Case AT.40028). Further hybrid settlement cases are under way. As mentioned above, the Commission adopted two settlement decisions in 2019 fining several banks €1.07 billion for participating in a foreign exchange spot trading cartel (Case AT.40135 – Forex). The Commission’s investigation into the possible involvement of Credit Suisse is still pending following that bank’s decision to withdraw from settlement discussions. In September 2019, the Commission also issued a settlement decision fining two undertakings for participating in the Canned vegetables cartel, while it continued its investigation against the non-settling party with a Statement of Objection being sent under the normal procedure in October 2020 (Case AT.40127 – Canned vegetables). 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 sixth edition of Global Legal Insights – Cartels discussed the GC’s judgment upholding the nearly €60 million fine imposed on Timab, the non-settling party, and confirming the Commission’s discretion in deciding on the final amount of the fine imposed on the non-settling party (Case T-456/10 Timab Industries and CFPR v Commission (EU:T:2015:296)). This judgment was upheld in 2017 by the ECJ on appeal (Case C-411/15 P Timab Industries and CFPR v Commission (EU:C:2017:11)). In another hybrid settlement case, the GC found that the Commission had acted in breach of the presumption of innocence by referring to the conduct of a non-settling party who would receive its non- settlement infringement decision only two years later (Case T-180/15 ICAP v Commission (EU:T:2017:795)). The GC confirmed that a hybrid settlement procedure must be carried out with respect for the presumption of innocence of the non-settling party. The GC suggested that this could be achieved in practice by the Commission adopting settlement

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Ashurst LLP European Union and non-settlement decisions on the same date. The appeal by the Commission against the ICAP judgment was dismissed on other grounds (Case C-39/18 P Commission v ICAP (EU:C:2019:584)). More recently, the GC found that the Commission is bound, by virtue of its duty of impartiality, to ensure that it does not adopt grounds in a settlement decision which may affect the procedural guarantees of an undertaking which will subsequently be the subject of ordinary proceedings. This drafting precaution allows the Commission to refer to this undertaking, but not to legally qualify its behaviour. The GC, however, also clarified that, in order to preserve the presumption of innocence, EU law does not oblige the Commission to adopt a settlement decision at the same time as the infringement and penalty decision against the non-settling parties (Case T-433/16 Pometon v Commission (EU:T:2019:201)). An appeal against this judgment is currently pending before the ECJ (Case C-440/19 P Pometon v Commission). Settlement decisions are subject to judicial review by the EU Courts, but appeals are relatively rare (as opposed to the appeals commonly brought by non-settling parties against the infringement decision addressed to them in hybrid cases). As parties are required to admit liability, challenges focus on the Commission’s calculation of the fine. In December 2016, the GC issued a judgment for the first time annulling a Commission settlement decision. The GC annulled the settlement decision adopted in December 2014 against Printeos in the paper envelope cartel for failure to give adequate reasons which, the GC recalls, constitutes an essential procedural requirement. In view of its broad discretion, the Commission has a duty to explain the factors taken into account when setting the fine and to justify any different treatment of undertakings (e.g. application of different fine reduction rates) (Case T-95/15 Printeos v Commission (EU:T:2016:722)). Following the judgment, the Commission issued a new decision in June 2017 re-imposing the same fine on Printeos as under the 2014 decision, and Printeos’ appeal against the new Commission decision has been rejected (Case T-466/17 Printeos v Commission (EU:T:2019:671)).

Civil penalties and sanctions The Commission’s extensive fining powers Fines 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 is limited by the general fining methodology set out in the 2006 Guidelines on the method of setting fines (OJ (2006) C 210/2). As mentioned above under “Thoroughness of judicial review in cartel cases”, the EU Courts have in recent years sanctioned the Commission for insufficiently motivating its decision on fines, in particular where the Commission has decided to depart from the general fining methodology set out in its Guidelines in view of “particularities of a given case” or “the need to achieve deterrence in a particular case” (paragraph 37 of the Guidelines). In its 2019 HSBC judgment, the GC annulled the €33.6 million fine imposed by the Commission on the HSBC group for its involvement in a cartel in the interest rate derivatives sector, in the absence of a sufficient statement on reasons for the reduction factor applied by the Commission to set the basic amount of the fine. The GC recalled that “[w]ith respect to a decision imposing a fine, the Commission must state the reasons, particularly with regard to the amount of the fine and the method of calculation”. In particular, the Commission must “indicate in its decision the factors which enabled it to determine the gravity of the infringement and its duration” and the Commission must “explain the weighting and

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Ashurst LLP European Union assessment of the factors taken into account” (Case T-105/17 HSBC v Commission (EU:T:2019:675)). An appeal is currently pending before the ECJ (Case C-883/19 P HSBC v Commission). In July 2019, the GC also annulled the €33.7 million fine imposed by the Commission on the CCPL Group in 2015 for its involvement in three cartels in the retail food packaging sector. The Commission was sanctioned for its failure to provide sufficient reasoning for its decision to grant a 25% fine reduction for inability to pay, in accordance with paragraph 35 of the Guidelines (Case T-522/15, CCPL and others v Commission, ECLI:EU:T:2019:500; an appeal before the ECJ is pending). The Commission re-adopted a cartel decision against CCPL in 2020, addressing the procedural error identified by the GC, and imposing a reduced fine of €9.44 million (Case AT.39563 –Retail Food Packaging). Following the ECJ’s 2018 judgment partially setting aside its earlier judgment (Case C-99/17 Infineon Technologies v Commission (EU:C:2018:773), the GC ruled in July 2020 that the Commission had failed to adequately establish Infineon’s involvement in the Smart card chips cartel. In those circumstances, the GC found that an additional fine reduction of 5% must be applied, in addition to the 20% reduction initially granted by the Commission by way of mitigating circumstances (Case T-758/14 RENV Infineon Technologies v Commission (ECLI:EU:T:2020:307)). In November 2020, the ECJ overturned the GC judgment annulling the 2016 Commission decision re-imposing a fine of €3.3 million on the GEA group for its involvement in the Heat Stabilisers cartel (Case T-640/16 GEA Group v Commission (EU:T:2018:700), and on appeal, Case C-823/18 P Commission v GEA Group (ECLI:EU:C:2020:955)). The case has been referred back and is now pending before the GC (T-640/16 RENV GEA Group v Commission). Harmonisation of powers to impose fines across the EU The ECN+ Directive focuses, in part, on the power of NCA to impose fines and aims to minimise the divergence of outcomes from one Member State to another, ensuring that in all EU Member State fines will be effective, proportionate and dissuasive. To this aim, the Directive establishes a common set of parameters for the calculation of fines. For instance, it imposes that the legal maximum amount of the fine for infringements to Articles 101 and 102 TFEU cannot be less than 10% of the total worldwide turnover. It insists also on the need for each NCA to apply the same notion of “undertaking” in order to avoid situations where an infringer escapes from liability through a corporate restructuring. Parent liability A 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, the Commission can hold the parent jointly and severally liable for payment of the fine imposed on the subsidiary, in which case the 10% upper fine limit is calculated using the parent’s turnover. 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 influence where the parent owns (nearly) 100% of the subsidiary’s share capital (Case 97/08 Akzo Nobel v Commission (EU:C:2009:536)). A purely financial investor may escape the application of the presumption of parental liability only where it can demonstrate that it has in fact refrained from management and control of the subsidiary. In 2018, the GC ruled that Goldman Sachs had failed to do so in respect of its subsidiary’s involvement in the Power Cables cartel and upheld the Commission’s finding of parental liability (Case T-419/14 The Goldman Sachs Group v Commission (EU:T:2018:445)). The ECJ recently dismissed Goldman Sachs’ appeal, considering that the presumption of parental liability applies since the latter held all voting rights and, as a

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Ashurst LLP European Union consequence, was in a position to exercise decisive influence over its subsidiary (although it did not hold “all or almost all” of the share capital) (Case C-595/18 P The Goldman Sachs Group v Commission (ECLI:EU:C:2021:73)). 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 the finding that the factual and legal arguments invoked by the companies concerned do not suffice to rebut the presumption (Case C-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 the parent has exercised decisive influence over its subsidiary. In the Evonik Degussa judgment, the ECJ clarified that the presumption cannot be rebutted only by showing that the subsidiary acted against its parent’s instruction (including the explicit instruction not to engage in anti-competitive conduct). This confirms previous case law according to which decisive influence does not require the subsidiary to carry out all the 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)). EU Courts have clarified in recent years that a parent’s financial exposure, where its liability is based exclusively on the subsidiary’s conduct, can in principle not exceed that of its subsidiary. Accordingly, the GC held in its UTi Worldwide judgment that it was wrong for the Commission to impose a fine on UTi Worldwide, as parent company, 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 resulting in a reduction of about one month) and on this basis reduced the fine for the parent (Case T-264/12 UTi Worldwide and Others v Commission (EU:T:2016:112)). In certain situations, the liability of the parent company may nevertheless exceed that of its subsidiaries even where its liability is purely derivative of that of its subsidiaries. This is the case where there is a factor that individually reflects the conduct for which the parent company is held liable (Case C-516/15 P Akzo Nobel v Commission (EU:C:2017:314)). The aggravating circumstance of recidivism may constitute a factor individually characterising the conduct of a parent company, justifying that the extent of its liability exceeds that of its subsidiary from which it is entirely derived (Case T-264/12 UTi Worldwide and Others v Commission (EU:T:2016:112)). The GC has recently considered such individualising factor when imposing a fine against Deutsche Telekom, but an appeal is currently pending before the ECJ (Case C-152/19 P Deutsche Telekom v Commission (ECLI:EU:C:2020:678)). Advocate General Saugmandsgaard Oe proposed, in his opinion of 9 September 2020, to dismiss the appeal brought by Deutsche Telekom and Slovak Telekom. Successor liability A 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 whilst under its ownership, even if, when the decision finding the infringement is adopted, 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, the Commission must take account of the specific turnover of the infringing subsidiary for the period prior to the acquisition in order to apply the 10% ceiling for fines (Case C-637/13 P

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Laufen 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 respect of the fine which is imposed exclusively on it, in relation to the period prior to its acquisition 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 long as it remains in existence and has significant economic activities. The principle of personal liability was confirmed in 2018 with the GC upholding Coveris’ liability for its participation in the 2015 Retail food packaging cartel and the corresponding fine, even though certain assets had been transferred to an independent undertaking and Coveris was no longer active in the sector (Case T-531/15 Coveris Rigid France v Commission (EU:T:2018:885)). The Court reaffirmed that the need to ensure an effective enforcement of competition law may exceptionally justify a derogation from this general principle, penalising an entity that is not responsible for the infringement, in particular where the entity that has committed the infringement has ceased to exist, either in law or economically (principle of economic continuity). Consequently, when the assets of a legal entity that participated in an infringement are transferred to independent undertakings, liability follows those assets only in exceptional cases, where the legal entity that owned those assets has ceased to exist in law or has ceased all economic activities.

Criminal sanctions The Commission has no jurisdiction to impose criminal sanctions on individuals or businesses. However, fines imposed for competition law infringements have been characterised 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. The EU Courts’ position is more nuanced. For instance, in its Sasol case, the GC ruled that “while competition law is indeed similar to criminal law, it is not at the ‘heart’ of criminal law. Outside the ‘hard core’ of criminal law, the guarantees in matters of criminal law laid down in Article 6 of the ECHR will not necessarily apply with their full stringency” (Case T-541/08 Sasol and Others v Commission (EU:T:2014:628)). Many EU Member States have criminal sanctions (imprisonment and/or individual fines) 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. For example, 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 were sentenced to five and eight years imprisonment in the UK 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 in a €1.04 billion settlement with Barclays, Deutsche Bank, RBS and Société Générale in 2013, and a further €485 million of fines imposed on non- settling parties in December 2016.

Developments in private enforcement of antitrust laws Private enforcement of competition law is on the rise in Europe in recent years, which is

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Ashurst LLP European Union evidenced by a significant increase in the number of damages actions brought before national courts. Since the adoption of the EU Damages Directive in 2014, the general policy at both EU and Member State levels has been to encourage individuals and companies to claim damages before national courts where they have suffered harm as a result of competition law infringements, such as cartels. The Commission concluded in its December 2020 report that the EU Damages Directive has been implemented consistently across the Member States. In August 2019, the Commission adopted Passing on Guidelines explaining to national courts how to quantify damages particularly in a passing-on context (where part or all of the cartel overcharge is passed on to indirect purchasers). In the course of 2020, the EU Courts issued several key rulings in the area of private enforcement which related mainly to: • damages claimants; • successor and parent/subsidiary liability for damages; • disclosure/confidentiality (in particular, disclosure of leniency information); • requests by damages claimants for access to the Commission’s case file; and • jurisdiction/choice of forum delicti. Damages claimants Anyone who has suffered harm as a result of an infringement of competition law is entitled to seek damages where a causal connection between the loss and the infringement of the competition rules exists. This right to compensation is available to suppliers or customers directly suffering losses as a result of the cartel. In a 2019 judgment, the ECJ clarified that this right to compensation extends also to a public body which granted promotional loans to purchasers of products covered by a cartel (Case C-435/18 Otis v Land Oberösterreich (EU:C:2019:1069)). Successor and parent/subsidiary liability The civil liability of the parent and/or successor of the infringer has been acknowledged by the ECJ in the context of private enforcement, by an extension of the notions of “undertaking” and “economic continuity” within the meaning of Article 101 TFEU to the private enforcement sphere (Case C‑724/17 Skanska Industrial Solutions, Vantaan Kaupunki v Skanska Industrial Solutions (EU:C:2019:204)). Therefore, a claimant is able to bring a claim against the successor of an infringer but also against other entities of a group, which in turn raises the question of “forum shopping”. The ECJ has expressly recognised that the parent company may be held liable for actions attributed to its infringing subsidiary, on account of the parent company’s ability to exercise decisive influence over the subsidiary’s conduct. In a pending request for a preliminary ruling, the ECJ is asked to rule whether liability for damages may also be extended the other way around, i.e. from the parent company to the subsidiary on the basis of doctrine of the “single economic unit” (Case C-882/19 Sumal, S.L. v Mercedes Benz Trucks España, S.L., pending). This question is also at the centre of the appeal currently pending before the ECJ (Case C-207/19 P Biogaran v Commission, pending). Disclosure/confidentiality The 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 EU 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

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Ashurst LLP European Union 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 EU Damages Directive by 27 December 2016. Quite how these protections will be deployed in practice at the national level still remains to be seen. In many jurisdictions the provisions of the EU 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. In this regard, in 2019, the ECJ considered the applicability of the EU Damages Directive to infringements taking place and damage actions issued prior to the deadline for implementation (Case C-637/17 Cogeco Communications Inc. v Sport TV Portugal and Others EU:C:2019:263). The ECJ found that, in the event the EU Damages Directive is not applicable (which is to be determined on a case-by-case basis), national provisions must comply with the principle of effectiveness. According to such principle, national rules governing damage actions may not make the exercise of the right to claim compensation practically impossible or excessively difficult. On 20 July 2020, the Commission adopted a communication offering guidance to national courts on the protection of confidential information in private enforcement proceedings. The communication provides that national courts may take several effective measures to protect confidential information both during and after court proceedings, such as redactions, confidentiality rings and the appointment of experts. The communication is however not binding for national courts and does not aim to modify the procedural rules applicable to civil proceedings in the individual Member States. Practice shows that the corporate leniency statement is generally not required to bring a successful damages action: for example, in England & Wales, the courts now regularly require a redacted version of the Commission infringement decision and other “non-leniency” documents from the Commission’s case file (in the possession of the addressees) to be disclosed into a confidentiality ring (which includes legal representatives of the claimants and addressees). This process appears to be sufficient to 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 be filed in the US whilst an investigation by the Commission is still ongoing. Requests for access to the file As noted above, third parties are increasingly seeking to rely on the Transparency Regulation to obtain access to documents contained in the Commission’s case file to assist them in bringing 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.

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Acknowledgments The authors would like to thank Sabina Pacifico ([email protected]) and Hélène Fricaudet ([email protected]) for their invaluable contributions to this chapter.

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Irene Antypas Tel: +32 2 641 9966 / Email: [email protected] Irene Antypas is a counsel in Ashurst’s Competition & EU law department, 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.

Jessica Bracker Tel: +32 2 641 9937 / Email: [email protected] Jessica Bracker is an associate in Ashurst’s Competition & EU law department, based in Brussels. She advises on all aspects of EU competition law (including antitrust investigations and merger control) as well as on State aid and regulatory matters. She has experience in dealing with the European Commission, the French Competition Authority, national and EU Courts.

Marie Florent Tel: +33 1 53 53 5380 / Email: [email protected] Marie Florent is an associate in the Competition & EU law department in Ashurst Paris. She specialises in all areas of French and EU competition law. She has extensive experience in merger control (French, European and multijurisdictional filings) and advises companies in antitrust investigations before the European Commission and the French Competition Authority, as well as on State aid and regulatory matters.

Ashurst LLP London Fruit & Wool Exchange, 1 Duval Square, London E1 6PW, United Kingdom Tel: +44 20 7638 1111 / Fax: +44 20 7638 1112 / URL: www.ashurst.com

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Ilkka Aalto-Setälä & Henrik Koivuniemi Borenius Attorneys Ltd

Overview of the law and enforcement regime relating to cartels Legislation Cartel 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 Treaty on the Functioning of the European Union (“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 by business undertakings which have, as their object, the significant prevention, restriction or distortion of competition or which result in the prevention, restriction or distortion of competition shall be prohibited”. In addition to the general prohibition of anti-competitive contracts, a list containing examples of agreements, decisions and practices that are always deemed especially anti-competitive is provided. The list of examples is in line with Article 101 of the TFEU and prohibits, for instance, direct and indirect price-fixing, and limiting or controlling 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 the implementation of a restraint on competition; 2) order a competition restriction to be terminated and obligate an undertaking to deliver a product to another with non-discriminatory conditions; 3) impose commitments to be binding on undertakings or associations; and 4) 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 evaluated in an administrative

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Borenius Attorneys Ltd Finland process by the FCCA; court processes in the Market Court and possibly in the Supreme Administrative Court follow this, 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 sanctions The FCCA is the main investigative authority with regard to 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 has been insignificant in competition law-related investigations and it has been limited to conducting 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 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 (808/2019). The Supreme Administrative Court’s judgment is the final decision on the matter. As there are only a few cartel cases in the history of Finnish competition law, cartel cases are usually appealed in every instance. Damage claims are handled in civil courts; such claims could, thus, be handled in three instances, 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. Sanctions The Market Court may impose, on the proposal of the FCCA, a penalty payment for an undertaking or association of undertakings, which has infringed the provisions of Sections 5 or 7 of the Competition Act or Articles 101 or 102 of the TFEU. The maximum amount of a penalty payment is 10% of the annual turnover of the undertaking or association of undertakings. 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 regulated 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

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Borenius Attorneys Ltd Finland 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 has revealed anti-competitive 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 by officials of the FCCA or by the Regional State Administrative Agencies. Officials can also authorise other persons to participate in the inspections. If needed, the police may provide executive assistance during the inspections. The European Commission can also carry out inspections. 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 at business premises, storage facilities, land and means of transport controlled by an undertaking. The officials of the FCCA and the Regional Administrative Agencies may also gain access to other premises (e.g. homes of the management of a company) if there is a justified reason to suspect that, for example, bookkeeping or other documents 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 business correspondence, bookkeeping, computer files and other relevant data and to take copies of 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. Personnel can also be interviewed during inspections and the authorities are permitted to record these interviews. When conducting an inspection in premises other than business premises, the FCCA can enter the premises, examine materials and take copies. In non-business premises, the FCCA is not permitted to seal the premises or request explanations or make records during inspection. An amendment to the Finnish Competition Act entered into force on 17 June 2019, which gave the FCCA further powers of continued inspection on the FCCA’s own premises. These powers are the standard for the Commission. 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 another person if there is a justified reason to suspect that a representative or a person has been involved in the execution of a cartel. The hearings are generally recorded.

Overview of cartel enforcement activity during the last 12 months The Finnish Market Court gave its judgment in a cartel case which concerned the EPS insulation sector on 3 March 2021. The Market Court imposed penalty payments in total

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Borenius Attorneys Ltd Finland of EUR 3.2 million on two companies for engaging in price-fixing in Finland during the period of November 2012 and the summer of 2014. Additionally, on 15 December 2020, the Market Court gave its judgment in another cartel case which concerned several driving schools and their association. The Market Court imposed penalty payments on two driving schools and their association while acquitting four other driving schools. In relation to cartel-related cases which are pending before the Supreme Administrative Court of Finland, the European Court of Justice (“ECJ”) gave its preliminary ruling concerning a bid-rigging cartel on 14 January 2021. The reference for a preliminary ruling concerned when a cartel infringement is deemed to have come to an end in a situation wherein a party to a cartel has concluded a contract with a third party in accordance with the terms of the cartel. In its judgment, the ECJ held that the cartel infringement had lasted until the essential features of the works contract and the total price to be paid for the works had been definitively determined. Moreover, the ECJ stated that the competition infringement could not be considered to have continued beyond the time which the bid was valid and thus had the potential of leading to a final contract, even if this would have caused financial harm to other operators on the relevant market. The Supreme Administrative Court of Finland is yet to ascertain the ECJ’s ruling. In the most recent investigation conducted by the FCCA, it investigated the effects of an alleged cartel in the sector of housing management and made a proposal to the Market Court to impose penalty payments totalling EUR 22 million to six undertakings active in the sector and to their association.

Key issues in relation to enforcement policy 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 manifestly unjustified. The FCCA has held that the prioritisation norm has been successful and 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 FCCA has not concentrated its investigative measures on any specific key sectors. The recent cartel enforcement judgments have been in the field of industry, for instance, the styrofoam cartel, the raw wood cartel, and the alleged power line manufacturing cartel. Recent investigations of the FCCA show that also alleged smaller scale infringements, which include hard-core restrictions like cartels, are monitored and interventions are made (for instance, in the above-mentioned driving school case the imposed penalties were relatively small).

Key issues in relation to investigation and decision-making procedures Investigation procedure An 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.

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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 proposal have a significant influence on the FCCA’s evaluation but at least the undertakings have the possibility to correct possible misleading information and to safeguard their business secrets. Decision-making procedure When deciding whether an undertaking or association of undertakings has been involved in a cartel, the FCCA analyses evidence gathered during inspections. The evidence could be, for instance, financial statements, bookkeeping, IT devices, other documents and data that could 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’s cartel decision, because the decision is not addressed to them. In addition, only the final decisions 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 investigation has officially ended and for as long as it could jeopardise the investigation or the handling of the case. In addition, business secrets are held confidential throughout the FCCA’s investigation, the court proceedings and even afterwards as long as the information

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Borenius Attorneys Ltd Finland is relevant (e.g. pricing information of the year 2014 can be held confidential during that year 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 payment A penalty payment can amount to a maximum of 10% of the annual turnover of an undertaking or association of undertakings. Under the FCCA’s guidelines, penalty payments have two aims. Firstly, a penalty payment is of a punitive nature, i.e. punishing undertakings, which have breached the competition norms. Secondly, the possibility of imposing a penalty payment should prevent potential cartel participation of an undertaking or association of undertakings as well as 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. When the FCCA assesses the proper amount of the penalty payment, it considers all 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 a cartel and in other competition restriction cases via a case-by-case analysis. In practice, the Market Court has 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/amnesty regime The leniency procedure enables the first undertaking or association to reveal a cartel to obtain 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 information on the cartel. Information provided by the applicant must present sufficient grounds 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 application confidential. The FCCA grants conditional leniency to an applicant until the investigation is finished. The final decision on full or conditional leniency is concluded at the end of the investigation. Leniency can be either full or partial. The first leniency applicant to provide sufficient

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Borenius Attorneys Ltd Finland information 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. There is no defined form for an application for leniency. However, it is essential that the moment of the provision of information to the FCCA can be determined in order for it to define the order of priority in granting leniency. Therefore, an application should be delivered 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 whistleblower and a penalty payment was not proposed by the FCCA. In the EPS insulations cartel, in which the Market Court gave its judgment recently, penalty payments were imposed upon ThermiSol Ltd and UK-Muovi Ltd, but Styroplast Ltd, which acted as the whistleblower, was granted leniency, and no penalty payments were imposed. 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.

Administrative settlement of cases 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 would not offer substantial benefits for handling infringement cases and would not fit well into the existing legal framework or the Finnish legal tradition.

Third-party complaints In addition to leniency applications, third parties may also reveal a cartel to the FCCA. In principle, anyone can make a request for action to the FCCA or unofficially tip-off the FCCA. A private person would, however, not benefit directly from making a request for action as there is no threat of competition law sanctions for private individuals. Moreover, an official tip-off does not necessarily lead to the initiation of an investigation, as it is at the FCCA’s discretion to decide whether or not to open an official investigation.

Civil penalties and sanctions 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 the civil process is the duty to pay damages to cartel victims. The Finnish legal system differs from some other jurisdictions wherein a criminal sentence is also possible as a result of a competition law infringement. The damage claims are brought before civil courts and are 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 claim is exceptionally filed in a district court before the administrative investigation on the

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Borenius Attorneys Ltd Finland matter has been finalised, it is likely that the court will delay its ruling until the FCCA has conducted 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 of profit, including interest. Under the Damages Act, an infringement of competition law found in a final decision by a national 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 under Articles 101 or 102 of the TFEU or under national competition law. Where a final decision 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. The Damages Act contains a specific section about the qualification of harm, under which it shall be 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 proof required for the quantification of harm, render the exercise of the right to damages practically impossible or excessively difficult. The foregoing also includes the concept of a joint and several liability. It means that undertakings which have infringed competition law through joint behaviour are jointly and severally liable for the harm caused by the infringement of competition law; with the effect that each of those undertakings 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 granted immunity from fines under a leniency programme shall not exceed the amount of the 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.

Right of appeal against civil liability and penalties As damages claims are brought before civil courts, they can ultimately be handled in three instances, first in a district court, and thereafter appealed to the Court of Appeal and the Supreme 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.

Co-operation with other antitrust agencies The FCCA co-operates with other antitrust agencies of the European Competition Network (“ECN”). In addition, the Nordic Agreement on Cooperation in Competition Cases allows

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Borenius Attorneys Ltd Finland the FCCA to co-operate also with Iceland and Norway which were before the conclusion of the agreement outside the ECN framework. The FCCA does not co-operate systematically with other antitrust agencies.

Cross-border issues The ECN 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, the Organization for Economic Cooperation and Development (“OECD”) and the International Competition Network (“ICN”). 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 several competition matters annually that have a cross-border element. In addition, it participates in ca. 50 international working groups’ activities. Under the above-mentioned “Nordic Agreement”, Nordic competition authorities can provide each other with executive assistance in company inspections and share the findings with other Nordic countries. These investigation powers can also be used in national cases and in this respect, they are broader than those available within the ECN.

Developments in private enforcement of antitrust laws There have been no any significant developments or changes regarding private enforcement of antitrust laws since the last edition.

Reform proposals At the end of the last year, the Finnish Government issued a proposal (HE 210/2020 vp) to make numerous amendments to the Finnish Competition Act in order to increase the FCCA’s enforcement powers in the wake of the so-called “ECN+ Directive” (2019/1), which aims to empower national competition authorities to become more effective in enforcing EU competition rules. The principal amendments set forth in the proposal provide the FCCA with new and more far-reaching investigative and enforcement powers in relation to inspections, remedial actions, hearing, interim measures, procedural fines, fines imposed on associations of undertakings as well as the calculation of fines. Following the amendment, the FCCA would be empowered to conduct unannounced inspections on premises other than business premises under a reasonable suspicion that information related to the business and relevant to the subject matter of the inspection is being kept on such premises, including the homes of directors, managers and other staff members of the undertakings subject to investigation. The proposal would also provide to the FCCA the right to impose structural remedies in relation to cartels, where it has previously been impossible, while the structural remedies have been fairly commonplace under the merger control regime. The Government proposal provides the FCCA with the right to summon any person who may be in possession of information relevant for the investigation of anticompetitive practices to attend a hearing. The proposal also extends the duration of interim measures whereby they can remain in force for a fixed term, subject to extension, or until the FCCA issues its infringement decision. After the implementation of the amendment, the FCCA also has a power to impose fines for procedural infringements. In relation to association of undertakings,

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Borenius Attorneys Ltd Finland the proposal provides that in situations where fines are based on the turnover of an association and its member undertakings, and the association proves unable to pay the fines, the FCCA has the right to require any of the member undertakings whose representatives were part of the decision-making bodies of the association to pay the fine. The FCCA may even further require any of the other members of the association to pay the outstanding amount of the fine. One of the most discussed amendments to the Finnish Competition Act relate to the calculation of fines, aiming to increase the transparency of calculation methods and thereby enhance legal certainty related thereto. Within the proposed framework, the calculation procedure would be based on a so-called basic amount and it would be subject to mitigating or aggravating factors. The “basic amount” of the fine would consist of a maximum of 30% of the turnover from the sale of goods related to the anticompetitive practice. When calculating the basic amount, the FCCA considers not only the turnover from the sale of goods that are directly related to the infringement, but also the turnover obtained from the sale of goods that are indirectly related to the said infringement, such as the turnover from products whose price is determined by the pricing of the goods directly linked to the infringement. The basic amount is multiplied by the number of years during which the undertaking has participated in the anticompetitive practice. Irrespective of the years of participation, the fine may be increased by 15–25% of the basic amount in cases of hardcore competition restrictions. The Directive was supposed to be implemented by 4 February 2021 via the Government proposal but the implementation is still in progress. The Constitutional Law Committee of the Finnish Parliament addressed the issue on 16 March 2021, disclosing its critical view on some of the proposed amendments. Above all, the Committee found problematic the proposed amendment related to the FCCA’s right to require any member of an association of undertakings to pay the outstanding fine. The Committee stated that the right to allocate the imposed fines should be reserved to a competent institution, such as the Market Court. Considering the critical nature of the Committee’s statements, the implementation of the Directive is likely to be further delayed and the exact content of the amendments to the Finnish Competition Act is yet to be seen.

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Ilkka Aalto-Setälä Tel: +358 20 713 3545 / Email: [email protected] Ilkka has worked for over 20 years within 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 joining Borenius, he was a Local Partner at the Helsinki office of an international law firm and worked as the head of its competition law practice. 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.

Henrik Koivuniemi Tel: +358 20 713 3269 / Email: [email protected] Henrik is a member of our EU & Competition Law team. He advises both companies and public entities on questions related to all aspects of competition law, public procurement, State aid and EU internal market law. Henrik represents various tenderers and contracting authorities at the Finnish Market Court on a regular basis. He has also represented our clients on numerous public procurement disputes at the Supreme Administrative Court, and he has experience of precedent-setting competition law and State aid litigation at both national courts and the Court of Justice of the European Union. Henrik joined Borenius in 2017 from the Finnish Competition and Consumer Authority where he gained practical experience in cartel investigations and dawn raids while working as a Research Officer. Prior to graduation, Henrik worked as an associate trainee at the competition law and public procurement practice of another leading Finnish law firm and as a legal trainee at the Finnish Competition and Consumer Authority.

Borenius Attorneys Ltd Eteläesplanadi 2, FI-00130 Helsinki, Finland Tel: +358 20 713 33 / URL: www.borenius.com

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Dr. Ulrich Schnelle & Elisabeth S. Wyrembek Haver & Mailänder Rechtsanwälte Partnerschaft mbB

Overview of the law and enforcement regime relating to cartels Germany has a long tradition of rigorously and effectively enforcing the prohibition of cartels. The German Federal Cartel Office (FCO) regularly uncovers and investigates a large number of different competition law infringements in many different industries each year. The total fines imposed in 2019 were quite high compared to previous years. In 2020, the total fines imposed in 2020 were relatively low compared to previous years. This, however, does by no means indicate that public enforcement is declining in Germany. Quite the contrary: the FCO repeatedly announced that, despite COVID-19, 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 19 January 2021. 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 can be sanctioned with up to five years in prison. The FCO has published the following guidelines in respect of important aspects of public cartel enforcement, which are available on the FCO’s website (https://www.freizeitcenter- oberrhein.de/de/index.html) and are also available in the English language: • Leniency Program (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 minimis guidelines do not apply to hardcore restrictions; however, other than the EU Commission, 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 Energy. 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 merger control provisions in specific industries and sectors. Three decision divisions deal exclusively

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Haver & Mailänder Rechtsanwälte Partnerschaft mbB Germany with the cross-sector prosecution of cartels and hardcore restrictions. The 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. The FCO may impose monetary fines on undertakings or individuals for wilful or negligent infringements of the prohibition to restrict competition, pursuant to section 1 ARC. Fines levied on individuals for wilful participation in a cartel may not exceed 1 million Euro. In cases of negligent infringements, the maximum fine is 500,000 Euros. Not all individuals may be fined, only directors, officers and certain senior employees. However, if lower- ranking employees have committed the cartel offence and cannot be held responsible, directors or officers can be sanctioned with a fine for breaching their duty to supervise. The FCO may impose fines on undertakings of up to 10% of the worldwide (group) turnover in the most recent fiscal year. There are as yet no criminal sanctions against individuals, nor are there any disqualifications of directors resulting from sanctions for participating in cartels. In 2013, the FCO published new fining guidelines. Under the new guidelines, the group-wide annual turnover of the company, as well as the turnover which it achieved in the cartelised market during the infringement period, is taken into consideration in the fine calculation. 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 level of fine. It should be noted in this respect that the fining guidelines are not binding and that judges of the German Federal Supreme Court have publicly questioned the adequacy and legality of the new fining guidelines, in that they do not sufficiently link the level of the fine to the guilt of the undertaking concerned. It is also still possible to waive or reduce a fine if a company that participated in the infringement submits an application for leniency. A reduction of 10% of the fine can be granted for an agreement to have the proceedings terminated by settlement. When setting the fine, the FCO also takes into account the undertaking’s financial capacity. Provided that the undertaking provides sufficient evidence that it is unable to pay the fine in the short or medium term, the FCO usually offers that the fine may be paid in instalments. Infringements of section 1 ARC become time barred after five years. If the FCO, the EU Commission or a competition authority of another EU Member State takes action for the purpose of the investigation or its proceedings in respect of an infringement, the limitation period is suspended. On 9 March 2017, the German Parliament adopted the 9th amendment to the ARC, which became effective on 9 June 2017. It introduced a number of changes in different areas of competition law. The majority of new provisions implemented 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 introduced new rules on corporate liability. First, the reform established liability for fines for any company that had “decisive influence” over a company found 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 successor of an addressee of a fine can in all cases also be held liable for the addressee’s conduct. In addition, the economic successor of the infringing entity shall be liable for the conduct. The provision on economic successors specifically aims to address restructuring 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” was closed. This

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Haver & Mailänder Rechtsanwälte Partnerschaft mbB Germany loophole became part of the political agenda after a sausage producer successfully escaped a fine liability through an internal corporate restructuring. On 19 January 2021, the 10th Amendment to the ARC, also called the ARC Digitalization Act, came into effect. The major purpose of the Act is to enable the FCO to effectively and proactively act against undertakings with importance for the competition in more than one market especially with respect to data which they hold and use. Furthermore, there were some changes with respect to increasing the effectiveness of cartel enforcement and new provisions concerning fines against associations of undertakings. The leniency programme has been implemented in a statutory form and is not based only on administrative rules. Furthermore, there has been a new legal presumption concerning cartel damages claims with respect to purchasers affected by a cartel.

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. The FCO may furthermore dawn raid offices and search private premises and objects. As a general 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 servers may be searched and relevant files may be copied. Also, private locations, such as residences, 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. The parties have a right to legal representation throughout the entire proceedings. Whilst in theory, 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. With the 10th ARC amendment, which came into force on 19 January 2021, the ECN+ Directive aiming at a more effective cartel prosecution was implemented. In line with the system in place at EU level, companies and their employees will in future be obliged to cooperate to a certain extent in the clarifications of the facts.

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Overview of cartel enforcement activity during the last 12 months In 2019, the FCO imposed fines amounting to approx. 848 million Euros on a total of 23 companies or associations and 12 individual persons. The sectors affected included bicycle wholesaling, building equipment, magazines, industrial batteries, automotive steel purchasing and steel manufacturing. The authority has received 16 applications for leniency and numerous indications of possible infringements of competition law. It carried out five dawn raids at a total of 32 companies and five individual persons. In 2020, around 158 million Euros in fines had already been imposed on a total of eight companies and eight individual persons by August. The sectors affected were the wholesale trade in plant protection products and the motor vehicle signage sector. In addition, the FCO has received seven new leniency applications and several investigations were initiated. Despite the exceptional circumstances surrounding COVID-19, the president of the FCO, Andreas Mundt, once again pointed out the importance of cartel prosecution: “Cartel prosecution remains a core task of the Bundeskartellamt. Even in economically difficult times there is no justification for illegal agreements. We receive indications of possible cartels time and again and will continue to pursue them consistently. It is quite another matter when companies want to cooperate with each other due to special circumstances, such as during the crisis triggered by Corona. In such cases, we are always ready to talk and have been able to support numerous companies in an advisory capacity in the past months, for example, in order to be able to react jointly to supply bottlenecks.” In November 2019, the FCO imposed fines totalling approx. 100 million Euros on Bayerische Motoren Werke AG, Daimler AG and Volkswagen AG for anti-competitive practices in the purchase of long steel products. Between 2004 and the end of 2013, representatives of the companies regularly met twice a year with steel manufacturers, forging companies and large systems suppliers and exchanged information on uniform surcharges for the purchase of long steel product. The companies acknowledged the facts as established by the FCO and agreed to a settlement. In December 2019, the FCO imposed fines totalling approx. 110 million Euros on 11 technical building services providers for colluding on bids for major contracts. The practices involve the design and installation of technical equipment for large building complexes such as power plants, industrial installations, shopping centres or office buildings. The proceedings were triggered in November 2014 as a result of a leniency application. The leniency application was made in the knowledge of imminent media reports about alleged agreements on the award of technical building services for the black coal-fired power plants in Hamm-Uentrop in Germany and Eemshaven in the Netherlands. In the days following the publication of the reports three other companies expressed their willingness to cooperate with the Bundeskartellamt within the scope of its leniency programme. Also in December 2019, the FCO imposed fines totalling approx. 646 million Euros on Ilsenburger Grobblech GmbH, thyssenkrupp Steel Europe AG and voestalpine Grobblech GmbH as well as three individuals responsible for exchanging information on and agreeing certain price supplements and surcharges for quarto plates in Germany. The illegal agreement was practised from mid-2002 until June 2016. Dillinger Hüttenwerke, a public limited company which also participated in the agreement, was the first company to cooperate with the Bundeskartellamt and so was granted full immunity from fines. In January 2020, the FCO imposed fines totalling around 157.8 million Euros on seven wholesalers of plant protection products and their responsible employees for agreeing on price

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Haver & Mailänder Rechtsanwälte Partnerschaft mbB Germany lists, discounts and some individual sales prices to retailers and end customers in Germany. From 1998 until the time of the dawn raid in March 2015, the companies had coordinated their price lists for plant protection products in spring and autumn. The basis for the coordination was a joint calculation by the wholesalers, which resulted in largely uniform price lists for retailers and end customers. The FCO also reports that the number of actions for damages following completed cartel proceedings by the FCO or the European Commission (follow-on damages claims) have increased significantly in recent years. The industries are diverse: sugar; trucks; rails; bathroom fittings; electronic cash; chipboard; detergents; monitor tubes; packaging; cement; steel abrasives; wallpaper; gas-insulated switchgear; drugstore articles; flour (mill cartel); or confectionery. The FCO expects a further increase in the enforcement of claims for damages from the fact that conditions for such claims have been further improved with the implementation of the EU Antitrust Damages Directive 2014/104/ EU and the 9th amendment of the ARC.

Key issues in relation to enforcement policy Particular enforcement priorities for the FCO do not seem to exist. Rather, the FCO’s most recent activities seem to reflect an overall balanced approach which equally tackles different types of infringements. The FCO has sanctioned various types of horizontal anti-competitive arrangements including price-fixing cartels, customer/market allocation schemes, bid rigging, and the exchange of commercially sensitive information. As regards the latter, somewhat disappointingly, the FCO seems to increasingly employ the concept of “exchange of commercially sensitive information” as a fallback 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/fair trial perspective; it has also led to significant legal uncertainty for companies.

Key issues in relation to investigation and decision-making procedures 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 – where applicable – to impose administrative fines. Here lies a significant structural shortcoming 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 an unbiased and objective manner, in practice the FCO officials who decide to open an investigation do show a strong commitment to close any such case with a decision finding a 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. The FCO does not have to investigate or decide cases in a specific time frame. 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

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Haver & Mailänder Rechtsanwälte Partnerschaft mbB Germany several years. On average, investigations by the FCO take some 20 months between the first investigative measure and the final decision. 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, the FCO has in the past even dawn-raided law firms. 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. With the 10th ARC amendment, the position of the cartel authorities in the judicial fine proceedings has been strengthened, as the FCO will remain the competent prosecution authority even after an appeal against a fine decision – instead of the General Public Prosecutor’s Office as was previously the case – and will in future have the same rights in the judicial fine proceedings as the Public Prosecutor’s Office.

Leniency/amnesty regime The FCO operates a leniency programme broadly similar to the one used by the EU Commission. The leniency notice is also available in English on the FCO’s webpage (https://www.bundeskartellamt.de/DE/Home/home_node.html). 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. A leniency applicant is guaranteed full immunity if it reports a cartel to the FCO of which the latter had no prior knowledge, provided that the applicant submits sufficient information and evidence that enables the FCO to obtain a search warrant. If the FCO already has sufficient evidence at its disposal to obtain a search warrant, it will grant immunity from a fine to the first applicant, unless the available evidence already allows the FCO to prove its case, and provided that no other cartel participant has received full immunity under the first alternative. 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 participants who are not eligible for full immunity may still obtain a significant reduction of the fine by up to 50%, provided that they provide the FCO with verbal or written information and, where available, evidence that represents a significant contribution to 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.

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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 translation without undue delay. A leniency application filed by an undertaking is also considered 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 identity of those involved. The FCO also asks for clarification as to whether and – where applicable – with which other competition authorities leniency applications have been, or are intended to be filed. Upon placement of the marker, the FCO grants a time period of up to eight weeks within which a full leniency application must be submitted. The FCO confirms in writing that a marker has been placed and that a leniency application has been submitted, including date and time of receipt. In case of an application for full immunity where the FCO does not have sufficient evidence to obtain a search warrant, the FCO will confirm that the applicant will be granted full immunity, provided that the applicant 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 eligible for immunity or a reduction. A final decision as to whether a possible reduction in the fine will be granted and – where applicable – to what extent, will only be taken by the FCO 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. The FCO endeavours to assure the confidentiality of the process and will seek to avoid revealing 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 the case file, including all confidential information, and in particular all and any leniency applications. 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 leniency application confidential. With the 10th ARC amendment, which came into force on 19 January 2021, the leniency programme has now been enshrined in law. The FCO will adapt its notices in this regard. In any case, leniency applications can still be filed at any time.

Administrative settlement of cases In recent years, an informal practice has evolved that provides the 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 govern

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Haver & Mailänder Rechtsanwälte Partnerschaft mbB Germany the settlement process. A settlement requires in the first place a guilty plea on the part of the undertaking that wishes to settle the case. In return, the FCO grants a reduction of a potential fine of up to 10%, in addition to any reductions granted under the leniency notice. The companies concerned usually also waive their rights for complete access to the file and for a complete statement of objections. However, the Federal Court of Justice has held that a waiver to appeal the final decision by the FCO may never be a part of a settlement agreement. The final decision of the FCO in settlement cases would normally only contain a short summary of the relevant facts, which makes it more difficult for third parties 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.

Third-party complaints Complaints can be lodged by anyone in any form: orally; by fax; email; phone; or in writing. 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, with enclosed copies of all documents/files with potential relevance, increases the chances of success significantly. 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 whistleblower 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.

Civil penalties and sanctions Infringements of competition law can be sanctioned with administrative fines of up to 10% 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, interpreting it in conformity with German constitutional law, the upper limit of the fining range. As a reaction to this judgment by the German Federal Court, the FCO has issued the new fining guidelines of June 2013, which have been dealt with in detail above. 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 must 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, in this field, is still foreign to the German substantive and procedural rules to law.

Right of appeal against civil liability and penalties Decisions of the FCO can be appealed before the Higher Regional Court in Düsseldorf, which

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Haver & Mailänder Rechtsanwälte Partnerschaft mbB Germany is exclusively competent. An appeal against a decision imposing a fine produces suspensory 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 important economic 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 reflect profound competition law knowledge and expertise. Whilst the appeal procedure is generally highly effective and straightforward, it can also entail significant efforts and costs for 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, the court reduced the FCO’s original fine of 660 million Euros to 328.5 million Euros. On the other hand, the court is also entitled to increase the level of the fine, and has not hesitated to do so. In the LPG case mentioned above, the court increased some of the fines that were originally imposed by the FCO by 80%. It should be noted, however, that the legality of such reformatio in peius is highly questionable. However, the Higher Regional Court in Düsseldorf, in essentially all cases in the last two to three years, has increased the fines as compared to the fines issued by the FCO. Under certain circumstances, the decisions of the Higher Regional Court in Düsseldorf can be appealed – confined to points of law – before the German Federal Court of Justice. The long duration of the appeal proceedings before the Higher Regional Court in Düsseldorf, and the “openness” of the decisions, have largely contributed to the significant increase in settlement proceedings before the FCO. In recent months, the German Federal Court of Justice overturned quite a number of decisions by the Higher Regional Court of Düsseldorf. By decision of 9 October 2018 (KRB 51/16, KRB 58/16, KRB 60/17), the Federal Court of Justice overturned a judgment of the Higher Regional Court for a miscalculation of the fine (Flüssiggas, LPG) and for not having properly taken evidence. In the confectionery cartel by decision of 21 June 2019, the Federal Court of Justice overturned a judgment (KRB 10/18) of the Higher Regional Court for lack of proper assessment of evidence. The 10th Amendment to the FCO has strengthened the role of the FCO. The FCO now has the same position and the same procedural rights as the attorney general who used to represent the FCO before the Higher Regional Court in Düsseldorf and the FCO only could accompany and follow and, if permitted by the court, ask questions to witnesses.

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 five years in prison.

Cooperation with other antitrust agencies The FCO traditionally cooperates rather closely with US and European Competition Network (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.

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Cross-border issues The FCO is also part of the network of ECNs, providing an institutional framework for the cooperation between the national authorities and between the national authorities and the European Commission. With the 10th ARC amendment, which came into force on 19 January 2021, the ECN+ Directive was implemented aiming at a more effective cartel prosecution. In the past, the FCO has requested other national competition authorities, among them the Austrian, Swedish and French authorities, to carry out dawn raids in their countries and to secure evidence on behalf of the FCO. Likewise, the FCO has conducted investigations on behalf of other national competition authorities. Apart from the formal investigative requests, the FCO itself reports that many contacts take place between European and non-European competition authorities to allow for an informal exchange of general information or experience relating to specific proceedings.

Developments in private enforcement of antitrust laws 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, it is now presumed that a cartel infringement leads to damages. However, the cartel defendant 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. For the benefit of any claimant that is an indirect purchaser, there is a rebuttable presumption 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, whereas leniency applicants thus far only benefitted in relation to the imposition of fines, applicants will now also benefit from restricted civil damages liability. In this regard, 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 from three to five years after the end of the year in which the claim arose and the claimant gained 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 high financial risk exposure, given the fact that often participating cartel members join the defendant (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 the binding 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

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Haver & Mailänder Rechtsanwälte Partnerschaft mbB Germany 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 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 as a result of the boycott. In the first place, the German Federal Court of Justice held that the binding effect of a competition authority’s decision is not confined to the operative provisions of the decision but rather also comprises the factual and legal findings contained in the body of the decision. The court then clarified that the mere existence of a prohibition decision 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 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 deal with the claimant had ceased at the latest on the day when the German cartel office issued its prohibition decision. Rather, the court found that the mere issuance of the prohibition decision was not sufficient to assume that the joint boycott had indeed stopped. 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 for the recovery of so-called “post cartel” damages claims. Whereas until today the general view had been that cartel infringements and their respective anti-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. On 12 June 2018, the Federal Court of Justice rendered a landmark judgment with respect to the statute of limitations of cartel damages claims (Grey Cement II). The Court ruled, in deciding controversies among various Higher Regional Courts, that the rules on the tolling of the statute of limitations by investigations of the EU Commission or any national competition authority, which were introduced on 1 July 2015, would also apply to any and all claims which had come into existence before that date. This judgment is in favour of plaintiffs since in this way quite a number of claims which had come into existence in many larger cartels, in particular in the trucks cartel, may still be successfully brought. On 11 December 2018 (KZR 26/17 – Schienenkartell I), the Federal Court of Justice, again in a landmark judgment, ruled that there was no prima facie evidence in the sense of a presumption that a transaction within the framework of a cartel as decided with binding effect would be affected by the cartel and that damage resulted from such a transaction. Following this judgment, the lower courts have taken the approach that there was a factual presumption for a transaction being affected by the cartel and damage resulting from such transaction, if it were covered by the authority’s decision on the cartel. With its ruling on 28 January 2020 (KZR 24/17 – Schienenkartell II) the Federal Court of Justice has clarified its 11 December 2018 judgment to the effect that there is a presumption in fact that the prices of cartelised products were higher than they had been without the cartel

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(“affected by the cartel”), if the products or services provided by the claimant are the subject matter of the cartel and fall within the scope of such cartel as far as time and geographic scope are concerned. The ruling of the Federal Court of Justice is in line with the case law of the European Court of Justice in the Otis case. On 23 September 2020 (KZR 35/19) the Federal Court of Justice issued its first ruling in the trucks cartel case, a further landmark judgment for cartel damages claims. By confirming a broad binding effect of the European Commission’s decisions factual and legal findings, the Court pointed out that the infringement established by the Commission did not only constitute an exchange of information but in fact concerned agreements on list prices and the transfer of costs for the EURO standard technologies. The Court once again confirmed that whether truck customers are affected by the cartel is to be seen separate from the issue of actual impact of the cartel. Furthermore, the Court clarified that the statute of limitations was halted since the Commission’s raids. In some cases concerning the cartel on rail tracks, the Federal Court of Justice gave some rules of principle with respect to passing-on defence. The Court confirmed prior jurisprudence by other 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 to show that the passing-on of the cartel overcharge is more than just a hypothetical theory but rather a likely scenario. 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. The Federal Court of Justice has also decided to be rather reluctant in shifting the burden of proof to the direct purchaser to show that such purchaser has not passed on any cartel overcharge to its customers.

Reform proposals As reported on 19 January 2021, the 10th ARC amendment came into force under the name “ARC Digitalization Act” addressing issues raised by the digital economy. The law focuses on the modernisation of the law on abuse of market power by strengthening the position of the FCO and the Federal Court of Justice with regard to large digital groups, the intermediation power of online platforms and tipping. In addition to the topics referred to supra, the amendment also contains various innovations in the area of fine regulations. For example, new rules are provided with regard to fines against associations of undertakings. In addition, the leniency programme has now been enshrined in law. The FCO will adapt its notices in this regard. In any case, leniency applications can still be filed at any time. Given that the reform which had been considered to be necessary has just been implemented, there are no urgent reform proposals at the moment for which the legislator is expected to become active.

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Dr. Ulrich Schnelle Tel: +49 711 22744 27 / Email: [email protected] Dr. Ulrich Schnelle is a partner in the Stuttgart Office of Haver & Mailänder and 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 at court before the EU Commission and the German Federal Cartel Office. Another focus of 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 further field of activity is his advice to clients seeking 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. Since 2016, he has been an honorary professor at the University for Applied Sciences for Economics and the Environment.

Elisabeth S. Wyrembek Tel: +49 711 22744 59 / Email: [email protected] Elisabeth S. Wyrembek is an associate in the Stuttgart Office of Haver & Mailänder. She specialises in EU and German antitrust law and represents companies in national and multinational antitrust litigation at court and in antirust proceedings before the German Federal Cartel Office and the European Commission. She advises companies on all aspects of German and EU merger control, including strategic assistance, ranging from the initial stages of investment decision making to potential post-clearance complexities. She is experienced in advising companies of all sizes, ranging from internationally operating groups to early stage start-ups, active in all kinds of industries, particularly focusing on automotive, card payment systems, digital industries and energy. Elisabeth S. Wyrembek graduated from the University of Tübingen in 2011 and was admitted to the Bar in 2013. She is an alumna of Queen Mary University of London (LL.M.) and the University of Tübingen.

Haver & Mailänder Rechtsanwälte Partnerschaft mbB Lenzhalde 83–85, 70192 Stuttgart, Germany Tel: +49 711 22744 0 / URL: www.haver-mailaender.de

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Anu Monga & Rahul Goel AnantLaw

Overview of the law and enforcement regime relating to cartels The key statute in relation to cartel regulation and enforcement in India is the Indian Competition Act, 2000 (“Act”); the provisions whereof were enforced on 20 May 2009. Section 2(c) of the Act defines a ‘cartel’ to include “an association of producers, sellers, distributors, traders or service providers who, by agreement amongst themselves, limit, control or attempt to control the production, distribution, sale or price of, or, trade in goods or provision of services”. The proposed revision to the definition of cartels shall include a reference to buyer’s cartels. As per the proposed Competition Amendment Bill, 2020 (“Competition Bill 2020”), a cartel has been defined to include an“ association of producers, buyers, sellers, distributors, traders or service providers who, by agreement amongst themselves, limit or control or attempt to limit or control the production, distribution, sale or price of, or, trade in goods or provision of services”. Under Section 3 of the Act, anti-competitive agreements including cartels are prohibited and are also presumed to have an appreciable adverse effect on competition (“AAEC”). The Act further provides for investigation, inquiry and penalties for violations. Under Section 19 of the Act, the Competition Commission of India (“CCI”) is authorised to initiate investigation upon receiving information of anti-competitive conduct of parties. Sub-section (3) of Section 19 provides certain parameters that the CCI shall consider while conducting an enquiry into the anti-competitive behaviour of entities. Section 26 of the Act lays down the procedure for such investigation and inquiry; while Section 27 provides remedies and monetary penalties for violations. In 2017, the Supreme Court of India held that the imposition of penalty on (especially) multi-product companies must be on the basis of ‘relevant turnover’ or the ‘turnover’ for which the enterprise/company was investigated and found to be in violation of the Act. As per the Supreme Court imposition of penalty beyond the ‘relevant turnover’ would be in violation of ‘principle of proportionality’ under the Constitution of India. The CCI initiates investigations into cartel activities upon receipt of information from parties or on a suo-moto basis (based on news reports, public discussions, etc.) or through the leniency programme (referred as Lesser Penalty Regime under the Act). The Director General’s office DG(“ ”) is the investigative wing of the CCI. The DG works in accordance with the direction of the CCI and commences investigation upon receipt of (prima facie) order under Section 26(1) of the Act. The DG has not been vested with powers to undertake investigations on a suo moto basis. After completion of the investigation process, the DG submits its investigation report to the CCI along with all the material, evidence and documents as may be collected during the investigation process. The said investigation report

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© Published and reproduced with kind permission by Global Legal Group Ltd, London AnantLaw India of the DG may be submitted as ‘Confidential’ and ‘Public Version’ as per the requirements of each case. There are several (writ) petitions pending before various High Courts in India (as well as the Supreme Court of India), challenging the arbitrariness in the orders issued by the CCI and/or the DG. The issues in writ petitions vary from the CCI’s obligations while passing the prima facie order under Section 26(1) of the Act, to the scope of discretion for grant of confidentiality (and the necessary balance with rights of defence), to what constitutes as ‘right to lawyer’ during proceedings under the Act, and many others. Upon receipt of the DG investigation report, the CCI may direct circulation of the same to all the concerned parties for comments/responses and thereafter conducts a detailed hearing into the matter (wherein all the parties are allowed to present their arguments/submissions). The Act permits the right to cross-examine witnesses, both before the DG as well as the CCI; however, despite the Act permitting this, entities invoking the said provision have had to fight for it before courts in India. After final arguments/submissions by all parties in a case, the CCI has the power (under Section 27 of the Act) to impose fines and/or issue directions if companies are found to be cartelising, i.e. in violation of Section 3 of the Act. However, if the CCI believes that the DG investigation report requires further investigation, the DG can then be directed to undertake further investigation and submit a supplementary investigation report. It may be noted that not all information(s) filed under Section 19 of the Act are sent for investigation and further not all investigations always result in imposition of penalty (or other orders, holding parties under investigation to be in violation of the Act). Accordingly, if the CCI is not satisfied with the information filed under the Act, with respect to cartelisation by certain companies, the CCI may either seek additional evidence from the Informant or pass an order closing the case, under Section 26(2) of the Act. In terms of Section 53B of the Act, only the final orders of the CCI can be appealed before the National Company Law Appellate Tribunal (“NCLAT”). However, in terms of Section 53T of the Act, any order passed by NCLAT can be appealed before the Supreme Court of India. The appeal can be filed within 60 days from the date of receipt of the order. The Competition Commission of India (Lesser Penalty) Regulations, 2009 (“Leniency Regulations”) were enacted to provide a regime for implementing Section 46 of the Act. Through the Leniency Regulations, those parties which volunteer to provide vital information regarding the existence of cartels are incentivised with reduced penalties, provided the disclosure is ‘full, true and vital’ and the ‘leniency applicant’ cooperates with the CCI until the completion of proceedings before the CCI. The Government of India has proposed significant amendments to the present Act and the proposed Competition Bill 2020 is likely to be tabled before the Parliament of India in February 2021. The Competition Bill 2020 will come into force after the same is passed by both the houses of Parliament and approved by the President of India. It will then get notified by the Government of India in the Gazette and the same shall specify the date of notification/ enforcement of the amendment to the Act.

Overview of investigative powers in India The DG has been granted powers of investigation under Section 41 of the Act. Section 41 of the Act grants wide-ranging powers to the office of the DG to enable it to carry out the investigation in line with directions of the CCI. In terms of Section 41(2) of the Act, the DG shall have the power to summon and enforce attendance of any person and examining him on oath, requiring discovery and production of documents, and receive evidence of affidavit.

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Further, Regulation 20 of the CCI (General) Regulations, 2009 (“General Regulations”) provides for the procedure to be adopted by the DG during investigation. In terms of Regulation 35 of the General Regulations, the DG has also been granted power to grant confidentiality to the data, documents on its own motion or when requested by parties subject to the following: extent to which the information is known to outside public; extent to which the information is known to the employees, suppliers, etc.; the measures taken by the party to guard the secrecy of the Information; and ease or difficulty with which the information could be acquired by others. Regulation 41 of the General Regulations lays down the procedure for taking of evidence by the DG as well as cross-examination of witnesses (by parties) before the DG. Regulation 43 of the General Regulations bars any party from adducing additional evidence before the CCI, if the same was in the knowledge and possession of the party during the investigation process and the party did not disclose the same to the DG. Section 35 of the Act, as well as Regulations 46 and 46A of the General Regulations, empower any party under investigation to seek legal assistance and representation before the CCI and the DG through an Advocate/authorised legal representative. Section 41(3) of the Act empowers the DG to conduct dawn raids after obtaining orders from the Chief Metropolitan Magistrate. Interestingly, under the Act, the power to conduct dawn raids is not automatically granted to the DG. It is required that the DG first showcases and establishes the need for a dawn raid before the Chief Metropolitan Magistrate and obtains a written order to do so. The scope of dawn raid shall be governed by the order/warrant for dawn raid as may be issued by the Chief Metropolitan Magistrate. The proposed Competition Bill 2020 seeks to transpose investigative powers to the DG which are antithetical to the intention under the Act . The proposed amendment of Sub-section 8 to Section 41 under the Competition Bill 2020 provides that in the event the investigated party fails to provide any documentation or resource sought by the DG, or fails to appear before the DG for an interview or fails to sign examination notes as recorded by the DG, the said party may be punished by way of imprisonment extending up to six months and fined up to 5 lakh per day. The abovementioned proposed amendment may be evaluated in a context where the witness is not conversant in ‘English’ and cannot read the statement to verify if what was deposed is the same as what has been recorded by the the DG (and that there have been no ‘addition’ or deletion’, etc. by the DG) – however, the lawyer representing the party deposing is also prevented from reading and verifying the statement.

Overview of cartel enforcement activity during the last 12 months The CCI’s cartelisation rulings While dealing with the economic downturn owing to the effects of the COVID-19 pandemic during the last 12 months, the CCI has displayed a new, more market economy-specific understanding with respect to cartel cases. In two notable decisions regarding anti-competitive conduct and cartelisation, the CCI found explicit evidence of cartelisation in the form of communications between the impugned enterprises, however interestingly, citing the peculiar facts and circumstances of the cases as reasons, the regulator did not impose penalty provisions but merely passed a cease and desist order against the violators. The Automotive Bearings case [Suo Motu Case No 5/2017] was initiated upon the filing of a leniency application by Schaeffler, disclosing the existence of coordinated action in terms of

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© Published and reproduced with kind permission by Global Legal Group Ltd, London AnantLaw India price and distribution of automotive bearings to original equipment manufacturers (“OEMs”) between five companies alleged to be operating in a cartel. Upon an examination ofthe the DG investigation report, the CCI found that there was clear and explicit evidence by way of several incriminating communications and meetings between higher management of the companies. Despite coming to a conclusive determination on the existence of a cartel and its presumed AAEC, the CCI digressed from its usual strictness in imposing penalties in cartelisation cases and issued cease and desist orders to the violators – a mere rap on the knuckles as opposed to deterrent application of heavy penalties. While the CCI stated that “in light of the peculiar facts and circumstances of the present case as detailed in this order, ends of justice would be met if the parties cease such cartel behaviour and desist from indulging in it in future”, it failed to elaborate on the ‘peculiar facts and circumstances’ or provide any mitigating circumstances, on which the digression from penalty provisions was reasoned. In another such decision in the Composite brake blocks case [Ref Case No 3/2016], the CCI found the opposite parties (“OPs”) guilty of cartelisation and explicitly provided the following reasons for refraining to impose penalty on the violators. Firstly, the CCI took into consideration the Micro Small and Medium Enterprise (“MSME”) status of the OPs; secondly, the Commission noted that most of the OPs have a small annual turnover and thirdly, the economic downturn due to COVID-19 and resultant impact on the OPs. In light of the aforementioned reasons, the CCI considered it sufficient to issue cease and desist directions and not impose monetary penalties on the OPs. As a mitigating factor in favour of the OPs, the CCI took into account the cooperative conduct of the OPs in assisting the DG during the investigation. Upholding the larger objectives of the Act, the CCI observed that “the ultimate object of the [Competition Act, 2000] Act is to correct the market distortions and to discipline the behaviour of the market participants. In such backdrop, the Commission holds that the objectives of the Act would be met if the parties in the present matter cease such cartel behaviour and desist from indulging in similar behaviour in future, as directed earlier”. The CCI’s recent decisions are a deviation from its earlier strict but uniform imposition of penalties in cartelisation cases, however, presently the CCI has considered market factors, economic conditions of the violators and unprecedented circumstances in which the parties operate while granting relief from imposition of penalties despite having been found to be in violation of the Act. While the CCI’s considerate decisions may be relevant in a COVID-19 scenario, it must be noted that these decisions inadvertently create a disincentive to the leniency regime of the CCI. In the Automotive Bearings case, the CCI failed to draw a distinction between the leniency applicant and the other violators. This may be seen to discourage further applications under the regime due to lack of drawing a distinction between the applicant and other OPs. Further, the CCI has cited the MSME status of OPs as a reason for non-imposition of penalty. This parameter having not surfaced earlier and not having been envisaged by the Act, may raise future disputes regarding the differential treatment of violators. CCI’s collaboration with tax authorities Vide a notification dated July 30, 2020, the Government of India has authorised tax authorities to share ‘relevant and precise information’ with the CCI in order to assist the same during investigations. While this notification is not specific to cartel investigation, it will certainly boost investigation into cartel structures. Cartels are extremely difficult to detect and pin down, owing to the lack of any documentation or other obvious explicit means of detection. Sharing of financial information pertaining to parties under investigation from tax authorities are likely to provide assistance to the DG and the CCI in determining the existence of cartels.

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Key issues in relation to enforcement policy i. Technology and competition law: Due to the rapid advancement in anti-competitive conduct and the role of technology, the competition law requires requisite amendments to law and revision in implementation/adoption of best-practices around the globe to deal with the investigations and cases. As a routine practice, the DG (during investigations) seeks email-dumps for several years (of parties under investigation) – the issue of ‘fishing and roving’ investigation aside; both the DG and the CCI ought to rely on more efficient means of seeking information and data from parties under investigation. In the light of mergers and combinations involving multinational entities dealing in assets such as ‘big data’, the Act requires amendments to treat acquisition of such assets as adding to the market power of an entity. This will render assistance in determination of anti- competitive conduct and subsequent enforcement of the remedies. ii. Cross-border enforcement of competition laws: Please refer to the section on ‘Cross- border issues’. iii. Jurisdictional challenges to the CCI: The CCI has faced several jurisdictional challenges in the past. In a recent ruling of the Delhi High Court in the case Monsanto Holdings Pvt. Ltd. v. CCI, it was argued that the CCI has no jurisdiction to entertain any complaint against an enterprise in respect of matters which relate to exercise of patent rights as the same is governed under the Patents Act. The Delhi High Court rejected the arguments of Monsanto and upheld the jurisdiction of the CCI distinguishing between the standard established by the Supreme Court in CCI v. Bharti Airtel Ltd. (2018 – which pertained to companies in the telecommunications industry). Clarity on the role of the CCI as opposed to other sectoral regulators and statutes will bring about uniformity in the jurisdiction and subsequent enforcement of the Act. The power of the CCI to direct investigation against officers of the company under Section 48 of the Act and imposition of penalty against such officers (if found to be in violation) on their personal incomes has been challenged (being ultra vires) in Tranter India Pvt Ltd. & Ors v. CCI & Ors, which is pending before the High Court of Delhi. Regulations 46 and 46A of the General Regulations, which allows legal representation before the DG as well as action against an advocate for misconduct are also under challenge before the High Court of Delhi. In terms of Section 30 of the Advocates Act, 1961, every person is permitted legal representation while recording the statements on oath. It is argued that if during the recording of the statement on oath, the legal representative is permitted to sit in a separate room (not at a hearing distance) then the purpose of permitting legal assistance/representation is defeated and is also against the Advocates Act, 1961. Further, the Supreme Court of India has held that power to regulate Advocates and initiate action against them solely rests with the Bar Council of India and no other authority/regulator is empowered to initiate action for misconduct. In Sumitomo Chemical India Ltd v. CCI, the imposition of interest on delayed payment of penalty under the CCI (Manner of Recovery of Monetary Penalty) Regulations, 2009 has been challenged, before the High Court of Delhi) for being ultra vires and contrary to the provisions of the Act. Scope of directing investigation under Section 26(1) and interpretation of Section 3 are under review before the Supreme Court of India in Cadila Healthcare Ltd. & Ors v. CCI. In the Cadila Healthcare matter, it is argued that the CCI is mandated to pass an order directing investigation against parties under Section 26(1) and in the absence of any order against any party (directing investigation), the said party cannot be investigated by the DG (on its own). Further, the Act, while covering anti-competitive agreements, only provides

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for agreements between parties at a horizontal level or vertical level. It does not envisage a situation where parties are not located at horizontal or vertical level and have no direct relationship with each other. However, the CCI in the Cadila Healthcare case proceeded against parties which were neither horizontally placed nor vertically placed. Accordingly, the same has also been challenged before the Supreme Court of India, which is likely to interpret Section 3 of the Act. The Supreme Court of India will also examine whether an initiation of investigation based on fabricated/false documents and statements is tenable under the law and whether the CCI has power to recall its own orders.

Key issues in relation to investigation and decision-making procedures Some of the primary issues with respect to investigation and decision-making procedures of the CCI are discussed below: i. Powers of the DG: The Act, vide Section 36, empowers the DG with powers of a civil court under the Code of Civil Procedure, 1908 and Section 41 of the Act contains the duties of the DG. As the office of the DG acts as a separate investigative function of the CCI, it inevitably exercises autonomy over several issues in the process of investigation. Despite the CCI keeping a check on the procedures and methods adopted by the DG during investigation, it is essential to maintain institutional transparency of the same. The investigative methods and autonomy exercised by the DG have faced criticism on being vague and resulting in the abuse of power by the DG office. In several cases, different High Courts have opined on the limitations and scope of the powers ofthe DG. In Grasim Industries Limited v. CCI, discussing the scheme of Section 26 and Section 41 of the Act and Regulation 42 of the General Regulations, the High Court of Delhi concluded that the DG investigation should be “confined to the allegations made in the information…and he is not competent to travel outside the scope of the same”. In the Hyundai Motor India Ltd v. CCI, the Madras High Court held that the DG has no power to expand the scope of investigation and is required to work as per the directions of the CCI. In the most landmark and highly cited case dealing with cartels, Supreme Court of India in Excel Crop Care Ltd v. CCI (on the issue of the DG’s scope of power) held that “while carrying out this investigation if other facts are also revealed and are brought to light…. the DG would be well within his powers to include those [in the investigation] as well”. In Cadila Healthcare Limited case placing reliance on the decision on Excel Crop Care case, the Delhi High Court found that in investigations directed by Section 26(1) of the Act, “the subject matter included not only the one alleged, but other allied and unenumerated ones, involving other (i.e., third parties)”. Before the decision of the Delhi High Court in Cadila (supra), it had in Roche Products India Pvt Limited and Ors v. Competition Commission of India and Ors, noted that the DG was conducting a fishing and roving inquiry, which was unrelated to the allegations made before the CCI and stayed the investigation. Such contradictory decisions in aforementioned cases have only increased the uncertainty and confusion regarding the exercise of powers by the DG. There has been a constant debate on the scope of power of the DG under the Act. Issues such as extensive and exhaustive information requests (even beyond the scope of investigation), roving and fishing investigation, coercion during recording of statements, lack of transparency as an investigative arm, confirmation bias (in several cases), non- compliance with due process and principles of natural justice among others are being

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heavily debated and also raised in several cases pending before the Courts in India. Although the Competition Bill 2020 seeks to strengthen powers of enforcement of the DG, it does not include transparency provisions for the same or address many of the issues which are still pending before the Courts. ii. Lack of clarity on imposition of penalties: The problems associated with lack of clarity regarding imposition of penalties to the violators of the Act remains intact. The CCI’s trend in imposing monetary penalties has been irregular and arbitrary at best. In two recent cases (Automotive Bearings and Composite Brake Blocks discussed in response to ‘Overview of cartel enforcement activity during the last 12 months’ above), the CCI, despite finding the existence of cartels, chose to not impose any penalty at all and merely issued a cease and desist order. In Automotive Bearings, the CCI made no reference to any mitigating factors supporting its directions. This is inconsistent with its earlier decisions wherein the CCI has imposed severe and harsh penalties on cartels (for example, in the Cement Cartel case, the CCI imposed a penalty of INR 67 billion, i.e. around USD 1 billion). It is pertinent to note that in Excel Crop Care case, the Supreme Court of India had categorically stated that the CCI should consider aggravating and mitigating factors while imposing the penalty. It also suggested that the CCI should come up with penalty guidelines to provide clarity to all the OPs. However, the CCI has still not issued any penalty guidelines. The lack of objective principles in the imposition of penalties by the CCI has led to uncertainty, which poses a key issue in the decision-making procedure.

Leniency/amnesty regime The leniency programme of the CCI is formulated under Section 46 of the Act and is regulated by the Leniency Regulations. The Leniency Regulations set out the requirements for qualification of applicants and the procedure to be followed for the imposition of a lesser penalty and the benefits available. Under the Leniency Regulations, applicants who make ‘vital disclosures’ regarding the existence of cartels are afforded reduced penalties. The Leniency Regulations provide for a reduction in the penalty of up to 100% if an applicant makes a vital disclosure about the existence of a cartel to the CCI and if such disclosure enables the prima facie opinion of the Commission. The first applicant to disclose viral information is given priority status. Subsequent applicants can be granted a penalty reduction up to 50% and so on. Under the proposed Competition Bill 2020, the Commission has made provision for the withdrawal of application for lesser penalty by the applicant. However, upon a withdrawal, the Commission shall have the right to use all relevant evidence and information submitted by the applicant except the admission. However, the procedures adopted by the CCI and the DG in leniency cases is also under litigation before various Courts in India. In a recent decision in CCI & Anr v. Forech India Pvt Ltd, the Supreme Court of India refused to entertain the CCI’s appeal with respect to resile from the content given before the High Court of Delhi to provide all non-confidential documents and orders granting confidentiality (after redacting confidential portions) to Forech in a leniency matter. In effect, the CCI, in accordance with its consent given to High Court of Delhi, will now be required to grant all non-confidential documents and orders granting confidentiality (after redacting confidential portions) to Forech. As a practice, in leniency matters, whenever a party seeks inspection of public records, before the CCI under Regulation 37 of the General Regulations, the CCI declines the same stating

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© Published and reproduced with kind permission by Global Legal Group Ltd, London AnantLaw India that the entire file is confidential. The CCI recently introduced Regulation 6A in Leniency Regulations to not grant inspection to parties under Regulation 37 of the General Regulations. However, this has led to investigations wherein the parties are issued notices and are directed to furnish data, information, evidence, email dumps, without being told about the nature of investigation or the allegations or the product segments which are being investigated. In another matter, the High Court of Delhi disagreed with the CCI approach of keeping everything confidential and on aprima facie basis held that the said approach will not allow the parties to defend the case properly/impact rights of defence. On this basis of the direction of the High Court of Delhi, the CCI granted inspection of public files to the petitioner (alone). In a writ petition filed by Hindustan Rubbers Silvasa, before the High Court of Delhi, the validity of the CCI order refusing to grant inspection of public files has been challenged. Further, the nature of the DG notice seeking exhaustive information/data including dumps of all personal email accounts has been challenged for being excessive and amounting to roving and fishing investigation. Also, specific direction is sought from the High Court with respect to permission of legal representation before the DG and during recording of the statements. Interestingly, in this case (conveyor belt cartel matter) the names of the leniency application filer as well as all other parties were published by a prominent national newspaper (along with all the relevant details of the allegations), and this was done almost a year prior to parties receiving any formal notice from the DG. Similarly in another case dealing with the procurement of male latex condoms, the name of the leniency filer and other parties was published by a prominent national newspaper (along with all the relevant details of the allegations) in too few days after filing of the leniency petition. One of the OPs had filed a writ petition before the High Court of Delhi against the breach of confidentiality andthe CCI’s non-action against publishing of such information and also alleged that the leniency filer not only got the information published in the newspaper but also actively lobbied with/coerced/forced other OPs for filing of leniency petition. The CCI decided to ignore the requests made by certain OPs against the action/conduct of leniency filer and the matter is now pending before the High Court of Delhi as well as the High Court for the state of Telangana (at Hyderabad). The High Court of Telangana has passed an interim order staying the investigation in the said matter. It may also be a matter of coincidence that the news reporter as well as the advocate representing leniency filers in both the cases were the same set of individuals. However, when the issue of breach of confidentiality, coercion, etc. were raised before the CCI, the same were dismissed stating that the same cannot be examined by the CCI and can be raised before any other court/forum. However, it is likely that the CCI may receive more leniency applications but it is important to settle the procedural flaws so as to avoid any undue coercion/harassment of other OPs. The Constitution of India grants each and every party a right of defence, which cannot be allowed to be taken away, in any manner. The CCI must still take any action against such errant leniency applicants – those who tend to take advantage of Leniency Regulations and still go against the spirit of full and absolute disclosure and confidentiality.

Administrative settlement of cases There are no current provisions in the Act for settlement of cases for anti-competitive conduct. However, the Competition Bill 2020 proposes the inclusion of a new Section 48A. This Section proposes a settlement and commitment mechanism which permits the parties to submit a settlement application after the report of the DG has been received by the CCI; the application must, however, be submitted before the final order ofthe CCI.

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Under the proposed framework for settlement, the CCI will have the discretion to accept or reject the settlement application on the basis of nature, gravity and impact of the contraventions. The specific factors to be taken into account and further details on settlement application are proposed to be notified vide regulations, which will have to be formulated under the Act. It must be noted that the settlement orders passed by the CCI under this provision will not be appealable. The proposed Section 48B permits any person against whom an inquiry has been initiated to submit an application offering commitments on the contravention. The CCI will examine the commitment application in light of the nature, gravity and impact of the alleged contraventions and the effectiveness of the proposed commitments and proceed to accept or reject the same. While the Competition Bill 2020 makes a provision for settlement and commitments mechanism, it is not without serious consequences for failing to follow through by the parties. Proposed Section 48C provides that if the “applicant has not made full and true disclosure or there has been a material change in the facts, the order passed under section 48A or 48B, as may be applicable, shall stand revoked and withdrawn and such person may be liable to pay appropriate legal costs incurred by the Commission which may extend to rupees one crore and the Commission may restore or initiate the inquiry with respect to which the order under section 48A or 48B was passed”.

Third-party complaints The Act does not prescribe any strict locus standi requirement on who can file information under the Act. The CCI, in Shri Saurabh Tripathy v. Great Eastern Energy Corporation Ltd. [Case No. 63 of 2014], while examining the issue of locus standi held that “[a]dmittedly, under the scheme of the Act, any person may approach the Commission with an information bringing to the notice of the Commission any anti-competitive conduct in the market. It is not necessary for such a person to be personally aggrieved of such a conduct. This is also the scheme of the Act”. However, in its decision in the case Samir Agrawal v. CCI, the NCLAT noted that despite the fact “that the concept of locus standi has been diluted to some extent by allowing public interest litigation, class action and actions initiated at the hands of consumer and trade associations”, the Act provides for taking cognisance of allegations regarding contravention of provisions relating to certain anti-competitive behaviour in a “particular manner and at the instance of a person apart from other modes viz. suo motu or upon a reference from the competitive government or authority”. Further, the NCLAT held that “reference to receipt of any information from any person in section 19(1) (a) of the Act has necessarily to be construed as a reference to a person who has suffered invasion of his legal rights as a consumer or beneficiary of healthy competitive practices. Any other interpretation would make room for unscrupulous people to rake issues of anti-competitive agreements or abuse of dominant position targeting some enterprises with oblique motives”. Owing to the above reasoning, the NCLAT held that the informant in the case had no locus standi to maintain the case and on the ground that no prima facie case was made out, dismissed the same. Recently, Supreme Court of India in Samir Agarwal’s case, has concurred with the understanding of the CCI with respect to locus standi of an individual to file an information before the CCI. The ambiguity with respect to who can file an information before the CCI has been settled by Supreme Court. Effectively, any person/third party can file information before the CCI.

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Civil penalties and sanctions The CCI can impose significant penalties on the parties which contravene the provisions of the Act or fail to provide due assistance or information to the CCI or fail to comply with the order/directions of the CCI or the DG among others. Under Section 53Q, the contravention of the order of the NCLAT will lead to a penalty of maximum INR 10 million or imprisonment up to three years or both. The same is to be decided by the Chief Judicial Magistrate of Delhi. As prescribed in Section 27 (b), the penalty that may be imposed in case of any anti- competitive conduct cannot be more than 10% of the average of the turnover (clarified by the Supreme Court as ‘relevant turnover’ in Excel Crop Care Limited v. CCI) of the contravening enterprise for the three preceding financial years. However, in the case of a cartel, the CCI can impose a penalty of up to three times the profit of the contravening enterprise or 10% of the turnover of the contravening enterprise, for each year of the continuance of the cartel, whichever is greater. Further, the directors and other employees of the contravening entity found responsible can also be penalised under the Act. Individual penalties The CCI has also been imposing penalties on individual income of officers of the company for violation of the provisions of the Act by such companies. The officers of the company are investigated under Section 48 of the Act and penalty is imposed under Section 27 of the Act. The penalty for contraventions by individuals found to be responsible may go up to 10% of the average income of the concerned individuals, for three preceding financial years. However, the CCI interpretation of Section 48 and the power to impose penalties on officers of the Company has been challenged before the High Court of Delhi in Tranter’s case. Further, the question of whether the CCI can undertake an investigation against officers of the company, without first finding the company in violation, is also pending adjudication before the Supreme Court of Indi in Zydus Cadila’s case. The penalty imposed on such individuals is in addition to that imposed on the enterprise in question, and failure to pay the penalty amount could result in such individuals being imprisoned for up to three years, under Section 42(3) of the Act. The Competition Bill 2020 proposal stipulates that the quantum of penalty that can be levied on individuals will be limited to a maximum cap of 10% of an individual’s average ‘income’ for the last three preceding financial years; in cartel cases, up to 10% of the individual’s average income for each year of the continuance of the anti-competitive agreement (Section 48).

Right of appeal against civil liability and penalties In terms of the Act, the final order/decisions of the CCI (as specified under Section 53A of the Act) are appealable before the NCLAT. Further, any order or decision of the NCLAT can be appealed before the Supreme Court of India under Section 53T of the Act. However, any appeal must be filed within 60 days of receipt of the order by the party. The proceedings before the NCLAT are considered judicial proceedings as per Section 53O of the Act. In deciding matters before it, the NCLAT exercises all powers of a civil court as per the Code of Civil Procedure, 1908. The decision is further guided by the principles of natural justice. The Competition Bill 2020 proposed the addition of a proviso to Section 53B stating that “no appeal by a person, who is required to pay any amount in terms of an order of the Commission, shall be entertained by the Appellate Tribunal unless the appellant has deposited

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© Published and reproduced with kind permission by Global Legal Group Ltd, London AnantLaw India twenty-five per centof that amount or such other lower amount as may be prescribed and in such manner as may be prescribed”. It should be noted that in terms of the Competition Bill 2020, appeal from any settlement or commitment order (proposed Sections 48A and 48B, respectively) passed by the CCI shall not be appealable.

Criminal sanctions The Act does not prescribe criminal penalties for violators. Only certain contraventions of the Act provide for imprisonment as a deterrent – in Section 42 (contravention of the orders of Commission), if any person does not comply with the orders or directions of the Commission, they are liable to imprisonment, which may extend to three years or fine up to INR 250 million or both. Section 53Q of the Act provides a penalty of imprisonment up to three years or fine up to INR 10 million or both for the contravention of the orders of the NCLAT. Under these Sections (42 & 53Q), the Chief Metropolitan Magistrate shall have the discretion to levy the extent of imprisonment and/or fine. However, the CMM does not have the authority to take cognisance of the offence suo moto, it may only be undertaken upon the filing of a complaint by an authorised officer theof CCI.

Cooperation with other antitrust agencies As per Section 18 of the Act, the CCI may enter into any memorandum or arrangement (upon the prior approval of the central government) with any foreign agency or country. The CCI actively collaborates with organisations around the world for advancement in competition law and its effective implementation. Further, the CCI signed on the extension of the BRICS Memorandum of Understanding on cooperation in the field of competition law and policy. In the latter half of 2020, the CCI also participated in ‘Virtual Meeting of the Heads of the BRICS Competition Authorities’ and supported the joint statement by the BRICS Competition Authorities on consolidating efforts to combat the negative economic consequences of COVID-19 and the initiative of the FAS Russia to include the issue of combatting cross- border cartels in the work of the intergovernmental group of experts on competition law and policy of the UNCTAD.

Cross-border issues Section 32 (acts taking place outside India but having an effect on competition in India) of the Act provides the CCI extra-territorial jurisdiction to the CCI. While the Act provides for taking cognisance of anti-competitive conduct outside India, there arise several issues in the implementation and enforcement of the provisions of the Act. Some of the issues are discussed below: Cross-jurisdiction collaboration in enforcement procedures: Since anti-competitive conduct may be present over a number of jurisdictions, it is essential that antitrust authorities over those jurisdictions coordinate in execution and enforcement. For this, it is also essential that the authorities recognise the procedures of the other jurisdictions. Sharing of evidence: In matters involving multinational entities, sharing of evidence between cross-border antitrust regulators could provide great assistance in making and strengthening claims of anti-competitive conduct.

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Enforcement: While the CCI has the authority to direct or give orders pertaining to international entities, the means of enforcing the same are not as robust. However, in recent developments, it is seen that the CCI has been actively involved in developing cross-border relations with foreign competition enforcement agencies and regulators to facilitate the same.

Developments in private enforcement of antitrust laws At the inception of a case, while the Act permits any person to file information, it does not empower them to assert their private right of action. Under Section 53N of the Act, however, after a positive finding of infringement of the provisions of the Act and anti-competitive conduct is concluded, the parties who have suffered losses owing to the anti-competitive conduct are permitted to seek compensation from the defaulting party vide a compensation application filed before the NCLAT. The Act provides for a number of persons who have the same claim against a common defaulter of the substantive provisions of the Act, a class action suit can be instituted to seek compensation under Section 53N. This class action suit is subject to the provisions of the Civil Procedure Code, 1908. It must be noted that the Act does not provide a timeline for filing of such claims and also does not prescribe a time limit within which the same must be resolved. In addition to private persons and class actions, the “Central Government or a State Government or a local authority or any enterprise” may also make an application to the NCLAT to adjudicate on a claim for compensation. In terms of Section 53N of the Act, any party can file a claim for compensation/ damages before the NCLAT after the order of the CCI or NCLAT. Section 53N of the Act does not specify any time period, under which such application for compensation must be filed. However, the Supreme Court of India has repeatedly held that the reasonable period (if not specified under the statute) cannot be more than three years from the last order. Also, Section 53N of the Act is silent on the fact whether an application for compensation/damages can be filed after the Supreme Court of India passes its final order. Also, Section 53N of the Act does not permit filing of composite application for compensation/ damages against several parties. It contemplates a situation where several claimants can file an application against a party (a defendant). The above issues have been raised before the Supreme Court of India in the Excel Crop Care Ltd v. FCI matter and the same is pending adjudication. Also, the Competition Bill 2020 has proposed an amendment to Section 53N of the Act by including ‘after the orders of the CCI, NCLAT or Supreme Court’.

Reform proposals The Competition Law Review Committee (“CLRC”) which examines the Act and accompanying rules and regulations as set up by the Ministry of Corporate Affairs (“MCA”) in October 2018, gave its recommendations for amendments in the Act to the MCA in August 2019. On the basis of this report, the MCA released the first draft of proposed amendments to the Competition Act, 2002 titled ‘Draft Competition Amendment Bill, 2020’. The Competition Bill 2020 was officially released into the public domain in February 2020. Through the bill, significant reforms have been brought about in the functioning, enforcement and efficiency of the CCI. Some of the key reforms are discussed below: i. Reform in the regulatory structure of the CCI: Given that the CCI has several functions (adjudication, investigation, enforcement), the bill provides for the formation of an overarching governing body to oversee the same. This governing body will have six

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full-time members from the Department of Economic Affairs, Ministry of Finance, MCA, and other members to be nominated by the Central Government. The creation of such a body brings about clear direction and streamlines the functioning of the CCI. ii. Public consultations: The bill provides that public comments will be invited in terms of formation of regulations for the functioning of the CCI (proposed new Section 64A). This is a welcome reform as it will allow transparency and a more democratic manner of rulemaking. iii. Guidance on issuance of penalties: The new proposed Section 64B (Commission to issue Guidance) mandates that the CCI shall issue guidelines on penalty provisions under the Act. iv. Settlement and commitments: The proposed amendment brings to life a new regime based on settlement and commitments from parties. The new proposed Sections 48A (settlement) and 48B (commitment) make way for settlement and commitment applications to be filed by parties. The CCI will decide and accept/reject the same on the basis of the nature and gravity of contravention, and the effectiveness of the same.

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Anu Monga Tel: +91 98 11 264 474 / Email: [email protected] Anu Monga is a partner at AnantLaw. Her practice focuses on Competition Law, International Trade and WTO law. She also advises clients on Technology, Media & Telecommunication (“TMT”) law. She advises clients on behavioural and adversarial matters, merger control and general compliance, including audit and training. In particular, she has considerable experience in merger control provisions within the power and oil & gas industries. During her career, Anu has advised foreign, multinational and Indian corporate clients across sectors including healthcare and pharmaceuticals, automobile, chemicals and fertilisers, aviation, manufacturing, steel, cement, telecommunications, broadcasting, information technology, power, insurance and insurance. Additionally, she has a thorough understanding of competition economics and assists clients on competition economics analysis. Her matters were nominated for the Global Competition Review (“GCR”) Awards in 2013 and 2014. She has represented clients in several high-stake matters including the Builders Association of India (cement cartel matter), Excel Crop Care Ltd. (Aluminium Phosphide cartel matter and obtained the judgment on ‘relevant turnover’), Delhi Development Authority (abuse of dominance), Schott Glass (abuse of dominance), Cadila Healthcare Ltd., RMG Polyvinyl Ltd., and Forech Ltd. She has advised on merger control provisions in several transactions including ONGC-HPCL, PFC-REC, Jabil-Ericsson. Anu is currently involved in the first private damage claim application that has been filed post-final order of the Supreme Court and is acting as a lead counsel for defendants.

Rahul Goel Tel: +91 98 99 027 144 / Email: [email protected] Rahul Goel is a partner at AnantLaw. His practice focuses on Competition Law and TMT law. He also advises on International Trade and WTO Laws. Rahul has over 19 years of professional experience in advising, assisting and representing clients on a wide variety of legal, regulatory and policy issues. He regularly appears before the Supreme Court of India, various High Courts, NCLAT (Appellate Tribunal) and the Competition Commission of India (“CCI”). Rahul has acted as lead counsel in a number of high-stakes matters and he has been involved in many landmark matters in Competition Law, including the Supreme Court’s judgment on imposition of penalty on the basis of ‘relevant turnover’. Rahul has the distinction of being nominated at the GCR Awards (Washington, D.C.) for matters being handled by him in 2013 (for representing the Informant Builders Association of India in the cement cartel matter); and 2014 (for obtaining an order on imposition of penalty on relevant turnover in the Excel Crop Care matter). Rahul holds an LL.M. with a focus on Competition and TMT law from the University of Essex. He is a member of the Supreme Court Bar Association and also a Fellow of the UK-based Royal Society of Arts.

AnantLaw A2/2, Vasant Vihar, New Delhi, India Tel: +91 98 99 027 144 / 98 11 26 44 74 / URL: www.anantlaw.com

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Daiske Yoshida, Tomohiko Kimura & Kazuyasu Yoneyama Morrison & Foerster LLP

Overview of the law and enforcement regime relating to cartels 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 restraint of trade”, which is defined as business activities by which a business, “in concert with other enterprises, mutually restrict[ing] or conduct[ing] their business activities in such a manner as to fix, maintain or increase prices, or to limit production, technology, products, facilities or counterparties, thereby causing . . . a substantial restraint of competition in any particular field of trade” (AMA art. 2, para. 6). This covers price-fixing cartels (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 for the enforcement of the AMA. It may, according to the case, impose administrative fines (called “surcharges”) and issue cease and desist orders on firms that it finds to have engaged in cartel conduct. Surcharges are 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. The JFTC may also give administrative guidance to firms that are suspected of having engaged in cartel conduct. In addition to administrative sanctions, firms and individuals face criminal exposure for cartel violations. The filing by the JFTC of a criminal accusation to the Prosecutor General is the exclusive means by which a criminal prosecution may be brought against firms and individuals for cartel violation of the AMA (AMA art. 96.1). If the JFTC determines through its investigation that a case is particularly egregious and has a significant effect on people’s lives, or that the administrative remedies are not sufficient, it may file a criminal accusation with the Prosecutor General, which may result in a fine of up to JPY 500m (approximately US$ 4.68m) for firms or imprisonment of up to five years and a fine of up to JPY 5m (approximately US$ 46,800) for individuals. If criminal penalties are imposed in addition to the JFTC’s administrative sanctions, the JFTC surcharge is reduced by an amount equivalent to one-half of the criminal fine. 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. In addition, directors of firms that have been found to have engaged in cartel conduct may be sued by shareholders for breach of fiduciary duty.

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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 specific types of businesses to apply to the JFTC to set up “pass-on cartels” and “price representation cartels”, which would allow for uniform behaviour and fairness among competitors in responding to the tax increase.

Overview of investigative powers in Japan Administrative investigation Under Article 47 of the AMA, the JFTC may conduct an investigation using the following measures: (1) ordering persons to be interrogated and gathering their opinions or reports; (2) ordering expert witnesses to give opinions; (3) ordering persons to submit books and documents and to keep such documents at the JFTC; and (4) entering and inspecting the firm’s premises or any other necessary sites. In practice, the JFTC typically starts a cartel investigation with simultaneous dawn raids or surprise inspections (called “on-site inspections”) on all suspected cartel members, including any leniency applicants. While in most cases the on-site inspections are triggered by leniency applications, they could also be triggered by third-party complaints (AMA art. 45), which the JFTC is required to duly consider. If the third party’s report is sufficiently detailed and in writing, the JFTC must inform the third party whether it has taken steps in response to the report. Cartel investigations also may be triggered by the JFTC’s own initiative or at the request of other ministries and agencies. 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 copies of electronic files. Such inspections can take place at a firm’s headquarters, as well as any offices, facilities, or employee residences that may have relevant materials. The JFTC 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 requires firms to submit detailed reports about the business operations and sales data. The JFTC 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. However, pursuant to the most recent amendments to the AMA, discussed below, the JFTC established rules and guidelines to protect certain attorney-client communications. In addition to seizing documents and materials, the JFTC may request individuals to submit to voluntary interviews during and 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 guidelines effective as of January 2016 clarifying that witnesses are permitted to consult with counsel during breaks and that the record should reflect any corrections suggested by witnesses. The interviewee and the firm may not receive a copy of the signed statement. An individual 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.

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Article 39 of the AMA requires the JFTC to keep confidential any information it has seized, been provided, or created, including witness statements. However, prosecutors may use such signed statements as evidence during a criminal trial, and a firm may obtain copies of 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 of documents from the appeal, but the firm will be given an opportunity to request redactions of confidential business information. Criminal investigation Criminal 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 office to commence a criminal prosecution based on the filing of an accusation by the JFTC. 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 police 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 therefore will try to extract a confession from the suspect within the first 20 days but may immediately 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 2016 amendment to the Criminal Procedure Law requires audio and video recording of interrogations in certain cases, but not for violations of the AMA.

Overview of cartel enforcement activity during the last 12 months Criminal prosecutions In 2020, the JFTC referred a case for criminal prosecution against three companies and seven individuals who engaged in a bid rigging in relation to pharmaceutical drugs ordered by the Japan Community Healthcare Organization (“JCHO”). Previously, the JFTC referred cartel matters for criminal prosecution in connection with a bid-rigging case concerning snow-melting equipment engineering works in 2014, a bid-rigging case concerning Tohoku Earthquake reconstruction works in 2016, and a bid-rigging case concerning construction of new terminal stations for the Maglev railway in 2018. Enforcement data According to the JFTC’s official statistics for fiscal year 2019 (April 2019 through March 2020), the JFTC imposed administrative orders against a total of 40 firms in 11 separate cases, including surcharges totalling approximately JPY 69.2bn (approximately US$ 648m). This was a significant increase compared to the past several years, resulting partially from the surcharges imposed on eight manufacturers for price-fixing in relation to asphalt mixtures, which amounted to JPY 39.9bn (approximately US$ 374m) in total, the highest amount ever imposed in a single case. In fiscal year 2018, there were administrative orders against a total of 46 firms in eight separate cases, including surcharges totalling approximately JPY 0.26bn

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(approximately US$ 2.44m); and in fiscal year 2017, there were administrative orders against a total of 41 firms in 13 separate cases, including surcharges totalling approximately JPY 1.89bn (approximately US$ 17.7m). The number of leniency applications was 73 in fiscal year 2019, remaining almost the same as the previous year (72 applications in fiscal 2018). There has been a total of 1,310 leniency applications filed between its introduction in January 2006 and March 2020, with a sharp increase in applications since 2010, when the JFTC increased the maximum number of leniency applicants per case and permitted joint applications by firms in the same corporate group, which continued until 2012. The number of new cases resulting from leniency filings dropped to nine in fiscal year 2019, remaining below 10 over the past two years: there were 12 in 2013; four in 2014; seven in 2015; nine in 2016; 11 in 2017; and seven in 2018. The average surcharge per firm in fiscal 2019 rose to approximately JPY 1.9bn (approximately US$ 17.8m), ending the decreasing trend over the last several years: JPY 14.5m (approximately US$ 136,000) in fiscal year 2018; JPY 59.1m (approximately US$ 554,000) in fiscal year 2017; JPY 286m (approximately US$ 2.68m) in fiscal year 2016; and JPY 275m (approximately US$ 2.58m) in fiscal year 2015. There have been no official announcements of international cartel investigation by the JFTC in 2020. Regarding domestic cartel cases, there were the following cases: 1) In March 2020, the JFTC issued cease-and-desist and surcharge payment orders against a manufacturer for a price-fixing arrangement in relation to branded medicines used for the treatment of high blood pressure. The total amount of the surcharge to be paid amounted to JPY 2.87m (approximately US$ 27,000). 2) In June 2020, the JFTC issued cease-and-desist orders against three manufacturers and a surcharge payment order against one manufacturer for bid rigging in relation to uniforms for police officers ordered by Yamagata prefecture. The total amount of the surcharges to be paid amounted to JPY 1.41m (approximately US$ 13,000). 3) In July 2020, the JFTC issued cease-and-desist orders against distributors for a price- fixing arrangement in relation to school uniforms for six high schools in Toyota City, Aichi Prefecture. 4) In December 2020, the JFTC issued cease-and-desist and surcharge payment orders against four enterprises for bid rigging in relation to the construction of new terminal stations for the Superconducting Maglev Shinkansen ordered by the Central Japan Railway Company. The total amount of the surcharge to be paid amounted to JPY 4.32bn (approximately US$ 40.5m). The JFTC conducted several on-site inspections in 2020. These included on-site inspections of: eight firms in September on suspicion of bid rigging regarding security services provided to national and prefectural government facilities in Gunma prefecture; 14 manufacturers in October on suspicion of bid rigging regarding computer equipment for schools in Hiroshima prefecture and Hiroshima city; and four manufacturers in November on suspicion of price- fixing regarding piping joint of air conditioning facility.

Key issues in relation to enforcement policy, investigation and decision-making procedures The 2019 amendment to the AMA, which came into effect in 2020, significantly reformed the surcharge calculation and leniency regime (see “Overview of Surcharge” and “Leniency/ Amnesty regime”). It also introduced a new regime called “Hanbetsu-Tetsuzuki”

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(Determination Procedure) (see “Hanbetsu-Tetsuzuki”) which gives some protection to attorney–client communications for the first time under the AMA. JFTC investigations are fairly quick, typically resulting in the issuance of an administrative order within 12 to 18 months of the first on-site inspection. This speed imposes a great burden on firms and their lawyers, who are required to deal with a large volume of information in a compressed time period, often with limited access to documents. Even through the JFTC permits access and copying of documents that have been seized, they must be reviewed and copied on JFTC premises in the presence of JFTC investigators. The situation is made even more difficult if the JFTC has interviewed employees during the on- site inspection, without an opportunity for such employees to consult with counsel before or during the interview. The JFTC permits counsel to be present at on-site inspections and permits employees to consult with counsel before they are interviewed in order to facilitate leniency applications, but the JFTC 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 permits interviewees to consult with counsel during breaks). If the interviews result in signed statements by employees acknowledging the cartel conduct, it obviously impacts the firm’s ability to defend itself. The challenge is multiplied if the conduct is international in scope, requiring firms and their counsel to consider strategy in other jurisdictions. Under the Japanese leniency system, firms may obtain a reduction to the surcharge, even if they seek leniency after the on-site inspection. If the cartel was purely domestic, with no effect on other countries, then it may seem sensible for a firm that is subject to an on-site inspection to apply 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. Not permitting attorneys to participate in witness interviews also creates risk not only for the firms but also for the individuals who may not fully understand that they face criminal exposure in Japan or elsewhere based on their statements. The 2016 amendments to the AMA provided some protection to parties from such disadvantages, including 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 JFTC guidelines issued in 2016 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.

“Hanbetsu-Tetsuzuki” (Determination Procedure) The 2019 amendments to the AMA, which went into effect in December 2020, introduced a new system called “Hanbetsu-Tetsuzuki” (Determination Procedure), which gives some protection for attorney-client communications, aiming at making the leniency programme

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Morrison & Foerster LLP Japan more effective. This procedure only applies to communications with Japanese law-qualified attorneys (bengoshi), not foreign attorneys. This protection can be given to communications (meetings, telephone calls, emails, etc.) between a firm and an independent attorney which relate to providing a legal opinion concerning a cartel case to which the leniency programme could be applied. An in-house attorney generally will not be considered as an “independent attorney”, unless the in-house attorney starts independently engaging in legal practice at the written instruction of the firm, for example as a result of discovery of a suspected violation, and thus is no longer acting under the firm’s direction. To be privileged under this system, the communication must be documented and stored appropriately in accordance with the requirements set by the JFTC. Specifically, the documents (including data, hereinafter the same applies in this Section) containing the communication must be (i) marked as privileged under the JFTC rules, and (ii) stored in such a way that they are distinguishable from other documents. The procedure is as follows: during an inspection by the JFTC for the alleged cartel, a firm may request the application of Hanbetsu-Tetsuzuki by identifying the documents it seeks to protect; the JFTC orders the firm to submit the identified documents and let a “Determination Officer”, an official designated within the JFTC Secretariat who is unrelated to the investigation at issue, handle such documents; the firm must provide the JFTC with a log summarising the documents in question within two weeks after the submission; and if the Determination Officer determines that the submitted documents qualify for the protection, they will be returned to the firm without investigators’ access.

Overview of surcharge (administrative fine) The 2019 amendments to the AMA added the following basis for the calculation of surcharges: sales generated by subsidiaries of the infringing firm acting under the direction of or based on information provided by the infringing firm; sales generated in connections with the business closely related to goods or services subject to cartels (e.g. subcontract between infringing firms); and the financial gains obtained for not supplying or not being supplied with the goods or services subject to cartels. The surcharge (administrative fine) 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 10 years, which was extended from the previous maximum of three years by the 2019 amendments to the AMA. The applicable rate is 10% regardless of the type of the firm, as set by Article 7-2 of the amended the AMA. This rate may be adjusted upwards or downwards based on certain factors. The applicable rate is reduced to 4% when the firm and all of its affiliated companies are regarded as small and medium sized manufactures. If the firm repeatedly engaged in the conduct during a 10-year period, or took a leading role (including, but not limited to, requiring other firms not to apply for leniency to the JFTC), the applicable rate is increased by 50%; and if the firm both repeatedly engaged in the conduct and took a leading role, the applicable rate is doubled. The 2019 amendments to the AMA abolished the reduction for the early withdrawal of an infringement. If the resulting amount is less than JPY 1m (approximately US$ 9,400), a surcharge will not be imposed. Before issuing an administrative order, the JFTC gives parties prior written notification and an adequate opportunity to review the case file (and make a copy of other parties’ documents), after which there is a hearing presided by a JFTC officer. In the hearing, a party may make arguments (orally or in writing) and submit supplementary evidence. The JFTC issues its administrative order only after the hearing.

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Leniency/amnesty regime Before the 2019 amendments to the AMA Under Japan’s system, before the most recent amendments to the AMA, a maximum of five firms could obtain leniency from administrative fines on a given product. The first firm to apply for leniency before the JFTC investigation begins was entitled to receive full immunity, the second applicant received a 50% reduction to the surcharge, and the third, fourth, and fifth applicants received a 30% reduction. After a case was initiated, a maximum of three firms could apply (up to a maximum of five including applicants before the start of the case), and the amount of the leniency would be 30% for all of them. After the 2019 amendments to the AMA The most recent amendments introduced the discretion of the JFTC in determination of the surcharge amount and, in particular, allowed the JFTC to increase the reduction rates of the surcharge for leniency applicants in accordance with a firm’s contribution to the JFTC’s fact-finding in the case. The JFTC may apply the reduction rate to the surcharge amount according to the degree of contribution after applying the reduction rate according to the order of application (see table below).

The date of The order of Reduction rate Reduction rate Total reduction rate application application according to according to applicable at maximum the order of the degree of application contribution 1st 100% - 100% Before the 2nd 20% 60% investigation rd th was initiated 3 –5 10% Up to 40% 50% 6th and below 5% 45% Up to three 10% 30% After the applicants investigation Up to 20% Other than was initiated 5% 25% above *The limitation on the number of applicants has been abolished. There is no programme such as “amnesty plus”, which refers to benefits that the authorities can offer to a cartel member who discloses previously undetected antitrust offences involving a cartel, even if they are not the member who originally brought that cartelist to the authorities’ attention. 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 submit by email to the JFTC a copy of “Form 1”, a one-page form that requires the identification of the applicant, the relevant product, the type of conduct being reported, and the 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 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.

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To obtain the reduction according to the degree of contribution, the applicant must submit “Form 4”, a one-page form which states that the applicant proposes to start a consultation with the JFTC, within 10 business days of receiving the notice of investigation. During the consultation, the applicant must explain the cooperation it offers, including descriptions of information and evidence the applicant would submit after the application is accepted. The JFTC determines the applicable reduction rate based on the explanation made by the applicant. Reduction 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 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 administrative orders. The JFTC is required to maintain the confidentiality of documents relating to its investigation, including leniency submissions, during the course of an investigation.

Right of appeal against civil liability and penalties 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 the Tokyo District Court. The court is not bound by the JFTC’s factual findings, and parties are permitted to submit new evidence.

Criminal sanctions Firms face a maximum criminal fine of JPY 500m (approximately US$ 4.7m), and individuals face up to five years’ imprisonment and a maximum fine of JPY 5m (approximately US$ 47,000). If the term of imprisonment is no more than three years, the court may impose a suspended sentence (i.e., probation). In most white-collar criminal cases in Japan, a first-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. The most recent amendments to the AMA increased the criminal fine for the offence of obstructing an investigation committed by a representative, agent, employee, etc. of a company, from JPY 3m (approximately US$ 28,000) to JPY 200m (approximately US$ 1.87m). Firms that are subject to both an administrative surcharge and a criminal fine will receive a reduction in the amount of the administrative surcharge, equivalent to one-half of the amount of the criminal fine.

Cross-border issues On several occasions, the JFTC has issued administrative sanctions against foreign firms for cartel conduct affecting the Japanese market. Recent examples include a cease-and-desist order against European firms in theMarine Hose case in 2008, a cease-and-desist order and surcharge orders against Asian firms in the CRT case in 2009, and a cease-and-desist order and surcharge order against a Norwegian shipping firm in the Automotive Shipping case in 2014. In the Marine Hose case, four European firms and one Japanese firm were found to have violated the AMA, but the Japanese firm was the only party that the JFTC decided to

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Morrison & Foerster LLP Japan fine, because the European firms did not have Japanese turnover. In the CRT case, a surcharge payment order was issued against Korean, Malaysian, and Indonesian firms, even though those firms did not have direct sales in Japan regarding CRTs. The Asian firms appealed the orders but were denied by the JFTC in May 2015, which held that foreign subsidiaries of the Japanese manufactures purchased the CRTs under the direction of their parent companies in Japan, and thus, the parent companies in Japan should be regarded as purchasers of the CRTs. In 2017, the Supreme Court upheld the JFTC’s position and held that even if a price- fixing cartel is formed outside of Japan, if the cartel damages the competitive functioning of the domestic Japanese market, then this would constitute a violation of free competition in Japan, and so the AMA would apply. By so doing, the Supreme Court recognised the extraterritorial application of the AMA.

Cooperation with other antitrust agencies 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. Department of Justice and the European Commission. In multi-jurisdictional leniency applications, the JFTC will ask the applicant for a waiver to permit it to discuss the case with other competition authorities. As of December 2020, Japan has Anti-Monopoly Cooperation Agreements with the U.S., EU and Canada, Economic Partnership Agreements (competition- related provision only) with 16 countries, and Inter-agency Cooperation Memorandums/ Agreements with 10 countries. Among these agreements, the Cooperation Arrangement which the JFTC concluded with the Australian Competition and Consumer Commission in 2015 and with the Canadian Competition Bureau in 2017 allows the authorities to exchange information obtained in their respective investigations. In addition, Japan has mutual legal assistance treaties (“MLATs”) with various countries, pursuant to which Japanese prosecutors may cooperate with foreign authorities to obtain evidence in criminal investigations.

Developments in private enforcement of antitrust laws 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. One basis for a private action is Article 25 of the AMA, which provides that firms that have violated the AMA shall indemnify injured parties. Such cases can only be brought in the Tokyo High Court and only after the JFTC has instructed that its decision is final. In such cases, liability is usually not an issue, because there is a rebuttable presumption that the JFTC’s factual findings are correct. Instead, the litigation is over the scope of damages, 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.

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In addition, although not a “private enforcement” action as such, an increasing number of derivative claims are filed by shareholders of firms that have been found to be violating the AMA. Such claimants seek to collect damages from the firm’s directors on behalf of the firm and improvements to the firm’s antitrust compliance. Discovery is limited in Japan, but a private plaintiff may seek the court’s permission to obtain evidence from litigants and third parties by making specific disclosure requests for relevant documents that are known to exist. Also, an “interested party”, including injured parties, may review and copy filings from appeal proceedings and criminal trials, subject to redaction of sensitive information. In 2012, the Osaka District Court made a decision accepting part of the request by a private plaintiff for disclosure of the documents collected by the JFTC during its investigation, after the in-camera inspection.

Commitment procedure (“Kakuyaku-Tetsuzuki”) In 2018, the AMA was amended to introduce a new procedure for administrative settlement (referred to as “commitment procedure” in some jurisdictions) in antitrust cases (“Kakuyaku- Tetsuzuki”). The new commitment procedure can be applied to various unilateral infringements but not cartel infringements.

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Daiske Yoshida Tel: +81 3 3214 6522 / Email: [email protected] Daiske Yoshida is a partner at Morrison & Foerster. He has extensive experience in cross-border litigation, arbitration and investigations in a wide range of industries, and specialises in advising clients on matters involving antitrust, anti-corruption, economic sanctions, and data privacy/security. Mr. Yoshida has represented firms in international antitrust investigations by competition authorities in Australia, Canada, China, EU, Japan, South Korea and the US, in products including semiconductors, air cargo, power cables and automotive parts. He is admitted in New York and in Japan as a foreign attorney.

Tomohiko Kimura Tel: +81 3 3214 6522 / Email: [email protected] Tomohiko Kimura is a partner at Morrison & Foerster. Mr. Kimura previously served as a chief investigator with the JFTC, where he handled global cartels as well as IP-related cases involving high-tech industries. He currently serves as a Non-Government Advisor to the JFTC. Mr. Kimura regularly represents clients in proceedings before the JFTC and assists clients in conducting internal investigations. His practice also covers advising clients on a wide range of competition matters, including joint ventures and strategic alliances. Mr. Kimura is admitted to practise law in Japan and is a member of the Daini Tokyo Bar Association.

Kazuyasu Yoneyama Tel: +81 3 3214 6522 / Email: [email protected] Kazuyasu Yoneyama is of counsel at Morrison & Foerster. Mr. Yoneyama’s principal areas of practice are antitrust and intellectual property matters. In addition to a range of domestic Japanese antitrust matters, he has represented clients in complex cross-border antitrust investigations. These include the defence of a Japan-based manufacturing group in an international cartel investigation brought by the European Commission, representation of individuals in relation to Antitrust Criminal Investigations driven by the US Department of Justice, and representation of a global technology company in a JFTC investigation of its competitor and as the plaintiff in Japanese civil antitrust litigation. Mr. Yoneyama also has a range of experience in intellectual property, US national security matters and other litigation matters. He is a member of the Tokyo Bar Association.

Morrison & Foerster LLP Shin-Marunouchi Building, 29th Floor, 5-1 Marunouchi 1-Chome, Chiyoda-ku, Tokyo 100-6529, Japan Tel: +81 3 3214 6522 / URL: www.mofo.com

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Ricardo Bordalo Junqueiro & Leonor Bettencourt Nunes VdA

Overview of the law and enforcement regime relating to cartels The Portuguese competition law, currently adopted by Law no. 19/2012, of 8 May (the “Portuguese Competition Act” or the “Act”), sets forth a general prohibition on cartels and any “agreements between undertakings, concerted practices and decisions by associations of undertakings which have as their object or effect the prevention, distortion or restriction of competition in the domestic market, in whole or in part” under its Article 9. In line with EU rules, specifically Article 101 of the Treaty of the Functioning of the European Union (“TFEU”), Article 9 of the Act comprises a non-exhaustive list of prohibited practices, which includes: (i) direct and indirect fixing of price or other trading conditions; (ii) limitation of production, markets, technological development or investment; (iii) share of markets or sources of supply; (iv) application of distinct conditions to equivalent transactions with trading parties; and (v) the conclusion of contracts conditional upon the acceptance of supplementary obligations unrelated with the subject of such contracts. The Portuguese Competition Act is further developed by a number of instruments issued by the Portuguese Competition Authority (the “PCA”), on leniency policy, investigation procedures and fining methodology. The PCA is the national competent authority for the enforcement of EU and national competition law and policy in Portugal, having the nature of an administrative independent body enjoying administrative, financial and management autonomy. It has jurisdiction over any infringement of EU and/or national competition rules having effects in the Portuguese territory, even if conducted outside thereof. Its decisions may, in most circumstances, be appealed to the specialised Competition, Regulation and Supervision Court (the “Competition Court”). Even though competition law infringements do not constitute criminal offences under Portuguese law, the investigation of anticompetitive wrongdoing follows a procedure inspired by quasi-criminal and criminal procedures (as will be further detailed below), both of which are applicable on a supplementary basis. Therefore, competition infringements are punishable with severe penalties, most notably fines of up to 10% of the undertaking’s turnover in the preceding financial year.

Overview of investigative powers in Portugal The Portuguese Competition Act, namely its Articles 18 to 20, grants the PCA a wide range of investigative powers, relating to inquiry, search and seizure, which are similar in nature to the powers of the European Commission under Regulation 1/2003.

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All undertakings and natural persons are bound to cooperate with the PCA, whether they are being investigated or are third parties. This duty encompasses the obligations to timely reply to requests for information, and to produce relevant documents if required by the authority. Failure to cooperate with the PCA can amount to obstruction of a public authority investigation, a criminal offence under Portuguese law. Furthermore, failure to reply to a PCA’s request for information or providing false, inaccurate or incomplete information may also qualify as a minor competition law offence, punishable with a fine of up to 1% of the undertaking’s turnover. This was applied by the PCA in three cases regarding CP Carga, Ford Lusitana and Peugeot Portugal (all in 2015), where fines of up to €150,000 were imposed for alleged infringement of these companies’ cooperation duty. The PCA is legally entrusted with the power to conduct unannounced search-and-seizure procedures at the premises of undertakings (“dawn raids”), provided that a judicial warrant to the effect has been issued in advance by the competent court or other competent judicial authority. In some circumstances, the judges must also be present during dawn raids, namely if the inspected undertaking or association of undertakings is likely to hold sensitive personal information (e.g. financial institutions). Should the PCA find it necessary, it may require the police to accompany its officials during dawn raids. During dawn raids, the PCA may examine, collect and seize copies of all types of information, including accounting data, regardless of the support in which they are stored. If deemed necessary for obtaining evidence, such powers extend not only to the premises of the undertaking concerned, but also to all its property and means of transport. Documents protected by legal (and likewise medical) privilege cannot be analysed nor seized by the PCA, except if they are the object of the infringement. Within the context of a dawn raid, the PCA may also ask the undertaking’s staff or representatives for clarifications and to carry out oral interviews to them, being bound to reply truthfully on the spot. The PCA also has the power to seal off the premises of undertakings if evidence is (or is likely to be) stored, but only during the period and to the extent strictly necessary. Likewise, should the PCA have well-substantiated indication that evidence of a serious competition infringement is being held at the homes of partners, directors, workers or collaborators of an undertaking, it may carry out inspections at such locations, which must be previously authorised by a judicial warrant, and a judge responsible for procedural safeguards must be present during the search. Failure to cooperate with the PCA during a dawn raid may also amount to a competition offence, punishable with a fine of up to 1% of the undertaking’s turnover and may also amount to criminal liability for obstructing a public authority investigation. The PCA investigative powers are expected to be further reinforced after the implementation of the ECN+ Directive, which is due to take place within the first part of the year 2021 (see below).

Overview of recent cartel enforcement activity The PCA has been quite active with regard to cartel enforcement in Portugal in the last few years. The last annual activity report published by the PCA refers to the year 2019, in which the authority registered an intense cartel enforcement activity. In fact, the PCA imposed a record total of fines of €340.2 million in seven proceedings (surpassing the total amount of fines imposed by it since the beginning of its activity in 2003), of which four related to price fixing practices in a variety of sectors (for instance,

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© Published and reproduced with kind permission by Global Legal Group Ltd, London VdA Portugal insurance and infrastructure), as well as a decision regarding the exchanging of sensitive information of credit products between 14 undertakings in the banking sector, resulting in a fine of €225.2 million. Notably, three out of the four cartel decisions issued were settled. While 2020 was an uncommon year due to the outbreak of the COVID-19 pandemic – which determined generalised lockdown periods involving remote working for public and private entities – the PCA maintained its activities, proceeding with the investigation and prosecution phases in several ongoing cases. The PCA issued Statement of Objections (“SO”) towards undertakings in six different proceedings and reached two final decisions imposing fines, in the telecom and retail sectors, one of which referring to six large retail chains, in the total amount of €304 million, comprising the largest fine ever imposed by it on a single undertaking in a competition case in Portugal of €121.9 million to Modelo Continente (one of the largest food retail chains in Portugal). In fact, the retail and telecoms sectors seem to be in the PCA’s spotlight, considering that, in addition to the two fines, four of the SOs issued in 2020 relate to alleged price fixing practices between supermarket chains and its suppliers (namely suppliers of pre-packaged bread, cakes, non-alcoholic beverages and juices, wine and alcoholic drinks, cosmetics and other personal care products), and another regarding to telecoms operators. The food retail cases allegedly have elements of hub-and-spoke practices. According to the PCA, instead of communicating directly with each other, the retailers used contacts with common suppliers to align their retail prices in the market, thus restricting competition. In addition to the referred SOs and sanctioning decision, the PCA conducted a dawn raid in the Autonomous Region of Madeira, during October 2020, following suspicions of concerted behaviour in the food-based retail sector in that region. With regard to the telecom sector, the PCA issued a SO to the four Portuguese telecom operators, accusing them of limiting competition in advertising on the Google search engine. In addition, the Authority also adopted a final prohibition decision imposing a fine of €84 million on the telecom operator MEO for allegedly fixing prices and sharing markets with competitor NOWO under the mobile virtual network operator (“MVNO”) contract between the two. The later applied for leniency and was exempted from the fine. Finally, following a complaint made in May 2020, the PCA opened a price fixing investigation on the National Association of Land Surveyors. This entity allegedly published on its website, from November 2003 onwards, detailed prices and fees, to promote standardisation in the activity of land surveying developed by its 729 members, which is essential to civil construction, public works and other sectors. The PCA closed the case in March 2021, sanctioning the association with a reduced fine of €50,000, following a settlement procedure.

Key issues in relation to enforcement policy In 2020, one of the main priorities of the PCA was to maintain its level of activity in relation to the detection, investigation and sanctioning of cartel practices, either by the authority’s own initiative or through leniency applications. As the negative effects of the COVID-19 pandemic continue to take its toll in the Portuguese economy, the PCA has set forth, in its 2021 enforcement policy priorities, that it will be focusing on protecting firms and consumers from being exploited in the context of the COVID-19 situation, as well as promoting economic recovery by consolidating its investigation practice. Additionally, the authority seeks to reinforce recommendations aimed at eliminating unnecessary barriers to corporate and professional initiative in order to contribute to the reduction of unemployment.

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Considering that eCommerce has been playing a crucial role during these unusual pandemic times as several markets have been obliged to focus on digitalisation, the PCA is intending to be particularly vigilant of price fixing or market-sharing practices in the digital sector, namely through its new interdepartmental digital task force. Finally, the PCA has set forth its commitment to enhance efficiency and due process, particularly when considering legal and economic robustness of its decisions, as well as improving its internal procedures and conducting swifter investigations, in order to intervene timely and to minimise harm to the economy and consumers, without compromising the legal and economic frameworks.

Key issues in relation to investigation and decision-making procedures The PCA may learn of a potential competition law infringement by its own motion (ex officio), through third-party complaints or through leniency applications. In any of these cases, the Portuguese competition procedure is divided in two stages: i) investigation; and ii) prosecution. During the investigation stage, the PCA is due to investigate the existence of an infringement and collect the necessary evidence, namely through dawn raids and information requests to the investigated undertakings. This stage has an 18-month provisional duration, since the Authority is free to extend this deadline, subject to informing the investigated undertakings in advance. Undertakings are not granted access to file during this stage every time it is protected by investigation secrecy. However, the PCA generally submits the documentation seized during the investigation stage to the proprietary undertakings for the purposes of identification and treatment of confidential information. Issues relating to confidentialities have led a considerable amount of litigation over the years. At the end of the investigation stage the PCA is due to either: i) issue a SO; ii) close the case; iii) close the case through a settlement decision; or iv) close the case through a commitments’ decision. The prosecution stage starts at the moment the PCA issues a SO, in which it gives defendants a certain deadline to reply. The PCA is due to close the prosecution stage within 12 months but it is free to extend this time limit, provided that the investigated undertakings are informed of the extension. Additional evidence gathering measures may be promoted at the Authority’s initiative at this stage, which may lead to the issuing of a new SO, in cases where such measures determine a material change to the initial charges. By the end of this stage, the PCA is bound to either: i) issue a final decision declaring the existence of an infringement; ii) impose a sanction under the settlement procedure; iii) issue a commitments decision, closing the case pursuant to conditions imposed; or iv) close the case without the imposition of any conditions. Undertakings can appeal the decision of the PCA to the Competition Court within 30 working days.

Leniency/amnesty regime The Portuguese Competition Act provides for a leniency programme, which has been implemented in similar terms to that of the European Commission. While leniency is substantially governed by the Act, at a procedural level, a significant part of the rules is set forth in PCA’s Regulation 1/2013, and further explained in its Leniency Guidelines. It is well-acknowledged that the leniency programme has constituted a very relevant tool

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© Published and reproduced with kind permission by Global Legal Group Ltd, London VdA Portugal for cartel detection since its creation, as many of the ongoing and recent cartel cases have reportedly started with a leniency application. Therefore, the PCA wishes to further develop the use of its programme and has actively engaged in its promotion to stakeholders in the few last years. Under the Portuguese leniency programme, both undertakings and individuals (i.e. directors, managers and persons holding equivalent positions in the business units involved in the cartel) can be granted immunity from fines as long as they are the first to provide the PCA with information allowing it either to conduct a dawn raid or to find the existence of a competition law infringement, as long as, at that moment in time, the PCA did not already hold enough information to carry it out or to find such anticompetitive practices without it. Leniency applicants are further required: i) to fully and continuously cooperate with the PCA, most notably by supplying it with all the information in their possession and promptly replying to all its information requests, and by refraining from destroying evidence and from revealing the existence of the leniency claim; ii) to put an end to its participation in the cartel – unless otherwise required by the authority; and iii) not to have coerced other undertakings to participate in the cartel. Undertakings failing to qualify for immunity from fines can still be granted a fine reduction under the leniency programme, provided that they: i) convey to the PCA information and evidence with significant added value for the investigation; and ii) cooperate with the PCA’s investigation and terminate its participation in the cartel – unless otherwise required by the PCA. Not all undertakings providing information and evidence with significant added value for the investigation will be rewarded equally. The first undertaking submitting information of such kind will be eligible for a reduction of the amount of its fine between 30% and 50%, the second between 20% and 30% and the subsequent undertakings of up to 20%. In the case of leniency applications submitted after the issuing of a SO, the aforementioned ranges for fine reduction are reduced by half.

Administrative settlement of cases Similarly to EU Competition Law, the Portuguese Competition Act sets forth a settlement procedure where the investigated undertakings may acknowledge responsibility for an infringement and renounce their right to judicial review in exchange of a fine reduction. The procedure is initiated by settlement discussions between the PCA and the investigated undertaking, which may be triggered by either party in both the investigation and prosecutions stages of the proceedings (i.e. before or after a SO has been issued). During settlement discussions, the investigated undertaking is granted early access to the information at the PCA’s disposal in order to prepare a written settlement submission which must mirror the settlement discussions held. It is worth noting that the Portuguese Competition Act expressly precludes third-party access to settlement submissions, unless express consent is given by the undertaking submitting them. Should the settlement conversations succeed, and the case proceed to a settlement decision, the investigated undertaking will be given a reduction on the amount of the fine. Unlike EU Competition Law, there is not an amount of fine reduction set forth in the Portuguese Competition Act. A further tool to fast-track cases at the PCA’s disposal is the possibility to close cases subject to the presentation of commitments by the investigated undertakings, but not state the existence of a competition law infringement. In order to ensure transparency of the decision-making procedure, commitments decisions must be notified to both the complainant

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© Published and reproduced with kind permission by Global Legal Group Ltd, London VdA Portugal and the competent sectorial regulator as well as be subject to a public consultation, the latter consisting in a period of at least 20 working days during which third parties may submit observations. It is up to the PCA to monitor undertaking’s compliance with the commitments. Failure to comply with the commitments constitutes an offence punishable with a fine of up to 10% of the undertaking’s annual turnover. Likewise, in the two years following the adoption of a commitments decision, the PCA may reopen the case should: i) a substantial change in the facts that led to the decision occur; ii) the commitments not be complied with; or iii) the decision prove to be based on false, inaccurate or incomplete information. The PCA seems more willing than ever before to make use of the administrative tools to fast-stream cases, especially settlements. An interesting trend to point out is some hybrid settlement cases that are now pending in the Competition Court. Both settlements and commitments decisions can be adopted either in the investigation or prosecution stages of the proceedings (i.e. before or after an SO is issued).

Third-party complaints Complaints are an important tool for the PCA to become aware of the occurrence of anti- competitive practices. Indeed, and by way of an example, during 2019 the Authority received a total of 300 complaints. The PCA created an online complaints portal in 2017, and has encouraged its use specifically in the context of COVID-19, when most of public and private entities are working remotely. Under the Portuguese Competition Act, the PCA is not obliged to open an investigation for every complaint received, rather being solely obliged to keep a complete record of all of them. Complaints may, and often do, lead to formal investigations, provided that the PCA considers there are sufficient indications of the existence of an infringement and the case fits its enforcement priorities. In fact, the PCA is oriented by an opportunity principle (Article 7 of the Act), which determines its capacity to choose whether or not to pursue a case (namely a complaint) on the basis of the public interest pursued and, specifically, considering its competition policy priorities, the seriousness of the alleged infringement, the likelihood of proof and the extent of the investigative measures required to obtain it. Should the PCA decide not to open a formal investigation, the complainant is granted no less than 10 working days to submit its observations on the PCA’s draft decision. In case the complainant has submitted observations but the PCA decides not to open an investigation, the former is entitled to appeal the PCA’s decision to the Competition Court. In case the PCA decides to go for a formal investigation, complainants are granted limited procedural rights in the procedure; notably they are given the chance to submit observations to the PCA’s intention to close the case during the investigation stage. If they do submit observations and the PCA nonetheless decides to close the case, complainants may appeal the PCA’s decision to the Competition Court.

Civil penalties and sanctions Undertakings found to have participated in a cartel are subject to severe penalties under the Portuguese Competition Act. Indeed, each undertaking found to be part of the cartel faces a fine of up to 10% of its turnover in the financial year preceding the imposition of the fine. It is worth noting that the Portuguese Competition Act explicitly establishes the single economic

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© Published and reproduced with kind permission by Global Legal Group Ltd, London VdA Portugal doctrine, determining that parent companies may find themselves liable for an infringement committed by one of their subsidiaries. It must be noted that directors, managers and persons holding equivalent positions in the business units involved in the cartel may also be subject to a fine of up to 10% of their annual income in the undertaking concerned in the last full year. The exact amount of a given fine is dependent on several factors, notably the seriousness and the duration of the infringement, and is to be calculated in accordance with the PCA’s Guidelines on fining methodology of 2012. The PCA’s Guidelines establish that the calculation of the amount of a given fine shall take into account the turnover of the undertaking in the market(s) affected by the infringement during its duration. Experience shows that as a result of the application of the said methodology, fines imposed on different undertakings part to one same cartel often vary significantly. In the case of associations of undertakings, it is worth noting that fines can be imposed: i) exclusively on the association; ii) on both the association and its members; or iii) exclusively on its members. Should penalties be imposed on an association of undertakings, the amount shall not exceed 10% of the joint turnover of all the associated undertakings. The undertakings who were members of the associations’ corporate bodies at the time of the infringement are jointly responsible for the fine imposed on the association, except if they have declared in writing their opposition to the conduct that constitutes the infringement. Should fines be imposed on the members of the associations the above mentioned 10% cap of each undertaking’s turnover applies. Finally, it bears emphasis that, should fines be imposed on both the associations and their associates, the non bis in idem principle must be complied with. The Portuguese Competition Act provides for the following ancillary penalties for undertakings found to have infringed competition rules: i) the publication of an extract of the decision imposing a sanction stating the applied penalty in the official gazette and in one if the newspapers with the highest circulation in the relevant geographic area (national, regional, or local); and ii) should, the infringement be connected with public procurement, restricting the undertaking’s participation in public tenders for up to two years. This last sanction was applied for the first time in 2019 in a case regarding anticompetitive practices relating to railroad maintenance public tenders. The Authority may also impose behavioural or structural remedies in its infringement decisions. Experience demonstrates that in most cases the PCA will issue a decision imposing a fine on the undertakings investigated, either in a final infringement decision or via settlement procedure. Considering the PCA’s track record regarding 2019 and 2020, the total amount of fines imposed on undertakings, specifically in cartel cases, has experienced an exponential increase in the last few years. Indeed, in these last years, the PCA has consistently been setting new records regarding the biggest individual fines imposed, to date, on a single undertaking, the last time being in the Food Retail Cartel, in 2020.

Right of appeal against civil liability and penalties In the context of competition investigations, undertakings may appeal both interlocutory decisions of the PCA as well as the final decision imposing fines and/or remedies. Appeals of interlocutory decisions are common in cartel investigations and often regard subjects such as access to file and identification of confidentialities. Despite not being

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© Published and reproduced with kind permission by Global Legal Group Ltd, London VdA Portugal expressly provided for by the Portuguese Competition Act, the application of subsidiary rules determines that undertakings have 10 days counting from the date they are notified of the PCA decision to submit their appeal to the Competition Court. The ruling of the Court can further be appealed to the Lisbon Court of Appeals, but only with regard to law issues. Undertakings may also appeal to the Competition Court of the decisions of the PCA imposing fines (i.e. final decisions), within 30 working days from the date they were notified of the decision. In appeal, the Competition Court has full jurisdiction over the PCA’s decisions. The Competition Court may also annul the decision, as well as reduce or increase the amount of a fine. Its rulings can be appealed to the Lisbon Court of Appeals, acting as a court of last instance, which is limited to law issues. While the Portuguese Competition Act currently establishes, as a rule, that appeals do not suspend the implementation of fines and other sanctions, it also allows some exceptions to that rule. The first refers to PCA’s decisions imposing structural remedies, which have suspensory effect. The second consists in situations where suspensory effect is required by the undertaking, who must prove that the execution of the decision would cause serious harm and simultaneously provide a guarantee. The constitutionality of the provision regarding non-suspensive effect of appeals has been brought up to the Portuguese Constitutional Court on a few occasions, leading to some conflicting rulings on the matter. The dispute was settled in a 2019 ruling where the plenary section of the Court finally concluded that such provision does not breach Portuguese constitutional law.

Criminal sanctions Under Portuguese Law, cartels and other prohibited anticompetitive practices are considered administrative offences and are not criminal offences. As previously noted, these infringements are sanctioned by fines up to 10% of the turnover of each undertaking involved in the infringement as well as other ancillary sanctions.

Cooperation with other antitrust agencies The PCA cooperates at EU and international level with several other competition law enforcers either under cooperation organisms or bilateral agreements. The PCA is a member of the European Competition Network (“ECN”), which integrates national competition authorities in the EU as well as the European Commission. Cooperation within the ECN is intended to be facilitated and increased following the implementation of the of the Directive 2019/1/EU (the “ECN+ Directive”), which introduced a mutual assistance mechanism, standardising the cooperation procedure with regard to investigation and sanctioning of anticompetitive practices. The PCA is also part of the International Competition Network, integrating competition authorities from around the world, as well as the Lusophony Competition Network, a cooperation network between the competition enforcers of a number of Portuguese-speaking countries including Angola, Brazil, Cape Verde, East Timor, Guinea-Bissau, Mozambique, Portugal, and São Tomé and Príncipe. On a bilateral basis, it is worth noting the cooperation with its Spanish counterpart, the Comisión Nacional de los Mercados y la Competencia, namely through the Iberian Competition Forum, which meets on a regular basis.

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Cross-border issues Under EU Competition Law as well as the Portuguese Competition Act, the PCA may jointly apply national and EU rules, namely by finding that certain anticompetitive practices also constitute an infringement of Article 101 TFUE. Furthermore, the Portuguese Competition Act applies to anticompetitive practices either taking place in the Portuguese territory or that may have effects in a part thereof, which determines that it may investigate practices originated in other Member States. However, the PCA’s decisional practice on cartels seems to suggest that the PCA restricts its investigations to conducts occurring in Portugal.

Developments in private enforcement of antitrust laws Private enforcement actions in Portugal are expected to largely increase following the implementation of Directive 2014/104/EU (“Private Enforcement Directive”), by Law no. 23/2018, of 5 June (“Private Enforcement Act”). While damage actions follow the general terms of the Portuguese Civil law, thus being already admissible prior to the implementation of the Private Enforcement Directive, private competition litigation was reportedly very limited, being typically used as a defence in cases pertaining to the validity of agreements containing anticompetitive practices. The highest profile case prior to the Private Enforcement Act is the (then unprecedented) class action brought by the Portuguese Observatory for Competition against SPORT TV, a Portuguese premium sports TV channel. While the class action was brought on after SPORT TV had been sanctioned by the PCA for abusing its dominant position by applying discriminatory conditions to pay-TV operators, it refers to a wider range of anticompetitive practices, allegedly leading to an artificial increase in prices and exclusion of consumers, and a longer period of time. The class action has been admitted by the Lisbon Court of Appeal in December of 2018 and is still pending judgment. The Private Enforcement Act, in line with the directive, confers the value of non-rebuttable presumption to the final decisions of the PCA finding an infringement of competition, with regard to the existence, nature, duration and scope of the anticompetitive practices concerned. In view of this presumption, and solely with regard to follow-on cases, damages applicants are only required to proof the existence of damages and the causal link between such damages and the restrictive conduct. Nonetheless, the Private Enforcement Act further establishes a rebuttable presumption of harm with regard to cartels. In addition to follow-on damage claims, the Private Enforcement Act also allows standalone actions, initiated independently of or prior to a final decision of the PCA (or any other competition authority) finding a competition infringement. However, in such cases, the claimant must demonstrate all requirements regarding civil liability, namely in what regards the existence of an illicit conduct under the Portuguese Competition Act, the imputation of said conduct to the undertakings concerned, the existence of damages and the causal link between the damages and the illicit conduct. The Private Enforcement Act also expressly sets forth the possibility of damage claimants bringing on class actions (“ações popular”), allowing a wider legal standing for the representation of such damage actions by any associations or foundations defending consumer’s rights, as well as associations of undertaking whose associates were affected by the anticompetitive practices, which must follow an opt-out model. Finally, the Competition Court was conferred competence to rule on any damage actions regarding competition infringements.

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Since the adoption of the Private Enforcement Act, there have been at least two damages class actions brought on before the Competition Court. The first,Ius Omnivus v. Mastercard, refers to total damages calculated at €400 million which have been allegedly incurred by Mastercard users in Portugal as a result of anticompetitive practices for limiting merchants’ access to cross-border card payment services, which were sanctioned by the European Commission in 2019. The second case, Ius Omnibus v. Superbock, which also regards total damages around €400 million, is related to minimum retail price fixing practices by Superbock, as sanctioned by the PCA in its decision of 2019. Both cases are still pending.

Reform proposals The Portuguese Competition Act is expected to be shortly revised in the context of the implementation of the ECN+ Directive. The PCA produced a first draft of the implementing measures, including a revision of the Portuguese Competition Act as well as other legislation, which was submitted to a public consultation at the end of 2019. The result of the participation in the public consultation was published in a report available on the PCA’s website and ultimately lead to the submission of a proposal for the implementation of the ECN+ Directive to the Portuguese Government, in March 2020. The proposal generally reinforces the investigative powers of the PCA and clarifies and amends certain procedural rules, namely those regarding access to file, limitation period and appeals, and introduces a mutual assistance mechanism between the national competition authorities integration the ECN, as provided for by the ECN+ Directive. However, this proposal is currently under review by the Portuguese Government and may still be subject to several changes during the legislative process.

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Ricardo Bordalo Junqueiro Tel: +351 21 311 3392 / Email: [email protected] Ricardo Bordalo Junqueiro is a Partner and Head of the Competition & EU practice at VdA. He has been involved in several matters, particularly in the electronic communications, energy, pharmaceutical, financial, media and infrastructure sectors, as well as accompanying economic regulation matters in the electronic communications sector. Prior to joining the firm in 2018, he was a Partner (2017) and Of Counsel (2013–2016) at Cuatrecasas law firm. Between 2002 and 2013, Ricardo was a lawyer at VdA Competition & EU practice. His educational qualifications include: a Law Degree at the Portuguese Catholic University, Faculty of Law; an LL.M. in EC Law, University of Essex, Department of Law; a post graduate degree in European Competition Law at King’s College, University of London; and the Advanced Programme in the Economics of Regulation and Competition at the Portuguese Catholic University, Faculty of Economics. Ricardo was awarded Lawyer of the Year from Best Lawyers – European Union Law (Lisbon), in 2020 and Clients Choice Award from International Law Office (“ILO”), in Competition & Antitrust, in 2019.

Leonor Bettencourt Nunes Tel: +351 21 311 5221 / Email: [email protected] Leonor Bettencourt Nunes is an Associate in the Competition & EU practice area at VdA. Before joining the firm, she worked as a Legal Advisor to the Minister of Economy and then to the Minister in the Cabinet of the Prime Minister and of Economy (2017–2019). She had previously been a trainee lawyer and Associate at Morais Leitão, Galvão Teles, Soares da Silva & Associados (2013–2017) and a trainee lawyer at Freshfields Bruckhaus Deringer (2013), in Brussels, as well at the European Commission, DG Competition (2012). She graduated in Law at the University of Lisbon, where she was an Assistant Teacher in the Economic Law Department (2017–2020), and obtained an LL.M. in European Law at King’s College London. Leonor has experience working on cartel and restrictive practices cases before the Portuguese Competition Authority, namely in the financial, telecoms and infrastructure sectors.

VdA Rua Dom Luís I, 28, 1200-151 Lisboa, Portugal Tel: +351 21 311 3400 / URL: www.vda.pt

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Mihaela Ion & Vanessa Nistor Popovici Nițu Stoica & Asociații

Overview of the law and enforcement regime relating to cartels 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”). In a nutshell, under the Competition Act, all agreements, concerted practices and decisions of associations of undertakings that have as their object or effect prevention, restriction or distortion of competition are prohibited. Among anticompetitive practices, as set out in article 7 of the Competition Act, price-fixing, output limitation or market sharing are the most harmful ones. Such practices are included within the hardcore restrictions category, de minimis exclusion not being applicable. Having in mind their harmful object, the aforementioned competition restrictions are fined regardless of their actual effects on the market and the market shares of the parties involved. The Romanian Competition Council (the “RCC”), an administrative autonomous authority, is entrusted with enforcement of competition rules. Within the RCC, the Cartel Office mainly sets the general strategy of the RCC’s Plenum (the “Plenum”), examines complaints, proposes the initiation of investigations ex officio, etc. Besides the direction for cartels, a specific direction, the Direction on Bids and Petitions, focuses on bid-rigging practices. In addition, for proper functioning of public procurement, under the umbrella of the “Module on Bid Rigging”, 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.). Competition law infringements can trigger administrative, criminal and civil liability. Before the recent amendment of the Competition law,2 the RCC was entitled to impose fines on the undertaking involved in an anticompetitive practice which varies from 0.5% to 10% of the total turnover achieved in Romania in the financial year before sanctioning. Now, the law speaks about a minimum threshold of 0.5% from the total revenues achieved in Romania in the financial year prior to the fining decisions vs. the maximum threshold of 10% from the total worldwide turnover. In practice, cartels are usually sanctioned with fines ranging from 4% to 8%. For undertakings with no registered turnover, the RCC will consider the previous financial year and so on, until an annual turnover is determined. The RCC may also request the parties to end the practice and impose comminatory fines if a party fails to observe the obligations imposed by the RCC. In addition, criminal liability of individuals breaching competition regulations may be exceptionally triggered by:

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(a) individuals with management attributions which fraudulently initiate an anticompetitive practice may be subject to criminal liability facing potential imprisonment of up to five years; and (b) removing a bidder from a public tender, by coercion or corruption, or engaging or colluding with the other bidders in order to distort the award price is punished with imprisonment from one to five years (article 246 of the Romanian Criminal Code). Nonetheless, the criminal sanctions are not applied by the RCC but only by the criminal court. In other words, the RCC may only inform the criminal investigation bodies about a potential criminal offence. As regards private enforcement of competition rules, our national legal framework enables any victim of an anticompetitive practice to bring a claim for damages. We have detailed the main rules applicable in the section “Developments in private enforcement of antitrust laws”.

Overview of investigative powers in Romania The RCC may launch an investigation ex officio, following a third-party complaint (including through the whistle-blowers platform) or based on a leniency application. The Competition Act grants the RCC extensive investigative powers, amongst which the right to carry-out dawn raids or the possibility to send information requests to undertakings that might have relevant data. In order to conduct a dawn raid, a dawn raid order issued by the RCC’s President (detailing its object, purpose and date) and a judiciary authorisation is required. The judiciary authorisation may be challenged before the High Court of Cassation and Justice within 72 hours from its communication, but the appeal does not suspend its enforcement. Competition inspectors may inspect any premises used by the undertaking, not only the ones legally owned but also those used de facto including the domicile, the lands or the means of transportation of administrators, directors, managers and other employees. In order to prevent concealment or destruction of evidence, competition inspectors may also seal any premises. Competition inspectors may collect copies and use any financial and commercial documents, including preparatory documents drafted by the undertaking investigated for the exclusive purpose of exercising its right to defence. The only documents which remain under protection are communications between the undertaking under investigation and its external lawyer made exclusively for the purpose of exercising the right of defence if they are drawn up after the launching of the investigation. In case such documents were drafted before the investigation, they benefit from legal privilege only if there is a link between such documents and the current investigation. In addition, electronic data may also be searched. Competition inspectors may access the electronic equipment and preview the documents at the company’s headquarters, or simply copy the data and review it at RCC’s headquarters. According to the RCC Procedure Regulation,3 copying all the data is possible in certain circumstances (e.g. when there is a big volume of data). Further on, the copied data will be sealed and the extraction of the information which falls within the scope of the investigation will be performed in the presence of the company’s representatives. Nonetheless, according to article 26 (9) of the RCC Procedure Regulation following seizing the hard copy of the electronic information belonging to the investigated party, the RCC can search data in the absence of the representatives of the companies investigated. In practice, it seems that the RCC still grants parties, upon request, to participate at the search data procedure. Hindering the conduct of the dawn raid or the refusal to cooperate with the investigative

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Popovici Nițu Stoica & Asociații Romania team designated by the RCC for conducting the dawn raids may be sanctioned with fines ranging from 0.1% to 1% of the turnover realised in the year before the sanctioning decision. Aside from dawn raids, another investigative power of the RCC is to send information requests to investigated undertakings, to other parties or to public authorities. Failure to comply with the RCC’s request may lead to fines ranging between 0.1% and 1% of the turnover achieved in the previous financial year for undertakings, and between Lei 1,000 and Lei 20,000 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. Most of the evidence is collected by the RCC during dawn raids. In practice, the RCC easily obtains the judiciary authorisation for the conduction of dawn raids as the court simply takes over the arguments invoked by the RCC. In fact, up until now, the courts have always granted the right to conduct dawn raids by the RCC. Regarding electronic data, it seems that seizing a copy of such data for further review is becoming the rule. As a consequence, the duration of dawn raids is decreasing, as the RCC simply takes a copy of the hard disk. Also, the RCC has more time to search the copied data.

Overview of cartel enforcement activity during the last 12 months Last year has challenged the world as a whole as the COVID-19 pandemic struck us all. According to the RCC: “2020 is marked from a social and economic stand point by the global spread of the SARS-CoV-2 virus, which has generated a shock of major magnitude.”4 The RCC was not spared the challenge brought up by the consequences of the COVID-19 pandemic and the measures taken in order to stop the spread of the virus. In this sense, especially when we speak about March–May 2020, when a state of emergency was declared in Romania, the RCC’s pace of work has slowed down. Nonetheless, this does not mean that 2020 was not a productive year for the RCC. On the contrary, as the COVID-19 pandemic did not come with a stop button for competition regulations, (a) the RCC has shown a proactive approach by issuing different recommendations aiming at avoiding competition rules violation in these special circumstances, and (b) has continued to detect, investigate and fine cartels. This goes especially for the second part of 2020. Thus, we may say that cartels continue to be in the spotlight for the RCC as it is important to get rid of one of the most harmful practices for the competitive environment. Cartels continue to be in the spotlight as one of the main priorities of the RCC is to detect and sanction such harmful anticompetitive behaviour. From a statistics perspective, from the public information available up until now, most of the investigations closed with sanctions concerned cartels in key sectors such as public tender, financial services, and the wood industry. The RCC focus concerned once again exchanges of sensitive information and bid-rigging schemes. At the beginning of 2020, the RCC issued its decision regarding the bid-rigging scheme put in place by two companies during the public tender organised by a Romanian forestry direction having as its object a services contract consisting in security services.5 The investigation was launched in the context in which the contracting authority has requested the RCC opinion with respect to its suspicions that the companies are implementing a bid- rigging scheme. As an interesting fact, the RCC has analysed the offers submitted by the two companies by looking at the identical mistakes and has even calculated the ratio of probability that two offers could have such common mistakes in the absence of coordination.

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Another decision issued at the beginning of 2020 concerns another bid-rigging scheme implemented on the market for commercialisation of road marking roads and road signs. According to the RCC, following several exchanges of sensitive information, the companies have coordinated their behaviour so as to eliminate competition – by submitting cover offers or by simply not bidding.6 In this case, the third companies implicated have all recognised the anticompetitive deed imputed. Recently, the RCC has fined five companies for having entered into a consortium agreement which was not objectively necessary but aimed at eliminating competition during the public tender having as its object street rehabilitation works. In fact, the common offer was the only one which was submitted at the tender. The RCC has observed that the companies have agreed not to compete and to share the contracts corresponding to the five lots of the public tender. Three of the five companies investigated have recognised the anticompetitive deed imputed.7 Another bid-rigging scheme was fined recently by the RCC with fines amounting to approximatively EUR 26.6 million.8 No fewer than 31 companies active on the market for wood commercialisation were fined by the RCC. From this total number of 31 companies investigated, 13 have recognised the deed imputed by the RCC. The RCC has analysed several public tenders organised in 2011–2016 and has observed that in 45 cases competition regulations were infringed – the companies have shared the lots of public tenders, eliminating thus genuine competition. The coordination of their behaviour preceded by an exchange of commercial sensitive information, including information regarding their commercial strategy regarding their participation to certain tender. Further on, the RCC has recently fined a price fixing cartel on the market for commercialisation of agricultural machinery.9 Two of the nine companies investigated have recognised the deed imputed. Worth mentioning that the investigation has been launched following a message received on the whistle-blowers platform. At the beginning of 2021, the RCC has announced the finalisation of its investigation on the financial leasing market.10 Not all companies which are part of the sector’s professional association were fined but only those who have transmitted and received from the association market reports whereby future sensitive information were included. Following the investigation, the professional association has implemented a black-box type of procedure whereby an external independent consultancy firm will draw up market reports which will contain only aggregated and information referring to past periods, not future intentions of the companies. With respect to operational leasing, it seems that the investigation having as its object a potential exchange of information between the members of a profile professional association in the context of reports drawn up by such association, will be finalised soon within the framework of the commitments procedure. In this sense, the RCC has published on its website in December 2020 the commitments submitted by the association, as well as those submitted by its individual members.11 One of the commitments concerns precisely a similar black-box procedure for conducting market studies/statistics as the one existent in the financial leasing case. Given the pandemic context, this year, the focus was not on new investigations, but rather on finalising some of the landmark investigations already launched. The difficulty when it comes to conducting dawn raids when social distancing is preached needs to also be considered. Nonetheless, at the beginning of 2020, the RCC launched an investigation regarding a potential bid-rigging scheme on the market of paid parking12 and another investigation regarding several bid-rigging schemes implemented on the market for sanitation services.13

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Key issues in relation to enforcement policy The RCC enforcement activity revolves around three main pillars: prioritisation; prevention; and detection of cartels. Prioritisation principle The prioritisation principle allows the RCC to decide what cases come first, based on the potential impact on effective competition, consumers’ general interest, or strategic importance of the economic sector concerned. However, there are still no precise, public criteria based on which the RCC may decide to prioritise the cases. In addition, under the umbrella of the priority principle, since the amendment of the RCC’s regulation procedure, complaints received from the Romanian Government will be urgently and expressly resolved. This amendment was adopted in the context of public disputes between the RCC and the Government regarding the Romanian banking industry. Similarly to the priority principle, there is no definition of the emergency procedure. Moreover, the amended regulation does not provide details on the correlation between this provision and the priority principle. Cartel prevention As a general remark, The RCC focuses on the prevention of cartel behaviour, actively advocating for the implementation of competition compliance programmes. The RCC seeks the growth of awareness and outlook of companies with respect to the necessity of compliance with competition regulations. This is why the RCC issued several years ago specific Guidelines regarding competition law compliance programmes detailing which measures part of a compliance programme may prove its effective implementation.14 Further on, the RCC regularly issues general guidance in order to shed light on different sensitive issues that may raise competition issues and lead to the implementation of cartels. In this sense, in 2019 the RCC has issued a project of a specific guide for associations regarding the compliance with competition regulations.15 The Project also addresses the limits of the exchange of information under the framework of professional associations. This issue should be a top priority for companies as the RCC has issued a lot of fining decisions in the past years for exchanges of sensitive information under the framework of professional associations. As developed above, such a decision came no later than at the beginning of 2021 in the financial services sector. Also, in the particular context of the COVID-19 pandemic, the RCC has tried to meet companies’ needs regarding their necessity to know exactly what are the limits of their potential cooperation during the COVID-19 pandemic. In this sense, since the beginning of the pandemic,16 the RCC stated clearly that companies may implement specific measures aiming at limiting the spread of the virus, such as: • reducing their functioning schedule in order to avoid crowds within commercial premises; and • managers of e-commerce platforms may impose measures in order to limit unjustified price increases for basic products and services. At the same time, the RCC reminded companies that they are not permitted to take advantage of the crisis in order to: • Increase their prices without objective justification. • Exchange sensitive commercial information. • Eliminate their competitors. • Abuse their dominant position.

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• Engage in anticompetitive agreements (elimination of commercialisation of a certain product/service, price fixing, market/client sharing). Further on, in line with ECN joint statement17 the RCC gave the green light to companies to act in a coordinate way in order to avoid deficit of essential products and ensure their fair distribution of the latter.18 Nonetheless, there was no official procedure ofcomfort letter such as the one existing at European level under the framework of the temporary framework for assessing antitrust issues related to business cooperation in response to situations of urgency stemming from the current COVID-19 outbreak.19 In the pharmaceutical industry, when it comes to solutions aiming at tackling the COVID-19 issue, the RCC has stated that it joins the European Commission’s policy for relaxing competition regulations for companies active in pharmaceutical field. In this sense, the European Commission has issued by the guidelines on the optimal and rational supply of medicines to avoid shortages during the COVID-19 outbreak.20 Moreover, the RCC has also recommended companies which have rented premises within commercial centres which have been subject to the lockdown in order to negotiate independently their contractual conditions with the owner/manager of the commercial centre.21 This is in order to avoid potential anticompetitive coordination following a prohibited exchange of information (especially in this situation regarding costs). Nonetheless, this does not hinder small companies to request the aid of an association, a mediator or another third party in order to represent their interests in relation to the owner/manager of the commercial centre. Cartel detection In view of cartel detection, the RCC actively uses various monitoring tools. One of the RCC’s monitoring tools consists of launching sectorial inquiries into different economic sectors when there is an indication of potential restrictions of competition. As a matter of fact, the RCC is particularly active in this field, launching yearly sectorial inquires in diverse industries. For instance, in 2020 it finalised its study on the collaborative economy and one of its recommendations is to launch a sector inquiry regarding ride-hailing services. Also, the RCC has finalised its sectorial inquiry regarding the effects on competition of the BigData platforms, which may facilitate collusion between competitors.22 In addition, the RCC uses new IT tools in view of an easier detection of anticompetitive practices, especially cartels. Besides an IT project whose main purpose is to ensure effective cooperation between public authorities (e.g., the National Direction of Anticorruption), through the establishing of an interoperable system, the RCC is currently implementing the Big Data project. Through the integration analysis of big volumes of data, the Big Data Project is expected to support the RCC’s investigative activities. According to the RCC, “the Big Data project will facilitate the identification of cartels in the field of public procurement and will facilitate the finalization of the internal computerization of the Competition Council”. Moreover, the price comparison platform for basic food products (the Price Monitor) has been extended at national scale. In addition, currently the platform also aims at monitoring prices for fuels. The immediate consequence is the increase in the market’s transparency, which will help the RCC detect potential price collusions. According to the RCC, such transparency with respect to prices could also enhance the degree of competition on the market. Moreover, since last year, the Price Monitor also includes the prices of medical gloves, masks and disinfectants.23 In addition, under the amended Competition Act all companies, regardless of the economic sector in which they are active, must provide to the RCC, if requested, information regarding prices.

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Further on, this year, as part of the RCC’s market monitoring and cartel detection activity, the RCC has analysed the prices offered for masks, disinfectants, protective gloves and over- the-counter medicine such as paracetamol and COVID-19 detection tests. As per the public information available, the RCC has not observed the existence of a price alignment for such products.24 Concerning COVID-19 tests, recently, the RCC mentioned that the prices vary and are in line with the prices available in other European countries.25

Key issues in relation to investigation and decision-making procedures A balance between the public and private interests of parties involved in an alleged cartel is the main objective of national competition legislation. The right of defence in its various forms, such as the right to access the investigation file, the right to submit written observations to the statement of objections, the right to defence during the hearings before the Plenum, and the right to a separate hearing, act to support private interests. As a means of protection for undertakings under investigation, the competition legislation provides strict rules for carrying out investigations. Parties also enjoy the right to appeal in court certain acts of the RCC, such as: inspection orders; interim decisions; qualification of some information as non-confidential; or sanctioning decisions, 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 as the hearings or on another day if the Plenum decides deliberations will be postponed for certain reasons. After deliberation, the RCC has 120 days to draft and communicate the decision. However, the competition legislation does not stipulate a maximum term for finalising the investigation. In practice, the average duration of investigations in cartel matters is approximately two to three years depending on the complexity of the case at hand. In practice, most statements of objections that reach the Plenum finalise with a sanctioning decision. Limited cases exist where the Plenum has issued a rejection decision or returned the statement of objections for further analysis.

Leniency/amnesty regime Domestic leniency policy, regulated by the Competition Act and detailed in the RCC’s Guidelines26 on the conditions and criteria for the leniency policy applicability is intensively promoted by the RCC, including through its Leniency Module. The RCC Guidelines have been recently modified in 2019 but the amendments do not bring great novelty but aim at simplifying and clarifying procedural aspects. Leniency also applies to cartels and conducts to fine immunity or only reduction. Fine immunity is available before and after the RCC launches an investigation. A basic rule in leniency proceedings says that one cartel may only have one successful immunity applicant, so the following applicants may get fine reductions: 30% to 50% for the first applicant; 20% to 30% for the second applicant; and up to 20% for subsequent applicants. The undertaking benefitting from immunity is jointly liable for damages caused by anti-competitive practices. 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 the applicant’s identity), only until the statement of objections is issued during file access. In the past years, companies have started to rely more often on the leniency tool. For

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Popovici Nițu Stoica & Asociații Romania instance, the leniency tool was used by the company which realised the market studies subject to the investigation regarding the financial sector developed here above.

Administrative settlement of cases Our domestic antitrust legal framework does not regulate a settlement procedure as in EU legislation. However, while companies involved in cartels cannot submit commitments, they can apply for the recognition procedure which may lead to important fine reductions (between 10–30%). In exchange of acknowledgment of the anti-competitive behaviour, the undertaking can benefit from a substantial reduction of the fine ranging between 10% and 30%. However, the fine cannot be below 0.2% of the turnover realised in the financial year preceding the sanction. Also, the recognition can take place even before the RCC issues the statement of objections. An undertaking that benefitted from the leniency policy may also use the acknowledgment procedure to gain an additional reduction of the fine. In order to benefit from a reduction of the fine, the undertakings must submit a formal request that will include (a) the clear recognition of the anti-competitive practice and accept the maximum sum foreseen for the fine, (b) the confirmation where they are informed accordingly and they had the possibility to express their opinions with respect to the infringement, and (c) confirmation that they will request access to the file and/or the organisation of hearings in case the investigation report communicated does not reflect the propositions of the practice’s recognition. In case the RCC does not accept the terms of the request and therefore the reduction of the fine is not awarded, the recognition cannot be used as evidence. As developed here below in the section Reform proposals, the recognition procedure has been recently amended. In any case, for the investigations launched before the entry into force of the amended instructions, the RCC will apply the legal provisions which were into force at the time the investigations were launched. Also, in case the practice was recognised, and a reduction of fine is awarded, if the undertaking decides to challenge the RCC’s decision, it will lose the benefit of recognition. Over the last couple of years, we may see an increase of recognition statements which seems to be the result of the RCC’s active advocacy of the recognition procedure’s benefits. This may be observed by looking at the number of companies that have recognised the deeds imputed by the RCC in 2020 as developed in the “Overview of cartel enforcement activity” section.

Third-party complaints Generally, any natural or legal person proving an interest can file 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) dismiss the complaint; or (3) inform the applicant that the facts described in the complaint fall outside the Competition Act, or are already analysed by the European Commission or by another national competition authority. The complainant may challenge the rejection decision in court within 30 days from communication. Third parties have access to documents from investigation files in limited situations. For example, the author of a complaint which was informed by the RCC that it would reject its complaint may request access to the non-confidential version of the documents taken into consideration by 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-confidential version of the investigation report, if the latter demands so.

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In addition, any individual may inform voluntary and anonymously the RCC of the existence of potential anti-competitive behaviours, using the online whistle-blowers platform. Their identity cannot be revealed and thus will not be disclosed, and their action will not be considered an infringement of confidentiality obligations provided by the Labour Code or in their employment agreements. The RCC has launched the investigation on the market for commercialisation of road marking roads and road signs as well as the investigation on the market for commercialisation of agricultural machinery following reports received via the whistle-blowers platform. The RCC can also be notified using another IT tool available on its site – the notification can be made anonymously, but there is no guarantee that the person will not be identified/ their identity will not be disclosed.

Civil penalties and sanctions The RCC’s procedure on imposing sanctions is rather transparent as there are secondary instructions issued by the RCC which detail such procedure, including the mitigating vs. aggravating circumstances that may be applied. The infringer is personally and individually liable for paying the fine. The base level of the fine is set based on the gravity and the duration of the investigated deed. Such base level may be increased or reduced depending on the existence of aggravating or the mitigating circumstances. For example, mitigating circumstances include the effective implementation of a competition law compliance programme and active cooperation with the RCC’s case handlers. Aggravating circumstances include recidivism or reinitiating the cartel. In case of associations of undertakings, the fine applied to associations of undertakings may not exceed 10% of the total turnover of each member active on the market affected by the association’s infringement.

Right of appeal against civil liability and penalties Sanctioned parties may appeal the RCC’s decision in order to seek its annulment before the Bucharest Court of Appeal. The decisions may be challenged within 30 days upon their communication. The court has the prerogative to review the decision under all aspects of fact and law. Almost all decisions issued by the RCC are subject to annulment. Some procedural omissions or errors made during the investigation or in the RCC’s decision-making process may be challenged only within a specific term (e.g., 72 hours from communication for judicial authorisation of dawn raids). Decisions regarding access to confidential information are no longer qualified anymore as unilateral administrative acts. Therefore, they may be challenged only along with the RCC’s final decision with respect to the investigation. There are 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. Also, the courts have started to admit a wider range of evidence (e.g., expert appraisements). There are no officially acknowledged and certified competition experts that may be used to establish the existence of cartels in court, but the judge may ask non-binding opinions from “specialists” in competition.

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Up to now, we have limited cases where the court has overturned the 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 by conducting an analysis of the proportionality of the said fines.

Criminal sanctions As mentioned above under “Overview of the law and enforcement regime relating to cartels”, criminal liability for competition law infringements is exceptionally triggered. To the best of our knowledge, there has been only one case in which an individual was criminally prosecuted for participation in a cartel. However, we expect anti-competitive criminal case- law on bid-rigging to be banned by article 246 of the New Criminal Code. 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 information the RCC will provide to other authorities: all confidential information obtained by competition law-specific procedural instruments, including information received in the context 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 clear rules should be enacted to: (a) introduce specific boundaries to information exchanges with prosecutors; (b) increase cooperation transparency; and (c) ensure the protection of the parties’ rights under the RCC’s investigation.

Cooperation with other antitrust agencies 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. Also, showing close cooperation between the RCC and other national competition authorities is the Cartels Office’s legal possibility 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. The cooperation between the RCC and other foreign EU competition authorities is in a reinforcement process. For instance, in 2019, the RCC has conducted dawn raids on the territory of other EU Member States (Italy and Belgium) in the context of the investigation of the immunoglobulin market. Cooperation between competition authorities will be further reinforced under the updated legal framework of the Directive ECN+ and was adopted and must be transposed into

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Popovici Nițu Stoica & Asociații Romania our national legislation by 4 February 2021. In a nutshell, the Directive focuses on the strengthening of enforcement powers granted to competition authorities and on creating a clearer cooperation legal framework between EU competition authorities.

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. In this sense, the RCC may issue sanctioning decisions addressed to foreign companies.

Developments in private enforcement of antitrust laws The domestic competition framework acknowledges third parties’ right to file damage claims in order to obtain reparation of harm caused by anticompetitive behaviour. Any person responsible for an anticompetitive act has the obligation to repair the damage caused. In this sense, the main principle is the full reparation of the harm suffered (effective loss, lost profits and interests). Damage claims may be filed both before (so-called stand-alone actions) or after the issuance of a sanctioning decision by the RCC (so-called follow-on actions). In both cases the statute of limitation is five years, which starts to run from the moment when the plaintiff knows or should have known of the infringement, the damage causes and the identity of the infringer. Representative actions for damages on behalf of consumers brought by certain bodies or “class actions” are also included. A key element regarding cartels is that the latter are presumed to cause harm. In this way the burden of proof of the claimant is eased. Another tool for easing damage claims is the disclosure of evidence procedure which is regulated by our national legislation. However, despite the transposition of the Directive on private enforcement in 2017, this field remains a developing area in Romania.

Reform proposals Before entering into details regarding the reform proposals, it is of interest to highlight several legislative reforms that were enacted in 2020 and have an impact on cartel enforcement policy. 2020 was an astonishing prolific year when it comes to legislative reforms. (a) Ordinance 39/201727 transposing the European Directive on private enforcement28 has been declared unconstitutional for procedural reasons. In this context, Ordinance 170/202029 was adopted. The Ordinance sets up a presumption that the prejudice caused by cartels consists of price increases with 20% of the products or services subject to the cartel and another presumption according to which abuse of dominant position causes harm. (b) Competition law was amended through Ordinance 170/2020 which now provides for fines a minimum threshold of 0.5% from the total revenues achieved in Romania in the financial year prior to the fining decisions vs. the maximum threshold of 10% from the total worldwide turnover. In addition, based on the Ordinance 170/2020, micro-enterprises may pay only half of the minimum of the fine imposed by the RCC. This favourable treatment is granted exclusively to micro-enterprises, as it was recently confirmed by a decision issued by the Supreme Court.30 Further on, Ordinance 170/2020 expressly provides that the RCC will take into consideration the effective economic capacity of the infringers to produce an important

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prejudice to other companies and consumers and thus establish the quantum of the fine in order to ensure a dissuasive effect. In addition, the RCC may also take into consideration that bigger enterprises usually have economic and legal infrastructures and knowledge which enable them to assess easily the illegal character of their behaviour and the attached consequences. Moreover, Ordinance 170/2020 established the criteria which the RCC takes into consideration when establishing the fine imputed to a specific company. Besides the already known criteria such as the gravity of the deed, its duration, the existence of mitigating or aggravating circumstances, the capacity of the company to actually pay the fine, a new criterion is mentioned – the intermediary financial benchmarks based on which the final quantum of the fine shall be established in the maximum limit provided by the law such as the total revenues realised in Romania or other types of revenues. (c) The RCC’s instructions regarding fine individualisation have been amended twice in 2019 and further on in 2020. Among the most important modifications, we signal the fact that the maximum 30% reduction for recognising the anticompetitive deed may be granted only if the company expresses its intention to start discussions regarding the recognition of the deed imputed in six months from the moment the company has known about the launching of the investigation. Also, the instructions provide several thresholds of reduction depending on the share of revenues generated from the products/services subject to the anticompetitive deed. (d) The Instructions regarding the commitments procedure now provide that should the RCC reject the request of the investigated to company to enter into discussions regarding potential commitments, the said company may not request again the initiation of discussions regarding potential commitments, unless significant changes have occurred on the market. In this case, the company may request only once to initiate such discussions. (e) The RCC’s Regulation procedure has also been amended providing that investigation team shall study all proofs and arguments provided by the parties and shall communicate any modifications regarding the object of the investigation. Also, it is provided that the investigation team may organise meetings with the parties involved in principle once every six months. Besides these recent reforms, there is also one project currently under debate in Parliament which provides that in case the turnover of the companies that have infringed competition law is below €1 million, the RCC may apply the fine by considering only the turnover achieved on the relevant market concerned by the infringement. The President of Romania has submitted to the Parliament a request for re-examination.31 We remind here that there was a second project in discussions, which mentioned that the percentage of the fine should be calculated based on the turnover generated from the sale of the products or services which are subject to the anticompetitive behaviour. Up until now, this project has been rejected by the Senate.32 In addition, as mentioned above, the Directive ECN+33 was adopted and must be transposed into our national legislation by 4 February 2021. In a nutshell, the Directive focuses on the strengthening of enforcement powers granted to competition authorities and on creating a clearer cooperation legal framework between EU competition authorities.

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Endnotes 1. Competition Act no. 21/1996 republished in the Official Journal of Romania no. 153 on 29 February 2016. 2. Amended through Emergency Ordinance 170/2020. 3. RCC Regulation Procedure, published in the Official Gazette, Part I no. 601 of 26 July 2017. 4. http://www.consiliulconcurentei.ro/wp-content/uploads/2020/01/raportul_privind_ evolutia_concurentei_in_sectoare_cheie_2019_ok_web-1.pdf. 5. http://www.consiliulconcurentei.ro/wp-content/uploads/2020/03/amenzi_paza_ian_2020. pdf. 6. http://www.consiliulconcurentei.ro/wp-content/uploads/2020/03/amenda_semnalizare_ rutiera_feb_2020.pdf. 7. http://www.consiliulconcurentei.ro/wp-content/uploads/2020/09/amenzi-drumuri-pitesti- sept-2020.pdf. 8. http://www.consiliulconcurentei.ro/wp-content/uploads/2021/01/Amenda-lemn- ian-2021.pdf. 9. http://www.consiliulconcurentei.ro/wp-content/uploads/2021/01/Amenda-masini-agr- ian-2021.pdf. 10. http://www.consiliulconcurentei.ro/wp-content/uploads/2021/01/Amenda-Leasing-fin- ian-2021.pdf. 11. http://www.consiliulconcurentei.ro/wp-content/uploads/2020/12/angajamente-leasing- op-dec-2020.pdf. 12. http://www.consiliulconcurentei.ro/wp-content/uploads/2020/03/insp_parcari_brasov_ ian_2020.pdf. 13. http://www.consiliulconcurentei.ro/wp-content/uploads/2020/03/insp_salubriz_mures_ ian_2020.pdf. 14. http://www.consiliulconcurentei.ro/uploads/docs/items/bucket12/id12280/ghid_privind_ conformarea_cu_regulile_de_concurenta.pdf. 15. http://www.consiliulconcurentei.ro/wp-content/uploads/2019/10/ghid_conformare_ oct_2019.pdf. 16. http://www.consiliulconcurentei.ro/uploads/docs/items/bucket15/id15807/masuri_ mar_2020.pdf. 17. https://ec.europa.eu/competition/ecn/202003_joint-statement_ecn_corona-crisis.pdf. 18. http://www.consiliulconcurentei.ro/wp-content/uploads/2020/04/masuri_ce_mar_2020. pdf. 19. https://ec.europa.eu/info/sites/info/files/framework_communication_antitrust_issues_ related_to_cooperation_between_competitors_in_covid-19.pdf. 20. https://ec.europa.eu/health/sites/health/files/human-use/docs/guidelines_isc_en.pdf. 21. http://www.consiliulconcurentei.ro/wp-content/uploads/2020/06/centre-comerciale- iun-2020.pdf. 22. http://www.consiliulconcurentei.ro/wp-content/uploads/2020/12/BigData_executive_ summary.pdf. 23. http://www.consiliulconcurentei.ro/wp-content/uploads/2020/06/Monitor-Masti- iun-2020.pdf. http://www.consiliulconcurentei.ro/wp-content/uploads/2020/06/Monitor-Masti- iun-2020.pdf. 24. https://www.news.ro/economic/consiliul-concurentei-urmareste-pretul-testelor- pentru-depistarea-covid-si-va-anunta-curand-daca-va-demara-o-investigat ie-1922405529272020101519568866.

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25. http://www.consiliulconcurentei.ro/wp-content/uploads/2021/01/teste-rapide-ian-2021. pdf. 26. http://www.consiliulconcurentei.ro/wp-content/uploads/2021/01/teste-rapide-ian-2021. pdf. 27. Emergency Ordinance no. 39/2017 published in the Official Gazette, Part 1, no. 422, 8 June 2017. 28. Directive 2014/104/EU of the European Parliament and of the Council of 26 November 2014 on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union Text with EEA relevance, OJ L349. 29. Ordinance no 170/2020, published in the Official Gazette, Part 1, no 952 of 16 October 2020. 30. Supreme Court, Decision no 72/2020, published in the Official Gazette of 25 January 2021. 31. http://www.cdep.ro/pls/proiecte/docs/2017/cd582_17.pdf. 32. http://www.cdep.ro/proiecte/2019/000/70/2/pl79.pdf. 33. Directive (EU) 2019/1 of the European Parliament and of the Council of 11 December 2018, L11/3 to empower the competition authorities of the Member States to be more effective enforcers and to ensure the proper functioning of the internal market.

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Mihaela Ion Tel: +40 21 317 7919 / Email: [email protected] Mihaela Ion is a partner at Popovici Nițu Stoica & Asociații and the head of the competition practice group. Her areas of expertise cover, in particular, antitrust litigation, unfair trade practices, consumer law, merger control proceedings and state aid. She also assists clients in structuring and implementing compliance programmes and 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, Competition and Regulatory Law from Freie Universität Berlin, a Master’s degree 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.

Vanessa Nistor Tel: +40 21 317 7919 / Email: [email protected] Vanessa Nistor is a senior associate at Popovici Niţu Stoica & Asociaţii. Her practice covers all competition matters, including merger control, antitrust, unfair competition and trading policies. Vanessa holds a Law Degree from Université Paris I Panthéon-Sorbonne, and an LL.M. in International Business Law and a LL.M. in Intellectual Property, both from Université Paris I Panthéon-Sorbonne. Vanessa Nistor is member of the Bucharest and Paris Bars and of the Romanian and French Bar Associations.

Popovici Nițu Stoica & Asociații 239 Calea Dorobanti, 6th floor, Bucharest, st1 District, Postal Code 010567, Romania Tel: +40 21 317 7919 / URL: www.pnsa.ro

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Alla Azmukhanova & Anastasia Sidorenko ALRUD Law Firm

Overview of the law and enforcement regime relating to cartels Cartels in Russia are typically regulated by the Federal Law “On Protection of Competition” No. 135-FZ dated July 26, 2006 (“the Competition Law”), the Code of the Russian Federation on Administrative Offences dated December 30, 2001 No. 195-FZ (“the Code on Administrative Offences”), the Criminal Code of the Russian Federation dated June 13, 1996 No. 63-FZ (“the Criminal Code”) and the Code of the Russian Federation on Criminal Procedure dated December 18, 2001 No. 174-FZ (“the Code on Criminal Procedure”) (together – “Russian Cartel Laws”). The cartel enforcement in Russia is both administrative and criminal. Generally, the main principles of cartel regulations of the Competition Law are aligned with the approach of EU competition law and international best practices. Herewith, there are certain peculiarities, which are highlighted below. The Competition Law (Part 1 Article 11) prohibits agreements between competitors that lead or may lead to the following: • control or fixing the prices, discounts, mark-ups and extra charges (price-fixing); • bid rigging (increasing, reducing or maintaining of prices at tenders); • market sharing according to the territorial principle, volume of sales/purchases, range of products or types of sellers or buyers (market-sharing collusion); • reduction or discontinuance of production of goods (collusion to create a deficit); and • boycotts (refusal to enter into a contract with particular sellers or customers). It should be noted that the cartel prohibition is approached under “per se” doctrine. Whilst such agreement is unlawful in itself, its unlawfulness is not connected with the actual occurrence of negative consequences. The key authority that is responsible for the administrative investigation, decision-making and imposing sanctions for cartels is the Federal Antimonopoly Service (the “FAS”); however, if the case requires criminal prosecutions, the Ministry of Internal Affairs (“MIA”) is also involved. Russian courts, in turn, represent the judicial branch that acts independently from the FAS and MIA and which is exercised by means of constitutional, civil, administrative and criminal proceedings (in particular, it is possible to bring a civil action for damages against a cartel member as well as challenge the FAS or the MIA actions in the Russian courts as being unlawful). In particular, on March 4, 2021, the Plenum of the Supreme Court adopted the Resolution “On certain issues arising in connection with the application by the courts of the antitrust law” No. 2 (“Antitrust Resolution”), which will partly replace the previous Resolution of the Supreme Arbitrazh Court of the Russian Federation (with the exception

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© Published and reproduced with kind permission by Global Legal Group Ltd, London ALRUD Law Firm Russia of some points). The Antitrust Resolution is crucial for law enforcement practice since it removes various complex issues on cartels. More details on this Antitrust Resolution will be given below. Concerning sanctions for anticompetitive horizontal agreements, cartel sanctions for companies are established only by the Code of Administrative Offences setting out an administrative turnover fine and the Competition Law carrying a recovery of civil damages. There is no criminal liability for companies in Russia. Regarding sanctions for individuals, both criminal and administrative liabilities, as well as civil compensation of losses, are established. An administrative liability for individuals may constitute a fine or a disqualification, while a criminal sanction may be expressed in the form of a fine, a disqualification or imprisonment.

Overview of investigative powers in Russia The FAS is the authorised federal executive authority responsible for, amongst other things, the prevention, restriction and suppression of monopolistic activity and unfair competition, and for ensuring that the antimonopoly legislation is observed. The FAS may start a cartel investigation, based on the information received from other governmental authorities, individuals or legal entities, public sources (e.g. a media report) or the results of scheduled (once every three years) and unscheduled inspections (“dawn raids”). According to the Competition Law, the key investigative powers of the FAS during inspections are: requiring the submission of any documents or information as well as explanations of the supplied inputs; copying original documents; carrying out interviews during inspections, which are on a voluntary basis; “imaging” computer hard drives using forensic IT tools; inspecting the premises, buildings and vehicles of the inspected company or individual; and checking accounting documents and other materials. However, there are certain limitations, in particular, the FAS is not entitled to require the documents or information not related to the subject of inspection or ask irrelevant questions, demand original documents, carry out a search of residential premises, and require access to personal telephones or computers. The Competition Law also provides the rights and duties of the company or an individual during the inspection, such as, not to obstruct conduct of inspection, assist inspection officials, provide information and documents at the request of the FAS, answer briefly and clearly on valid questions that do not go beyond the subject of inspection, to examine inspection documents and appeal against the results of inspections (procedural documents), record all actions of the inspection as well as keep video and audio recordings. The Code of Administrative Offences provides certain sanctions for the obstruction of investigations. Refusal of the inspected person or company to present information and documents requested by the FAS, submission of misleading information and documents, and failure to submit the requested data in due course, entails administrative fines in the amount of up to RUB 500,000 for legal entities.

Overview of cartel enforcement activity during the last 12 months In the context of the pandemic, great emphasis was placed on preventing violations. The FAS actively applied rapid response measures (issued warnings and precaution) and, in the opinion of the FAS, this has given positive results.1 As for 2020, in order to reduce the pressure on business during the pandemic, at the initiative

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© Published and reproduced with kind permission by Global Legal Group Ltd, London ALRUD Law Firm Russia of the Ministry of Economic Development and Trade of the Russian Federation, the Resolution of the Government of the Russian Federation No. 438 and the Order of the FAS No. 397/20,2 which limited inspections (including in relation to cartels) were adopted. All scheduled inspections were excluded from the consolidated inspection plan, and unscheduled inspections were carried out only in a remote format. The changes also affected the grounds for unscheduled inspections. Particularly, in addition to general grounds for unscheduled inspections, the following specific ones were introduced: (1) the prosecutor’s request in connection with the received materials and appeals; and (2) the order of the President of the Russian Federation or the Government of the Russian Federation. As for the objects of inspections in 2020, they were mainly retail chains, suppliers and manufacturers of socially important products. In addition, during the pandemic, the consideration of many cases was postponed, but in general, both antitrust cases and administrative proceedings were set up to be conducted online. According to representatives of the FAS, this practice will continue, since this format reduces costs and provides an opportunity to better present position to opponents/ administrative authorities. Finally, in order to reduce the administrative financial burden during the period of overcoming the crisis, the FAS extended (until June 30, 2020)3 the instalment period for paying administrative fines. During the pandemic, there was a noticeable increased attention of the FAS to socially important markets.4 Fundamentally, some market participants tried to make profits on medicines, disinfectants and personal protective equipment. The FAS actively monitored prices for medical masks.5 In addition, the FAS began to identify more cartel agreements in product markets, which were relatively calm before the pandemic. Bread and bakery markets, buckwheat groats, sugar, milk, and sunflower oil are now under the close scrutiny of the FAS.6 In the context of the pandemic, it became clear that without “digitalisation”, even traditional markets would become impossible to work. Accordingly, antitrust mechanisms of influence on digital platforms are very important. According to the Deputy Head of the FAS, Andrey Tsarikovsky: “It was easy for us to switch to telecommuting during the pandemic, because there were already a lot of digital tools. We already had a Big Digital Cat [a program that itself detects signs of antitrust violations], we sent it a little to monitor prices for food and essential products.”7 For example, a cartel conspiracy in procurement tenders for the National Medical Research Center was identified using the Big Digital Cat web service (“Big Digital Cat”) developed by the FAS.8 According to the FAS, the Big Digital Cat is aimed at not only screening, but also collecting, recording and analysing evidence.9 In addition, many antitrust mechanisms of influence on digital platforms have already been developed by the FAS in the Fifth Antimonopoly Package, which, according to the FAS representatives, should be adopted as soon as possible. In particular, the Fifth Antimonopoly Package assumes that the use of the price algorithm will become an aggravating circumstance in case of liability for the cartel, and the admissibility rules will apply to all cases of coordination of economic activity. In addition, an illustration of tightening the policy is a continuing practice of bringing individuals to criminal liability.10 In July of 2020, the court handed down the fifth conviction in criminal cartels (against CEOs of companies).11 The majority of bid rigging (collusive tendering) cases is the peculiarity of cartel investigations in Russia. According to the FAS’ statistics, 88% of cartels in 2019 are bid rigging cases.12

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A significant number of cartels and other anticompetitive agreements are identified annually in the Russian Federation. In 2019, the FAS initiated 944 cases on anticompetitive agreements, 424 of which were cases on cartels. Compared to 2018, the number of cartels increased by 22% (previously 332 cases). At the beginning of 2021, one of the largest fines amounted to more than RUB 400 million for the cartel in the scheme of the supply of fuels and lubricants.13

Key issues in relation to enforcement policy In 2020, the FAS took all necessary measures to reduce the burden on business entities in connection with COVID-19. The number of inspections carried out in the first half of 2020 (159) decreased by almost 15% compared to the same period in 2019 (187). In addition, the territorial bodies were instructed to reduce the load in the form of information requests in the implementation of the control (supervisory) functions of the FAS.14 A third part of anticompetitive agreements are related to the restriction of competition in the field of repair and construction, including highways of federal, regional and local importance, including their maintenance and improvement of adjacent territories by 37%, medicines by 11%, food by 10%, transportation by 8%, real estate transactions by 6%, fuels and lubricants by 5%, and major repairs by 4%.15 It is important to mention that the authority paid specific attention to the pharmaceutical market. During the coronavirus pandemic in the first half of 2020, the FAS initiated 8% more cases on the pharmaceutical market of the Russian Federation than in the same period of 2019.16 Regarding general trends, during the pandemic, the activity of the cartels decreased. According to Mr. Andrey Tenishev: “The reason for this may be two factors: more responsible behavior of honest business and a decrease in the activity of cartels in public procurement and their reorientation to product markets… For 9 months of 2019, 840 cases of anti- competitive agreements were initiated, including 345 cases of cartels, for 9 months of 2020 - 480 cases of anti-competitive agreements, of which 203 are cases of cartels. The decrease here is 42.8% and 41.1%, respectively.”17 In addition, the cartel map has changed – there are fewer cartels in biddings and more cartels in markets. As mentioned above, the FAS began to identify more cartel agreements in markets, which were relatively calm before the pandemic. Now the markets of bread, cereals, sugar, oil, gasoline and oil products are now under the close scrutiny of the FAS. Moreover, during the pandemic, the topic of “purchasing alliances” (the so-called “crisis cartels”) also became interesting, since many regulators of foreign countries reacted by temporarily softening the approach to cooperation between companies, if such cooperation is necessary to ensure the availability of medicines, medical devices and other vital products. According to the FAS, purchasing alliances will be able to create small competing enterprises to counteract large players.18 The FAS is currently preparing a regulatory framework for their formation of purchasing alliances and believes that they can be permitted not only between buyers, but also sellers, provided that several conditions are met.

Key issues in relation to investigation and decision-making procedures Once an investigation is initiated, a special commission for the case review shall be formed consisting of at least three officials, with the head/deputy head of the FAS/head of the relevant department presiding. The commission shall complete reviewing the case within

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© Published and reproduced with kind permission by Global Legal Group Ltd, London ALRUD Law Firm Russia three months from the date of the initiation of the investigation. It has a right to extend the period up to six additional months. Powers of the commission include rights to request documents, data and explanations in written or oral form in order to prepare a statement of objections, market assessment and adoption of different acts including procedural ones, mandatory orders to perform certain actions and the final decision on whether the violation of the competition legislation occurred. During the consideration process in the FAS, the authority may request legally protected secret information. However, there are certain privileges, such as advocate-client communications or bank secrets. It should be noted that in-house legal advisors have no privileges under the Russian laws. At the same time, the FAS is proactive in requiring any documents or information that leads to disputes in courts (e.g. recently there has been an interesting case between the FAS and a bank,19 in which the Supreme Court defended a banking secrecy from the FAS request). In Russia, there are certain specifications in the procedure for administrative liability imposition. In particular, the decision on violation of the competition legislation triggers proceedings on administrative liability (i.e. this is the separate procedure, which follows completion of the competition investigation). This procedure may be initiated within one year from the date of entry into force of the final decision on violation of the competition legislation. As a result of this procedure, a special administrative regulation is issued, which shall indicate an amount of a fine imposed (or other administrative sanction). There is a limitation period for an antimonopoly violation, which is three years from the date of the breach or its completion or detection (in case of continuing violation). Under the Competition Law, the antimonopoly proceedings cannot exceed three months, except in the case that there is a need for additional information, at which the consideration period can be extended, but by not more than six months. After the abovementioned proceedings, in case the relevant thresholds are met, the FAS provides the MIA with the investigation materials and the divisions of the MIA may start criminal investigations under the Code of Criminal Procedure. The MIA prosecutes only cartel cases, which constitute criminal crimes. The Criminal Code states a 10-year limitation period from the date of the crime committed. The company/individual is entitled to challenge not only final decisions on the case but also actions and orders of the FAS. In particular, an order of a head of an antimonopoly authority to conduct an inspection can be challenged in court. Moreover, the following procedural documents may be appealed in court: decisions; actions of authorities; their officials not adopted in the procedural form; rulings to initiate proceedings on violation of the Competition Law; and warnings of the antimonopoly authority, etc. Regardless of parties and the nature of an appeal, disputes concerning violation of the Competition Law shall be considered by arbitrazh courts (analogue to commercial courts of several European jurisdictions competent in resolving disputes in the field of commercial activity). In case of the appeal to an arbitrazh court performance of the prescription or ruling is suspended until the decision of the arbitrazh court comes into force. The procedure of submission, consideration and adoption of decisions on the claim is provided for by the arbitrazh procedure laws. Separately, pursuant to the Competition Law, decisions and prescriptions of the territorial bodies of the FAS (there are 84 territorial divisions of the FAS in regions of the Russian Federations) may be appealed during the three-month period from the day of their adoption. Decisions and prescriptions of the territorial antimonopoly authority may be appealed to the collegial body of the FAS, as well as to arbitrazh courts.

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In case of appeal to the collegial body of the FAS, the claim is to be considered within 30 days from the date of its registration. The term may be prolonged if the head of the collegial body of the FAS decides that it should analyse the claim more comprehensively or request additional information, but for not more than 30 days. Performance of the prescription or filing is suspended until the decision of the collegial body of the FAS comes into force. Upon the appeal examination, a decision on compliance or non-compliance, partly or in full, of the decision of the antimonopoly authority may be adopted. Generally speaking, procedural rights in cartel investigations are currently developing in Russia. It is currently proposed to amend the Competition Law and separate the procedural part, since at the moment these procedural provisions are not systematised, there are fragments in the Competition Law and in the Code on Administrative Offences regarding the procedural rights of parties to cartel investigation, but it is proposed to combine them into one document to be systematised.

Leniency/amnesty regime There are two leniency programmes that exist in Russian legislation as separate provisions incorporated in the Code on Administrative Offences and in the Criminal Code. The institute of leniency is developing fast in Russia. According to the FAS, it annually receives about 100 applications on a leniency programme in order to avoid criminal or administrative liability. The statistics show that the role of such regime increases. The provisions of the administrative leniency programme are included in the special note to Article 14.32 of the Code on Administrative Offences. Under the Code of Administrative Offences, legal entities engaged in restrictive agreements or concerted practices have an opportunity to take part in a leniency programme under which companies that (i) voluntarily report their own participation in anticompetitive agreements or concerted practices to the FAS, (ii) cease their participation in the agreement or concerted practice, and (iii) provide the FAS with documents and information sufficient to establish the fact that the offence was committed, and the FAS did not have these documents or possess this information earlier, are fully relieved from administrative liability. Full immunity is possible in respect of all anticompetitive agreements (for example, cartels, vertical restraints and other anticompetitive agreements). In practice, leniency can be applied for after the FAS has started its investigation and before a decision is issued by the FAS commission reviewing the relevant case. Additionally, if an undertaking receives immunity from administrative liability, its managers also receive immunity from administrative liability. Individuals seeking such immunity are therefore not required to make a separate application. Herewith, it is important to note that a party who escapes administrative liability through the leniency programme does not automatically escape criminal liability. These two processes exist in parallel. Criminal leniency rules are provided for in the Criminal Code of the Russian Federation as a special note to Article 178, which establishes liability for entering into cartel agreements. Recently certain amendments were made to this article excluding criminal liability for abuse of a dominant position. The criminal leniency programme is administered by the MIA and the FAS simultaneously. An application for leniency from criminal liability must be made separately from an application for administrative leniency. The applicant must turn himself in to the police.

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At the moment there is a draft law refining the criminal leniency regime. Previously, in order to be exempted from criminal liability, a cartel applicant in addition to the abovementioned key steps had to pay all the damage/income from the cartel (including caused/received by other participants). In practice, this was almost impossible, so this article was not active. Now the applicant needs only “to compensate for the damage caused by him, to return the income received by him or otherwise to make amends for the harm caused by him” (there is no need to compensate for the entire cartel – only himself). The FAS would like to entirely exclude compensation for damage/income (in order to popularise the institute of leniency), but law enforcement authorities do not permit this. However, the FAS will try again to exclude the provision on compensation for damage/income while considering the draft in the State Duma.

Administrative settlement of cases The Russian Cartel Laws do not provide the equivalent of the administrative settlement as in the EU. The Competition Law does not establish the rules under which a company may offer commitments to the FAS in order to avoid initiating antimonopoly proceedings. However, in the course of the FAS consideration/hearing of the case, a company or an individual may propose some commitments to the authority in order to agree on the format and content of the antimonopoly authority’s remedies and reduce the administrative fine. Moreover, it should be noted that there is an equivalent option in court. Thus, if there is a court action between the FAS and a company, at each point of time a party may propose to the authority a voluntary settlement agreement that might be accepted by the court in the future.

Third-party complaints Under the Competition Law, any third party may submit a complaint to the FAS, which should be considered within 30 days. Herewith, there is a right to extend the review period up to two months. Cartel investigations quite often are initiated on the basis of a complaint of a third party (e.g. on the basis of consumers, clients, or other public organisations like the Anti-Corruption Fund or the organisation of small and medium enterprises, OPORA Russia). As an example of the cartel case, which was initiated on the basis of the complaint, we may consider the cartel agreement on the market of locking and sealing mechanisms (“LSMs”) necessary for containers or tanks sent by rail. Since 2008, LSMs manufacturers have concluded and implemented an anticompetitive agreement, the purpose of which was to establish and maintain prices, as well as to divide the market by volume and buyers (consumers) of LSMs used in rail transportation. The case was started on the basis of several complaints filed by the customers of the LSM manufacturers. There is a right to challenge the decision of the FAS if it refuses to consider the complaint.

Civil penalties and sanctions Article 14.32 of the Administrative Code differentiates administrative liability for different types of violations such as cartel conclusion, bid rigging (cartel within auctions/tenders), prohibited vertical anticompetitive agreements, coordination of economic activity as well as concerted practices. As a rule, administrative liability under Russian law includes fines for entities or officials (employees in organisations, which are guilty of committing the relevant offence on behalf of the entity). Herewith, additional (or alternative) sanctions for officials

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© Published and reproduced with kind permission by Global Legal Group Ltd, London ALRUD Law Firm Russia are also possible. In the competition area, such sanction may include disqualification, which is a prohibition to hold certain positions for a certain period. Below is the description of certain types of liability. A. Cartels: • For officials: a fine up to RUB 50,000 or disqualification from one to three years. • For entities: a turnover fine in the amount 3–15% of revenue received from the sale of goods/services in the market, where violation occurred, or in the amount of costs of purchase of goods/services in the market, where violation occurred, but not less than RUB 100,000. • Turnover fines in Russia shall be calculated for the calendar year preceding the violation and shall relate to the particular entity only, which committed the offence, rather than to its group. B. Bid rigging (cartel within auctions/tenders): • For officials: a fine from RUB 20,000 to RUB 50,000 or disqualification of up to three years. • For entities: a turnover fine of 10–50% of the initial price of the subject of an auction but not more than 4% of revenue derived by an entity from the sale of all goods/ services and not less than RUB 100,000. The Russian law usually provides for the minimum and maximum possible fines. The exact amount of a fine is calculated on a case-by-case basis and is based on the below principles. First, the FAS shall calculate minimum and maximum fines based on the data of revenues of an entity for the particular year in the market, where violation occurred. After that, the FAS needs to calculate the “basic” fine, which is the difference between the maximum and minimum amounts of a fine, plus ½ of the difference between them. In case there are no mitigating and aggravating circumstances, a fine is imposed in the sum of a “basic” fine. Each mitigating circumstance reduces the final amount of a fine by ⅛ of the difference between the maximum and minimum amounts for a fine, while each aggravating circumstance, for the opposite, increases it accordingly.

Right of appeal against civil liability and penalties The undertaking has a right to appeal the administrative fine both during an administrative proceeding or in court. Various mechanisms for mitigating administrative responsibility are established by the Code on Administrative Offences, which may in certain circumstances reduce an administrative fine in the amount of less than the minimum. In particular, the fine may be reduced in case of: a critical financial position; assistance for the authority to identify the violation; voluntary execution of the remedies; and/or unintentional nature of company’s actions, etc. Both the court and the official of the authority have a right to reduce the size of sanctions assigned by the administrative authority. The undertaking may start discussions regarding the amount of the fine even within the administrative procedure in the FAS, in particular, while working on an administrative protocol. From a practical point of view, it seems more effective to file substantial objections to the fine imposed after signing the protocol, since after that the materials would be transferred to the FAS legal department, which can correctly assess the objections. Even in the case that the attempts of the undertaking in the FAS were unsuccessful, the Competition Law still permits parties to appeal the FAS decision on the amount of a fine in court. However, it is common practice that the Russian courts often decide cases in favour

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© Published and reproduced with kind permission by Global Legal Group Ltd, London ALRUD Law Firm Russia of the antimonopoly authority. According to representatives of the FAS, over the past two years, the courts have overturned only 11% of the decisions taken by the antimonopoly department. At the same time, in total, 48.4% of decisions tried to appeal to the courts.20 An interesting cartel appeal – Pangasius cartel (2016) – is worth mentioning. The court proceedings of this case lasted for approximately three years, but that cartel appeared to be too difficult to prove for the FAS. The Supreme Court decided that Russian importers of pangasius from Vietnam did not participate in the anticompetitive agreement. During the hearing of the case, the parties managed to convince the court that the FAS had no direct evidence of the cartel.

Criminal sanctions Conclusion of a cartel may lead to criminal liability under certain circumstances. Article 178 of the Criminal Code establishes criminal liability for entering into cartels, if it led to major damage (i.e., equal to or exceeding RUB 10,000,000) to citizens, entities, state, or resulted in major income (i.e., equal to or exceeding RUB 50,000,000). The following types of criminal liability are possible: • If it caused a damage exceeding RUB 10,000,000 or resulted in income exceeding RUB 50,000,000 (i.e. the basic criminal sanctions): a fine in the amount from RUB 300,000 to RUB 500,000, or in the amount of salary for the period from one to two years, or obligatory works up to three years with deprivation of rights to hold certain positions up to one year, or imprisonment up to three years with deprivation of rights to hold certain positions up to one year. • If there are certain circumstances, the liability may be higher. The maximum sanctions within this Article are established as: obligatory works up to five years with deprivation of rights to hold certain positions from one up to three years; or imprisonment up to seven years with deprivation of rights to hold certain positions from one up to three years. Under Russian law, criminal liability is possible for individuals only, legal entities cannot be subject to criminal liability. After considering the case, the FAS transfers all the materials to the MIA that initiates a criminal case. Sometimes the MIA starts a criminal case by itself, which happened in a recent criminal case – the Samara region case of Modern Medical Technologies LLC (2019) – where the court sentenced the officials to imprisonment; the MIA initiated the case on its own. Herewith, as a rule, it is the FAS that transfers the materials, and then the MIA initiates a criminal case. The FAS actively interacts with law enforcement agencies. Based on the materials of the FAS, as well as the direct participation of employees, the antimonopoly department, the investigating authorities of the MIA in 2019 initiated 37 criminal cases (12% more than in 2018), of which 22 cases (29% more than in 2018) were under Article 178 of the Criminal Code of the Russian Federation.21 Herewith, as mentioned above, the FAS now considers the possibility to tighten criminal liability.

Cooperation with other antitrust agencies The FAS actively cooperates with other competition authorities in foreign jurisdictions and it is primarily associated with work within the framework of the Eurasian Economic Union (the “EAEU”), BRICS and the Commonwealth of Independent States (“CIS”). In addition, the FAS participates in the activities of international organisations dealing with competition policy, such as the Organisation for Economic Co-operation and Development (“OECD”), the International Competition Network (“ICN”), the United Nations Conference on Trade and Development (“UNCTAD”), as well as the Asia-Pacific Pacific Economic Cooperation (“APEC”).

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The EAEU Treaty as of May 29, 2014 as well as Annex 19 establishes supranational competition regulation principles and a framework for the EAEU Member States. These principles are rather similar to the principles provided by the Competition Law but cover trans-border markets within the EAEU. The EAEU is one of the most important platforms for the cooperation of competition authorities of the EAEU Member States. The FAS aims to use more often the following cooperation tools provided by the EAEU Treaty: (a) a request for information/conduct of particular procedural actions with respect to the entities active in the territory of the relevant EAEU Member State; (b) coordination of competition enforcement policy of the EAEU Member States with respect to particular entities from non-EAEU countries, whose actions may affect competition in the EAEU; and (c) a request to initiate competition enforcement proceedings against entities active in the territory of another EAEU Member State, which committed the violation negatively affecting other Member States. Cooperation within BRICS countries is also an important direction of the FAS activities. A number of events with the participation of representatives of the BRICS countries were held where the aim is to deepen the dialogue and cooperation between competition authorities of BRICS countries.

Cross-border issues It should be noted that the EAEU system is not a joint, but a two-tier system of regional and national competition issues, depending on whether the negative impact affected (or may affect) cross-border or national markets. The FAS does not consider violations in cross-border markets. The negative impact on cross-border markets should be considered as a single violation, resolved by the Eurasian Economic Commission. Conducting a simultaneous review, investigation, prosecution by the EEC and authorised bodies of a Member State in relation to the same violation is impossible. It is necessary to transfer the case on jurisdiction in accordance with the established competence in order to exclude the suppression of violations of the general rules of competition by bodies that do not have the authority to do this. Despite the fact that the EEC started its operations just a couple of years ago, in 2018, the authority considered 27 complaints, conducted nine investigations and issued six proposals. Moreover, in order to create effective mechanisms to combat restrictive business practices and violations of anti-trust laws of a cross-border nature, the FAS has developed a draft convention on the fight against cartels. The Convention, as an international legal act, is called upon to determine the principles and foundations for the interaction of Member States in the fight against cartels at the international level. Regarding cross-border markets of the EAEU, it is very interesting that during the pandemic, by decisions of the EEC Council, amendments were made to the Procedure for considering cases and the Methodology for calculating fines on new grounds for suspending time limits.22 • Changes made to the Procedure provide for the suspension of the period for considering the case for the duration of the restrictions due to the pandemic. According to the current Procedure, the maximum period for considering a case is 120 working days and there is no provision for a suspension of the period for consideration in connection with a pandemic. • Amendments to the Methodology for calculating fines will permit exclusion from the statute of limitations; restrictions of such were set due to the pandemic.

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Developments in private enforcement of antitrust laws Under the Russian Cartel Laws, civil liability (private damages) for competition violations is also possible; however, it is rather rarely used/sought in practice due to some legal difficulties in part of proving all elements by claimants. Private follow-on claims for damages are more common in Russia. At the same time, there are almost no “standalone” actions in court without an initial appeal to the FAS. However, it is important to consider that such right exists. It is widely believed in practice that the decision of the antimonopoly body on violation is only half of the task that must be solved before filing a lawsuit to the court. It is still necessary to calculate the damages, prove the validity of the calculation and the cause-effect relation in court. The FAS attempts to promote using these kind of claims; e.g., in October 2017 it issued Clarifications on Determination of Damages Caused by Violation of Competition Legislation, which summarised main approaches to the ways of calculating the damages for different types of violations. However, there is still a need for other government institutions support, including courts support. Now it is planned to develop a strong mechanism for recovering civil damages by anti-trust violations since the relevant practice has not been formed yet. In addition, the new Antitrust Resolution lays down important rules and principles for the application of cartel rules. For example, it emphasises that the similarity of the behaviour of several economic entities in itself cannot indicate a cartel agreement. It is necessary to consider whether there were other reasons for similar behaviour: for instance, the same assessment of the market situation. The burden of proof of the cartel collusion lies with the antimonopoly authority. Furthermore, according to the Antitrust Resolution, agreements between consumers and suppliers can also form a “cartel” structure. For example, if one can prove that an agreement between them was made to prevent other consumers from receiving similar discounts, or to force a supplier to give discounts that are not provided to competitors. There was another crucial provision: simultaneous qualification of the behaviour of economic entities as an agreement restricting competition and as the coordination of economic activity is not permitted. Finally, considering that a group of persons is considered as a single person according to the Competition Law, the Supreme Court indicates that a person who is formally included in a group of persons may not be subject to the legal regime of this group if, during the consideration of the case, it is established that factually this person is autonomous in determining his behaviour on the product market, for example, due to the lack of sufficient legal (contractual, corporate) and organisational (managerial) means of influence on its behaviour by other members of the group.

Reform proposals First, it is worth mentioning that the Federal Law on Antimonopoly Compliance was adopted. According to this Federal Law, competition compliance shall be defined as a complex of legal and organisational measures established by local acts of an entity or by any other company from its group, which has an obligatory effect for this entity and which is aimed at compliance with the competition legislation and prevention of the competition violations. The Federal Law also provides establishment of a priori legality of all actions, provided for by a compliance programme, if the antimonopoly authority already approved it. Taking into account the fact that the market is constantly changing, the FAS is constrained to continuously develop and adapt new mechanisms of antimonopoly regulation to new realities. For example, in order to serve the needs of the current market environment and to answer the challenges of the digital markets, the FAS prepared significant amendments to the Competition Law (the so-called “Fifth Antimonopoly Package”). In particular, the Fifth

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Antimonopoly Package provides an introduction to the concept of “price algorithm”, which will be applied, in particular, in the course of cartel investigations. Furthermore, there are plans to introduce for consideration the following amendments: • differentiation and increasing of the criminal liability for cartels (the FAS suggests certain amendments to the Criminal Code, according to which the criminal liability will be imprisonment for a term of four to eight years); • introduction of a turnover-based fine for obstructing inspections of the FAS; • broadening the FAS investigative powers (including the right to receive original documents and hard evidence); and • excluding the compensation of damages in a criminal leniency regime and giving the relevant methodological guidance describing the leniency procedure and all sensitive questions in detail. The most significant results of the work of the FAS in 2019 and the first half of 2020 are the following; • introduction of a block of bills aimed at improving mechanisms for combatting cartels and other anticompetitive agreements (bill No. 848392-7 was adopted in the first reading); and • development of the concept and implementation of the first module of the “Anticartel” system into the activities of antimonopoly authorities to identify and prove agreements restricting competition, taking into account the digitalisation of antiompetitive practices of bidders.

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Endnotes 1. Available at (in Russian): https://fas.gov.ru/news/30018. 2. Available at (in Russian): https://fas.gov.ru/documents/686621. 3. Available at (in Russian): https://fas.gov.ru/news/29843. 4. Available at (in Russian): https://fas.gov.ru/publications/22029. 5. Available at (in Russian): https://fas.gov.ru/pages/monitoring-cen-na-maski. 6. Available at (in Russian): https://fas.gov.ru/news/29725, https://fas.gov.ru/news/29720, https://fas.gov.ru/news/29848, https://fas.gov.ru/news/29752; https://fas.gov.ru/ news/29868, https://fas.gov.ru/news/29765. 7. Available at (in Russian): https://pravo.ru/story/223161/. 8. Available at (in Russian): https://newsib.net/ekonomika/bolshoj-cifrovoj-kot-naxodit- kartel-za-den.html. 9. Available at (in Russian): https://fas.gov.ru/news/28865. 10. Available at (in Russian): https://fas.gov.ru/publications/21961. 11. Available at (in Russian): https://pravo.ru/story/228217/, https://fas.gov.ru/news/30075. 12. Available at (in Russian): https://fas.gov.ru/documents/687358. 13. Available at (in Russian): http://fas.gov.ru/news/31113. 14. Available at (in Russian): https://fas.gov.ru/documents/687358. 15. Available at (in Russian): https://fas.gov.ru/news/30504. 16. Available at (in Russian): https://fas.gov.ru/publications/22029. 17. Available at (in Russian): https://www.interfax.ru/interview/735751. 18. Available at (in Russian): https://www.dairynews.ru/news/fas-gotovit-normativnuyu- bazu-dlya-formirovaniya-v.html.

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19. Available at (in Russian): http://kad.arbitr.ru/Kad/Card?number=%D0%9040 -199212/2017. 20. Available at (in Russian): https://pravo.ru/fas15/news/219064/. 21. Available at (in Russian): https://fas.gov.ru/documents/687358. 22. Available at (in Russian): https://cljournal.ru/news/20831/ – http://adilet.zan.kz/rus/docs/ H20EV000099.

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Alla Azmukhanova Tel: +7 495 234 96 92 / +7 495 926 16 48 / Email: [email protected] Alla Azmukhanova is an Associate in the Competition/Antitrust Practice at ALRUD Law Firm. Alla participates in projects related to clearance with the FAS, the Governmental Committee on exercising control over foreign investments, and other state authorities with oversight of transactions in the purchase of shares in companies doing business in Russia. She conducts competitive analysis for complex transactions and large clients. Alla also provides consultancy for various clients on matters concerning compliance with the requirements of Russian antitrust legislation. She graduated from the National Research University – Higher School of Economics law department, with a Bachelor’s degree in civil law. Alla graduated from a Master’s programme at Moscow State Law Academy, law department, specialising in competition law, gaining a diploma with honours. Alla is a member of the International Bar Association (“IBA”) and a member of the Competition Support Association for the CIS countries.

Anastasia Sidorenko Tel: +7 495 234 96 92 / +7 495 926 16 48 / Email: [email protected] Anastasia Sidorenko is a Junior Attorney of Competition/Antitrust Practice at ALRUD Law Firm. Anastasia advises clients on issues relating merger control clearance, tariff regulation, abuse of dominant position, as well as cartel and vertical restrictions in Russia. Anastasia is also engaged in projects concerning compliance of the companies’ activities with the requirements of the Russian antitrust legislation including Strategic Investments Law. In addition, Anastasia consults clients on the antitrust legislation of the Eurasian Economic Union (“EAEU”). Anastasia graduated from Moscow State University, law faculty, with a Bachelor’s degree in civil law, and received a diploma with honours.

ALRUD Law Firm 17 Skakovaya Street, Building 2, 6th floor, 125040 Moscow, Russia Tel: +7 495 234 96 92 / +7 495 926 16 48 / URL: www.alrud.com

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Lim Chong Kin & Corinne Chew Drew & Napier LLC

Overview of the law and enforcement regime relating to cartels Singapore’s Competition Law Regime Enacted in 2004, the Competition Act (Cap. 50B) (the “Act”) is the principal statute governing the competition law regime in Singapore. The Act is administered and enforced by the Competition and Consumer Commission of Singapore (the “CCCS”), which is a quasi-judicial, statutory body established under Part II of the Act. Previously known as the Competition Commission of Singapore (the “CCS”), the CCS was renamed the CCCS when it took on the additional function of administering the Consumer Protection (Fair Trading) Act (Cap. 52A) with effect from 1 April 2018. Cartel matters are decided upon by the CCCS, but the CCCS’s decisions can be appealed to the Competition Appeal Board (the “CAB”). A decision of the CAB can subsequently be appealed to the General Division of the High Court on a point of law arising from the decision, or from any decision as to the amount of a financial penalty. Parties may also appeal decisions of the General Division of the High Court to the Court of Appeal under Section 74 of the Act. The Section 34 Prohibition Cartel activities are prohibited by Section 34 of the Act (the “Section 34 Prohibition”), which provides that: “…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 the ambit of this prohibition. Specifically, Section 34(2) of the Act states that agreements, decisions or concerted practices may have the object or effect of preventing, restricting or distorting competition within Singapore if they: • directly or indirectly fix purchase or selling prices or any other trading conditions; • limit or control production, markets, technical development or investment; • share markets or sources of supply; • apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; 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 the Act provides for excluded agreements that are specified in the Third Schedule to the Act. For example, the Minister may exclude a particular agreement or

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Drew & Napier LLC Singapore any agreement of a particular description if he is satisfied that there are exceptional and compelling reasons of public policy as to why the Section 34 Prohibition ought not to apply (paragraph 4 of the Third Schedule to the Act). Other specific activities and industries excluded from the application of the Section 34 Prohibition are specified in paragraphs 5, 6 and 7 of the Third Schedule to the Act, and include 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 otherwise specifies by order (paragraph 8 of the Third Schedule to the Act). To date, the Minister has not specified any vertical agreement to which the Section 34 Prohibition will apply. Additionally, the Section 34 Prohibition does not apply to arrangements that give rise to net economic benefit (an exclusion that is provided for in paragraph 9 of the Third Schedule to the 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 to the attainment of those objectives; 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 Orders Section 36 of the Act empowers the Minister to make an order, following the recommendation of the CCCS, 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 competition law. It initially took effect on 1 January 2006 for a period of five years, and its extension until 2015 was granted by the Minister for Trade and Industry on 16 December 2010. It was then subsequently extended by the Minister for a further period of five years. The BEO would have expired on 31 December 2020 but for an extension by the Minister for Trade and Industry granted on 26 August 2020 which extended the BEO for one additional year until 31 December 2021. CCCS’s Guidelines Pursuant to Section 61 of the Act, the CCCS has published guidelines that outline how the CCCS administers and enforces the provisions under the Act. Of relevance to cartel enforcement are the CCCS Guidelines on the Section 34 Prohibition 2016 (the “Section 34 Guidelines 2016”), the CCCS Guidelines on Lenient Treatment for Undertakings Coming Forward with Information on Cartel Activity 2016 (the “Leniency Guidelines 2016”), and the CCCS 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 CCCS has not issued a provisional infringement decision (“PID”) before 1 December 2016.

Overview of investigative powers in Singapore The investigative powers of the CCCS are set out in the Act, specifically: • Section 62 of the Act provides that the CCCS 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 CCCS or a duly appointed inspector (Section 62(2) of the Act).

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• Section 63 of the Act provides that the CCCS has the power to require the production of specified documents or specified information. • Section 64 of the Act provides that the CCCS has the power to enter premises without a warrant. • Section 65 of the Act provides that the CCCS has the power to enter and search premises with a warrant. The CCCS’s powers of investigation are described in detail in the CCCS Guidelines on the Powers of Investigation in Competition Cases 2016.

Overview of cartel enforcement activity during the last 12 months The CCCS issued two new infringement decisions (“IDs”) during the last 12 months, as at December 2020. Bid-rigging of building, construction and maintenance tenders On 4 June 2020, the CCCS issued an ID against three building and maintenance companies for infringing the Section 34 Prohibition for bid-rigging conduct in relation to invitations to quote and invitations to tender called by Wildlife Reserves Singapore (“WRS”) which manages the Singapore Zoo, the Jurong Bird Park, the Night Safari and the River Safari. The parties involved in bid-rigging were Shin Yong Construction Pte Ltd (“Shin Yong”), Geoscapes Pte Ltd (“Geoscapes”) and Hong Power Engineering Pte Ltd (“Hong Power”). Following a complaint from WRS, the CCCS commenced investigations on 6 April 2016. Investigations revealed that the three parties had rigged at least eight tenders for construction and maintenance called by WRS between 1 July 2015 to 6 October 2016. The CCCS also found that Shin Yong was the initiator and coordinator of bids and had instructed the other contractors on the price that they needed to quote. The CCCS imposed financial penalties of S$7,148 on Shin Yong, S$19,739 on Geoscapes and S$5,211 on Hong Power. According to the CCCS, the relatively lower statutory penalty for Shin Yong, despite being the coordinator of the scheme, resulted from the fact that WRS had barred Shin Yong from all tenders and cancelled all existing purchase orders, drastically reducing Shin Yong’s total turnover for the relevant financial years. In calculating the financial penalties, the CCCS considered the relevant turnovers of the parties, the duration and seriousness of the infringements, aggravating and mitigating factors, the submissions of the parties and the appropriate leniency discounts. All three parties applied for leniency and received leniency discounts. Bid-rigging of maintenance services for swimming pools On 14 December 2020, the CCCS issued an ID against three providers of maintenance services for swimming pools and other water features for infringing the Section 34 Prohibition for bid-rigging conduct in relation to tenders called by privately owned developments, including hotels and condominiums. The parties were CU Water Services Pte Ltd (“CU Water”), Crystalene Product (S) Pte Ltd (“Crystalene”) and Crystal Clear Contractor Pte Ltd (“Crystal Clear”). On 27 September 2017, the CCCS commenced an investigation into potential bid-rigging and market-sharing conduct. Investigations revealed that bid-rigging had taken place between CU Water and Crystalene and between CU Water and Crystal Clear from 2008 to 2017. The parties regularly requested “support quotes” from each other to assist the requesting party in winning a tender. Most of the time, the requesting party would request a price higher than what it had already quoted. The CCCS also found that the parties also took part in market

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Drew & Napier LLC Singapore sharing of customers as the parties agreed or understood not to compete for the other party’s customers and sought out the incumbent for instructions on the appropriate price to quote. The CCCS concluded that the parties had rigged hundreds of tenders, with the lowest valued at S$110 and the highest at S$390,000. The CCCS imposed financial penalties of S$41,541 on Crystalene, S$68,793 on Crystal Clear and S$308,680 on CU Water. Discounts for leniency applications and for agreeing to the CCCS’s fast-track procedure were given to Crystalene and Crystal Clear. Notably, Crystalene and Crystal Clear signed fast-track agreements with the CCCS after investigations began. In short, parties who sign these agreements admit their liability and involvement in the infringement, agree to cooperate throughout the CCCS’s investigation and confirm that they will not make extensive written representations or request to inspect documents and evidence. More information on the fast-track procedure is discussed below: see “Administrative settlement of cases”. In accordance with the Fast Track Practice Statement, the parties had their financial penalties reduced by 10 per cent, which was in addition to the leniency discounts also granted to both parties. This is the first ID in CCCS history where the fast-track procedure has been utilised. CU Water did not apply for leniency or agree to a fast-track procedure and did not receive either discount.

Key issues in relation to enforcement policy The CCCS 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. The Section 34 Guidelines 2016 clarifies the CCCS’s analytical framework and considerations in relation to the Section 34 Prohibition, as well as its stance towards vertical agreements. It noted that the fact that undertakings are in a vertical relationship and/or have a vertical agreement does not, however, preclude the finding of a horizontal concerted practice which has as its object or effect the prevention, 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 CCCS’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 CCCS. 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 CCCS. The purpose of introducing the fast-track procedure is to assist the CCCS to more effectively and efficiently enforce the Act.

Key issues in relation to investigation and decision-making procedures In deciding whether to launch a formal investigation, the CCCS takes into account its strategic priorities and the merits of the case. The CCCS prioritises its enforcement efforts based on the following: • potential impact of the conduct on the economy and society (e.g. the significance of the industry in the Singapore economy, whether the infringement has a great impact on

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business costs in Singapore, how large a consumer base the industry has, how much the infringement will add to costs of living); • severity of the conduct (e.g., hard-core price-fixing, serious abuse of dominance, mergers which substantially lessen competition); • importance of deterring similar conduct (e.g., whether other companies will follow suit and engage in the same conduct if it is left unchecked); • resource considerations (e.g., how many cases the CCCS is handling, how resource- intensive the case is relative to the expected benefits); and • risk of over-intervention (e.g., when action by the CCCS may inadvertently deter innovation and entrepreneurship). There is no prescribed timeframe for the conclusion of the CCCS’s cartel investigations. The timeframe for an investigation depends largely on the nature and complexity of each case.

Leniency/amnesty regime The CCCS’s leniency programme is described in detail in the Leniency Guidelines 2016. Leniency applications may be made orally or in writing to the CCCS. If a party provides sufficient information to the CCCS to establish the existence of cartel activity before the CCCS has opened an investigation, that party may benefit from full immunity from financial penalties (“full immunity”). To earn full immunity, the leniency applicant must also ensure that it: • provides the CCCS with all the information, documents and evidence available to it regarding the cartel activity; • grants an appropriate waiver of confidentiality to the CCCS in respect of other jurisdictions and regulatory authorities which have been notified of the conduct and/or from whom leniency has been sought; • unconditionally admits liability to the conduct for which leniency is sought; • maintains continuous and complete cooperation throughout the investigation and until the conclusion of any action by the CCCS arising as a result of the investigation; • refrains from further participation in the cartel activity from the time of disclosure of the cartel activity to the CCCS (except as may be directed by the CCCS); • must not have been the one to initiate the cartel; and • must not have taken any steps to coerce another undertaking to take part in the cartel activity. After the CCCS has commenced an investigation, the first party that provides information to the CCCS about the cartel that is sufficient for it to issue an ID can benefit from lenient treatment by way of a reduction of up to 100 per cent in the level of the financial penalties. Subsequent leniency applicants may benefit from a reduction in financial penalties of up to 50 per cent. The CCCS provides a marker system for leniency applications. If the leniency applicant is unable to immediately submit sufficient evidence to allow the CCCS to establish the existence of the cartel activity, the leniency applicant will be given a limited time to gather sufficient information 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 permitted to perfect its marker to obtain full immunity or a 100 per cent reduction in financial penalties. Once the marker has been perfected, the other leniency applicants in the marker queue will be informed that they no longer qualify for full immunity or a 100 per cent reduction in financial penalties.

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The CCCS also operates a “Leniency Plus system”. A party cooperating with the CCCS 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 was to provide information in respect of Cartel B, it may not only stand to benefit from lenient treatment in respect of Cartel B, but may benefit from further reduction in penalties in respect of Cartel A.

Administrative settlement of cases 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 of financial penalty to be imposed. It exists in parallel to the CCCS’s leniency programme and is distinct from voluntary commitments offered to the CCCS, in that the latter does not involve any admission of liabilities by the parties under investigation and finding of infringement under the Act. The fast-track procedure can be initiated by the CCCS prior to or after a PID but not after an ID has been issued. The CCCS 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 CCCS their willingness to engage in a fast-track procedure discussion. However, the CCCS 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. The fast-track procedure was first successfully utilised by two parties in a case of bid-rigging of maintenance services for swimming pools in an ID issued on 14 December 2020, discussed above: see “Overview of cartel enforcement activity during the last 12 months”.

Third-party complaints Third parties may lodge complaints with the CCCS if they believe that there has been a breach of the Section 34 Prohibition. The CCCS 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 CCCS’s purview, the CCCS may ask the complainant to provide further information. If the complaint cannot be substantiated, the matter will be closed. The CCCS 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 CCCS will evaluate and assess whether the subject matter of the complaint is likely to have an appreciable adverse effect on competition. The CCCS may launch an investigation if there are reasonable grounds for suspecting that competition law has been breached.

Civil penalties and sanctions The CCCS, 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 of the infringement. While Section 69 of the Act provides general discretion to the CCCS in making directions to bring an infringement to an end or to remedy, mitigate or eliminate any adverse effect of the infringement, it provides specific examples of the directions that the CCCS may make, including: • requiring parties to the agreement to modify or terminate the agreement;

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• the payment to the CCCS of such financial penalty in respect of the infringement as the CCCS may determine (where it determines that the infringement has been committed intentionally or negligently), such financial penalty not exceeding 10 per cent of such turnover of the business of the undertaking in Singapore for each year of infringement for such period, up to a maximum of three years; • to enter such legally enforceable agreements designed to prevent or lessen the anti- competitive effects that have arisen as may be specified by the CCCS; • to dispose of such operations, assets or shares of such undertaking in such manner as may be specified by the CCCS; and • to provide a performance bond, guarantee or other form of security on such terms and conditions as the CCCS may determine. The CCCS’s Guidelines on the Appropriate Amount of Penalty in Competition Cases 2016 was revised in 2016 (“Revised Penalty Guidelines 2016”). The CCCS has stated in the Revised Penalty Guidelines 2016 that it will adopt the following six-step approach when determining the amount of financial penalty 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 infringement in the undertaking’s last business year; • the adjustment for the duration of the infringement; • the adjustment for other relevant factors, e.g., deterrent value; • the adjustment for aggravating or mitigating factors; • the adjustment if the statutory maximum penalty is exceeded; and • the adjustment for immunity, leniency reductions and/or fast-track procedure discounts. The CCCS has imposed financial penalties on the parties involved in cartel activities in every ID published to date, save for the parties who have enjoyed immunity under the leniency programme. Section 69(4) of the Act provides that the maximum amount of financial penalty imposed may 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.

Right of appeal against civil liability and penalties Parties to an agreement or persons whose conduct in respect of which the CCCS has made a decision as to the infringement of the Section 34 Prohibition may appeal against (or with respect to) that decision, the imposition or amount of any financial penalty, or any directions issued by the CCCS, 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 issue of the CCCS’s ID. The CAB is an independent body established under Section 72 of the Act. It currently comprises 15 members including lawyers, economists, accountants, academics and other business people. In the usual course, a panel of five members will be appointed to hear an appeal. It has broad powers to make directions it thinks fit to determine the just, expeditious and economic conduct of the appeal proceedings. As of December 2020, the CAB has received 19 appeals relating to the cartel infringement decisions and issued its appeal decisions in 10 of these appeals. Three appeals were withdrawn by the appellants and six appeals are currently in progress.

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A decision of the CAB can subsequently be appealed to the General Division of the High Court on a point of law arising from the decision, or on the amount of a financial penalty (Section 74 of the Act). 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 decisions of the General Division of the High Court to the Court of Appeal under Section 74 of the Act. Such right of appeal is the same right that exists in the case of decisions made by the General Division of the High Court in the exercise of its original civil jurisdiction. There is no further right of appeal 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: • refuses to provide information pursuant to a requirement on him or her to do so; • destroys or falsifies documents; • provides false or misleading information; or • obstructs an officer of the CCCS in the discharge of his or her duties. Offences are punishable by a prison sentence not exceeding 12 months, a fine not exceeding S$10,000, or both. There have been no such criminal sanctions imposed in Singapore to date.

Cooperation with other antitrust agencies As provided under the Third Schedule to the Act, certain activities and industry sectors in Singapore are carved out from the Competition Act. These activities and industry sectors are regulated by robust sector-specific competition rules, which are enforced by sectoral regulators. As stated in the CCCS Guidelines on the Major Competition Provisions 2016, the CCCS will work with the relevant sectoral regulator on cross-sectoral competition matters to determine which regulator is best placed to handle the case in accordance with the legal powers given to each regulator. The lead will be taken by the agency which is best placed in terms of the ability to investigate the alleged anti-competitive conduct and impose any necessary remedies. Please refer to the section on cross-border issues below for cooperation between CCCS and foreign competition authorities.

Cross-border issues Section 88 of the Act provides for cooperation between the CCCS and foreign competition bodies. The CCCS inked its first memorandum of cooperation with the Japan 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 for 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 CCCS uncovers cartel activities undertaken in Japan that affect Singapore, the CCCS can request that the JFTC initiate investigations. In addition to the above, the CCCS announced, on 30 August 2018, that it had entered into a memorandum of understanding with Indonesia’s Commission for the Supervision of Business

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Competition to facilitate cooperation on competition enforcement. On 17 September 2019, the CCCS signed a memorandum of understanding with the Competition Bureau Canada. This is the first cooperation agreement between the CCCS and an overseas enforcement agency in respect of both competition and consumer protection laws. Besides these three memoranda, it should be noted that many of Singapore’s Free Trade Agreements include chapters on competition and provide for cooperation on competition matters. The CCCS is also a founding member in the International Competition Network’s Framework on Competition Agency Procedures (joined on 16 May 2019), which is a non- binding multilateral framework promoting procedural fairness and transparency among competition agencies. Further, the CCCS already cooperates with foreign competition authorities on cartel investigations through its leniency programme. Leniency applicants are required to grant a waiver of confidentiality to the CCCS in respect of any jurisdiction where the leniency applicant has also applied for leniency, as a condition to benefit from total immunity from financial penalties.

Developments in private enforcement of antitrust laws Section 86 of the Act 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 claimants to claim for double or treble damages. This right is predicated on an infringement finding by the CCCS, and may only be brought within 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 Between September and October 2020, the CCCS carried out a public consultation on proposed changes to six sets of its guidelines. While it did not propose any changes to the Section 34 Guidelines 2016, several proposed changes to the CCCS Guidelines on Treatment of Intellectual Property Rights in Competition Cases 2016 (the “IPR Guidelines 2016”) and the CCCS Guidelines on Enforcement of Competition Cases 2016 (the “Enforcement Guidelines 2016”) are of significant relevance to cartel enforcement. Proposed changes to the IPR Guidelines 2016 With regard to the IPR Guidelines 2016, the CCCS proposed significant additional guidance on the competition concerns surrounding several types of licensing restraints and arrangements, including: • exclusive and non-exclusive grant backs; • territorial and field-of-use restrictions; • technology and patent pools; • non-challenge clauses; and • IP settlement agreements including “pay-for-delay” and “cross-licensing” type agreements. Furthermore, the CCCS also proposed to lower the market thresholds for when an IP licensing agreement (not including an agreement involving price-fixing, market-sharing, output limitations or a restriction of a licensee’s ability to exploit its own technology rights) will

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Drew & Napier LLC Singapore generally have no appreciable adverse effect on competition. This proposal will therefore increase the likelihood of a finding that certain IP licensing agreements have the effect of harming competition. Proposed changes to the Enforcement Guidelines 2016 In relation to the proposed changes to the Enforcement Guidelines 2016, the CCCS’s proposals will provide guidance as to the commitment procedures and how the CCCS will approach commitments proposed by parties who notified the CCCS of an agreement for a decision on their commercial agreements or by parties already under CCCS investigation. In particular, the CCCS proposes to expressly communicate that it takes a “dim view” of repeated revisions of commitments proposals. In addition, for parties already under investigation for an agreement which restricts competition by object (e.g. bid-rigging) with no accompanying net economic benefit, the CCCS has stated that it will not be inclined to accept commitments.

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Lim Chong Kin Tel: +65 6531 4110 / Email: [email protected] Chong Kin is a Director at Drew & Napier LLC. He heads both the Competition, Consumer and Regulatory and the Technology, Media and Telecommunications 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 notes, “[Chong Kin] is a very technically proficient and commercially savvy lawyer. He is also very entrenched in the competition space, giving him unique insights into policy direction and interpretation”.

Corinne Chew Tel: +65 6531 2326 / Email: [email protected] Corinne is the Deputy Head of the Competition, Consumer and Regulatory Practice at Drew & Napier LLC. Corinne’s all-encompassing competition law experience includes assisting clients in the filing of merger notifications to the CCCS, leniency applications and assisting clients with CCCS investigations. Corinne has also assisted multinational and local companies in setting up competition law compliance and audit structures, dawn raid and whistleblowing programmes and audit checks in a wide range of industries in Singapore and other jurisdictions. Corinne’s corporate experience includes providing contractual and regulatory advice for listed and unlisted companies in a broad spectrum of industries. She has assisted in the reviewing and drafting of joint venture, shareholder, distribution, as well as sale and purchase agreements. The Legal 500 Asia Pacific 2018 lists Corinne as a leading individual in Competition and Antitrust in Singapore.

Drew & Napier LLC 10 Collyer Quay, 10th Floor Ocean Financial Centre, 049315 Singapore Tel: +65 6535 0733 / URL: www.drewnapier.com

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Pedro Moreira SCA LEGAL, S.L.P.

Overview of the law and enforcement regime relating to cartels (1) In Spain cartel activity is covered and sanctioned by legislation on competition, enacted both at the European Union level – basically Article 101 of the Treaty on the Functioning of the European Union (“TFEU”) and Article 1, (1) and (2), of the Council Regulation (EC) No. 1/2003, on the implementation of the rules on competition laid down in Articles 101 and 102 of the TFEU (“EU Regulation”), and, at national level – basically, in Article 1 of Law 15/2007, on competition (“Spanish Competition Act” or “SCA”), which follows the said EU provisions very closely, and in Regulation on Competition, approved by Royal Decree 261/2008, which developed and implemented the SCA (“Competition Regulation”).1 Article 1 (1) SCA 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 Spain. Cartels are one of those types of collusive conducts, which the Fourth Additional Provision of the SCA, in its current version, defines as an“ agreement or concerted practice between two or more competitors aimed at coordinating their competitive behaviour on the market or influencing the relevant parameters of competition through practices such as, but not limited to, the fixing or coordination of purchase or selling prices or other trading conditions, including in relation to intellectual property rights, the allocation of production or sales quotas, the sharing of markets and customers, including bid-rigging, restrictions of imports or exports or anti-competitive actions against other competitors”.2 Agreements qualified as cartels are void, except if covered by a provision of the same Act that provides in different terms (Article 1 (2) SCA). As a matter of fact, the general cartel prohibition (“Prohibition”) foreseen in the said Article 1 SCA, is subject to several limitations. One of them is foreseen by Article 1 (3), which provides that the Prohibition “will not apply to agreements, decisions, recommendations and practices that contribute to improving the production or the commercialisation and distribution of goods and services or to promoting technical or economic progress, without the need for any prior decision for this purpose, providing that: a) They allow consumers a fair share of its benefits; b) They do not impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives, and c) They do not afford participating undertakings the possibility of eliminating competition in respect of a substantial part of the products or services in question”. Article 1 (4) sets forth also that the Prohibition “is not applicable to agreements, collective decisions or recommendations, or concerted or consciously parallel practices that comply with the provisions set out in the Community Regulations on the application of Article 81 (3) of the EC Treaty3 for certain categories of agreements,

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decisions by associations of undertakings and concerted practices, including when the corresponding conduct may not affect trade between EU Member States”. Finally, Article 1 (5), following the regime already foreseen in the EU Regulation and in the mentioned Article 1 (4), provides that “the Government may also declare through Royal Decree the application of Section 3 of this Article to certain categories of conduct, prior report by the Competition Council and the National Competition Commission”.4 In addition, Article 5 of the Spanish Competition Act establishes that the “Prohibition set forth in the aforesaid Article 1 will not apply to conducts which, due to their scant importance, are not capable of significantly affecting competition. The criteria for demarcating conducts of minor importance shall be determined according to regulations, considering, among others, the market share”. For now, the demarcation has been carried out by Articles 1 and 2 of the Competition Regulation, the first determining the conducts qualifiable of “scant importance” on the ground of their market share and the second excluding certain conducts from that concept even if they meet the requirements foreseen in the first of them to be qualified as “of scant importance”. (2) The Prohibition is enforced by the Comisión Nacional de los Mercados y de la Competencia, the Spanish Commission on Markets and Competition (“CNMC”), which was created in 2013, by Law 3/2013, and that assumed, since its inception, among others, the powers to enforce competition regulations that once were entrusted to the Comisión Nacional de la Competencia, the Competition Commission,5 now extinguished (Article 5). These powers extend to the enforcement in Spain of EU competition law, where the conduct taking place in the country may affect trade between Member States, under Article 5 of the EU Regulation.6 Public enforcement of the Prohibition at first is vested in the CNMC,7 which, in this field, has the authority to: • investigate any agreements or conducts that may be infringing the Prohibition and, as such, to request the undertakings concerned to supply the information necessary and to carry out any inspections for that purpose; • declare that a certain conduct infringes the Prohibition;8 • impose fines of up to 10% of the turnover of the offender in the preceding business year (Article 63 (1) (c) SCA), or in case the turnover cannot be determined and on the ground of the infringement being qualified as very serious, of more than €10 million (Article 63 (3) SCA); • impose periodic penalty payments up to the amount of €12,000 per day, aimed at compelling the infringer to put an end to the conduct that has been declared as infringing the Prohibition (Article 67 SCA);9 and • the enforcement of its sanction resolutions as well as of those given in review by the courts (Article 5 Law 3/2013). On the grounds that the infringements of the Prohibition are qualified asvery serious by the SCA (Article 62 (4) (a)), this piece of law also sets forth that they lapse after four years, as against shorter lapses for less serious infringements. The term of the lapse period shall be counted as of the day when the infringement was committed or, in the case of continued infringements, as of when they have ceased (Article 68 (1) SCA). Law 3/2013 provides for a formal distinction between the organ of the CNMC in charge of investigating agreements and conducts and the one in charge of applying fines and other sanctions for the infringement of the Prohibition (Article 29.2). Whereas investigation activities and the drafting of the resolutions are carried out by the Competition Division, fines and other sanctions are applied by the Competition Committee of the CNMC’s Council,10 the corresponding decisions being challengeable before the Courts, which are entitled to repeal or modify them, though on legal grounds only (Article 48 SCA).

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(3) In addition to the public enforcement of competition law – where what is at stake is the application of fines and other sanctions for the infringement, by a certain conduct, of competition rules – in Spain private enforcement of these rules is also foreseen by the law. Third parties (such as customers of cartel participants) may bring private actions, before the Courts of Commerce, for damages arising from an infringement of the Prohibition. Since the enactment of the SCA, the initiation of the said private actions does not depend on a previous decision by the CNMC sanctioning the (allegedly) damaging conduct, or even on the opening of investigation proceedings against the defendant, something that clearly leaves room for stand-alone claims. Nonetheless, with a view to avoiding decisions on competition matters based on an interpretation of the competition laws that is not in line with that of the CNMC, the 2000 Civil Procedure Act allows for the CNMC to intervene in any proceedings, as an amicus curia, on its initiative or at the request of the court, for the purpose of informing or making comments regarding the enforcement of competition laws (Article 15 bis).11 Whereas public enforcement is vested both in the Authorities and the Courts, private enforcement is in the hands of Courts only, though law also states that competition disputes between offenders and victims can be solved by arbitration or ADR (Article 77 SCA). Regarding arbitration, the CNMC is entitled to act as a court of arbitration for, among others, the hearing of damage claims filed by victims against offenders (Articles 5 (1) b) SCA and 46 of the CNMC’s bylaws). (4) In addition to its cartel enforcement activity, the CNMC acts also as a consulting body of the Government, the parliaments, the regional governments, and other public entities, in all matters related to competition, something that empowers it to participate in the drafting of any piece of legislation on competition (Article 5 (2) SCA).

Overview of investigative powers in Spain Investigative powers are vested in the Competition Division of the CNMC, as foreseen in Article 27 of Law 3/2013, which gives tenured civil servants of the CNMC, duly authorised by the relevant director, the status of an agent of the authority enabled to conduct as many inspections as required, at companies and undertakings, for the proper enforcement of such piece of legislation and, notably, of the commitments in competition matters entrusted to it by Article 5. The powers of inspection granted to the CNMC include, among others, those of making dawn raids, checking books and other documents, obtaining copies of any documentation, and enquiring the staff of the companies or undertakings under investigation (Article 5 (2)). The performance of some of these powers (e.g., that of making a dawn raid) depend on the express prior consent of the affected party or, failing that, on a court authorisation.12 In addition to such powers, in the performance of its function of defending competition, the CNMC benefits from a duty of collaboration with it, imposed by Articles 39 SCA, 10 of the Regulation and 28 of Law 3/2013, on all persons, bodies or entities of all public authorities. This duty extends to the provision, on time, of all types of data and information in their possession which may be necessary for the discharge of the CNMC’s functions. On the ground that the infringement of competition laws is not of a criminal nature, one could see the investigation powers of the CNMC as smaller if compared to those of the police when investigating the commission of crimes. Nonetheless, the court authorisation is also the rule in criminal investigation whenever the police intend to carry out certain investigation measures that may vulnerate certain constitutionally protected rights. The difference, if any, therefore, have not so much to do with the powers themselves, but with how they are

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© Published and reproduced with kind permission by Global Legal Group Ltd, London SCA LEGAL, S.L.P. Spain exercised by the police, on one hand, and the CNMC, on the other, whose staff, most of which has civil servant status, does not see itself as a police department. Sanction procedures are subject to a time limitation foreseen by Article 36 (1) SCA, which sets forth that those procedures shall not extend for more than 18 months following the date of their commencement. In case no resolution is adopted in the first 18 months following this date, the procedure will be deemed as expired (Article 38 (1) SCA).

Overview of cartel enforcement activity during the last years (1) At the time of writing this chapter (March 2021), the last global figures on CNMC’s enforcement activity are those disclosed by it in the 2019 Annual Report13 (“Report”), published in early 2020. In accordance with the Report, in 2019 the CNMC initiated several sanction proceedings for infringements of Article 1 of SCA, of which five were for bid rigging conducts in private and public tenders. In that year, the CNMC terminated several sanction proceedings for infringements of Article 1 of SCA, of which two ended with a sanction resolution. Both resolutions sanctioned cartels that aimed at setting prices, markets sharing and bid rigging. Fines amounted in total to €172.55 million, of which €26.25 million was pardoned under the leniency regime. The said resolutions referred to the following cases: (i) Railways electrification and electromechanics maintenance (file S/DC/0598/2016, decided on 14 March 2019 (“Railways case”): In this case, upon denunciation filed by one of the cartelists (Alstom, S.A.), the CNMC found that 15 companies in the businesses of electrification, electric maintenance and electromechanics maintenance for railways (Alstom, S.A., Electrén, S.A., Sociedad Española de Montajes Industriales, S.A., Isolux Ingeniería, S.A., Siemens, S.A., among others) engaged in three different bid rigging cartels, one per business, with a view to optimise their bids in public tenders launched by ADIF, the Spanish public body in charge of the railway infrastructure. Fines to the companies amounted in total to more than €118 million, the highest single fine amounting to €27.2 million, but out of leniency measures, the cartel member that denounced the cartel was exempted from its fine and another, one that provided relevant information to the CNMC (Siemens, S.A.), saw its fine reduced to 45%. In addition, the CNMC notified the sanctions to the National Public Procurement Advisory Board, so that the sanctioned companies can be excluded from participating in public procurement procedures for a certain period of time, and decided to apply fines to top executives of some of the sanctioned companies, which amounted in total to €666,000. (ii) Industrial assembly and maintenance (file S/DC/0612/17, decided on 1 October 2019): In this case, the CNMC found that 19 companies (ACSA, Duro Felguera, Grupo Navec, S.L., Envesa Operaciones, S.A., HGL, IMASA, etc.) dedicated to industrial assembly and maintenance had established a cartel, under which they had been setting prices and market shares in this market between 2001 and 2017. Fines to the companies amounted in total to €54.26 million, the highest single fine being €14.65 million, but out of leniency measures, the cartel member that denounced the collusion (Grupo Navec) was exempted from its fine and another, one that provided relevant information to the CNMC (Envesa Operaciones, S.A.), saw its fine reduced to 50%. In addition, the CNMC notified the sanctions to the National Public Procurement Advisory Board, so that the sanctioned companies can be excluded from participating in public procurement procedures for a certain

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period of time, and applied also fines to top executives of some of the sanctioned companies, which amounted in total to €280,500. The said two cartel procedures were initiated following a leniency request submitted by companies taking part in the cartels. In the Railways case, in addition to several reductions, a leniency exemption, to the amount of more than €8.83 million, was applied to the participating companies that brought information on the cartel to the CNMC (Alstom,S.A. and other company of the same group), while in the other case, a similar exemption in excess of €9.33 million was applied to Grupo Navec on the same grounds. Since the beginning of 2020, the CNMC has initiated several investigation procedures and adopted several sanction resolutions on cartels, the most important of which are the following: (a) Investigations on possible collusion practices in the markets of (i) iron and steel industry, and (ii) real estate agency. (b) Sanction resolutions: (i) Meteorological radar devices (file S/0626/18, decided on 13 February 2020): In this case, the CNMC found that three companies operating in the meteorological radars business (Adasa Sistemas, S.A., Schneider Electric España, S.A., and DTN Services and Systems Spain, S.L.) engaged in a bid rigging cartel that operated between 2014 and 2018, for the sale of meteorological radar devices to the AEMET, the Spanish meteorological office. Fines amounted in total to €610,000, the highest single fine amounting to €450,000. (ii) School buses (file SANAV/02/19, decided on 9 September 2020): In this case, the CNMC found that 33 companies operating in the school transportation business (Alberto Elcarte, S.L., Ativar, S.L., Autocares Albizua, S.L., Autocares Felix Gastón, S.L., and others) and a business association from this area established a bid rigging cartel for the award of contracts by the Regional Government of Navarra that operated between 2013 and 2018. Fines to the companies and the business association amounted in total to more than €3.55 million, the highest single fine amounting to €667,297. (iii) Solid fuels (file S/DC/0620/17, decided on 22 December 2020). In this case, the CNMC found that several companies operating in the trade of solid fuels (Félix de Inchaurraga, S.L., Grafitos Barco, S.A., Toro y Betolaza, S.A., Candel Energía, S.L., and others) established three cartels at different periods of time, each aiming at sharing markets and relevant information and at setting prices. Fines to the companies amounted in total to more than €3.56 million, the highest single fine amounting to €1,255,455. Executives of those companies who played a role in the cartels where also sanctioned with fines amounting to €51,400, the highest, and €4,800, the lowest. (iv) Radiopharmaceuticals (file S/0644/18, decided on 2 February 2021): In this case, the CNMC found that two companies operating in the radiopharmaceuticals production and distribution market (Advanced Accelerator Applications Iberia, S.L., and Curium Pharma Spain, S.A.) engaged in a cartel aimed at sharing clients from both the private and the public sectors. Fines to those companies amounted in total to €5.76 million, the highest one reaching more than €4.24 million. (2) Since late 2019, at judicial level, the Tribunal Supremo (“Supreme Court”) and the Audiencia Nacional (“National High Court”), the two high courts in charge of hearing cases on sanctions applied by the CNMC ruled on several occasions on cartels, among which it is worth mentioning the following:

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(a) From the Supreme Court (Administrative Chamber): (i) Ruling n. 1449/2019 (cassation procedure 5839/2018), which, on request of Rua Papel Gestión, S.L., a company operating in the business of production and sale of recycled paper, dismissed a ruling given by the National High Court that had partially upheld an appeal filed by that company against a resolution of the CNMC had applied a €354,888 sanction, pursuant to Article 1 SCA, for having engaged with several other companies in certain collusive activities in the said market (file S/0430/12). The National High Court did not revoke in full the appealed resolution, insofar as it understood that the CNMC had correctly applied the doctrine of “accidental discovery” previously devised by the Supreme Court, under which terms documentation accidentally seized in a certain sanction procedure can be used in a new one if its confiscation by the CNMC fully complies with the court order that had authorised the raid. In its cassation ruling, the Supreme Court considers that the a quo court had wrongfully applied the said doctrine, as, in this case, the court order that authorised the raid, granted for the purpose of a previous sanction procedure (file S/0415/12), in which the affected market was that of sanitary waste, did not cover the market under investigation in the mentioned file S/0430/12 (paper waste). (ii) Ruling n. 95/2020 (cassation procedure 7458/2018), which, on request of the CNMC, dismissed a ruling given by the National High Court, that had partially upheld an appeal filed by an employee of FENIM, a business association, against a resolution of the CNMC that had applied to such physical person a €6,000 sanction, pursuant to Article 63.2 SCA, that, in case of infringements committed by juridical persons, allows for sanctions to be applied not only to the infringer undertaking but also to members of its “governing bodies” who had played a role in the sanctioned infringement. This ruling is relevant insofar as it clarifies that, in order for one such member to be validly sanctioned by the CNMC two requirements must be met: first, that the person was a member of a governing body of the infringer, no matter whether this body is singular or collective; and, second, that she played a role in the sanctioned infringement, even if such role was merely ancillary. Therefore, if one these requirements is not met, as it happened in the case of the mentioned physical person, there is no ground for sanctioning her. (iii) Ruling n. 1403/2020 (cassation procedure 4227/2019), which, in a cassation appeal filed by the CNMC, revoked a ruling given by the National High Court, that had declared void a sanction applied by the CNMC to Alluitz Motor, S.L., for having engaged in cartel activities with several other companies, all concessionaires of Audi, Seat and Volkswagen vehicles (file S/0471/13). The National High Court had declared the appealed resolution void, based on the understanding that, although the appellant had participated with the other sanctioned companies in the cartel activities, it did not operate in the market affected by these activities. In this case, the Supreme Court revoked the a quo ruling and confirmed the CNMC resolution, as it understood that what is forbidden by Article 1 of the SCA is the participation in cartel activities, for these purposes being irrelevant that the company that engages in these activities operates in a market other than the one affected. (iv) Ruling n.1822/2020 (cassation procedure 4038/2019), which, on request of the CNMC, repealed a ruling given by the National High Court, that had upheld an appeal filed by Innovaciones del Mediterráneo, S.A. (“IMSA”), a former concessionaire of Audi and VW cars in the region of Andalucía, against a

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resolution given by the CNMC in 2015 (file S/0471/13). This resolution had applied to IMSA a fine of more than €101,510, for having engaged with other concessionaires in the same region in an horizontal cartel used to set prices and other market terms. The fine applied was not based on IMSA’s turnover in the year before the one where the sanction is applied, as ruled in Article 63 of the SCA, as IMSA had had no turnover in that year, but on an indirect estimation based on the turnover acquired by the company to which IMSA had sold its business. In its cassation ruling, the Supreme Court considers that the appealed ruling, that had exempted IMSA from any fine, breaches the rule set out in Article 63 of the SCA and orders the CNMC to replace the said fine with a new one, not exceeding the original amount to avoid breaching the principle that forbids that an appeal ends with a reformatio in pejus, but calculated in accordance with the company’s turnover in the year previous to the sale of its business. (b) From the National High Court (Administrative Chamber): (i) A ruling given on 18 February 2020 by the Sixth Section (appeal n. 676/2015 (case Transportes Carlos), which declared void and of null effect a resolution of the CNMC (file S/0454/12) that had applied a €47,657 sanction to Transportes Carlos, S.L., a company operating in the of refrigerated by road transportation market, for having engaged, between 1993 and 2012, with 11 other companies and a business association all in the same business, in collusion practices aimed at setting prices. In its ruling the National High Court understood that, although there was evidence that the appellant had participated in the cartel until 2008, there was no such evidence thereafter, which means that, when the CNMC initiated the sanction procedure (July 2013), the four-year time limit foreseen in Article 68.1 SCA for sanctioning the breaches of such piece of legislation had already elapsed, and, as such, there existed no cartel infringement that could still be validly sanctioned by the CNMC. (ii) A ruling given on 16 October 2020 (appeal against an administrative decision n. 405/2014) (case Aplicaciones y Transformaciones de la Madera), which declared void and of null effect a sanction resolution of the CNMC, in relation to a €286,834.71 fine applied to Aplicaciones y Transformaciones de la Madera, S.L., the appellant) in a sanction procedure where it was found that such company and several other manufacturers of EUR palettes had engaged in collusion conducts (file S/0428/12). In this ruling, the Court understood that the sanction applied by the CNMC was not adjusted to the criteria set out in the ruling given in cassation by the Supreme Court on 29 January 2015 (cassation n. 2872/2013) and, as such, ordered the CNMC to recalculate it in accordance with such criteria.14 (iii) A ruling given on 21 December 2020 (appeal 477/2016 (case Surgyps), which declared void and of null effect, in relation to the fine applied to Surgyps, S.A., the appellant (€114,852), a 2016 sanction resolution of the CNMC (case S/ DC/0525/14) that applied fines, amounting, in total, to €29.17 million, to 23 cement and concrete manufacturers, for having participated, between 1999 and 2014, in a cartel aimed at exchanging relevant commercial information, market sharing and setting of prices. In this case, the National High Court considered that there was no evidence of the participation of the appellant in the cartel, as the documentation in the proceedings related to the appellant did not constitute sufficient evidence that such company had taken part in an integrated plan

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to continuously engage in the mentioned collusive conducts with the other sanctioned companies – and, as such, that there came to exist no infringement by it of Article 1 SCA that could validly be sanctioned by the CNMC.

Key issues in relation to enforcement policy The CNMC has the authority to decide not to initiate proceedings following a complaint, but only when the Competition Directorate considers that, in the case brought to its attention, there seem to be no infringement of competition rules (Article 49 (3) SCA). Notwithstanding the fact that this provision does not leave much room for an enforcement policy that sets priorities in the use of the scarce resources available to enforce competition rules, the fact is that room exists, although only in relation to the investigation activities carried out at the CNMC’s own discretion. In relation to those investigation activities, there are key issues in enforcement policy that tend to change from time to time, as the circumstances of the economy and the authorities’ views on what to do in order to better enforce competition rules, also change. In the case of the CNMC, on the ground of its recent creation, seen in the fact that its first managing board, the Council, is still pending renovation by the Government, it seems that the time to see significant changes in its enforcement policy has not yet come. Nonetheless, since 2015, the CNMC has been approving annual programmes where it defines the general strategic measures to be taken in the year and the measures specifically foreseen for each of the sectors over which it has regulatory powers and in terms of enforcement of competition rules. In 2018, it created the Department of Economic Analysis, in charge of analysing public procurement data and surveying sectors where sensible competition issues have already been identified. For 2019, the CNMC’s annual programme has set, among others, the following priorities: (i) advise the Government in the transposition of the Directive (EU) 2019/1, of 11 December 2018, to empower the competition authorities of the Member States to be more effective enforcers and to ensure the proper functioning of the internal market, known as the “ECN+ Directive”; (ii) strengthen the capacity to initiate, on its own, sanction procedures for the infringement of the competition legislation; (iii) strengthen the surveillance of the sanctioned companies with a view to detect unfulfillments of the CNMC’s resolutions and adopt the corresponding measures; (iv) develop a framework of procedures to be used by public bodies in relation to public procurement, with a view improve efficiency of the tenders; and (v) analysis of the functioning of the markets that depend on digital economy, with a view to improve the surveillance of the same. Besides, in 2019, as announced in the year before, the CNMC has taken, among others, the following measures: (i) disclose guidelines on the drafting of economic reports to be submitted within certain complex procedures; (ii) allow oral pleadings in certain complex procedures; (iii) reinforce the economic background of its resolutions; (iv) develop a technical framework for the analysis of public procurement tenders and auctions, with a view to improve its standards and efficiency; and (v) improve the defence of its resolutions before the courts. In addition, following the importance given to the digital economy by its former chairman, Mr. José María Marín Quemada (2013–2020), an economist, the CNMC has identified as priority areas of its competition enforcement activity in 2020 certain areas of business where the use of the internet, as a platform from which business is conducted, has been expanding (financial sector, transportation, and public procurement). Other areas also identified as priorities for the CNMC in 2020 were television advertisement, pharmaceuticals, hospitals, port services, and agriculture.

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Key issues in relation to investigation and decision-making procedures As commented before, investigation of cartel activity is carried out by the Competition Division through its Cartels and Leniency Subdivision, which has powers neither to initiate sanction procedures nor to apply sanctions, these powers being vested in the Council. This has been understood as enough to observe the usual rule in sanction procedures that requests that the power to investigate and the power to punish are vested in different persons or organs. Nonetheless, since the creation of the CNMC, there has always been a discussion of whether this would be sufficient to make the CNMC strong enough to impose fines for competition law infringements to companies with which it has close and frequent relations, not on the ground of being a competition authority, but on that of being also the authority in charge of most of the regulated sectors (energy, telecommunications, etc.). That is to say, the weakness of the CNMC as a competition authority would lie not so much on the fact that the distinction between who investigates and who punishes is not much more than formal,15 but on the fact that who oversees regulating a sector may not seem very well positioned to punish competition infringements by companies operating in the same sector. Though the said argument ignores the fact that competition laws apply not only to companies operating in regulated sectors but also to companies in the other sectors of the economy, the truth is that companies operating in regulated sectors – on the ground of being only a few and having, as such, high turnover and big market shares – are prone to being applied high fines in case of infringement of competition rules, precisely those for which strength and independence on the part of the competition authority are mostly required. Anyway, notwithstanding the above arguments used against the CNMC, after more than six years of activity, there is no doubt that this agency has been independent and strong enough to impose heavy fines for competition infringements to a high number of companies from different sectors of the economy, including many operating in sectors regulated by it. Therefore, it seems that, at least in this point, the concerns raised by the creation of the CNMC have proved to be somewhat ungrounded. Nonetheless, if independence and strength have proved not to be an issue, some argue, not always with reason, that the same cannot be said of the CNMC’s skills to deal with complex cases, for lack of economic vision, which leads cases not be handled in an efficient manner, at least from an economic point of view, or of legal assertiveness, which has led many sanction resolutions, most of them adopted before 2016, to be declared void and of no effect when reviewed by courts. Regarding these CNMC’s resolutions, many of them were repealed on mere formal grounds (e.g., lack of notification of certain interim decisions to the investigated parties or of hearing of these, etc.), something that generated criticism and frustration, notably from members of its own Council.

Leniency/amnesty regime Articles 65 and 66 SCA, as developed and implemented by Articles 46 to 53 of the Competition Regulation, allow the CNMC to grant exemptions from payment of fines, or reductions in the amount of them, to undertakings or individuals that inform the CNMC of the existence of a cartel and of their participation or responsibility in the same, accompanied by the substantive evidence at their disposal or which may be obtained through an internal investigation, provided the requirements and conditions thereto laid down in the SCA and in the Competition Regulation are duly met. The SCA establishes an exemption of sanction for the members of a cartel that bring evidence

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© Published and reproduced with kind permission by Global Legal Group Ltd, London SCA LEGAL, S.L.P. Spain to the CNMC of the existence of (i) sufficient clues to ground an investigation of the cartel, or (ii) of the infringement of the Prohibition – when, in this second scenario, no exemption has been given to any person on behalf of the former (Article 65.1) – provided that she cooperates with the CNMC and, among others, ceases to participate in the cartel (Article 65.2). In addition, Article 66 SCA provides for a reduction in the sanctions to those individuals or companies participating in a cartel, that, without meeting all the requirements foreseen for the exemption granted by Article 65, at least meet some of them, and notably that of cooperating with the CNMC in the investigation, by providing evidence deemed relevant in comparison to that already gathered by such Commission. In June 2013 the extinguished competition authority, the Comisión Nacional de la Competencia, approved a clemency programme under the SCA, which follows the leniency programme of the European Commission and which the CNMC has been applying since its creation. The notice of the programme, published in the Official Gazette in August 2013, includes detailed rules on the requests for exemption and reduction of the fines, the collaboration to be provided by the offenders and confidentiality, as well as an exhibit with the model form to be used by companies and undertakings that request leniency measures. In 2019, the CNMC used this programme to exempt several offenders from fines, or to reduce the amount thereof of several offenders. An example of this is the mentioned business parcel services case, where, as mentioned, the CNMC exempted the members of the cartel that informed of the conduct from paying a fine to the amount of €3.8 million out of a leniency measure applied to such offenders.

Administrative settlement of cases Following the solution devised by the EU Regulation, Articles 52 of SCA and 39 (5) of the Competition Regulation set a route for the termination of sanction proceedings without the application of a sanction to the offender. Under this provision, the Council of the CNMC, following a proposal by the Competition Division, has the authority to terminate sanction proceedings on cartel activities, when the alleged offenders have offered to bind themselves to eliminate the damages arising out of the investigated conducts, in terms deemed to sufficiently protect the general interest. The offer is converted to a commitment once the Council adopts the decision to terminate the proceedings. Such decision cannot be taken after the termination of the investigation phase and the notification to the alleged offenders of the draft of the Resolution of the proceedings. Though the administrative settlement of cases is different from a leniency programme – notably on the ground that, in such case, the sanction proceedings are not opened on the basis of information provided to the CNMC by a company or undertaking participating in a cartel – it can lead to the non-application of sanctions to the offender, which is, by all means, a form of leniency. Though the CNMC has administratively settled several cases (e.g., abuse of dominant position), so far only one cartel case, the recently decided case n. S/DC/0573/16 (odontology services) has been settled in these terms. In this case, decided on 9 February 2021, the CNMC accepted to terminate sanction proceedings against two dental professional associations (Colegio de Odontólogos de la 1ª Región and Consejo General de Colegios Oficiales de Odontólogos y Estomatólogos de España) by accepting the offers made by each of these associations under which both assumed the obligation to eliminate damages arising out of the investigated collusive conducts (media campaigns against companies employing doctors to render dental services under a trademark).

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Third-party complaints Third parties (e.g., customers of cartel participants) can denounce cartels as well as other anti-competitive conducts that they see as infringing the SCA and actually a substantial part of the CNMC’s sanctioning procedures are opened following a complaint filed by a third party. For example, the 2015 investigation of the mentioned public tenders’ case, which, as mentioned, led to fines of almost €30 million, was opened on the ground of a complaint filed by one of the acquirers of those services. The complaint needs to be submitted through the CNMC’s webpage and include the data foreseen in Article 25 of the Competition Regulation. Data foreseen in Exhibit I of this Regulation can also be included in the complaint, although this is not mandatory. Participants have the right to be notified of the CNMC’s decision to open sanctioning proceedings or to set the case aside following the submission of a complaint. This decision, which is taken by the Council of the CNMC, following a proposal by the Competition Division, can be challenged before the courts. In case the CNMC decides to initiate sanction proceedings, informers, as interested parties, have the right to (i) access those proceedings, with the exception of documents therein with commercial secrets belonging to other parties, (ii) request evidence, (iii) file pleadings, and (iv) receive notifications of certain developments produced in the same and, notably, receive the list of conducts that the Competition Division deems as foreseeably breaching the competition rules, and the draft of the resolution that ends the sanction proceedings (Articles 31–33 of the Competition Regulation). Nonetheless, with a view to increase the number of infringements brought to the attention of the CNMC, it has announced, in early 2018, that it will authorise complaints to be filed without the need to disclose the name of the person/company that fills them.

Penalties and sanctions As mentioned before, the CNMC has the authority to apply sanctions to offenders of competition rules, either in the form of fines or in that of periodic penalty payments. Pursuant to Article 63 SCA, fines can be up to 10% of the turnover of the offender in the preceding business year. Apart from establishing an upper limit, as this provision does not include any guidelines on exactly how the fine should be set, in 2009 the predecessor of the CNMC, the National Competition Commission, approved some guidelines on the subject. Nonetheless, in 2015 in its ruling 112/2015 (appellation 2872/2013), the Administrative Chamber of the Supreme Court ruled that the 2009 Guidelines did not comply with the provision of Article 63 SCA and set some criteria that the CNMC has been following since then (“Criteria”). In accordance with the Criteria, the said 10% upper limit is not a cap to be applied to a previously determined sanction, as it had been understood before, but the true upper limit of the fine range, whose amount needs to be set in accordance with the seriousness of the infringement to be sanctioned, the 10% amount being restricted to the most serious infringements only. In addition, the relevant turnover for the purpose of determining the said upper limit is the global turnover of the offender, which comprises not only the one corresponding to the market where the infringement was committed but also those corresponding to the remaining business activities of the offender. In order to set the amount of the fine, the Criteria distinguish between the general amount – which is based on the nature of the infringement in itself, corresponding to around 60% of the upper limit – and the specific one – which takes into consideration the circumstances

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© Published and reproduced with kind permission by Global Legal Group Ltd, London SCA LEGAL, S.L.P. Spain of the infringement (duration and positive/negative aspects of the conduct of each of the companies to be sanctioned and the dimension of the market affected by the infringement),16 corresponding to the remaining 40% of the upper limit. Nonetheless, in accordance with the Criteria, the sum of the said general and specific amounts corresponds to the final amount of the fine if such sum is deemed to be proportionate to the “relevance of the conduct of the infringer”, bearing in mind the importance of the business activities for which the infringer is to be sanctioned in her global turnover and the profits generated by the conduct to be sanctioned. Based on this, the fine should neither be smaller than the amount of those profits nor substantially higher than the same. Therefore, in case the sum of the general and the specific amount lies outside of those limits, the amount of the fine needs to be adjusted accordingly. In October 2018, with a view to detail the Criteria established by the mentioned 2015 ruling of the Supreme Court, the CNMC published new Guidelines on the setting of fines. In these new Guidelines, the CNMC discloses how it has been interpreting the Criteria since 2015 and sets out some additional rules aimed at assuring that the mentioned general and specific fine amounts are adjusted to the effective economic impact of the infringement. For that, it devises a so-called (upper) limit of proportionality to which every fine needs to be lowered in case the sum of the general and the specific amounts is higher than that limit.

Right of appeal against civil liability and penalties (1) Rulings on civil liability given by the Courts of Commerce, which are provincial and based on the capital of each province, can be appealed before the corresponding Provincial High Court (Audiencia Provincial), also based on the province capital. The Provincial High Courts hear the cases in second instance, which means that their rulings can be based on facts different from those accepted by the rulings given by the a quo courts. Nonetheless, the appellate powers of these courts are limited by the grounds foreseen by the appellant in her pleadings. The appellate rulings are appealable in cassation before the Civil Chamber of the Supreme Court, based in Madrid. The grounds for cassation of the rulings given by the Provincial High Courts are those foreseen in general terms in the 2000 Civil Procedure Act, according to which a ruling given by a Provincial High Court is appealable in cassation on any of the following types of grounds: (i) where the a quo ruling deals with fundamental rights, except the right to the due process of law foreseen in Article 24 of the Spanish Constitution; (ii) when the amount of the proceedings exceeds €600,000; or (iii) if that amount is lower or the proceedings have been conducted due to their subject matter, when the hearing of the appellation has “cassation interest” (Article 477 (2)).17 (2) With regard to public enforcement, the trying of the decisions by the CNMC is vested in the Administrative Chamber of the National High Court, based in Madrid, which hears the cases in unique instance. The rulings given by this Court are appealable in cassation before the Administrative Chamber of the Supreme Court, also based in Madrid.18 The grounds for cassation of the rulings given by the said Chamber of the National High Court are those foreseen in general terms in the 1998 Contentious Administrative Proceedings Act, according to which a ruling given by the Administrative Chamber of the National High Court is appealable in cassation on one or both of the following types of grounds: (i) infringement of procedural rules in the proceedings followed in the said a quo court; and (ii) infringement of any rules and or case law applicable to the case being heard (Article 88).

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Criminal sanctions The Spanish legislation does not qualify as a crime any of the conducts forbidden by the competition legislation. The criminalisation of certain anticompetitive conducts has been discussed on several occasions, but the legislator has always opted to keep things as they have been since anticompetitive conducts began to be punishable under the 1963 Competition Act. In the case of cartel behaviour, when forbidden, it is also deemed as an administrative infringement, sanctioned with penalties, applied by the CNMC, and which, in no case, are deemed to have criminal sanction nature. Notwithstanding the above, certain anticompetitive conducts may be deemed a crime if they are qualified as such under a broader rule not specifically devised to punish those types of conducts. That is notably the case of several fraudulent schemes seen in public procurement tenders (bid rigging) – where several bidders collude to increase prices, if acting as sellers, or to lower them, if acting as buyers, thus generating a direct loss to the launcher of the tender or auction and an indirect one to taxpayers and the whole economy – which are punishable, under Article 262 of the Criminal Code, with imprisonment from one to three years and several ancillary and several ancillary sanctions, which are more severe when the tender or auction has been called by a public body.

Cooperation with other antitrust agencies The CNMC cooperates with several competition authorities, both at EU level and with national authorities from other Member States, and is a member of the European Competition Network (“ECN”), a network integrated by those authorities and the European Commission, that, in the words of the CNMC, “facilitates compliance with the obligations on cooperation imposed by legislation in the European Community, and which ensures consistent and effective application of the regulations on defence of competition, while also allowing sharing of experiences and identification of best practices”. The CNMC also participates in the European Competitions Authorities Forum (“ECA”), which the CNMC describes as focused on discussion of experiences and exchange of information on good practices among competition national authorities from Member States of the European Economic Area; and takes part in the Committee on Competition from the OECD, on behalf of Spain, which concentrates on the distribution and exchange of knowledge and experiences in the defence of competition. In addition, the CNMC is a member of the Latin-American and Caribbean Competition Forum, a project of the OECD and the Inter-American Development Bank that supports the application of competition policies in Latin America and the Caribe. In the 2019 edition of the said Forum, the 17th, which took place in San Pedro Sula, Honduras, the CNMC, among others, submitted a paper on the estimation of damages caused by cartels. It also sponsors, together with the competition authorities from Portugal, an Ibero-American Forum on Competition, which meets once a year with competition authorities from the Caribe and the Ibero-American countries, with the purpose of establishing ties with them. The CNMC also organises bilateral summit meetings with competition authorities from other countries, the most recent of which took place in 2019, with the French competition authority. Finally, in January 2019, the CNMS signed a Memorandum of understanding with the Moroccan competition Authority, with a view to (i) reinforce cooperation on the competition legal framework and policy, and (ii) exchange information and technical assistance.

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Cross-border issues In accordance with the EU Regulation and the SCA, the CNMC has the authority to enforce not only the national competition rules, but also such regulation, when an infringement of Article 101 TFEU, i.e., one that affects competition in the EU market, occurs at least partially in Spain (Article 5 Law 3/2013). The performance of this power may lead the CNMC to exert extra-territorial jurisdiction, in the sense that it can investigate the effects, in other EU Member States, of cartels whose practice occurs at least partially in Spain, or impose fines which take into account the effect of the forbidden conduct on territories outside of Spain. In cases where the applicable legislation is the SCA, there may exist grounds for the CNMC to exert extra-territorial jurisdictions, when part of the investigated or sanctioned conducts had taken place outside of Spain. Nonetheless, none of the proceedings initiated or terminated in recent years which we had knowledge of, led the CNMC to exert such jurisdiction. The Spanish authorities and courts regularly cooperate with authorities and courts in other jurisdictions when they are requested to do it, particularly in what concerns the notification of the initiation of proceedings. In 2019, the CNMC notified the ECN of the initiation of eight proceedings for the enforcement of Articles 101 and 102 TFEU.

Developments in private enforcement of competition laws (1) In Spain, private enforcement of competition law and, as such, that of the Prohibition, has been in place for some time, and notably before the enactment of the SCA in 2007. As a matter of fact, although, in the first few decades of the Spanish competition legislation private enforcement was not specifically foreseen, and the mainstream understanding was that competition rules were aimed at protecting general interests – not private rights – and, as such, that the infringement of those rules could not be a ground for claiming damages – courts began to accept the existence of the right to claim those damages long before the legislation opted to specifically rule this matter. Whilst before 2007 no provision expressly foresaw such enforcement,19 courts began to accept that the right to claim damages caused by infringement of competition rules was covered by general rules and principles that allow for the claim, by an individual or a juridical person, of any damages suffered because of the infringement of any laws, as was upheld by a ruling given by the Civil Chamber of the Supreme Court in 2000.20 Nonetheless, the enactment of the SCA significantly upheld such enforcement by (i) entrusting the Courts of Commerce with the power to decide any controversies arising out of the infringement of Articles 1 and 2 of the same, and (ii) by repealing the need, foreseen in the long repealed 1989 Competition Act, to have a decision of the competition authority that sanctions a conduct, as a condition for any claim for damages to be admitted by the courts. In 2017, with the transposition of the Directive 2014/104/EU, by Royal Decree Law 9/2017, which added several provisions to the SCA – and, notably, a title (VI) on compensation of damages – private enforcement of competition law in Spain received a new impulse. The provisions of Title VI of the SCA (Articles 71–81) cover relevant issues on the damage claims caused by the infringement of competition laws, and, notably, the principle of full indemnity of damages, the determination of the amount to be indemnified and the burden of proof, some of them already covered, though in very general terms only, by the civil torts’ legislation (Article 1902 of the Civil Code). Following Article 3 of the Directive 2014/104/EU, Article 72 SCA provides for the existence of a right to full compensation of damages, adding that such compensation

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shall place a person who has suffered harm in the position in which that person would have been had the infringement of competition law not been committed, which means the right to compensation for actual loss and for loss of profit, plus the payment of interest accrued since the date when the damages were caused. Nonetheless, pursuant to this provision, full compensation shall not lead to overcompensation, whether by means of punitive, multiple, or other types of damages. To avoid overcompensation, Article 78 SCA provides that compensation amounts to the damages effectively suffered by the claimant, which excludes any amounts passed on, i.e., “compensation for actual loss at any level of the supply chain cannot exceed the overcharge harm suffered at that level”. The courts have the power to estimate the share of any overcharge that was passed on. As to the burden of proof, we need to distinguish between the burden of proof of the infringement and the burden of proof of the damages. Regarding the burden of proof of the infringement, Article 75 SCA sets forth that “an infringement of competition law found by a final decision of the CNMC or by a Spanish court is irrefutably established for the purposes of an action for damages for the infringement of competition rules”. As to the burden of proof of damages, Article 76 SCA establishes that it shall be presumed that cartel infringements cause harm, although the infringer shall have the right to rebut that presumption. In any case, the burden of determining the amount of damages suffered is upon the plaintiff. If this fails to comply with that burden, it will be up to the court to estimate such amount (Article 76 (2) SCA). In case of more than one offender, liability for the damages is joint and several (Article 73 (1) SCA). Therefore, if an offender pays the victims more than itsshare of the damages, she will have the right to recover from the other offenders the amounts paid in excess (Article 73 (5) SCA). The limitation period for claiming an indemnity for damages caused by an infringement of the Prohibition is now five years (Article 74.1 SCA), which is substantially higher than the one foreseen in the general torts’ legislation (one year),21 though this is not applicable with retroactive effect in relation to the 2017 reform (first additional provision of the Royal Decree Law 9/2017). The said limitation period is suspended, among others, for the duration of any consensual dispute resolution process between the parties. (2) The reform carried out by Royal Decree Law 9/2017 did not only affect substantive law matters but it also extended to procedural ones, by amending the 2000 Civil Procedure Act. The said piece of legislation added a section (1st Section bis of Fifth Chapter of the Second Title of the Second Book) to the said Civil Procedure Act, with Articles 283 bis a) to 283 bis k), on evidence in damages proceedings for the infringement of competition rules. The most significant innovation in this matter has to do with the disclosure of evidence by the defendant, or would-be defendant, at the request of the plaintiff, which may now be ordered by the court, if certain requirements thereto are duly met. The failure of the requested party to comply with a court order on this may generate several negative consequences for such party, including the application by the court of daily fines of up €60,000, let alone be a ground for the initiation of a criminal procedure on charges of a commission of a crime of disobedience (Article 283 bis h). In 2020 there were few court rulings on damage claims filed by victims of cartels that can be deemed innovative in terms of how they interpret competition laws and regulations, and some of them were not in relation to cartel infringements forbidden by the SCA but by the EU Regulation. Among them it is worth mentioning the following: (i) Ruling n. 926/2020 of the Court of Appeals of Cáceres on 19 November 2020 (appeal procedure 499/2020), whereby it revoked a ruling by the First Court of First

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Instance of Cáceres that had dismissed a cartel damages lawsuit filed by a person who had acquired four MAN trucks in 2008, against Man SE, the manufacturer of which the sellers of the trucks were concessionaires, on the ground that when the lawsuit was filed time foreseen thereto by the law had already lapsed. The lawsuit was based on damages caused by a cartel of several car manufacturers, including several companies belonging to the MAN group, whose existence had been declared by the European Commission in a Decision dated 19 July 2016. In its ruling the ad quem court began by understanding that the time to file the lawsuit had not lapsed, as, among others, such time could not be counted from the date when such decision was announced by the European Commission in a press release but from the date when it was published in the Official Journal of the European Union. Based on this, the court decided to hear the case, uphold the lawsuit and, as such, to condemn the defendant to pay a certain amount of damages to the plaintiff. In doing so, the Court dismissed a passing on argument used by the defendant, by saying that this failed to comply with the burden, imposed by the general procedural rules, to provide evidence that the overprice had been passed on, i.e., that the plaintiff had actually sold those trucks in the same market, that of new trucks, for a price similar or higher than that for which it had acquired them. (ii) Order n. 369/2020 of the Tenth Court of Commerce of Barcelona of 23 November 2020 (case 2182/2019), which, under the rule set out in the mentioned Article 283 bis l of the Civil Procedure Act, authorises a request filed by Grupo Danone against several companies operating in the corrugated cardboard business (Cartonajes M Petit, S.A., Hispano Embalaje, S.A., Cartonajes Europa, S.A., and Cartonajes La Plana, S.L.) to disclose certain documents that such applicant deems necessary with a view to the filing of a lawsuit against those companies for damages arising out of the breach of competition rules, This order is interesting in so far as it is possibly the first order of this type given in advance of the foreseeable filing of a damages stand-alone lawsuit. Although the case is based on sanction applied to the now sued companies by the CNMC in a procedure where they and several other companies were sanctioned in 2015 for having engaged in a cartel (case S/0469/13), the sanction was declared void by the National High Court in 2019 not because the court did not appreciate the existence of an infringement, which it did appreciate, but only on the ground that it had been applied five days after the lapsing of the 18-month deadline set out in Article 36 (1) of the SCA. (iii) Ruling n. 709/2020 of the Court of Appeals of Pontevedra on 23 December 2020 (appeal procedure 463/2020), whereby it confirmed a ruling by the Second Court of Commerce of Pontevedra that had uphold a cartel damages lawsuit filed by Kartin, S.L., a company that had acquired 14 MAN trucks between 1997 and 2011, against Man SE, the leaser from which the buyer acquired those vehicles in the end of the lease agreement. The lawsuit was based on damages caused by a cartel of several car manufacturers, including companies belonging to the MAN group, whose existence had been declared by the European Commission in the mentioned Decision dated 19 July 2016. In the appealed ruling, although the a quo had dismissed the criteria for the quantification of indemnity sought by the plaintiff (€176,727.23), partially uphold the lawsuit by condemning the defendant to pay a lower indemnity, set by it in accordance with the rule set out in Article 76 (2) of the SCA, enacted by the by Royal Decree Law 9/2017. Based on that rule, such court condemned the defendant to an indemnity to the amount of 5% of the price for which the trucks had been acquired.

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In its appeal, the defendant sustains, among others, that the said rule could not have been applied to facts occurred before the mentioned Directive 2014/104/EU, and that the rejection of the said criteria used by the plaintiff should have led to the dismissal in full of the lawsuit. The ad quem Court dismissed the appeal by saying, among others, that the right of the court to set the indemnity when the plaintiff fails to do it in due terms, though not enshrined in the Spanish internal legislation before the addition of the mentioned Article 76 (2), was part of the EU case law that was to be taken into consideration, in internal cartel damages cases, at the time of interpreting the main internal provision on non-contractual damages (Article 1902 of the Civil Code).

Reform proposals For the time being, except for the amendments required for the transposition of the mentioned Directive (EU) 2019/1,22 which will require, among others, the amendment of the SCA, there are no substantial outstanding proposals for reform of the Spanish national competition regime, although the debate about the institutional framework of the Spanish competition laws enforcement has been on the table since the creation of the CNMC in 2013. The ideas behind the merger of the competition authority and some of the regulatory ones in the CNMC in 2013, which had to do with reducing costs, generating synergies, and avoiding contradictions between regulatory and competition policies, have not been confirmed by the CNMC’s practice in its first years of existence. This, and the mentioned weaknesses seen by many in the CNMC’s institutional framework, had in recent years led the main parties to question the existing institutional framework of the competition laws and to consider revising the solution devised in 2013, with a view to get back to a regime similar to the one in place before the creation of the CNMC, i.e., a regime that entailed a competition authority, with powers to investigate and sanction the infringements of the competition legislation, and several independent regulatory agencies, with powers to rule and sanction conducts except those foreseen by the said legislation. This matter, at least for now, is seen as something of the past, and the existing institutional framework seems to be gradually taking hold. Now what is being discussed is not a reform of the CNMC model but of the CNMC’s internal structure and, notably, of how the competition department and the regulatory ones operate in a manner that avoids undesirable interaction between them. The recently appointed president of the CNMC, Ms. Cani Fernández, an experienced competition lawyer (2020–), has promised to pursue an amendment of the bylaws of the entity, with a view to strengthen its independence and develop a more efficient financial and human resources regime. She has also pleaded for an increase in the budget of the entity, as this, in her words, is too low when compared to the savings it generates to the economy.

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Endnotes 1. In addition, Spain has enacted Law 3/1991, on unfair competition. This piece of legislation does not aim to protect competition in the markets, but each of the players in the markets (companies and consumers) from unfair acts and conducts, i.e., committed in bad faith, of companies against other companies or consumers. Amongst others, this piece of legislation rules on the effects of unfair acts and conducts, by establishing a right of the companies or persons damaged by the same to be indemnified by the agents. Although Law 3/1991 does not specifically cover cartel activities, the pursuance of these might lead to the commission of unfair acts and conducts covered by the same.

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2. This definition was given by Royal Decree Law 9/2017, which transposed several EU directives and notably Directive 2014/104/EU, of the European Parliament and the Council, on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union, whose Article 2 (14) reads in the very same terms. Before that the Fourth Additional Provision of the SCA read the following: “[C]artel is taken to be any secret agreement between two or more competitors which has as its object prices fixing, production or sales quotas, market sharing, including bid rigging, or import or export restrictions.” The most significant differences between the two versions have to do with the fact that, in the current version, neither secrecy of the agreement nor even the existence of an agreement are requirements for the existence of a cartel. Instead of an agreement, a mere “concertation of practices” is now sufficient. 3. Now, Article 101 (3) of the TFEU. 4. Now, the below mentioned Commission on Markets and Competition. 5. Pursuant to Articles 13 and 15 SCA and 1 of Law 1/2002, the enforcement of SCA is shared by the CNMC with the regional competition commissions in each of the Spanish regional communities (“Regional Commissions”), which have established a department of such type, for the time being only 12 of those communities having done so. Basically, in accordance with such piece of legislation, the regional commissions engage in the enforcement of the Prohibition in case of agreements or conducts taking place within each of their territories, the CNMC keeping to itself the enforcement of the Prohibition in all other cases. Nonetheless, some Regional Commissions have not been given full powers in this matter but only some of them. Where there is no Regional Commission in place or where its powers do not cover the enforcement of the Prohibition in full but only a part thereof, the CNMC performs the corresponding powers (Transitory Provision of Law 1/2002). 6. In addition to such powers, Law 3/2013 has also vested the CNMC with powers to regulate several sectors (telecommunications, electricity, mail, railways, ports, etc.) that, before its creation, were entrusted to different regulatory boards and commissions. 7. In this chapter any reference to the Prohibition enforcement powers entrusted to the CNMC comprises those entrusted to the Regional Commissions by their corresponding bylaws, in accordance with the rules on assignment of enforcement powers to national and regional competition authorities foreseen by Law 1/2002. On this issue, see endnote 5. 8. Article 62 (4) SCA deems a cartel infringement as a very serious infringement. 9. In the case of juridical persons, in addition to the fines applied to such persons themselves, the SCA also foresees the applications of fines of up to €60,000 to the individuals that manage or are members of the board of the same or integrate the managing departments that played a role in the prohibited agreement or conduct (Article 63.2). 10. The composition and powers of the organs of CNMC are ruled by its bylaws, which were approved by Royal Decree 657/2013. 11. This provision entrusts the same powers to the European Commission in any procedures where what is a stake is the enforcement of Article 101 TFEU. 12. The use by the CNMC of the power to engage in dawn raids without the consent of the affected party or acourt authorisation, on several occasions, has generated legal disputes, where the affected party, as plaintiff, requested the setting aside of the proceedings, out of the illegality generated by undue access to her premises. A recent example of this is the case heard by the Supreme Court, where this ruled, in cassation, in favour of the plaintiff (Repsol, S.A.) and against the CNMC, by annulling the information gathered in a dawn

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raid carried out on the premises of the said plaintiff (ruling given by the Administrative Chamber on 17 September 2018 – proceedings 2922/2016). 13. The figures for 2019 will be disclosed in the Annual Report for this year, due in early 2020 but not yet published. 14. Anyway, this situation exists since the enactment of the SCA, which merged the Servicio de la Competencia, integrated in the Ministry of the Economy and with powers to investigate infringements, and the Tribunal de Defensa de la Competencia, in charge of applying sanctions, and replaced them by the mentioned Comisión Nacional de la Competencia. At that time, the mainstream view was that this change strengthened independence at the time of investigating conducts, and this on the ground that the said Servicio integrated the Government and the new Comisión was independent from this. 15. These circumstances are those set in Article 64 SCA. Among the positive circumstances established therein, it is worth mentioning the one, added in 2017, consisting of the intent, by the infringer, to eliminate the effects of the infringement. This circumstance has a reinforced positive effect when the offender succeeds in fully eliminating those effects before the CNMC passes the corresponding sanction resolution. 16. Pursuant to Article 477 (3) of the 2000 Civil Procedure Act, there exists “cassation interest” when the a quo ruling is not in line with case law from the Supreme Court or there exist rulings from two or more Provincial Courts that rule on similar matters in contradictory terms, or where it applies rules that have been in force for less than five years, as long as, in the latter case, no case law from the Supreme Court exists concerning previous rules of identical or similar content. 17. The 2000 Civil Procedure Act also foresees an appeal of appellate rulings, called “extraordinary” for the infringement of procedure by an a quo ruling. This appeal, which, since its creation, has been subject to a transitory regime set forth in the Sixteenth Final Provision of the said 2000 Act, is based on any of the following grounds: (i) a breach of the rules on objective or functional jurisdiction and competence; (ii) an infringement of the procedural rules governing the judgment; (iii) a violation of the rules governing the procedures and safeguards of the proceedings, where such breach gives rise to the nullity of the ruling in accordance with the law or could have brought about a lack of proper defence; and (iv) a breach of the right to a due process, foreseen in Article 24 of the Spanish Constitution. 18. Apart from the mentioned Law 3/1991, on unfair competition, in its original version, which, though not foreseeing the indemnification of damages, was seen by some court rulings, as a ground thereto. A reform of this Act passed in 2009 amended Article 18 (now Article 32) of Law 3/1991 to expressly foresee the indemnification of damages caused by the unfair competition acts or conducts. 19. We refer to ruling 540/2000, whereby a sort of distribution agreement was deemed void, on the ground of infringing Article 81 (now 101) of the TFEU, and which included, as obiter dicta, statements on indemnification of damages caused by the infringement of competition rules. 20. Article 1968 of the Civil Code. 21. This ruling is one of several given in similar lawsuits filed by other companies sanctioned in the mentioned S/0469/13 procedure, where the National High Court found that no sanction could validly have been applied to the infringers by the CNMC on the ground of the lapsing of time foreseen in Article 36 SCA. 22. Although the piece of legislation that must be passed for the transposition of the said Directive has not yet been enacted, this should have happened already, as all EU Member States are required to have such Directive transposed by 4 February 2021 (Article 34).

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Pedro Moreira Tel: +34 91 781 50 40 / Email: [email protected] A founding partner of SCA LEGAL, S.L.P., Pedro Moreira has almost 20 years of experience as a litigation lawyer, specialising in commercial, competition and corporate law disputes. Thanks to his expertise in those areas of law and his background in economics and business administration, he regularly advises clients, from different jurisdictions and sectors, in competition matters proceedings and complex litigation cases (in relation to the breach of commercial contracts, damage claims, shareholders conflicts and other corporate law issues, bankruptcy and insolvency matters, etc.), some of them multijurisdictional and/or heard by a court of arbitration. Pedro also advises on a regular basis on non-contentious matters, mostly in commercial, corporate and competition law. Pedro graduated in Law from the Complutense University of Madrid and has a B.A. in Law from the Catholic University of Lisbon, an M.A. in Economics (Diploma de Estudios Avanzados en Economía) from the Complutense University of Madrid and an M.B.A. from the EAE (Madrid)/Camilo José Cela University (Madrid). He is a member of the Madrid Bar Association, speaks fluent Spanish, Portuguese and English and has also a good command of French and German.

SCA LEGAL, S.L.P. Castelló Street nº 82, 4º izquierda 28006 Madrid, Spain Tel: +34 91 781 50 40 / URL: www.sca-legal.com

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Michael Tschudin, Frank Scherrer & Urs Weber-Stecher Wenger & Vieli Ltd.

Overview of the law and enforcement regime relating to cartels The authorities The Swiss Competition Authorities, comprising the Competition Commission (“ComCo”) and its Secretariat (“Secretariat”), are responsible for the public enforcement of the Swiss Cartel Act of 1995 (“CartA”). The 12 members of the ComCo meet on a regular basis to decide cases, while the Secretariat conducts the investigations and submits proposals to the ComCo for determination. The ComCo consists of a majority of independent experts, such as professors of law and economics, and a minority of stakeholders, including industry and trade union representatives. There are approximately 74 lawyers, economists and other staff (FTE 64.2) within the Secretariat, which is divided into four, equally sized divisions: infrastructure; services; product markets; and construction. Typically, the Competition Authorities investigate complaints reported by businesses or consumers and leniency applicants. Cases that would be likely to have a substantial impact on the Swiss economy, such as market foreclosure by restrictions on parallel trade, are more likely to be prioritised for investigation. Cartels that do not substantially restrict competition are not subject to financial sanctions in Switzerland and complaints by concerned parties regarding such cartels are often referred to civil redress by the Competition Authorities. Enforcement priorities The enforcement priorities of the Competition Authorities consist of fighting hard core horizontal cartels and vertical agreements involving foreclosure of the Swiss market. Such vertical agreements are of particular interest to the ComCo in cases where parallel imports from the EU into the Swiss market are potentially restricted. For example, agreements between parties within the European Economic Area (“EEA”) restricting passive sales outside of the EEA have been considered illegal from a Swiss perspective, since imports into Switzerland – not being part of the EEA – were affected by such agreements (see section below on “Overview of cartel enforcement activity during the last 12 months”). Often such restrictions are only internally reviewed by companies from the perspective of European competition law and strict regulations outside of the EU are not taken into account. In August 2020, the ComCo opened an investigation against a German producer of tobacco products and certain distribution partners outside of Switzerland in relation to import restrictions to Switzerland. Similar restrictions were subject of various proceedings by the ComCo in the past. Fines and criminal sanctions The CartA distinguishes administrative sanctions from criminal sanctions. Criminal sanctions for individuals are very rare and only apply to those who wilfully violate an amicable settlement or a final and non-appealable decision (including rulings regarding

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Wenger & Vieli Ltd. Switzerland the obligation to provide information). Administrative fines against firms may amount up to 10 per cent of the turnover that the firm achieved in Switzerland in the preceding three financial years. According to the Federal Supreme Court, such administrative sanctions have the characteristics of criminal sanctions. Therefore, the guarantees of the European Convention for the Protection of Human Rights and Fundamental Freedoms (“ECHR”) apply in principle, however, not in full. Not all kinds of cartels are subject to fines. On the horizontal level, only hard core cartels regarding price-fixing, volumes, allocation of customers and territories may directly result in a fine. Regarding vertical restrictions, resell price maintenance and absolute allocation of a geographical market, to the extent that passive sales by other distributors into such territories are not permitted, may be fined. Other restrictions, such as vertical online sales restrictions, may be found illegal, but only fined where the undertaking involved violates the corresponding decision of the authority.

Overview of investigative powers in Switzerland Proceedings under the CartA are generally in two stages. The Secretariat can initiate preliminary investigations on its own initiative, at the request of certain affected undertakings (e.g. competitors), or based on third-party complaints. It is at the discretion of the Secretariat whether to open a preliminary investigation. If the Secretariat finds indications of a significant restriction of competition, it requests the opening of an investigation by a presidium member of the ComCo. Also, dawn raids and seizures of documents and electronic data first require an investigation to have been opened, as these coercive measures are not possible in preliminary proceedings. In principle, the Secretariat may not decide on any procedural orders without the consent of a presidium member of the ComCo. Generally, once official investigations are opened, they are seldom closed without any consequences for the undertakings involved. The scope of the investigative powers depends on whether or not the party involved is subject to an administrative sanction. If so, the right against self-incrimination (nemo tenetur principle) limits the investigative powers to a certain extent. If such sanctions do not apply, the investigative procedure is merely administrative. Such procedures are characterised by a certain duty of cooperation according to Swiss administrative law. For example, upon specific request for information, the undertakings under investigation are obliged to provide the Secretariat with all information required for the investigation and to produce necessary documents (article 40 CartA). In case the Competition Authorities investigate a hard core cartel – which is subject to a fine – an undertaking may refuse to cooperate in relation to a request for information, to the extent that by cooperating the undertaking could incriminate itself. The same principle applies in relation to interviews with individuals (within the executive bodies) who speak for the undertaking. Upon request of the Secretariat, a presidium member of the ComCo may order dawn raids and seizures (see article 42 para. 2 CartA). 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 undertaking being raided may request the sealing of specific or even all documents and electronic data. The Swiss Competition Authorities may communicate with the EU Authorities based on the

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Wenger & Vieli Ltd. Switzerland agreement between Switzerland and the EU on cooperation and exchange of information between their respective competition authorities. This agreement allows them to mutually exchange specific case-related confidential information. The scope of this information exchange agreement is broader than in previous EU cooperation agreements with non-EU Member States and is therefore called a “Second Generation Agreement” in the EU. The crucial point in this new generation of agreements is that confidential information can be transmitted without the parties’ consent. Nevertheless, the agreement provides for limitations on the exchange of information and the use of it. For instance, only information already in the possession of the authority may be requested by the other authority, and information received under a leniency or settlement procedure must not be transmitted. Finally, it is noteworthy that the ComCo and DG Comp have coordinated the timing of dawn raids regarding the same or similar competition concerns in the past.

Overview of cartel enforcement activity during the last 12 months The COVID-19 situation has obviously influenced the Competition Authorities’ agenda in 2020. While in March 2020 the ComCo warned companies that the CartA should be observed practically without exception even in times of crisis, it clarified that the CartA provides for exceptions where coordination between competitors can be justified on efficiency grounds. This applies, in particular, to temporary measures to prevent imminent supply bottlenecks. The authorities were also able to give guidance to companies in a timely manner in relation to specific projects meeting the challenging COVID-19 situation. Generally, cooperation between competitors may be necessary in order to secure the supply chain and avoid imminent supply bottlenecks of scarce products. This includes joint planning regarding production (e.g. specialisation agreements). Such cooperation requires an exchange of information, which is normally sensitive under competition law. According to the authorities’ view, the CartA leaves sufficient room for such cooperation. This is persuasive since, first of all, agreements between competitors generally do not constitute restrictions of competition if they are made to mitigate a state of emergency. Secondly, a cooperation is considered justified if it increases economic efficiency, in particular by reducing production costs or using resources more rationally. Although the ComCo warned especially dominant firms in relation to price excesses, no formal investigations were opened regarding COVID-19 specific cases to date. While the ComCo conducted around 19 investigations in the last 12 months, only three decisions have been taken during this period which concerned cartels. In the year under review, the ComCo closed more investigations in relation to dominance than regarding cartels. However, it opened five new investigations into cartels. Generally, the enforcement level increased compared to previous years. As in other jurisdictions, the enforcement activity highly depends on the number of staff within the Competition Authorities, and this number has not increased in the year under review. Whereas in the past the detailed effects analysis had bound significant resources, the effects of cartels play a subordinate role now based on new case law of the Federal Supreme Court. These cases resulted in two main effects: firstly, the investigations are shorter since less economics is involved when considering hard core cartels; and secondly, the Competition Authorities seem more courageous or rather more aggressive in their investigative work. Therefore, we believe that the trend in Switzerland is clear: the level of enforcement has been raised and there is less room for pragmatic solutions. In October 2020 the ComCo decided two cases regarding its investigation into various banks

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Wenger & Vieli Ltd. Switzerland and brokerage houses for alleged manipulation of reference interest rates. The first decision concerned the bank Crédit Agricole and HSBC France. The authorities reached a settlement with these banks including fines of CHF 6.5 Mio in total. The second case concerned NEX International Limited (formally ICAP plc). While other companies have been fined in this case, no fines have been issued against NEX International Limited according to the media release, although its behaviour has been partly considered as illegal. Whereas the Secretariat focuses especially on bid rigging cases in the building sector, in November 2020 the ComCo decided its first case of bid rigging in the IT sector. This case concerned a public tender procedure by the Swiss National Bank. The providers coordinated the prices of certain components of the IT infrastructure for the Swiss National Bank. Since all parties cooperated with the Competition Authorities, the fines were reduced significantly. It is noteworthy that public procurement law in Switzerland changed in 2021. One important aspect of the revision relates to sanctions – such as blacklisting – against bidders which coordinate their bids or commit bribery. As far as we are aware, the Secretariat conducted four dawn raids in 2020. The first dawn raid concerned the investigation against bid rigging in relation to optical networks in January 2020. The alleged cartel relates to hard- and software of optical networks, which are used for the transfer of data through optical fiber for large customers. In June 2020, the ComCo opened an investigation against bid rigging in the street construction sector in a small Italian speaking part of the canton of Grisons. This region was excluded from the previous proceedings concerning the canton of Grisons, which were reported in last year’s edition. The canton itself reported its suspicions to the ComCo, which reacted by conducting dawn raids. The largest investigation opened in 2020 concerned Markant and certain Swiss wholesalers and retailers which allegedly coordinated in the framework of a purchasing group. While it is not clear what the scope or rather the focus of the investigation is, it seems that the purchasing group as such is not being reviewed. According to the media release of the Competition Authorities, the wholesalers and retailers pushed the manufacturers to use the debt collecting services of Markant. Apparently, the alleged threat of the companies involved to discontinue purchasing from manufactures which refuse to use the services of Markant prompted the ComCo’s action in this matter.

Key issues in relation to enforcement policy The enforcement policy of the Swiss Competition Authorities is strongly based on EU competition law. In particular, in relation to vertical restrictions, the Swiss Authorities heavily rely on the corresponding block exception rules and the guidelines of the EU. Accordingly, the ComCo has stated in its guidelines on vertical restrictions that vertical agreements, which are legal according to EU competition law generally, are legal according to Swiss law. The ComCo wishes to avoid a Swiss finish – i.e. an additional review according to Swiss law of international distribution systems which are in line with EU competition law. However, the goal of avoiding a Swiss finish is often not met in practice, since ComCo takes the specifics of the legal and economic framework in Switzerland into account. For example, an exclusive purchase obligation could restrict parallel imports into Switzerland and could therefore – given the circumstances – be considered critical by the Competition Authorities. In addition, the EU rules and guidelines do not, of course directly apply in Switzerland, and the ComCo reserves the right to deviate from EU standards to the extent that the specifics of the Swiss market require a specific analysis. Therefore, while undertakings may profit

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Wenger & Vieli Ltd. Switzerland from some degree of guidance from the EU competition law, reliable safe harbours only exist to a very limited extent in Switzerland. Consequently, the degree of legal certainty is smaller than in the EU.

Key issues in relation to investigation and decision-making procedures There is some controversy in Switzerland around the ComCo’s decision-making process as the two bodies, the ComCo as deciding body and the Secretariat as investigating body, are not separate. As already noted, the ComCo must approve the opening of an investigation, and, to conduct a dawn raid and seize documents and electronic data, the consent of a presidium member of the ComCo is required. The ComCo announces the opening of an investigation by means of an official publication. This announcement must state the purpose of the investigation and the names of the parties involved. All parties subject to the investigation are vested with the usual administrative procedural rights, unless the CartA stipulates otherwise (article 39 CartA). They particularly have the right to consult and comment on the case files and to suggest witness hearings, and they have the right to be heard and to participate in oral party and witness hearings. On the basis of the investigation, the Secretariat issues a draft decision, which is comparable to the statement of objections in the EU. The parties may comment on such draft decision. The ComCo and the appellate courts are not obliged to reach a final decision within a specified period of time. The question of whether statutory time bars apply is controversial and currently subject to an appeal before the Federal Administrative Court. In ComCo’s view, no statutory time bars exist except that no direct fines can be imposed if an investigation was opened later than five years after the restriction of competition had ceased (article 49a para. 3 letter b CartA). In certain specific circumstances, procedural decisions (interim decisions) may be appealed even before a final decision on the merits has been taken. This may generally be the case regarding an order to produce specific documents or compulsory interviews with individuals. Procedural rights against dawn raids are very limited. Consequently, dawn raids by the Competition Authorities have not been successfully challenged in court. As a result of the Menarini decision of the European Court of Justice on 27 September 2011, the Swiss courts have held that the guarantees of the ECHR may be met by the appeal proceeding of the Federal Administrative Court. It should be noted that the Federal Administrative Court covers a broad field of administrative law and the administrative judges generally tend to support the administration. While the Federal Administrative Court following the guarantees of the ECHR must examine the facts of a case point by point, it often gives leeway to the ComCo in relation to legal and economic issues.

Leniency/amnesty regime In Switzerland, many cartel investigations are started by a leniency application. In the first 10 years after the leniency regime came into force, the Competition Authorities had received about 50 leniency applications. In general, the ComCo and the Secretariat are considered to be fair and proportionate with regard to the obligations imposed on a leniency applicant, such as the obligation to fully cooperate with the authorities during the investigation. Pursuant to article 8 para. 1 of the Ordinance on Sanctions imposed for Unlawful Restraints of Competition (“CASO”), the ComCo grants immunity from a fine if an undertaking is the first to either: (i) provide sufficient information enabling the ComCo to open an investigation

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Wenger & Vieli Ltd. Switzerland that the ComCo itself did not have at the time of the leniency filing; or (ii) submit evidence enabling the ComCo to prove a hard core cartel, provided that no other undertaking has already been considered the first leniency applicant. Immunity from a fine will not be granted if the undertaking: (i) coerced any other undertaking to participate in the infringement and was the ring leader; (ii) does not voluntarily submit to the ComCo all information or evidence in its possession concerning the illegal anti-competitive practice in question; (iii) does not continuously cooperate with the ComCo throughout the investigation without restrictions or delay; or (iv) does not cease its participation in the infringement voluntarily or upon being ordered to do so by the competition authorities. Pursuant to the CartA, full immunity is limited to the “first in”. As outlined above, full immunity from a fine is also possible for cooperation that enables the ComCo to prove an infringement and therefore also when an investigation has already been opened and a dawn raid conducted. As soon as an undertaking becomes aware of an investigation having been opened and/or a dawn raid has been conducted, it needs to decide immediately whether or not to cooperate with the Competition Authorities. If the intention is to cooperate, it should submit a leniency marker or application to the ComCo without delay (in writing such as by e-mail or orally by protocol declaration). Going in second or later in the same investigation will only allow for partial immunity. A reduction of up to 50 per cent is available at any time in the proceeding to undertakings that do not qualify for full immunity. A leniency application may include information, which allows the ComCo to investigate further infringements (leniency-plus). The maximum discount in fines for such a leniency- plus application is 80 per cent. A party in a case regarding building hardware for windows, decided in 2010, benefitted from a reduction of 60 per cent in the original proceedings and of 100 per cent in the subsequent investigation, which concerned building hardware for doors. The latter case concerned five wholesalers who agreed on minimum margins for products from a specific producer. Leniency applications are also open to undertakings involved in vertical restrictions. In the Stöckli case decided by ComCo in August 2019, the leniency application resulted in a reduction of 70 per cent, whereas the settlement agreement was taken into account was well. Generally, a full immunity is not possible for the manufacturer in relation to restrictions in distribution agreements, since generally the manufacturer plays a leading role in the anti- competitive agreements with its distributors.

Administrative settlement of cases Under Article 29 of the CartA, the Secretariat may propose an amicable settlement on ways to eliminate the restraint to competition by the undertakings involved. The Secretariat regularly proposes such settlements, which must be approved by the ComCo. By using settlements, which include commitments of the undertakings involved regarding their future conduct, a direct and often immediate effect on the relevant market can be accomplished. Settlements can also lower the risk of an appeal and consequently avoid costly and time-consuming procedures before the Federal Administrative Court and subsequently the Federal Supreme Court. In addition, companies which accept an amicable settlement may benefit from a discount of generally up to 20 per cent of a potential fine. Thus, settlements are generally appealing to all parties. However, fewer appeals mean that for practitioners there is less judicial guidance from case law. In its annual press conference of 17 April 2018, the ComCo emphasised the importance

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Wenger & Vieli Ltd. Switzerland of administrative settlements. It highlighted in particular the cost-saving aspects and the positive effects on the reputation of undertakings which agree to such settlements. On 28 February 2018, the Secretariat published a new guidance paper on amicable settlements. The guidance clarifies that the discount for such settlements depends, amongst other things, on the timing. Whereas a settlement in the early state of proceedings may result in a discount of up to 20 per cent, the discount is generally reduced if the settlement is agreed at a later state in the proceedings. Where a settlement is agreed to by an undertaking after the Secretariat has issued a draft decision, the discount may amount to as little as 5 per cent. The discount for an amicable settlement is not exclusive and may be combined with other discounts, such as leniency discounts and discounts for good cooperation with the authorities. In the latter case, the combined discount for an early state settlement of 20 per cent may be combined with a discount of another 20 per cent for good cooperation, a total discount of 40 per cent, which is not much less than the potential discount to a second leniency applicant, which may be up to 50 per cent.

Third-party complaints Anyone may file a complaint with the Secretariat (article 26 CartA). According to the official annual report of the ComCo, the Secretariat conducted 63 (informal) so-called market observations and 488 inquiries. Only very few of such matters were followed up by the Secretariat. Certain enquiries from companies, which are targeted against another company, are referred to civil enforcement by the Secretariat. However, this cannot hide the fact that a carefully drafted third party complaint is generally taken seriously by the Secretariat. So, a third party complaint may be the starting point of a detailed investigation particularly if convincing evidence is provided by the third party. No party is entitled to have an investigation opened by the Competition Authorities and therefore may not appeal a refusal to do so. A third party may bring a civil court action based on competition law, although such case law has not yet been developed much in Switzerland (see section below on “Developments in private enforcement of antitrust laws”). There is the possibility for affected third parties to join the investigation procedure. Where they qualify as a party, they have full legal standing and are vested with all procedural rights. However, under the Federal Supreme Court’s practice, third parties do not easily qualify as a party. Particularly with regard to competitors, in addition to a close proximity to the subject matter, they are required to suffer a clear economic disadvantage. Such disadvantage requires a specific and individual affectedness and is considered as given if an illegal anti-competitive agreement has disadvantageous effects on the competitor, in particular diminished turnover. The requirements for full legal standing must be clearly established by the competitor claiming to be a party.

Civil penalties and sanctions The amount of the fine depends on the duration and severity of the unlawful conduct. The turnover of the undertakings is calculated by application of the rules on the calculation of turnover in merger control cases (articles 4 and 5 of the Merger Control Ordinance; “MCO”) and includes the consolidated net turnover (excl. intra-group turnover). The base amount is up to 10 per cent 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 type and severity of the violation (article 3 CASO). Turnover of the undertaking abroad is not taken into account. The turnover relevant for the base amount

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Wenger & Vieli Ltd. Switzerland of the fine is calculated by application of the rules of the MCO. In recent price-fixing cases, absent specific circumstances, the ComCo applied a percentage of between 5 and 10 per cent for the base amount. The base amount will then be increased by up to 50 per cent if the violation was implemented for up to five years. Each additional year thereafter will lead to an increase of another 10 per cent. This interim base amount may increase by a certain percentage to reflect aggravating factors, such as repetition of an infringement, high cartel gains, ring-leading and measures to enforce cartel discipline (article 5 CASO). This is not exhaustive and other factors may be taken into account too: Swiss law provides the ComCo with wide discretion. For calculating the fine, mitigating factors also must be taken into account and the amount of the fine may be reduced accordingly. Examples of mitigating factors are: termination of the illegal conduct before or immediately after the ComCo has taken first steps; passive role in the cartel; or desisting from taking cartel enforcement measures. In recent cases, the reduction percentages have varied from 10 to 60 per cent depending on whether the companies fully collaborated, immediately ceased their unlawful practices, or concluded an amicable settlement. In exceptional cases, the ComCo may also impose a lump sum or symbolic fines – this has been the case in the presence of rather small turnovers.

Right of appeal against civil liability and penalties The decisions of the ComCo may be appealed at the Federal Administrative Court. Such appeals constitute full merits appeals on both the findings of facts and law. While administrative judges generally tend to support the administration, the Federal Administrative Court does not hesitate to annul ComCo’s decisions in full, if required. In our experience, the Federal Administrative Court’s judicial review of a case is more detailed in relation to hard facts as opposed to economic evidence, where the Court tends to often show reluctance to fully review ComCo’s arguments. It is noteworthy that the appeals committee, which was competent for competition law appeals before 2007, had economists who were closely involved in the judicial review. Unfortunately, the Federal Administrative Court currently lacks economists sitting on the bench. Since many legal questions have not been answered in Swiss competition law by the competent courts, most decisions (excluding settlement cases) are appealed. In particular, the calculation of the fine – similar to the EU – is reviewed in detail by the courts, which often results in smaller fines for the undertakings involved in cartel cases. The judgments of the Federal Administrative Court may be challenged in the Federal Supreme Court. In proceedings before the Federal Supreme Court, judicial review is limited to legal claims, i.e. the flawed application of the CartA or a violation of fundamental rights set forth in the Swiss Federal Constitution or in international law. In the last few years, the Federal Supreme Court has greatly tightened the CartA with its interpretation of the law. In certain cases, the legal reasoning was even more enforcement-driven than the ComCo’s position. Numerous competition law cases are currently pending before the two appellate courts. Some of these cases raise fundamental questions, such as the questions of whether, and if so, what statutory time bars apply for public enforcement proceedings and what requirements must be proven to find an illegal single overall infringement.

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Criminal sanctions The CartA distinguishes administrative sanctions from criminal sanctions. Criminal sanctions for individuals are very rare and only apply to those who wilfully violate an amicable settlement or a final and non-appealable decision (including rulings regarding the obligation to provide information). Administrative sanctions are not viewed as criminal sanctions in the strict sense. However, the guarantees of the ECHR regarding criminal charges apply in principle.

Cooperation with other antitrust agencies Following the agreement between Switzerland and the EU on cooperation and exchange of information between their respective competition authorities, which entered into force on 1 December 2014 (see also the section above on “Overview of investigative powers in Switzerland”), Switzerland continued bilateral talks with Germany in relation to cooperation between their respective competition authorities. Germany is the most important trading partner for Switzerland. In addition, according to the ComCo, Germany constitutes an important market for reference for Switzerland, in particular, regarding price comparisons.

Cross-border issues As in other jurisdictions, Swiss competition law is applicable irrespective of whether or not the infringement has taken place in Switzerland. Decisive for the application of the CartA is whether a certain behaviour may have effect in Switzerland. According to recent case law of the Federal Supreme Court, it is not necessary for there to be an actual effect, or a particular intensity of the effect. It is sufficient that the behaviour may potentially have an effect on the Swiss market. This broad interpretation deviates from international standards and may lead to surprising results. For example, clauses in contracts between foreign parties which have potential effects on the Swiss markets (for example, restrictions to export) are sufficient for a sanction in Switzerland. This holds true even if such exports to Switzerland do not occur anyway – i.e. also without a restriction – and therefore have not even been contemplated by the parties when drafting the agreement. In other words, actual effects no longer play a role when analysing the applicability of the CartA. This is particularly problematic in relation to hard core cartels, since the negative effects of such cartels are presumed by the CartA and, therefore, the ComCo does not need to prove such actual effects when deciding a fine.

Developments in private enforcement of antitrust laws Competition law in Switzerland is (to date) to a large extent driven by public enforcement. Private enforcement has not reached its full potential and in particular has not reached the level which the legislator originally hoped for. There are several procedural and substantive reasons for this. Compared to other jurisdictions it has not been attractive for plaintiffs to enforce competition law claims in a civil court. We believe that the modest development in private enforcement in Switzerland is based mainly on two elements: firstly, companies in Switzerland consider competition law predominantly as a compliance issue. The potential of competition law to protect a company’s interest, in particular, against dominant firms, is generally underestimated. Secondly, the amount of recent case law regarding private enforcement is relatively low. In the year under review the first follow-on private litigation for a large amount has been filed. Following the final decision of the Swiss Supreme Court in December 2019, Sunrise (a customer of Swisscom for broad band internet) filed a lawsuit against Swisscom in the

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Wenger & Vieli Ltd. Switzerland amount of CHF 350 Mio. We expect that this case will reinforce the trend towards follow-on claims in Switzerland. Specifically, the recent bid rigging cases could result in such follow- on claims brought by public procurement authorities. The Federal Supreme Court reduced the requirements in relation to negative declaratory judgments in international litigation cases in 2018. The Court’s new position rendered Switzerland very attractive as an alternative forum for competition law proceedings, which would otherwise be started at an unsuitable foreign forum. While the Federal Supreme Court required a particular interest in a declaratory relief in the past, the Court stated that in international cases the interest to define the forum in Switzerland is sufficient – subject to an abuse of rights, of course.

Reform proposals After the failed attempt to reform the CartA in 2014, several proposals have been put forward to reform certain specific elements in the CartA. The main current reform proposal in Swiss competition law relates to the controversial topic on how to fight Switzerland’s status as the so-called “Island of High Prices” in Europe. In 2016, the people’s initiative regarding “fair prices” was launched. By January 2018, the initiative committee had collected enough signatures to bring the initiative to a public vote. The initiative aims at introducing new regulation with regard to abuses by undertakings with “relative market power”. A similar concept already exists in German competition law. Under the people’s initiative, and subject to legitimate business reasons, undertakings would 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 a “Swiss surcharge” on the foreign market prices. However, as the initiative is drafted, all obligations which apply to dominant undertakings would apply also to undertakings with “relative market power”. Therefore, loyalty rebates of a supplier would be found illegal even if an undertaking is not dominant generally, but has market power in relation to a single customer, which for whatever reason relies on the products of the supplier. The Swiss Government has communicated a counterproposal in August 2018 limiting the scope of the concept of “relative market power” to the obligation to supply at foreign market prices. The advisory committee of the National Council essentially followed the approach of the initiative and consequently redrafted the counterproposal of the Government in November 2019. Both the initiative and its counterproposal have been discussed in the National Council in 2020. Parliament will propose a final counterproposal in summer 2021. Another more sector-specific reform proposal concerns online travel agencies. In October 2015, the ComCo prohibited several booking platforms the use of “wide” hotel rate parity clauses in their agreement with hotels. These clauses provided that hotels were not permitted to offer lower prices or larger quantities of rooms on, inter alia, other booking platforms. However, due to a lack of significant empirical value, the ComCo 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. However, a Motion by MP Bischof of 30 September 2016 to “Prohibit Adhesion Contracts from Online Booking Platforms against Hotels” aimed at prohibiting any kind of parity clauses in agreements between online booking platforms and hotels, i.e. including “narrow” hotel rate parity clauses. The Swiss parliament adopted the motion with a large majority. The Swiss Government drafted a legislative proposal in November 2020, which amends the act against unfair competition, without amending the CartA. This proposal is currently in consultation.

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In addition, the Motion by MP Fournier of 15 December 2016 aims at improvements of the situation of small- and medium-sized enterprises in competition law proceedings. In particular, the proceedings shall be simplified and statutory time limits shall limit the duration of investigations and potentially appeals. Furthermore, MP Fournier suggests to include a compensation for the parties’ costs in the proceedings of the ComCo. The Government is currently preparing a proposal addressing MR Fournier’s suggestions. Finally, the Government is currently developing a proposal to reform Swiss merger control. Essentially, the Government intends to replace the current dominance test in merger control with the internationally standard SIEC test. This proposal had been included in the failed 2014 reform, and the merger control element has not been disputed in parliament. The Government has announced that it will shortly start the consultation on this proposal.

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Michael Tschudin Tel: +41 58 958 53 36 / Email: [email protected] Michael Tschudin is specialised in Swiss and European competition law, regulated markets and competition law litigation. Michael Tschudin assists Swiss and international companies in all questions of competition law. He represents sanctioned companies in various industries before authorities and courts and advises clients on distribution systems, licences, joint ventures and other forms of cooperation as well as merger control. Having worked at the Competition Commission (2005–2006) and the court of appeal for competition law cases, the Swiss Federal Administrative Court (2013–2014), he is able to draw on this practical experience when advising clients. Since completing his Ph.D. in competition law, he has regularly published articles on related issues. He focuses particularly on economic principles and in 2014 he obtained a postgraduate diploma in ‘Economics for Competition Law’ from King’s College London. Michael Tschudin has been ranked by Who’s Who Legal Competition as a future leader since 2018 and by The Legal 500 as a next generation partner since 2020.

Frank Scherrer Tel: +41 58 958 58 58 / Email: [email protected] Frank Scherrer is specialised in pharmaceutical and healthcare law and competition law. He has many years of experience in advising clients on competition matters and representing them in proceedings before ComCo and the courts. He has written several publications, including his thesis, in competition law.

Urs Weber-Stecher Tel: +41 58 958 58 58 / Email: [email protected] Urs Weber-Stecher is specialised in international dispute resolution (mainly arbitration) and competition law. He has long-standing experience in advising companies on competition law matters, representing them in proceedings before ComCo and state courts, and handling competition law disputes in arbitral proceedings (as counsel or arbitrator).

Wenger & Vieli Ltd. Dufourstrasse 56, PO Box, 8034 Zurich, Switzerland Tel: +41 58 958 58 58 / URL: www.wengervieli.ch

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Gönenç Gürkaynak & Öznur İnanılır ELIG Gürkaynak Attorneys-at-Law

Overview of the law and enforcement regime relating to cartels 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”). The Competition Authority has administrative and financial autonomy. It consists of the Competition Board (“Board”), Presidency and service departments. There are six divisions, with sector-specific work distribution, that handle the Competition Law enforcement work through approx. 160 case handlers. The other service units consist of the following: (i) the department of decisions; (ii) the economic analysis and research department; (iii) the information management department; (iv) the external relations, training and competition advocacy department; (v) the strategy development, regulation and budget department; (vi) the administrative services department; (vii) human resources department; and (viii) 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 13 December 1994 (“Competition Law”). In 2020, the Competition Law was subject to essential amendments which passed through the Grand National Assembly of Turkey (the “Turkish Parliament”) on 16 June 2020, and entered into force on 24 June 2020 (“Amendment Law”) – on the day of its publication in Official Gazette No. 31165. The Competition Law finds its underlying rationale in Article 167 of the Turkish Constitution of 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. The Competition Law is similar to European Union law and the Amendment Law seeks to add the Authority’s experience of more than 20 years of enforcement to the Competition Law and bring it closer to European Union law. Article 4 of the Competition Law is the applicable provision for cartel-specific cases and 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 the TFEU, the provision does not define the term “cartel” explicitly. However, Article 4 prohibits all kinds of restrictive agreements, including any form of cartel agreements. Article 4 also prohibits any form of agreement that has the “potential” to prevent, restrict or

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© Published and reproduced with kind permission by Global Legal Group Ltd, London ELIG Gürkaynak Attorneys-at-Law Turkey distort competition. Again, this is a specific feature of the Turkish cartel regulation system, 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 benefit from a block exemption or an individual exemption issued by the Board. Vertical agreements 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 Amendment Law introduces de minimis principle under Article 41 of the Competition Law, with the aim to steer direction and public resources to more significant violations. Accordingly, certain agreements and practices exceeding thresholds yet to be determined by the Board (i.e. turnover and/or market share) do not to benefit from thede minimis principle. Moreover, de minimis principle is not applicable to “hard core” violations including price fixing, territory or customer sharing and restriction of supply. In other words, cartels do not benefit from the de minimis principle. The Board is yet to enact secondary legislation which is expected to provide details on the process and procedure related to application of the de minimis principle. The Board’s general practice shows that horizontal restrictive agreements such as price- fixing, market allocation, collective refusals to deal (group boycotts) and bid rigging, have consistently 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. Similar to the EU Competition Law regime, a concerted practice is defined as a form of 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 be in writing; it is sufficient if the parties have expressed their joint intention to behave in 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 judicial authorisation if an undertaking refuses to allow the dawn raid. The prevention or hindering of a dawn raid could result in the imposition of an administrative monetary fine. Article 15 of the Competition Law authorises the Board to conduct on-site investigations. The Amendment Law introduces changes to Article 15 that expand the scope of Board’s authority during on-site investigations, and further details are provided in the newly enacted Guidelines on Examination of Digital Data during On-site Inspections. The amendments, match the recent practice of the case handlers and currently, the Board is entitled to: • examine and make copies of all information and documents in companies’ physical records as well as those in electronic mediums and IT systems (including but not limited to any deleted items); • request written or verbal explanations on specific topics; and • conduct on-site investigations with regard to any asset of an undertaking.

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Refusal to grant the staff of the Competition Authority access to business premises may lead to the imposition of a fixed fine of 0.5% of the annual turnover. The minimum fine for 2021 is TRY 34,809. It may also lead to the imposition of a fine of 0.05% of the turnover for each day of the violation. 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. Officials conducting a dawn raid must be in possession of a deed of authorisation issued by 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 fall within the scope of the investigation specified in the deed of authorisation. Therefore, the Competition Authority officials may not copy documents or record verbal testimonies that 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 may impose certain conditions (e.g., to seal file cabinets or disrupt email communications). The Competition Authority may also request all information it deems necessary from all public institutions and organisations, undertakings and trade associations. Officials of these bodies, undertakings and trade associations are obliged to provide the necessary information within a fixed period of time. Failure to comply with a decision ordering the production of information may lead to the imposition of a turnover-based fine of 0.1% of the turnover generated in the financial year preceding the date of the fining decision (if this is not calculable, the turnover generated in the financial year nearest to the date of the fining decision will be taken into account). The Board may impose the same amount of fine if an undertaking provides incorrect or incomplete information in response to the Competition Authority’s request for information.

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 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 not totally clear; however, it appears that the Board may be aiming at avoiding the risk of having to impose astronomical monetary fines which could be deemed as disproportionate compared to the respective case at hand. The Competition Authority’s annual report for 2019 provides that the Board finalised a total of 69 cases relating to competition law violations. Among the 69 cases, 30 were subject to Article 4 (anti-competitive agreements) only and 12 cases were subject to both Article 4 and Article 6 (abuse of dominant position). The Board issued monetary fines amounting to a total of TRY 228,733,560 (approximately EUR 25.4 million as of January 15, 2021) for Article 4 cases. The monetary fine figures of 2019 for Article 4 cases show that the Competition Board has in total imposed roughly 12 times the monetary fines imposed last year, while the monetary fines imposed to Article 6 cases have decreased by nearly 37 times when compared to the number of fines imposed in 2018.

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Overall, there is an increase in the number of investigations with monetary fines. In fact, the Board imposed monetary fines totalling TRY 164,392,558 (approx. EUR18.3 million as of 15 January 2021) to horizontal anti-competitive arrangements in 2019 while the monetary fines for relevant arrangements on 2017 and 2018 were TRY 21,279,796 (approx. EUR 2.4 million as of 15 January 2021) and TRY 9,201,300 (approx. EUR 1.4 million as of 15 January 2021), respectively. In terms of cartel enforcement activity, the Board recently issued a short decision which concludes imposition of an administrative monetary fine against Novartis Sağlık Gıda ve Tarım Ürünleri San. ve Tic. A.Ş. and Roche Müstahzarları San. A.Ş. for their cartel arrangement (21 January 2021, 21-04/52-21). Furthermore, the Board found that certain ready mixed concrete producers operating in the Yozgat province infringed Article 4 of the Competition Law by way of establishing two legal entities (namely, Güven Beton and Sorgun Emek Beton) in order to coordinate sales, collectively determine prices and allocate customers (19 March 2020, 20-15/215-107). In this respect, the Board imposed an administrative monetary fine of 1.2% of the annual gross income of the investigated parties. In the investigation concerning traffic signalisation market, the Board concluded that nine of the 10 investigated parties violated Article 4 of the Competition Law by way of bid rigging (12 March 2020, 20-14/191-97). Among other practices, the Board essentially found that undertakings prepared offers and entered into bids based on a mutually reached consensus. As a result, all but one of the investigated undertakings were imposed with an administrative monetary fine of either 2% or 3% of their annual gross income. During the investigation process, one of the investigated undertakings – Mosaş Akıllı Ulaşım Sistemleri A.Ş. (Mosaş) – was fined separately for hindering the on-site inspection conducted by the Authority (21 June 2018, 18-20/356-176) and refusing to grant access to the Authority for 17 days (5 July 2018, 18-22/378-185). In another decision, the Board concluded that gas stations located in the Burdur province violated Article 4 of the Competition Law by way of fixing prices (9 January 2020, 20-03/28- 12). The Board found that the cartel arrangement was essentially formed via WhatsApp groups and messages created between certain employees of the relevant gas stations. Despite an explicit finding of a cartel violation, the Board took into consideration the lowest base fine rate stipulated under the Regulation on Fines applicable for violations other than cartel violations, since the profit margins of the investigated undertakings were significantly low and imposition of a high fine would restrict sustainability of their business. The investigations that have been initiated by the Competition Authority so far clearly show that it does not focus on any specific sectors when it comes to the investigation of cartel 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 enforcement policy The Turkish Competition Authority places equal emphasis on all areas of enforcement. The significance of the cartel enforcement regime under the Competition Law has nonetheless been repeatedly underlined by the Presidency of the Competition Authority. There are neither industry-specific offences nor defences which lead to a particular scrutiny. The Competition Law applies to all industries, without exception. In terms of cartel enforcement, cement, insurance, information and communication technology, pharmaceuticals,

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© Published and reproduced with kind permission by Global Legal Group Ltd, London ELIG Gürkaynak Attorneys-at-Law Turkey healthcare, medical equipment, traffic signalisation, household appliances, petroleum 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, 8 July 2013) marks one of the extremely rare files in Turkey where a policy concern not directly related to the Competition Law (i.e. a policy concern relating to minimising trade deficit) may have played a role in the ultimate decision, together with a state action defence of the parties concerned, as the parties’ collective behaviour was influenced by a set of rules brought by the relevant ministry tackling trade deficit. The Board found that seven paper recycling companies had violated the competition laws by harmonising their commercial behaviours and colluding against wastepaper producers that aimed to export wastepaper. However, the Board did not levy turnover-based monetary fines against the defendants, and granted three-year exemptions under objective criteria.

Key issues in relation to investigation and decision-making procedures 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- investigation prior to initiating a fully fledged investigation. At this preliminary stage, the undertakings concerned are usually not notified that they are under an investigation, unless the 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 within 10 days whether to launch a fully fledged formal investigation. If the Board decides to 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 have 30 days to prepare and submit their first written defences. Subsequently, the main investigation report is issued by the Competition Authority. Once this is served on the defendants, they have 30 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, which, as per the Amendment Law, is extendable for a further 15 days. The defending parties will have another 30-day period to reply to the additional opinion (third written defence), which is also extendable for a further 30 days. When this reply is served on the Competition Authority, the investigation process is to be completed (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 on Oral Hearings before the Board. The Board renders its final decision within 15 days from the hearing, if an oral hearing is held. Otherwise, the decision is rendered within 30 days from the completion of the investigation process. It usually takes around three to six months (from the announcement of the final decision) for the Board to serve a reasoned decision on the counterpart.

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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.

Leniency/amnesty regime In addition to the Amendment Law, the Competition Law had also undergone significant amendments in February 2008 – bringing a stricter and more deterrent fining regime, coupled with a leniency programme 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 were published in April 2013. With the enactment of the Regulation on Leniency, the main principles of immunity and leniency mechanisms have been set. The Regulation on Leniency provides that the leniency programme is only available for cartelists. It does not apply to other forms of antitrust infringements. A definition of a cartel is also provided in the Regulation on Leniency for this purpose. A cartelist may apply for leniency until the investigation report is officially served. Depending on the application order, there may be total immunity from, or reduction of, a fine. This immunity/reduction includes both the undertakings and its employees and managers, with the exception of the “ring-leader” which can only benefit from a second-degree reduction of a fine. The conditions for benefitting from the immunity/reduction are also stipulated in the Regulation 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 “investigation report” is officially served. Such an application would be independent from applications by the cartelist itself, if there are any. Depending on the application order, there may be total immunity from, or reduction of a fine, for such manager or employee. The requirements for such individual application are the same as stipulated above. According to the annual report of the Turkish Competition Authority, the Authority received two leniency applications in 2019. On the other hand, the Authority rejected a leniency application in 2018, within scope of the investigation launched against five undertakings and one association of undertakings active in cabotage Ro-Ro transportation lines in Turkey (18 April 2019, 19-16/229-101). Moreover, in a recent leniency case, which initiated with Arçelik Pazarlama A.Ş.’s (“Arçelik”) leniency application upon discovery of sharing of insider information by an Arçelik employee with various companies including Arçelik’s competitor Vestel Tipcart A.Ş. (“Vestel”), the Board found that Arçelik and Vestel did not violate Article 4 of the Competition Law as the investigated practices took place without knowledge of the senior management, they did not meet the mutual agreement criteria and did not constitute concerted practice (2 January 2020, 20-01/13-5). One of the Board’s most important decisions concerning leniency applications rendered back in 2017 is the Corporate Loans decision (28 November 2017, 17-39/636-276). The Board launched an investigation against 13 financial institutions, including local and international banks active in the corporate and commercial banking markets in Turkey with respect to whether they have violated Article 4 of the Competition Law by way of exchanging competitively sensitive information on loan conditions (such as interest and maturity) regarding current loan agreements and other financial transactions. The Bank of

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Tokyo-Mitsubishi UFJ Turkey A.Ş. (“BTMU”) made a leniency application on 14 October 2015 to benefit from Article 4 of the Regulation on Leniency. After 19 months of an in- depth investigation, the Board unanimously concluded that BTMU, ING Bank A.Ş. (“ING”) and the Royal Bank of Scotland Plc. Merkezi Edinburgh İstanbul Merkez Şubesi (“RBS”) have violated Article 4 of the Competition Law. In this respect, the Board imposed an administrative monetary fine on ING and RBS in the amount of TRY 21.1 million and TRY 66,400, respectively, over their annual turnover in the financial year of 2016. However, the Board resolved that BTMU should not have an administrative monetary fine imposed pursuant to its leniency application, granting full immunity to BTMU while also relieving the other investigated undertakings from an administrative monetary fine. The other leniency application concerned the mechanical engineering sector (14 December 2017, 7-41/640-279) within the Burdur region. The case largely rested on the allegation that mechanical engineers in the Burdur region pooled their revenue and shared it on the basis of predetermined percentages. One of the defendants applied for leniency and was granted immunity. One of the Board’s notable decisions where it granted full immunity is the Yeast Cartel case (14-42/783-346, 22 October 2014). 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 TRY 14 million (approximately EUR 1.5 million as of 15 January 2021). The fourth undertaking, Mauri Maya, 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. The Board considered the value and sufficient content of Mauri Maya’s leniency 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, 30 October 2012), the Board stated that the undertakings, MPS Metal Plastik Sanayi Çember ve Paketleme Sistemleri İmalat Tic. A.Ş. (“MPS”) and BEKAP Metal İnş. San. ve Tic. A.Ş., fixed the prices of steel strapping materials and were acting in collusion regarding certain tenders, and decided that both undertakings had violated Article 4 of the Competition Law. The Board considered the leniency application of MPS and imposed a fine equal to 1% of its annual 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 showing that leniency applications might not always be beneficial was the 3M case (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 a finding of violation. It remains to be seen whether the Board will apply this approach again in the future. In the Sodium Sulphate case (12-24/711-199, 3 May 2012), the Board imposed fines both on the cartelists and the persons having a determining effect on the violation, but eventually offered reductions on the fines after one cartelist and its general manager filed for leniency.

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In its decision, the Board stated that the undertakings, Otuzbir Kimya and Sodaş Sodyum, fixed prices of sodium sulphate and shared customers between the years 2005 and 2011. Additionally, it is also stated that Alkim Alkali Kimya, Otuzbir Kimya and Sodaş Sodyum collectively determined the prices of raw salt. The Board imposed a fine on Sodaş Sodyum equal to 3% of its annual gross income in the 2011 fiscal year, and simultaneously imposed a fine on Sodaş Sodyum’s general manager, who was actively engaged in the infringement, in the amount of 3% of the administrative fine applied to Sodaş Sodyum. Sodaş Sodyum and its general manager filed for leniency and eventually received reductions at the rate of one-third and 50%, respectively, of the fines to be imposed. In the decision regarding Gaz Cartel (10-72/1503-572, 11 November 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 a landmark decision. Berk Gaz, who received full immunity, was the first applicant to apply for leniency. That said, Berk Gaz managed to convince the Board that it provided sufficient documents and information, while also fulfilling the other conditions set out in the Leniency Regulation.

Administrative settlement of cases The Amendment Law introduces a commitment and settlement mechanism under Article 43 of the Competition Law with an effort to end investigation processes in duly manner. The Board is yet to enact secondary legislation which is expected to detail the process and procedure of such mechanisms; however, general information on relevant mechanisms is as follows: The commitment mechanism allows parties to voluntarily offer commitments during a preliminary investigation or fully fledged investigation to eliminate the Authority’s competitive concerns in terms of Articles 4 and 6. Depending on the sufficiency and the timing of the commitments, the Board can decide not to launch a fully fledged investigation following the preliminary investigation or to end an ongoing investigation without completing the entire investigation procedure. Commitment mechanism is not applicable to “hard core” violations including price fixing, territory or customer sharing and restriction of supply. In other words, commitment mechanism is not applicable to cartels. Yet the settlement mechanism is applicable to “hard core” violations; in other words, cartels. Under the settlement mechanism, the Board may, ex officio or upon the parties’ request, initiate a settlement procedure. Parties that admit to competition infringement until the official notification of the investigation report may benefit from a reduction of the administrative monetary fine by up to 25%. The parties may not bring a dispute on the settled matters and the administrative monetary fine once an investigation finalises with a settlement.

Third-party complaints 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 the official website of the Competition Authority, as well as through the e-Government system. In the case of a notice or complaint, the Board rejects the notice or complaint if it deems the complaint not to be serious. The Board will decide to conduct a pre-investigation if it finds the notice or complaint to be serious. Investigated parties have a right to access the file Communiqué( No. 2010/3 on Regulation of Right to Access to File and Protection of Commercial Secrets (“Communiqué No. 2010/3”)). The right to access the file can be exercised upon a written request at any time until the end of the period for submitting the last written statement.

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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 to grant access to the file and justifies the denial of access on the grounds 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. A Competition Board decision (16-26/433-192, 4 August 2016) defines the parties who have the right to access the file narrowly, stipulating that Communiqué No. 2010/3 allows the access request to only those who are being investigated. In this regard, the Competition Authority does not grant the complainant or third parties permission to access the file during the investigation period. 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.

Civil penalties and sanctions In case of a proven cartel activity, the companies concerned may be subject to fines of up to 10% of their Turkish turnover generated in the financial year preceding the date of the fining decision (if this is not calculable, the turnover generated in the financial year nearest to the date of the fining decision will be taken into account). Employees and managers of the undertakings or association of undertakings that had a determining effect on the creation of the violation can also be fined up to 5% of the fine imposed on the undertaking or association of undertaking. The current minimum fine is set as TRY 34,809 for 2021 (approximately EUR 3,854 as of January 15, 2021). 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 of possible damage in the relevant market; (ii) the market power of the undertaking within the relevant market; (iii) the duration and recurrence of the infringement; (iv) cooperation or driving role of the undertaking in the infringement; (v) the financial power of the undertaking; and (vi) compliance with the commitments in determining the magnitude of the fine. In line with this, the Turkish Competition Authority enacted the Regulation on Monetary 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 antitrust violations. The Regulation on Fines applies both to cartel activity (Article 4) and abuse of dominance (Article 6), but illegal concentrations (Article 7) are not covered by the Regulation on Fines. According to the Regulation on Fines, fines are calculated by determining the basic level first, which in the case of cartels is between 2% and 4% of the company’s turnover in the financial year preceding the date of the fining decision. Aggravating and mitigating factors are 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.

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In addition to the monetary sanction, restrictive agreements may be deemed as legally invalid and unenforceable with all its legal consequences. Under Article 9, the Amendment Law stipulates that besides an Article 7 violation, in determination of an Article 4 and 6 infringements, the Board may order behavioural as well as structural remedies to re- establish the competition and end the infringement. Overall, the Board may order to end practices, adopt remedies to restore the status quo without imposing an administrative fine. Additionally, the Competition Law authorises the Board to take interim measures until the final resolution on the matter, in case there is a possibility for serious and irreparable damages. The sanctions that could be imposed under the Competition Law are administrative in nature. Therefore, the Competition Law leads to administrative fines (and civil liability) 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 imprisonment and a civil monetary fine under section 237 of the Turkish Criminal Code. 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 of the violation. There are no sanctions specific to individuals other than those mentioned above.

Right of appeal against civil liability and penalties The Board decisions can be submitted for judicial review before the administrative courts in Ankara by filing an appeal case within 60 days upon receipt of the justified (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, by providing its justifications, may decide for stay of the execution if the execution of the decision is likely to cause serious and irreparable damages; and if the decision is 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 regional courts will (i) go through the case file both on procedural and substantive grounds, and (ii) investigate the case file and make their decision considering the merits of the case. The regional courts’ decisions will be considered as final in nature. The decision of the regional 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 decision of the regional court will not be considered as a final decision and the Council of 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.

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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 monetary fine under section 237 of the Turkish Criminal Code.

Cooperation with other antitrust agencies Article 43 of Decision No. 1/95 of the EC–Turkey Association Council (Decision No. 1/95) authorises the Turkish Competition Authority to notify and request the European Commission to apply relevant measures if the Competition Board believes that cartels organised in the EU adversely affect competition in Turkey. The provision grants reciprocal rights and obligations to the parties (the EU and Turkey), and therefore the European Commission has the authority to request that the Competition Board apply relevant measures to restore competition in the relevant markets. There are also a number of bilateral cooperation agreements between the Turkish Competition Authority and the competition agencies in Azerbaijan, Bosnia-Herzegovina, Croatia, South Korea, Bulgaria, the Russian Federation, Egypt, Ukraine, Serbia, Albania and the EU, among others. These cooperation agreements are signed and implemented for various purposes, such as: • Enhancing cooperation in applying competition law rules to increase the efficiency of product and service markets. • Exchanging documents and information on certain topics between authorities. • Improving cooperation and facilitating the exchange of information between the authorities with respect to competition law enforcement and policy. The Turkish Competition Authority also faces various issues where international cooperation is required. In this respect, there have been various decisions in which the Competition Authority has requested co-operation on dawn raids, information exchange, notifications and collection of monetary fines from the competition authorities in other jurisdictions via the Ministry of Foreign affairs and the Ministry of Justice. The Competition Authority has, however, been unsuccessful in these requests. The research department of the Competition Authority makes periodic consultations with relevant domestic and foreign institutions and organisations about the protection of competition to assess their results, and submits its recommendations to the Competition Board. A cooperation protocol was signed on 14 October 2009 between the Competition Authority and the Turkish Public Procurement Authority to procure a healthy competition environment with regard to public tenders by cooperating and sharing information. On 2 November 2011, a cooperation protocol was signed with the Turkish Information and Communication Technologies Authority in order to establish, develop and maintain competition in the electronic communication sector, and on 28 January 2015, a cooperation protocol was signed with the Turkish Energy Market Regulatory Authority in order to establish, develop and maintain a free and healthy competition environment in the energy markets. However, the interplay between jurisdictions does not materially affect the handling of the Competition Board in cartel investigations. The principle of comity is not an explicit provision of the Turkish Competition Law. A cartel conduct that was investigated elsewhere in the world can be prosecuted in Turkey if it had an effect on Turkish markets.

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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 train services, 15-44/740-267, 16 December 2015; Güneş Ekspres/Condor, 11-54/1431-507, 27 October 2011; Imported Coal, 10-57/1141-430, 2 September 2010; Refrigerator Compressor, 09-31/668-156, 1 July 2009; Şişecam/Yioula, 07-17/155-50, 28 February 2007; Gas Insulated Switchgear, 04-43/538-133, 24 June 2004) in the past. It should be noted, however, that the Board has yet to enforce monetary fines or other sanctions against firms located outside of Turkey without any presence in Turkey, as this is mostly due to the enforcement handicaps (such as difficulties of notification to foreign entities).

Developments in private enforcement of antitrust laws The most distinctive feature of Turkish Competition Law regime is that it allows for lawsuits with treble damages. Hence, administrative enforcement is supplemented with private lawsuits. Articles 57 et seq. of the Competition Law entitle 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. Most courts wait for the decision of the Authority, and build their own decision on that decision. Turkish procedural law denies any class action or procedure. Class certification requests would not be granted by Turkish courts. While Article 25 of Law No. 4077 on the Protection 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 Amendment Law introduces certain significant substantive and procedural changes to Competition Law. As elaborated in the previous sections, the Amendment Law introduces new provisions related to the de minimis principle, on-site inspection powers, behavioural and structural remedies, and commitment and settlement mechanisms. Inter alia other provisions, the Amendment Law replaces dominance test taken into consideration in merger control assessments under Article 7 with the “significant impediment of effective competition” (“SIEC”) test, clarifies the self-assessment procedure applied to individual exemption cases under Article 5 and also grants the Authority 15 more days for preparation of its

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© Published and reproduced with kind permission by Global Legal Group Ltd, London ELIG Gürkaynak Attorneys-at-Law Turkey additional opinion in response to the undertakings’ second written defence in a fully fledged investigation under Article 45. Details on application of the said provisions are expected to be provided with the secondary legislation. The Competition Authority published its Guidelines on Examination of Digital Data during On-site Inspections on 8 October 2020, which set forth the general principles with respect to the examination, processing and storage of data and documents held in the electronic media and information systems, during the on- site inspections. Furthermore, the Competition Authority conducted its public consultations in relation to the Draft Communique for De Minimis Practices and the Draft Communique for Commitments in the past months.

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Gönenç Gürkaynak Tel: +90 212 327 17 24 / Email: [email protected] Mr. Gönenç Gürkaynak is a founding partner of ELIG Gürkaynak Attorneys- at-Law, a leading law firm of 90 lawyers based in Istanbul, Turkey. Mr. Gürkaynak graduated from Ankara University, Faculty of Law in 1997, and was called to the Istanbul Bar in 1998. Mr. Gürkaynak received his LL.M. degree from Harvard Law School, and is qualified to practise in Istanbul, New York, Brussels and England and Wales (currently a non-practising solicitor). Before founding ELIG Gürkaynak Attorneys-at-Law in 2005, Mr. Gürkaynak worked as an attorney at the Istanbul, New York and Brussels offices of a global law firm for more than eight years. Mr. Gürkaynak heads the competition law and regulatory department of ELIG Gürkaynak 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. Every year Mr. Gürkaynak represents multinational companies and large domestic clients in more than 35 written and oral defences in investigations of the Turkish Competition Authority, about 15 antitrust appeal cases in the high administrative court, and over 85 merger clearances of the Turkish Competition Authority, in addition to coordinating various worldwide merger notifications, drafting non-compete agreements and clauses, and preparing hundreds of legal memoranda concerning a wide array of Turkish and EC competition law topics. Mr. Gürkaynak frequently speaks at conferences and symposia on competition law matters. He has published more than 150 articles in English and Turkish with various international and local publishers.

Öznur İnanılır Tel: +90 212 327 17 24 / Email: [email protected] Ms. Öznur İnanılır joined ELIG Gürkaynak Attorneys-at-Law in 2008. She graduated from Başkent University, Faculty of Law in 2005 and following her practice at a reputable law firm in Ankara, she obtained her LL.M. degree in European Law from London Metropolitan University in 2008. She is a member of the Istanbul Bar. Ms. İnanılır became a partner within the “Regulatory and Compliance” department in 2016 and has extensive experience in all areas of competition law, in particular: compliance with competition law rules; defences in investigations alleging restrictive agreements; abuse of dominance cases; and complex merger control matters. She has represented various multinational and national companies before the Turkish Competition Authority. Ms. İnanılır has authored and co-authored articles published internationally and locally in English and Turkish pertaining to her practice areas.

ELIG Gürkaynak Attorneys-at-Law Çitlenbik Sokak No. 12, Yıldız Mahallesi, Beşiktaş, 34349 Istanbul, Turkey Tel: +90 212 327 17 24 / URL: www.elig.com

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Belinda S Lee, Meaghan Thomas-Kennedy & Ariel Rogers Latham & Watkins LLP

Overview of the law and enforcement regime relating to cartels The United Arab Emirates (“UAE”) competition law and enforcement regime is relatively young with just over eight years since Federal Law Number 4 of 2012 (“Competition Law”) was enacted on October 23, 2012 and took effect on February 23, 2013. The Competition Law regulates “restrictive agreements” such as price-fixing, collusion on bids, market allocation arrangements, and agreements to suppress production. In the years since its enactment, the Competition Law has been followed by several implementing resolutions. Despite this, there is no publicly available data confirming enforcement of the Competition Law in connection with alleged or suspected cartel conduct.

Laws on cartels The stated purpose of the Competition Law, as discussed in Article 2, is to “protect and promote competition and anti-monopoly practices” by: 1. Providing a stimulating environment for Organizations (defined in Article 1 as “any natural or legal person practicing an economic activity, any person associated therewith, or any combination of these persons, regardless of its legal form”) to enhance efficiency, competitiveness and consumer interest and achieve sustainable development in the UAE. 2. Maintaining a competitive market governed by market mechanisms, in accordance with the principle of economic freedom, by prohibiting restrictive Agreements, prohibiting the acts and behaviours that lead to the abuse of a Dominant Position (defined in Article 1), controlling Economic Concentration (defined in Article 1) operations, and avoiding anything that would endanger, limit or prevent Competition (defined in Article 1 as “practicing economic activities according to the market mechanisms without such mechanisms having any adverse impact on or limitation to commerce and development”). The Competition Law defines “Agreement” expansively, covering “[a]greements, contracts, arrangements, joint ventures, or practices between two or more organizations, or any cooperation among organizations, or the decisions made by a syndicate of organizations, whether orally or in writing, expressly or implicitly, secretly or in public”. Article 1, Competition Law. Article 5 of the Competition Law prohibits “restrictive agreements”, defined as those that “have as their subject or objective the abuse, restriction or prevention of competition”. Clause 1 of Article 5 lists various restrictive agreements including those with the aim of: a. fixing, directly or indirectly, purchase or sale prices of goods or services by causing increase, reduction, or fixing of prices, thereby adversely affecting Competition; b. determining the terms and conditions of sale, purchase, or performance of services, or any similar transaction; c. collusion in bids or proposals in tenders, practices, and other supply offers;

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Latham & Watkins LLP United Arab Emirates d. freezing or limiting production, development, distribution, or marketing, and other investment aspects; e. conspiracy not to purchase from a certain organisation or organisations, limiting sale or supply to certain organisation or organisations, and preventing or obstructing its/their ability to carry out its/their business; or f. restricting the freedom of supply of goods or services to the Relevant Market, or removing goods or services from the Relevant Market, including hiding or unlawfully storing goods or services, abstaining from dealing in goods and services, or creating a sudden oversupply that leads to circulating the goods and services at fake prices. In addition, Clause 2 of Article 5 notes that “restrictive Agreements among Organizations, which prejudice, restrict, or prevent competition, shall be prohibited”, including such agreements that aim at: a. market sharing, or allocation of clients on the basis of geographical areas, distribution centers, customer quality, seasons, periods of time, or any other basis that adversely affects competition; or b. taking any measures to obstruct the entry of any Organizations to the market, excluding any Organizations from the market, or obstruction of accession to any existing agreements or joint ventures. However, Article 5 explicitly states in Clause 3 that “save for” sub-clause (a) within Clause 1 and sub-clause (a) within Clause 2 (listed above), the “provisions of this Article shall not apply to low-impact agreements in which the total share of the Organizations which are parties to these agreements do not exceed the percentage set by the Council of Ministers of the total transactions in the Relevant Market” (Article 5, Competition Law). Thus, certain agreements that could otherwise be deemed “restrictive” under Article 5 may be exempted because they are deemed “weak-impact” agreements when entered into by organisations with market share below certain thresholds. 1. Cabinet Resolution No. 37 Cabinet Resolution Number 37 of 2014 (“Cabinet Resolution No. 37”) gives effect to the Competition Law by providing steps and procedures for how the Competition Law treats various types of restrictive agreements, abuses of dominance, and merger control. For example, together with Articles 7 and 8 of the Competition Law, Cabinet Resolution No. 37 sets forth procedures for how “obtain exclusion for restrictive Agreements or practices relevant to a dominant position, set out in Articles (5) and (6) of the Law”. Article 2, Cabinet Res. No. 37. That is, companies “that wish to obtain exclusion for restrictive Agreements or practices relevant to a dominant position, set out in Articles 5 and 6 of this Law, shall notify the Competent Authority in advance”. Id. The Competent Authority (defined in Article 1 of Cabinet Resolution No. 37 as the “Ministry department concerned with competition”), upon receipt of the entity’s submission, “shall consider the exclusion” and “prepare a detailed report” that includes an evaluation of “the application from legal and economic aspects, particularly in respect of its impact on the competition level in the Relevant Market”. Id. at Article 3. Additionally, Articles 11 and 12 within Cabinet Resolution No. 37, concern investigations of violations and complaints of violations of the law made to the Minister of Economy. Importantly, there are two ways to begin an investigation. First, the Competent Authority “may, on its own motion, commence investigation” into violations of the Competition Law, “if it has plausible reasons and adequate information”. See Article 11, Competition Law. Second, the Competent Authority may accept and investigate a complaint provided that it notifies “the parties against whom the complaintis filed, and all concerned parties, of the subject of the complaint within ten (10) days”. See Article 12, Competition Law.

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2. Cabinet Resolution No. 13 In 2016, the UAE issued Cabinet Resolution Number 13 of 2016 (“Cabinet Resolution No. 13”), which sets out the percentages and thresholds related to the implementation of the Competition Law and Cabinet Resolution No. 37. Importantly, Cabinet Resolution No. 13 directly ties to Article 5 of the Competition Law, which, as discussed above, allows for certain “low impact” agreements from being deemed “restrictive”. Cabinet Resolution No. 13 sets the low-impact agreement threshold at 10% of the overall transactions in the Relevant Market. Article 1 of the Competition Law defines “Relevant Market” as a “[c]ommodity or service, or a combination of commodities or services, which, based on their price, characteristics, and methods of use, may be replaced with any other goods or services, or the alternatives of which may be chosen, to meet a specific requirement of consumers in a certain geographical area”. In addition, Cabinet Resolution No. 13 specifies the market share threshold that would suggest dominance (and thus trigger Article 6 of the Competition Law) at 40% of the overall transactions in the Relevant Market. 3. Cabinet Resolution No. 22 In Article 4, the Competition Law notes in part that the law shall not apply to “small and medium-sized Organizations in accordance with the controls prescribed by the Council of Ministers”. Cabinet Resolution Number 22 of 2016 (“Cabinet Resolution No. 22”) defines small and medium establishments (“SME”) and provides financial thresholds for falling into this SME or “micro enterprise” definition and thus falling outside the Competition Law. Interestingly, the appendix to the Competition Law and Cabinet Resolution No. 22 both contemplate that various sectors, activities, and businesses may be excluded from the provisions of the UAE Competition Law.

Overview of investigative powers in UAE Article 12 of the Competition Law provides for the establishment of a Competition Regulation Committee (“CRC”) to be chaired by the “Undersecretary of the Ministry of the Economy”. It was not until 2018, five years following the enactment of the Competition Law, that the CRC was established with the role of overseeing the work of the Department of Competition of the Ministry. Day-to-day operations remain the Ministry of Economy’s responsibility through its Department of Competition. The CRC organised its first meeting at the Ministry of Economy’s headquarters in Dubai in 2018. The CRC has these mandates, as discussed in Article 13: 1. Proposing the policy for the protection of Competition in the UAE. 2. Considering the issues related to the implementation of the provisions of this Law, and raising recommendations thereon to the Ministry. 3. Proposing legislation and procedures related to the protection of Competition and presenting such legislation and procedures to the Minister. 4. Examining the applications presented to the Committee for reconsideration of the decisions made by the Minister within no more than 10 days from the date of being notified of the decision. 5. Making recommendations to the Minister on the exclusion of restrictive Agreements or the practices relevant to a Dominant Position. 6. Preparing an annual report on the Committee activities to be presented to the Minister. 7. Any other matters related to the protection of Competition which are referred to the Committee by the Federal authorities or the competent authorities in the UAE. The Competition Law sets out these mandates for the Ministry of the Economy’s Competition Department, as discussed in Article 14:

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1. Implementing the Competition policy in cooperation with the competent authorities in the UAE. 2. Coordinating with the competent authorities in the UAE to address any form of activities or practices violating the provisions of this Law. 3. Preparing the forms and applications related to the performance of its duties and designating a record for notifications and complaints. 4. Soliciting information and investigating the practices violating Competition, based on complaints or on its own motion, addressing these practices in cooperation with the Competent Authorities, and making recommendations to the Minister on the decisions to be taken in this regard to take the appropriate action. 5. Receiving applications for reconsideration of the decisions made under this Law and taking the appropriate actions concerning these applications. 6. Conducting studies related to Competition in the markets, preparing reports, and providing information to the public. 7. Receiving and following-up the notifications of restrictive Agreements or the practices relevant to a Dominant Position, as amended, and Economic Concentration applications. 8. Retaining experts or consultants from outside the Ministry to perform any works that fall within its mandates. 9. Promoting the exchange of information with the authorities concerned with Competition in other countries in order to fulfil the purposes of and implement this Law. 10. Taking measures and procedures to disseminate the culture of Competition and free market principles. 11. Conducting the Executive Secretariat works of the Competition Regulation Committee. 12. Any other tasks relates to Competition referred to the Committee by the Council of Ministries.

Investigatory powers and procedures As noted above, Cabinet Resolution No. 37 provides procedures by which the Competent Authority can start an investigation either on its own initiative or following a complaint. Articles 10–11, Cabinet Res. No. 37. Article 12 of Cabinet Resolution No. 37 provides the steps of an investigation including notifying “the parties against whom the complaint is filed” and “all concerned parties subject to the complaint” within 10 days and including within the notification a summary of the important items of the complaint among other things. Id. at Article 12. Among other things, targets of the investigation must be provided with notice of: (a) the practice which is claimed to violate, prevent, or restrict competition and violated provisions of the law; (b) the defendant’s right to defend itself and reply to the allegations against it; and (c) the period of time given to the defendant to submit its reply in writing concerning the allegations. The Competent Authority’s investigatory tools are described broadly, including “any action it deems necessary to investigate the complaint”, including requesting information, documents, or statements by the parties (or other parties) and holding meetings with parties relevant to the complaint. Article 12. The Competent Authority is then tasked with preparing a “detailed report” to the Minister with a statement of all facts and procedures taken in service of the investigation such that the Minister may make a “reasoned decision on the complaint within 30 (thirty) days from the date of submitting the report”. Id. at Article 13. The parties may seek reconsideration of the Minister’s decision no later than 14 days following issuance of the Minister’s decision. Id. at Article 14. Importantly, and likely a reason for the relative lack of information about ongoing investigations pertaining to UAE cartel enforcement, the Competition Law specifically states

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Latham & Watkins LLP United Arab Emirates that the Ministry shall in essence guarantee confidentiality when an investigation is under way. See Article 15 (noting in part that the Ministry shall “take adequate procedures to ensure the confidentiality of the information to which to which the Ministry have access or which are provided to the Ministry by business incorporations, the disclosure of which may cause substantial damage to the commercial interests of the business enterprises or their owners, or which may conflict with the public interest”).

Search warrants or dawn raids The UAE Competition Law and its regulations do not specifically describe authority or procedures for dawn raids, but they also do not foreclose this investigatory tool.

Overview of cartel enforcement activity during the last 12 months There are no public records or reports reflecting cartel enforcement in the UAE during the last 12 months. But this does not mean that the Competition Committee has not engaged in investigations or enforcement action. Rather, such developments would be kept confidential. See Article 15, Competition Law (requiring that the Ministry ensure the confidentiality of the information to which it has access because disclosure “may cause substantial damage to commercial interests of the business enterprises or their owners, or which may conflict with the public interest” and no disclosure of information to which the Ministry has access shall be made except to the concerned parties or upon the request of competent authorities). Thus, the CRC may receive complaints, investigate alleged conduct, counsel subjects of investigation on corrective measures, and settle disputes all without referring criminal charges to public prosecution or otherwise disclosing the enforcement action publicly.

Leniency/amnesty regime There appears to be no special leniency programme available for violations of Competition Law after such violation has occurred. As discussed above, however, entities are expressly allowed to seek a prospective exemption from the Competition Law. See Chapter 1, Cabinet Res. No. 37.

Administrative settlement of cases The Minister of the Economy “may effect reconciliation … before referring the criminal case to trial in consideration for payment of any amount that is not less than double the minimum penalty”. Article 26, Competition Law; Id. at Article 15. The reconciliation must be made (1) before starting the criminal case, and (2) the payment must be no less than double the minimum limit of the penalty. Id. at Article 15. The settlement is binding on all those signed and effective once there is evidence of the payment. Id.

Civil penalties and sanctions The Competition Law contemplates various sanctions for violations ranging from AED 500,000 and AED 5,000,000 for violating Articles 5 and 6, and other fines for violating other provisions of the Competition Law. See Chapter VIII, Competition Law. The Competition Law also notes that “penalties . . . shall be aggravated in the event of recurrence”. Article 21, Competition Law. The Competition Law also provides that, upon conviction, a business could be closed down by a court for a period of three and six months and the court may “order the publication of its decision once or more in at least two local newspapers at the expense of the violating Organization”. See Article 22, Competition Law.

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Right of appeal against civil liability and penalties There is a right of appeal against civil liability and penalties. Article 27 of the Competition Law notes that “decisions made by the Minister under the provisions of this Law may be appealed to the competent court within sixty days from the date of notifying the concerned parties of such decisions”.

Criminal sanctions The Competition Law treats antitrust violations as potentially criminal, but a criminal case will be brought “only by a written request by the Minister or his authorized deputy”. Article 26, Competition Law. A settlement or “reconciliation” of a criminal case can occur for any of the alleged criminal acts if it is carried out before the case is referred to trial and after payment of “any amount that is not less than double the minimum payment”. Id. Such settlement must be an amount of no less than double the minimum penalty. Id.; Article 15. To date, no criminal cases or settlements have been made public.

Cooperation with other antitrust agencies Among the “mandates of the Ministry in the Competition Field”, the Competition Law charges the Ministry with “promoting exchange of information with the authorities concerned with Competition in other countries in order to fulfil the purposes of and implement this Law”. Article 14, Competition Law. Although no cooperation with other antitrust agencies during the last 12 months is apparent, the UAE Competition Committee’s attendance at the International Competition Network’s annual meeting in 2018 suggests that the UAE competition authorities are beginning to engage the international enforcement community. The CRC also organised its first meeting for 2018 in Dubai in which the committee members, led by the Undersecretary of Economic Affairs, showed interest in joining the global antitrust enforcement community.

Cross-border issues Article 3 of the Competition Law states that the law “shall apply to the economic activities carried out by the Organizations in the UAE and to the exploitation of intellectual property rights inside and abroad the UAE” and “shall also apply to the economic activities which are practiced abroad the UAE and affect competition in the UAE”. Thus, the scope of the Competition Law contemplates conduct outside the UAE with enforcement in UAE. To date, there is no public record of cross-border cartel enforcement in the UAE.

Developments in private enforcement of antitrust laws While there is no publicly available information about any recent developments in private enforcement of antitrust laws within the UAE, the Competition Law contemplates the possibility of private recourse against on offending party. Article 23 notes that the “penalties set out in this Law shall not prejudice the right of the harmed party to have recourse to the court to claim compensation for the damage arising from violating any provision of this Law”.

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Belinda S Lee Tel: +1 415 395 8851 / Email: [email protected] Belinda S Lee is the Global Co-Chair of the Antitrust & Competition Practice Group at Latham & Watkins LLP and a partner in the San Francisco office. She has extensive experience representing global companies in high-stakes antitrust litigations and investigations.

Meaghan Thomas-Kennedy Tel: +1 415 395 8821 / Email: [email protected] Meaghan Thomas-Kennedy is a litigation associate in the Antitrust & Competition Practice Group in the San Francisco office of Latham & Watkins. She represents global companies in criminal and civil cartel matters and internal investigations.

Ariel Rogers Tel: +1 415 395 8248 / Email: [email protected] Ariel Rogers is a litigation associate in the San Francisco office of Latham & Watkins where she focuses on antitrust and competition matters, ranging from cartel litigations to merger clearance.

Latham & Watkins LLP 505 Montgomery Street, Suite 2000, San Francisco, CA 94111-6538, USA Tel: +1 415 391 0600 / URL: www.lw.com

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Giles Warrington & Richard Snape Pinsent Masons

Overview of the law and enforcement regime relating to cartels 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). This closely mirrors the EU equivalent, Article 101 of the Treaty on the Functioning of the European Union (TFEU). However, following expiry of the Brexit transition period on 31 December 2020 (the Exit Date), directly applicable EU law, including competition law, ceased to have effect in the UK. 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 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,1 rail, civil aviation, financial services and payment systems sectors have concurrent civil enforcement powers with the CMA in their respective sectors.2 The following sanctions are available to the CMA (and the sectoral regulators) if they establish a civil law infringement of the Chapter I Prohibition. They may: • impose a fine of up to 10% of worldwide turnover; • declare the offending agreement void; • impose behavioural undertakings; 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 breach of the Chapter I Prohibition. The Courts may also find an agreement 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,3 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 agreeing with one or more other persons to implement, or causing to be implemented, arrangements for price-fixing, market-sharing, bid rigging or limiting supply or production, may receive a maximum five-year custodial sentence and/or an unlimited fine. The criminal cartel offence is more restrictive than its civil counterpart. The offence is designed to catch ‘hard-core’ cartel activity; for a cartel to be criminal, it must be a reciprocal horizontal agreement which is knowingly entered into.

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The CMA has jurisdiction to investigate and prosecute alleged criminal cartels in England, Wales and Northern Ireland. The Serious Fraud Office may seek prosecutions with the permission of the CMA. The Crown Office and Procurator Fiscal Service have responsibility.

Overview of investigative powers in the United Kingdom 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 data held electronically (such as on laptops and mobile phones); review, copy and/or remove soft-copy and hard-copy documents; ask for factual explanations of documents relevant to an investigation; and interview individuals. In practice, its dawn raids often involve taking copies of electronic servers and reviewing these at a later stage; and/or • formal mandatory requests in writing for information and for categories of, or specific documents. 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. The CMA published updated guidance regarding its Competition Act enforcement procedures in November 2020.

Overview of cartel enforcement activity during the last 12 months Over the course of 2020, the CMA issued 11 infringement decisions under the Chapter I Prohibition. These imposed approximately £60m in aggregate fines and concerned CMA findings of: a cartel in the supply of groundworks products to the construction industry (fine of £15m); use of most favoured national clauses in relation to a price comparison website (fine of £17.9m); price-fixing in the roofing materials sector (fines totalling £9m); restrictive agreements and/or concerted practices in relation to the supply of various pharmaceutical products (total fine of £5.47m); restrictive agreements and/or concerted practices in the musical instrument sector which consisted of four infringements decisions alone (fines totalling over £10.2m); and price-fixing between seven ophthalmologists (total fines of £1.2m). Since 2019, the number of infringement decisions increased from four to 11. As a result, 2020 has proved to be a very active year for the CMA in this respect despite Brexit and COVID-19 pressures. Two of the infringement decisions concerned the construction sector. This is the fourth time in the last two years that the CMA has fined a cartel in the construction sector, demonstrating that the construction sector continues to be a strong CMA focus. The CMA published specific guidance for the construction sector when liaising with suppliers or competitors when preparing tender documents in order to encourage compliance with competition law in this sector. This is in line with the CMA’s aim to adopt a more visible role in creating a culture of business compliance as stated in its Annual Plan 2020/2021 (Annual Plan).

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During 2020 the CMA’s spotlight was on the musical instrument sector, resulting in four infringement decisions. The CMA also issued an open letter to the industry and written to almost 70 manufacturers and retailers, warning them that they should not participate in resale price maintenance (RPM) and urging them to comply with competition law. Following of number of investigations of companies in the musical instrument sector, the CMA has created an online price monitoring tool to detect and track the implementation of RPM agreements in the market. It became apparent during the investigations that some musical instrument suppliers used online price monitoring software to ensure retailers did not sell below an agreed price. This prompted the CMA to monitor the online prices itself and create an innovative solution to detect suspicious activity going forward. An infringement decision in this sector was also the first time the CMA has fined a retailer for RPM (the CMA had always traditionally only pursued suppliers in RPM cases) after the retailer promised not to sell certain instruments below a minimum price when it discounted items in its online store. The pharmaceutical sector was also the subject of two infringement decisions, highlighting the CMA’s continued focus in this area. No new criminal investigations were launched this year. The CMA opened two new investigations into suspected infringements under the Chapter I prohibition in relation to: the pricing of Rangers FC-branded replica football kits; and RPM in the domestic lighting sector. A drop in the number of new investigations, compared to previous years, is likely due to the CMA juggling the impact of COVID-19 (for example, the CMA suspended one pharmaceutical case for three months due to lockdown restrictions) and preparing for its new post-Brexit responsibilities. 2020 has seen continued enforcement activity by the sectoral regulators, albeit the number of investigations appears to have slowed since 2019. For example, in October 2020, the telecoms regulator, Ofcom, issued a Statement of Objections (SO) to Motorola Solutions UK Limited and Supura Limited setting out its view that both parties had infringed Chapter I by exchanging competitively sensitive information relating to future pricing intentions in connection with a procurement exercise run by the Police ICT company in 2018. The financial services regulator, the FCA, also opened a new investigation in September 2020 into a suspected breach of Chapter I.

Key issues in relation to enforcement policy 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 prioritisation criteria: these assess likely consumer impact; strategic significance (particularly in terms of deterrence); likelihood of success; and cost of investigation. The CMA’s enforcement priorities in 2020 were arguably shaped by the COVID-19 pandemic and preparation for the UK’s exit from the EU. The pandemic gave rise to unprecedented challenges, for example around the need to produce, supply, source and transport essential products and equipment (including PPE and ventilators), and to ensure the continued supply of food and groceries to consumers. In many cases, this has necessitated competitors coming together to collaborate in a way that would normally raise competition law risks. At the outset of the COVID-19 pandemic, the CMA sought to provide guidance to help provide businesses with greater legal certainty and assurances on how they can deal with these challenges within the bounds of competition law.4 In addition, the CMA established a dedicated COVID-19 Taskforce to tackle business practices that exploit the COVID-19

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Pinsent Masons United Kingdom crisis; for example, opening excessive pricing cases in relation to the sale of hand sanitiser.5 The UK government also implemented, subject to certain limitations, several statutory exemptions (Coronavirus Public Policy Exemption Orders) from competition law, on a temporary basis, in certain industry sectors (grocery, healthcare, maritime transport, and dairy produce sectors).6 Even without the impact of the pandemic, 2020 would have been expected to have been a year of profound change for the UK and the CMA. For example, from 2021, the UK is set to take on numerous merger and cartel cases over which the European Commission previously had exclusive jurisdiction, and the CMA will take on enforcement of a new UK national subsidy control regime. As a result of this, the CMA’s Annual Plan for 2020/21 acknowledged that preparing for these new roles may limit the number of major new projects launched in 2020 as it prepares for its case load to increase post-Brexit. In terms of the CMA’s previously stated objectives for 2020, the Annual Plan centred around certain key principles. Firstly, the CMA continued its aim of protecting consumers, particularly individuals in vulnerable circumstances. In light of this objective, it is unsurprising that the CMA continued work in relation to funeral markets, care home providers, fertility clinics, the pharmaceutical sector and other healthcare related markets. Digital markets are also a growing focus for the CMA, with the Annual Plan recognising that most businesses are increasingly shifting their trading online. In December 2020, the CMA published recommendations of the Digital Markets Taskforce for the creation and operation of a new digital markets regime that will be enforced by the new Digital Markets Unit, to be set up within the CMA and to begin work in April 2021. Further detail is provided at the end of this chapter.

Key issues in relation to investigation and decision-making procedures Despite a slowdown in the number of new investigations launched since 2019, the number of infringement decisions demonstrates that the CMA is taking tough action against competition law infringements. The CMA has also successfully defended an appeal against its decision relating the supply of precast concrete drainage products. Case progression clearly remains at the forefront of the CMA’s objectives, although it remains to be seen how the anticipated additional workload following Brexit will impact the CMA’s ability to continue progressing such a significant case load. The CMA published revised guidance on investigatory procedures in November 2020 outlining further refinements to updates made in 2019. The amendments are designed to take action on recent recommendations from a variety of sources including the Furman Report, and CMA reform proposals sent by Lord Tyrie to the Secretary of State for BEIS in February 2019 (which noted that ‘there is always more that the CMA can do internally to speed up case preparation and progression’). Arguably the most controversial amendment to the guidance is that the CMA will, as a matter of course, publish the identities of the parties concerned in a CMA investigation from an early stage (e.g. post-dawn raid) rather than waiting until the SO. This represents a significant public relations challenge to the parties concerned given their likely limited understanding of the nature of the CMA’s case at this early stage. Otherwise, the CMA has stated that a draft penalty statement will accompany the SO (rather than following after the parties have submitted responses to the SO), and made specific amendments regarding access to file and confidentiality matters.

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However, these changes do not involve a major overhaul of investigation procedures which some would be keen to see – see the end of this chapter on the Penrose proposals).

Leniency/amnesty regime 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 RPM (this approach differs from other regulators, such as the European Commission), although, in 2020, the CMA revised its guidance so that the availability of certain types of leniency (in particular, Type B – see below) is more limited for RPM cases. The potential benefits of a successful leniency application include complete immunity from fines for undertakings, immunity from prosecution under the criminal cartel offence for individual employees/directors and immunity from director’s disqualification for directors (subject to conditions). A successful leniency application does not protect a company from damages actions, and given the potential risk in the risks of damages actions (see below), this is potentially a material limiting factor. 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 timing of a leniency application is of paramount importance: the sooner it is made, the greater the benefit to the applicant. Leniency will be unavailable to a company once a SO has been issued, or to an individual once he/she is charged. Applicants may benefit from one of three categories of immunity: • Type A immunity is only available where no investigation has been opened and the applicant is the first member of a cartel to come forward. If successful, the undertaking, 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 the first to seek leniency. Successful Type B applicants can receive the same benefits as a 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 (but fail to obtain Type A or B immunity; for example, because they are not the first leniency applicant). An undertaking’s fine may be reduced by up to 50% and an individual 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. Of the 11 Chapter I decisions issued by the CMA during 2020, three involved one business obtaining full immunity (and two others involved another business obtaining a 60% or 20% reduction).

Administrative settlement of cases There are two forms of administrative settlement available to parties: a settlement procedure (involving an early admission of breach in return for a reduction in fine); and the provision

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Pinsent Masons United Kingdom of commitments (a binding commitment to cease and desist conduct, and/or behave in a particular way, in lieu of an infringement decision and a fine). Both are discretionary processes, 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, but are by no means guaranteed. 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 has sufficient evidence to support an infringement decision, but prior to a final decision. In order to reach a settlement, an undertaking must make a clear and unequivocal admission of liability for the alleged infringing behaviour, end the infringement and confirm it will pay any fine imposed by the CMA. Case-specific conditions may also be imposed. 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 SO has been issued). There has been a significant growth in the use of so called ‘hybrid’ settlement agreements (whereby one (or more) of the parties admitted an infringement in return for a lower fine, but not all parties to an alleged infringement did). These can raise concerns for parties regarding procedural fairness, in particular, around the presumption of innocence. The European Commission has also employed such settlements, and there have been a number of related European Court decisions. These cases have not prevented regulators pursuing such settlements, but have emphasised the need for procedural safeguards. The CMA continues to use such settlements, and this appears likely to continue. Settlements continue to be an important feature of the UK regime. Eight out of the 11 infringement decisions in 2020 followed settlement agreements between at least some of the parties and the CMA, two of which involved ‘hybrid’ settlements.

Third-party complaints Complaints/information received directly from third parties represent an important source of intelligence. 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 on a SO and, depending on the confidentiality of documents, may also be granted access to all, or some of the case file. Alternatively, a complainant may 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 SO. The CMA’s prioritisation principles, in practice, represent a significant hurdle for third- party complainants. Many complainants are unable to gather sufficient evidence to satisfy these 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 2020/21 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 and productivity. Such a focus, combined with the active filtering of cases, can significantly

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Pinsent Masons United Kingdom constrain 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 (or sectoral regulators). 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. The CMA does have the power to impose interim measures, pending the final outcome of any investigation. The threshold for the application of interim measures was lowered in 2014 (to a requirement to show ‘significant damage’), but these remain a rarely used tool. In September 2020, the CMA imposed interim measures for the first time, in effect extending 2010 EC commitments given by several airlines relating to the Atlantic Joint Business Agreement and market opening measures, for another three years. The interim measures were imposed in part as a result of the impact of the COVID-19 pandemic creating material uncertainty for the aviation industry (suggesting that a temporary, rather than long-term, extension might be warranted). As will be seen from the end of this UK Chapter, there remains significant pressure on the CMA in respect of the speed of enforcement, and interim measures should be a key tool in this respect (but not yet regularly used by the CMA).

Civil penalties and sanctions As far as possible, the CMA tries to ensure that liability for penalties follows responsibility for the breach. The UK rules on parental and successor liability for fines generally reflect those of EU law. The overarching policy goals in determining the level of a fine are to reflect the seriousness of the offence and to deter future infringements. The CMA last updated its guidance on how it calculates fines in 2019. The guidance requires the CMA to identify a starting figure, which may be up to 30% of the undertaking’s turnover in the relevant market. 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 adjustments to the starting point to reflect the duration of breach, aggravating or mitigating factors, settlement agreements and leniency applications. The CMA must also ensure that the fine does not exceed the stated maximum of 10% of the undertaking’s total worldwide turnover. If the CMA intends to impose a fine, it must issue a Draft Penalty Statement, which must show how these steps are followed. The parties to the investigation must be given a reasonable period of time to make representations on the Draft Penalty Statement (as noted above, the CMA has updated its procedures guidance noting that the Draft Penalty Statement will be published alongside the SO). The final penalty calculation will be included in the decision. The CMA may also use civil powers to apply to the court for disqualification of directors of companies implicated in an infringement from acting as a director for a period of up to 15 years (or may agree a disqualification undertaking with the director concerned in 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), and pursuing a directors’ disqualification, where appropriate. The CMA now routinely considers the possibility of seeking director disqualifications in antitrust cases. During 2020, the CMA has continued actively pursuing individual sanctions for directors of companies found to have breached competition law. During 2020, the CMA has secured six director disqualifications across industry sectors involving estate agents and

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Pinsent Masons United Kingdom pharmaceuticals. The majority of these director disqualifications were secured through competition disqualification undertakings CDUs( ), voluntarily agreed to by the directors concerned. However, 2020 also saw the first-ever contested director disqualification case through a competition disqualification order CDO( ) in Court. That case was decided in the CMA’s favour, in July 2020, and the estate agency director was disqualified for seven years and ordered to pay £100,000 in legal costs. Action on directors’ disqualification has continued in 2021. At the time of writing, the CMA has agreed further CDUs in relation to Roofing Materials, and imposed two CDOs in Precast Concrete Drainage Products. In seeking CDOs or CDUs, the CMA and concurrent sector regulators can rely on conduct found to have infringed EU competition law, in addition to UK competition law, before the Exit Date. Director disqualifications relating to conduct that occurs after 1 January 2021 will be based on infringement of UK competition law only. 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 are the subject of a competition law investigation or infringement finding to enter into a redress 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 litigation through the Courts. It may also lead to a reduction in any fine imposed for the infringement. 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.

Right of appeal against civil liability and penalties UK law contains extensive rights of appeal against infringement decisions. First instance appeals are made to the Competition Appeal Tribunal (CAT), a specialist body with expertise in competition law matters. 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 replace the CMA’s decision with its own. 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. For example, three out of the 11 infringement decisions in 2020 have been appealed or, at the time of writing, have involved stated intentions to be appeal.

Criminal sanctions The CMA has the power to pursue financial and custodial sentences against individuals, although these must be imposed by a court. Undertakings and individuals may also be subject to confiscation orders. Whilst the possibility of significant custodial sentences has existed for a number of years, there are very few examples of successful prosecutions. The latest custodial sentence was secured by the CMA in 2017 in relation to 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

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April 2014, the offence involved a requirement to show that the defendants acted dishonestly. In practice, this presented a significant barrier to successful prosecutions. The CMA is yet to secure the conviction 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 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 exclusion related to: advance notification of the cartel agreement to customers; and advance publication. Three new statutory defences were also introduced. These apply where: there was no intention to conceal the arrangement from customers or the CMA; or reasonable steps 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. As noted above, the CMA currently has no ongoing criminal cases. This may partly reflect the CMA’s focus on director’s disqualification as a principal tool of deterrence for individuals.

Cooperation with other antitrust agencies Following the UK’s departure from the EU, the UK has a new opportunity to forge new relationships with other countries on a global platform. For example, in September 2020, the CMA signed the Multilateral Mutual Assistance and Cooperation Framework for Competition Authorities (MMAC) with counterparts in Australia, Canada, New Zealand and the United States. The MMAC includes a memorandum of understanding focused on reinforcing and improving existing cooperation and coordination on investigations. In terms of any cooperation with the European Commission, EU competition law continues to apply to agreements and conduct of UK businesses after the Exit Date where there is an effect on trade within the EU. This may therefore require cooperation in this sense. The European Commission also continues to be competent for antitrust cases in the UK initiated under EU competition law before the Exit Date. European Commission decisions resulting from such investigations will be binding on the UK and any appeals will be reviewed by the EU Courts, even after 31 December 2020. Moreover, the CMA has reassured companies that it remains open to talking to businesses and other interested parties about specific concerns they may have relating to Brexit. The CMA also aims to accelerate its engagement with ‘international partners’ to share information and expertise, in addition to participating in forums such as the Organisation for Economic Cooperation and Development and the International Competition Network.

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. 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, EU and Japanese authorities; the CMA also liaised with its counterparts in France and Italy in relation to the Modelling Agencies investigation in 2016). The CMA’s plans also take account of international trends in enforcement; for example, in relation to online pricing, pricing algorithms, and digital markets, and note the need to ensure consistent

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Pinsent Masons United Kingdom international enforcement. Brexit has introduced considerable uncertainty as regards the future cooperation with the European Competition Network (as of the Exit Date the CMA is no longer a member). However, the CMA has stated itself to be keen on international cooperation post-Brexit, and there is unlikely to be any change in the near term at least.

Developments in private enforcement of antitrust laws 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. The specialist court system also makes litigating in the UK appealing. However, the popularity of the UK as a forum for actions could decrease following Brexit. Currently, claimants may bring private actions for damages following an infringement finding in respect of UK competition law by the CMA 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. Follow-on damages claims based on EC infringement decisions may still be brought in the UK Courts in respect of EC decisions made before the Exit Date, or EC antitrust investigations that had already begun prior to the Exit Date but had not concluded (including any appeals process). Standalone damages actions relating to EU competition law can only be brought in UK Courts after 31 December 2020 if the infringement occurred before that date. The UK has 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), and this will be determined at a certification hearing. There have been a number of significant developments in private enforcement of anti-trust activity in 2020. Notable stand-alone cases in 2020 included new claims lodged in relation to exclusivity arrangements in the university gowns, sports data and betting and sportswear sectors; and a Supreme Court decision in Secretary of State for Health and others v Servier Laboratories Ltd relating to the admissibility of EU General Court decisions in national stand-alone damages proceedings. Follow-on damages actions continued to gather pace, with new claims lodged in relation to a number of EC cartel decisions relating to automotive parts including Bearings, Occupant Safety Systems and Thermal Systems, in addition to Forex Spot Trading, Smart Chips, Maritime Carriers and Flexible Polyurethane Foam, as well as an important Court of Appeal decision in relation to Trucks regarding the admissibility of statements made in related EC settlement proceedings. One of the most significant case developments was the Supreme Court’s (June 2020) decision in Sainsbury’s Supermarkets Ltd v MasterCard Incorporated and ors, a stand-alone claim related to a 2007 EC decision regarding Visa and Mastercard’s multi-lateral interchange fees (MIFs). The Supreme Court upheld that the MIF arrangements were a restriction of competition and provided valuable precedent on evidential issues relating to the standard of proof required to quantify damages and pass-on.

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MIFs were also the focus of Supreme Court’s (December 2020) landmark judgment in Walter Hugh Merricks CBE v Mastercard Incorporated & Others. The Supreme Court’s judgment follows that of the Court of Appeal last year, overturning the CAT’s ruling that the case was not “suitable” for hearing under the collective proceedings regime. By confirming a lower initial threshold for class action certification, the claim – and other collective actions that have been stayed pending the Supreme Court’s ruling – may now be able to more easily move past the initial procedural step of obtaining a CPO. In relation to other CPOs, various sets of proceedings incorporated as two collective actions (UK Trucks Claim Limited v Fiat Chrysler Automobiles N.V. & Others and Road Haulage Associated Limited v Man SE Others) continue, following a finding by the European Commission of cartel behaviour by suppliers of trucks. Third-party specialist litigation funders have become increasingly important for collective actions, in ensuring that claimants can demonstrate they have the financial clout to bring claims. However, recent commentary has raised concerns that, after payment of compensation, there is a risk that there may be insufficient funds to cover the funder’s fee. This risks disincentivising a source of funding which is important in the burgeoning market for private damages actions. Nevertheless, in 2020, CPO applications were lodged with the CAT (Maritime Car Carriers and Foreign Exchange Spot trading), separate to those relating to the Mastercard/Visa action. Time will tell whether cost recovery will act as a deterrent. However, more class actions of this kind can be expected in the coming months following the Merricks decision. 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. This has in the past proved to be an effective route for the pursuit of smaller claims, in particular those involving challenges to restrictions in land agreements and access to professional accreditations.

Reform proposals and Brexit Following the expiry of the Brexit transition period, directly applicable EU law, including EU competition law, cannot be applied by the CMA or UK Courts. However, EU competition law continues to apply to agreements and conduct of UK businesses after the Transition Period where there is an effect on trade within the EU. The CMA and the UK Courts are still required to ensure that there is no inconsistency between their decisions and the decisions of the European Courts before 31 December 2020. They must also have regard to the European Commission decisions and statements before that date. However, they can depart from the EU competition law ‘principles’ pre-dating 31 December 2020 where they consider it ‘appropriate’ to do so. EU block exemptions relating to vertical agreements, motor vehicles, research and development, technology transfers, specialisation etc have been transposed into UK law as retained EU law as of the Exit Date. There have also been important updates in relation to digital markets as alluded to above. In November 2020, the UK government announced the creation of a new Digital Markets Unit (DMU) within the CMA. This follows recommendations in the Furman Report, published in 2019, and the CMA’s own recommendations in July 2020 following its online platforms and digital advertising market study. The DMU will be established in April 2021 and will immediately start work investigating a variety of issues identified in digital markets. In time, the intention is for a new regulatory

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Pinsent Masons United Kingdom regime to be adopted in statute which will apply to digital platforms that are considered as having ‘strategic market status’ (SMS). The current design covers key areas including a legally binding code of conduct, market interventions, and enhanced merger control measures; with the ultimate aim of curbing conduct by dominant firms that could be anticompetitive or harm consumers. The DMU is also set to have significant powers to enforce compliance with the code, including the ability to impose fines of up to 10% of a company’s global turnover. The DMU would also be authorised to carry out pro-competitive interventions (PCIs), intended to promote competition and innovation in the digital sector. In contrast to the CMA’s existing market investigation powers, PCIs allow for a more dynamic and continuous assessment of digital market forces – with the aim of understanding the root cause of market power and any resulting competition concerns. The UK government intends to consult on proposals for the new regime in early 2021 and plans to legislate to put the DMU on a statutory footing when parliamentary time allows. These developments come alongside similar efforts at the EU level, within several EU Member States, and worldwide, to tackle competition issues in digital markets. Finally, in September 2020, the UK Government invited a Member of the UK Parliament, John Penrose MP, to conduct an independent review of UK competition policy in order to recommend how it could be reformed in the light of the UK’s new role as an independent trading nation and to assist with recovery from the coronavirus pandemic. On 16 February 2021, John Penrose MP published his report setting out proposals to update the UK’s competition and consumer regime. He identified that the CMA as a competition authority is ‘currently lagging behind’ its counterparts in other countries in terms of the number of cases it opens and fines imposed. He recommends greatly speeding up competition enforcement processes and appeals so that all but a small number of the most complicated cases are resolved within weeks or months, rather than years. In view of this, he recommended that the government should establish a task force to complete an end-to-end review and redesign of procedures and case management in the CMA and the CAT. Moreover, Penrose recommended that penalties for non-compliance with investigations, such as failing to comply with information requests, should be strengthened. The report also states that in order to increase the turnaround of competition cases, new fast-track County Competition Courts should be established for speedy, low cost resolution of local and regional competition and consumer claims at the tier below the existing CAT fast track. It is uncertain whether the Penrose proposals will be followed in part or full and, at the time of writing, there have been no moves to implement the proposals.

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Endnotes 1. There are proposals for the concurrent powers to be removed from the current regulator for the healthcare sector (NHS Improvement). 2. Following the Exit Date, the CMA and the sectoral regulators no longer have powers to enforce EU competition law where the activity/conduct may affect trade between Member States. 3. Closely mirroring the EU equivalent (Article 102 TFEU) subject to any post-Brexit deviations.

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4. For example, subject certain limitations, the CMA highlighted that it would not take enforcement action where temporary, necessary measures are taken by businesses to coordinate activities in order to ensure the supply and fair distribution of scarce or essential products and services affected by the pandemic. 5. All four such cases were later closed between July and September 2020. 6. Orders applying to the dairy products and grocery sectors ceased to have an effect in August and October 2020, respectively.

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Acknowledgment The authors would like to thank their colleague Mairghread Yule for her invaluable help in preparing this chapter.

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Giles Warrington Tel: +44 121 260 4037 / Email: [email protected] Giles is a Partner in Pinsent Masons’ International Competition, EU and Trade Group, specialising in UK & EU competition law. He has extensive experience 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 has acted for clients on competition investigations in a wide variety of sectors including the transport, building materials, music, education and energy sectors.

Richard Snape Tel: +44 121 626 5756 / Email: [email protected] Richard specialises in EU and UK competition law and consumer law. Richard has experience with both EU and UK competition authorities in the context of cartel, market and merger investigations. He has also worked on a number of consumer law investigations conducted by the CMA. Richard has extensive experience of advising clients at all stages of competition and consumer investigations including responding to requests for information, drafting substantive submissions and engaging in remedy processes. Richard also regularly advises on a variety of competition aspects of commercial agreements, corporate documents and compliance programmes. His clients include companies and public bodies across sectors including retail, construction, energy, pharmaceuticals, financial services and transport.

Pinsent Masons 55 Colmore Row, Birmingham, B3 2FG, United Kingdom Tel: +44 121 200 1050 / URL: www.pinsentmasons.com

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Jeffrey J. Amato, Sofia Arguello & Molly M. Donovan Winston & Strawn LLP

Overview of the law and enforcement regime relating to cartels In the United States, there are two major federal antitrust laws relating to cartels: • Section 1 of the Sherman Antitrust Act (15 U.S.C. § 1), which prohibits “[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations”; and • Section 5(a) of the Federal Trade Commission Act (“FTC Act”) (15 U.S.C. §§ 41- 58), which prohibits “unfair methods of competition” and “unfair or deceptive acts or practices”. The Sherman Act can be enforced criminally or civilly by the Antitrust Division (“Division”) of the U.S. Department of Justice (“DOJ”). Criminal antitrust enforcement is reserved for “hard core” violations of Section 1: price-fixing; bid-rigging; and market allocation schemes among horizontal competitors. The DOJ can also pursue less egregious cases civilly. Section 4 of the Clayton Act provides for a private right of action to enforce Section 1 of the Sherman Act. Private plaintiffs may recover treble damages and litigation costs and may also seek injunctive relief. While Section 1 of the Sherman Act on its face prohibits all restraints of trade, the Supreme Court has interpreted it to prohibit only “unreasonable” restraints. See Standard Oil Co. v. United States, 221 U.S. 1, 60–68 (1911). Naked horizontal agreements with competitors to fix prices (or any component of pricing), restrict output, rig bids, or allocate customers or geographic markets, i.e., the hard-core violations discussed above, are considered “per se” illegal regardless of the economic rationale or the consequences because these practices always or almost always restrict competition.1 Other types of agreements are assessed under the rule-of-reason standard, which weighs the anticompetitive harms caused by the restraint against its procompetitive benefits to determine whether competition has been harmed in the relevant antitrust market. This approach distinguishes between restraints that have an anticompetitive effect and harm the consumer and restraints that promote competition and are in the consumer’s best interest. Cont’l T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 26, 49 (1977). In analyzing a case under the rule of reason, courts consider several factors, such as the intent of the conduct and restriction, the position of the defendant in the market, market conditions, barriers to entry, objective justification, and procompetitive synergies for the conduct. A central element in all Section 1 cartel cases is proof of an illegal agreement. No formal written agreement is required. Instead, illegal agreements may be reached verbally, through emails, or even with a wink or nod – i.e., a “conscious commitment to a common scheme” is sufficient. Direct or circumstantial evidence may be used to establish the existence of an agreement, but the

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U.S. Supreme Court has held that “there must be evidence that tends to exclude the possibility of independent action” and establishes that the defendants “had a conscious commitment to a common scheme”. Monsanto Co. v. Spray-Rite Svc. Corp., 465 U.S. 752, 768 (1984). Proof that the defendants engaged in parallel conduct is insufficient, standing alone, to show such a “conscious commitment”. Plaintiffs must also allege certain “plus factors” to give rise to an inference of an agreement. Plus factors are proxies for direct evidence of an agreement because they tend to ensure that courts punish concerted actions as opposed to unilateral, independent competitive conduct. There is no definitive set of plus factors. Although the Federal Trade Commission (“FTC”) does not technically enforce the Sherman Act, it can bring civil cases under Section 5(a) of the FTC Act. The Supreme Court has said that all violations of the Sherman Act also violate the FTC Act, thus allowing the FTC to challenge the same kind of conduct that would violate the Sherman Act through the FTC Act. The FTC Act also reaches other practices that do not meet all elements of a Sherman Act violation, such as invitations to collude that do not lead to actual collusion. State attorneys general can also seek to enforce these federal antitrust laws on behalf of the state’s residents or the state. They often work on a multistate basis with each other and coordinate with the DOJ and the FTC to protect consumers from violations of antitrust law, as discussed further below. In addition to these federal statutes, all 50 states (and the District of Columbia and Puerto Rico) have some type of antitrust or unfair trade practice statute, most of which are based on and/or interpreted consistently with federal antitrust laws. State attorney generals are responsible for the public enforcement of these laws, and nearly all states permit private civil damages actions, most for treble damages, although some states limit recovery to actual or double damages. State attorneys general may also pursue criminal antitrust violations of state law, where applicable. These types of enforcement actions tend to focus on local bid-rigging schemes. The antitrust laws in the U.S. also provide for exemptions in certain circumstances and contexts, such as: (i) a state action exemption, which exempts certain conduct that is undertaken under state or local government policy; (ii) conduct to influence the government (Noerr–Pennington doctrine); (iii) collective bargaining under the labor exemption; (iv) the filed-rate doctrine, which bars antitrust suits based on tariffs filed with a federal or state regulatory agency; and (v) the limited implied exemption from laws regulating the sales of securities.

Overview of investigative powers in the United States Leniency cooperation The Division has often touted the Leniency Program as the DOJ’s most important investigative tool over the last 26 years.2 The program, discussed in detail below, was designed to encourage companies to self-report cartel conduct to the DOJ and provide evidence of the conspiracy in exchange for complete immunity from criminal prosecution. Providing evidence against co-conspirators is a prerequisite to securing leniency. A cooperating company that does not qualify for amnesty because it was not the first to report the conduct may still receive a reduced fine for providing substantial assistance to the DOJ in its investigation. Dawn raids Another important tool the U.S. DOJ uses to unearth and prosecute cartels is dawn raids. Dawn raids are unannounced searches of offices or residences by officers and agents of the

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DOJ and the Federal Bureau of Investigation (“FBI”) or other law enforcement agencies to seize documents, equipment, records, and data. In the U.S., a court will only issue a search warrant to authorize a dawn raid if agency officials have probable cause to support the allegations underlying the warrant. The year 2020 saw a reduction in dawn raid activity because of the impact of the COVID-19 pandemic and social-distancing policies, but it is expected that dawn raids and cartel enforcement more generally will increase in 2021. Issuance of subpoenas A grand jury investigation is generally opened if the DOJ’s investigation yields evidence confirming the alleged anticompetitive conduct and prosecution is expected to proceed. A grand jury must approve the issuance of subpoenas for the production of documents and to compel testimony. Subpoena recipients who fail to provide requested information or refuse to testify can be held in contempt. The scope of a subpoena is usually limited to evidence and documents located within the United States because of jurisdictional limitations on the DOJ. However, targets may choose to provide documents located overseas to the government on a voluntary basis. Civil investigative demands Civil investigations by federal or state enforcement agencies do not involve a grand jury. Instead, the federal or state enforcement agencies can directly issue civil investigative demands (“CIDs”) or civil subpoenas to obtain documents or sworn written or oral testimony from targets of a civil investigation, as well as from relevant third parties. A CID is usually issued before the government files a complaint. In September 2020, the DOJ announced that the Division had implemented updates to its CID forms and deposition process to clarify that materials or testimony provided in response to a CID may be used by the DOJ in other “unrelated” proceedings, including criminal investigations.

Overview of cartel enforcement activity during the last 12 months Criminal case filings continued to decline in 2020. The DOJ filed an average of 28 criminal antitrust cases from 2016 to 2020, compared to the average of 62 cases filed from 2011 to 2015. The number of criminal antitrust cases filed in 2020 against corporations and individuals was 11 and 22, respectively, which is still low compared to the decade before. Criminal fines and penalties went up in 2020, to USD529 million. This is an increase from the last few years – i.e., USD365 million (2019), USD172 million (2018), and USD67 million (2017) – but still significantly below the high of USD3.6 billion in 2015. The highest fines collected in 2020 include: • USD221.5 million: Broiler chicken company in a civil price-fixing case. • USD195 million: Generic pharmaceutical company charged for conspiring to allocate customers, rig bids, and fix prices for generic drugs. • USD105 million: Generic pharmaceutical company charged for conspiring with other generic drug sellers to artificially raise the price of a certain drug. • USD110.5 million: Poultry company that participated in a conspiracy to fix prices and rig bids for broiler chicken products. • USD100 million: Oncology treatment institute charged for conspiring to allocate oncology treatments for cancer patients. Criminal prosecutions for wage-fixing and no-poach agreements No-poach agreements have been a focus of the DOJ since at least 2016 when the DOJ and FTC issued their “Antitrust Guidance for Human Resource Professionals”, indicating that

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Winston & Strawn LLP USA companies could be criminally prosecuted for no-poach or wage-fixing agreements asper se illegal conduct under Section 1. Labor market collusion cases are an increasingly significant part of the DOJ’s docket, and prosecuting no-poach and wage-fixing agreements remains a top priority for the Division. In December 2020, the DOJ brought its first criminal charges for wage fixing against the former owner of a therapist staffing company for allegedly agreeing with co-conspirators to fix prices by lowering the pay rates to therapists. A month later, in January 2021, the Division announced its first criminal indictment into no-poach agreements against a surgical firm in the health care industry. The DOJ charged the health care company for allegedly agreeing with its competitors to refrain from soliciting senior-level employees in violation of the Sherman Act. The indictment referred to several internal communications and emails, including emails by the human resource team, about the alleged no-poaching agreement.

Key issues in relation to enforcement policy Increased use of deferred prosecution agreements In July 2019, the Division announced that, for the first time, prosecutors could consider resolving criminal antitrust investigations through deferred prosecution agreements (“DPAs”) where companies met four pillars of “good corporate citizenship”: (i) maintaining a robust compliance program; (ii) self-reporting the wrongdoing; (iii) cooperating with the DOJ in its investigation; and (iv) remedying the past misconduct. The Division simultaneously issued detailed guidance articulating specific components that the DOJ would like to see as part of corporate compliance programs. Since this policy shift, the DOJ has reached seven DPAs for Sherman Act violations; however, none refers to an effective corporate compliance program as the basis for proceeding via deferred prosecution. Instead, the DOJ entered into five of the DPAs with generic pharmaceutical companies (subject to price-fixing and bid-rigging investigations) in recognition that felony convictions would exclude them from federal health care programs, which would reduce (rather than enhance) competition. Each of the pharmaceutical companies agreed to pay a criminal penalty, cooperate fully with the ongoing criminal investigation, and admit to the relevant conduct. The Division also concluded a DPA with a private oncology practice in April 2020 to resolve allegations of anticompetitive conduct in the oncology industry – an agreement that also considered the substantial collateral consequences to patients if the oncology practice had been criminally charged and then excluded from federally funded health care programs.3 Finally, in January 2021, the Division resolved antitrust conspiracy charges against a concrete company, Argos USA LLC, through a DPA that required Argos to reform its antitrust compliance program.4 The Argos DPA noted certain factors that prosecutors considered in deciding to proceed by way of deferred prosecution, including that the antitrust violation had involved only a few employees who had joined the company in an asset acquisition, the conspiracy had begun before the acquisition, management had not known about the antitrust violations, and Argos had agreed to cooperate with the DOJ in prosecuting these former employees. Expansion of the Procurement Collusion Strike Force In November 2020, the DOJ announced that it was expanding the Procurement Collusion Strike Force (“PCSF”), formed in 2019 to combat antitrust crimes and related fraud in government procurement, including violations of the False Claims Act, the Foreign Corrupt

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Practices Act, and other relevant statutes. The PCSF is an interagency collaboration of federal law enforcement and prosecutorial agencies and offices across the country. This recent expansion involved 11 new partner offices, bringing the number of national agencies and offices participating in the partnership to 29. Antitrust whistleblower protection The Criminal Antitrust Anti-Retaliation Act was enacted in December 2020 to prohibit employers from retaliating against employees who report antitrust violations.5 The law provides new whistleblower protections to employees, contractors, subcontractors, or agents of private employers who report conduct related to a suspected criminal antitrust violation to their employer or the federal government, or who assist the federal government with an investigation or proceeding related to suspected criminal antitrust violations. Protections are not available to whistleblowers who planned or participated in the alleged criminal conduct or obstructed any investigation by the DOJ, and civil antitrust violations are not covered. A whistleblower who faces retaliation – including discharge, demotion, suspension, threats, or harassment – can file an administrative complaint with the U.S. Department of Labor within 180 days. Remedies include reinstatement with the same seniority status, plus back pay with interest, and compensation for special damages, including litigation costs, expert- witness fees, and reasonable attorneys’ fees.

Leniency/amnesty regime Leniency Program The Division offers immunity from criminal penalties for companies and their directors, officers, and employees who cooperate in its investigations. The Leniency Program creates a race to the agency because immunity is only available to the first company to cooperate, while subsequent cooperating companies qualify for fine reductions and other potential benefits. When a company uncovers potential cartel conduct, it can approach the DOJ for a “marker” that serves as a placeholder for a finite period to allow the company to conduct a more thorough investigation. To “perfect” the marker and otherwise qualify for leniency, the company must terminate its participation in the cartel; provide complete, candid, and continuing cooperation to the DOJ; admit wrongdoing; and make restitution where possible. Leniency is available whether or not the Division has received information about the illegal conduct from another source, provided the DOJ does not yet have sufficient evidence against the company to sustain a conviction. A company under investigation for one cartel that is unable to obtain leniency for that conspiracy can receive substantial assistance credit and a reduced fine under the Division’s “Leniency Plus” policy by reporting its involvement in a separate cartel in another product line and obtaining leniency for the newly reported conspiracy. Conversely, if a company pleads guilty to an antitrust violation but fails to report an additional cartel it was involved in, the DOJ will generally seek a more severe punishment for the new crime under its “Penalty Plus” policy. Both policies provide added incentive for companies to conduct thorough internal investigations and to report any additional antitrust crimes they uncover. As the global landscape for cartel enforcement and leniency becomes increasingly complex with enforcement threats all over the world, deciding whether to seek leniency has become more complicated. A company contemplating whether to apply for leniency should weigh the potential costs against the benefits. A leniency applicant bears the full expense for cooperating with the DOJ’s investigation – which often last several years – including:

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Winston & Strawn LLP USA reviewing millions of documents; identifying and describing “hot” documents during multiple attorney proffers; making witnesses available for multiple interviews; responding to inquiries; and providing testimony at trial if necessary. A multinational company operating or selling globally may find it difficult or impossible to receive leniency in every affected jurisdiction, while the pursuit of leniency in some jurisdictions may only increase its exposure in others. Complying with leniency requests in multiple jurisdictions only increases the expense and burden a company faces. Finally, even a company that successfully obtains leniency still faces significant exposure from follow-on civil damages actions, including class actions, in the United States and elsewhere. Antitrust Criminal Penalty Enhancement and Reform Act In addition to immunity from criminal sanctions under the Leniency Program, amnesty applicants may also be eligible for benefits in follow-on private civil actions – including reduction 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 was originally passed in 2004. On October 1, 2020, the Antitrust Criminal Penalty Enhancement and Reform Permanent Extension Act reauthorized ACPERA and repealed its sunset provision (making ACPERA’s protections permanent).

Administrative settlement of cases Civil cases A company or individual charged with a civil violation of U.S. antitrust laws can choose to settle with the DOJ or the FTC to resolve the enforcement action by consent decree. The agencies use consent decrees to stop unlawful conduct, prevent it from recurring, and to restore competition. The DOJ and FTC must comply with different regulations in reaching consent decrees, but both agencies are required to submit decrees to public scrutiny and comment before making them final. Criminal cases Companies or individuals charged with criminal antitrust violations can voluntarily negotiate with the DOJ to plead guilty rather than face trial. Plea bargains provide the defendant with several benefits, including certainty, expedience, finality, and reduced criminal penalties. Plea agreements allow the government to save resources that it can allocate toward other enforcement priorities. The scope of a plea agreement is subject to negotiation between the parties. Fines are determined based on the volume of affected commerce as well as the company’s assigned culpability score (which considers several factors, including the size of the company, involvement of its high-level officials, and its cooperation and acceptance of responsibility) as well as any discount provided for assisting the DOJ with its investigation.

Third-party complaints Third parties can contact the DOJ or the FTC to report a possible violation of the antitrust laws and provide the initial evidence to begin an investigation. The Division’s PCSF Tip Center receives and reviews complaints, concerns, or tips regarding potential violations affecting government procurement, grant, and program funding. Antitrust concerns that do not deal with those areas can be reported to the Division’s Citizen Complaint Center. As mentioned above, the newly enacted Criminal Antitrust Anti-Retaliation Act prohibits companies from retaliating against employees who report criminal antitrust violations to their employers or the federal government.

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Right of appeal against civil liability and penalties In civil matters, both plaintiffs and defendants have the right to appeal an adverse ruling on the merits of a case to an appellate judicial body composed of neutral decision-makers. After the appellate court enters a final decision, a case may be appealed to the U.S. Supreme Court, but that review is discretionary.

Criminal sanctions Cartel violations are subject to prosecution as criminal felonies. Corporations may be fined up to USD100 million or twice the gain from the illegal conduct or twice the loss to the victims. Individuals can be fined up to USD1 million and imprisoned for up to 10 years. Courts can also impose probation or require the payment of restitution to victims. Criminal sanctions in each case are imposed by the federal judge presiding over the matter in accordance with the Federal Sentencing Guidelines established by the U.S. Sentencing Commission. The Sentencing Guidelines prescribe a range of sanctions that depend on factors such as the level of trade affected by the offense, the defendant’s criminal history, cooperation and acceptance of responsibility, and the presence of an effective compliance and ethics program. While federal courts are not required to impose sentences within the ranges provided by the Sentencing Guidelines, they must still give “respectful consideration” to the Sentencing Guidelines. In most cases, defendants negotiate a plea agreement that includes sanctions consistent with the range of punishments allowed under the Sentencing Guidelines, which leaves limited opportunity for the exercise of discretion by the presiding federal judge. From 2015 to 2020, the DOJ prosecuted 76 companies and 210 individuals for criminal antitrust violations. During the same period, the criminal fines and penalties imposed totaled USD5.13 billion. The average prison sentence from 2010 to 2020 was 18 months. Since 1998, criminal fines of USD100 million or more have been imposed against 36 companies, including 13 fines of USD300 million or more.

Cooperation with other antitrust agencies The DOJ cooperates with foreign authorities wherever appropriate to investigate cartels. To do so, the DOJ enters into Mutual Legal Assistance Treaties (“MLATs”) with other countries’ respective enforcers, allowing the various agencies to exchange information and to coordinate dawn raids, among other things. The DOJ and foreign authorities, for example, can time dawn raids and searches to coincide in multiple jurisdictions to minimize the risk of evidence destruction. Most recently, on the MLAT front, in September 2020, the DOJ signed the Multilateral Mutual Assistance and Cooperation Framework for Competition Authorities with antitrust authorities in the United Kingdom, Canada, Australia, and New Zealand for exchanging confidential information and collecting cross-border evidence in mergers and antitrust investigations. In November 2020, the DOJ entered into a memorandum of understanding with the Korean Prosecution Service to promote increased cooperation and communication on criminal antitrust enforcement and policy. The DOJ may also seek the cooperation of foreign authorities to obtain indicted fugitives by issuing an Interpol “Red Notice”, which operates as an international “wanted” notice that, in some Interpol member countries, permits authorities to arrest the subject. If the subject of a Red Notice is located in a member country, the DOJ may then request his or her extradition to the United States. The DOJ may pursue an overseas fugitive’s extradition through the

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State Department, which transmits extradition requests via diplomatic note. Extradition is only available if the jurisdiction is a party to a treaty with the U.S. containing a reciprocal right to extradition or it maintains an informal extradition policy.

Cross-border issues The federal antitrust laws of the U.S. can have broad extraterritorial reach. Under the Foreign Trade Antitrust Improvements Act (“FTAIA”), any conduct – including if it is purely foreign – may be subject to the U.S. antitrust laws and falls within the jurisdiction of the DOJ so long as it “has a direct, substantial, and reasonably foreseeable effect” on commerce in the U.S. and that “gives rise to a claim under [§ 1 of the Sherman Act]”. In terms of practical enforcement, in 2017, the DOJ and FTC issued “Antitrust Guidelines for International Enforcement and Cooperation” (“International Guidelines”), which articulate the agencies’ enforcement policy and investigative tools available in connection with challenging conduct occurring abroad. They also provide guidance on the agencies’ enforcement cooperation with foreign authorities. The International Guidelines explain that in making investigative and enforcement decisions in situations involving foreign commerce, the agencies consider the connection between the conduct and the United States. Federal antitrust laws apply only if there is a sufficient connection to the U.S., and enforcement would redress real or threatened harm to U.S. consumers and commerce. The agencies also consider whether significant interests of any foreign sovereign would be affected. The agencies may coordinate and cooperate with foreign authorities conducting parallel investigations, including through informal discussion, exchanges of information, and joint interviews among other practices. The extraterritorial reach of the DOJ to prosecute cartels across jurisdictions is evident from the rise in charges, indictments, and pleas against international suppliers of component parts that allegedly cartelized the parts sold outside the U.S., with only the final finished product being sold in the U.S. The DOJ has argued that though the cartels emerged outside the boundaries of the U.S., their impact – that the greatly inflated prices of the components influenced the final price of the product – directly harmed consumers in the U.S. These include cartels involving automotive parts, foreign-exchange markets, liquid-crystal displays, electrolytic capacitors, and other products. The DOJ has also imposed substantial fines on the companies involved in these international cartels. Until January 2021, of the 156 corporations that have paid fines of USD10 million or more, 129 were foreign corporations. Extradition There are certain obstacles that may stand in the way of the DOJ actively prosecuting individuals in international cartels, as individuals can choose not to voluntarily submit to U.S. jurisdiction. Where provided by treaty, however, the DOJ may seek extradition of such individuals from foreign jurisdictions. Despite the challenges that it faces, the DOJ has actively attempted to extradite individuals who have violated the Sherman Act. In January 2020, a Dutch national and former senior vice president for a Dutch carrier was extradited from Italy to the U.S. to face charges for her alleged involvement in an international conspiracy to fix surcharge rates on air-cargo shipments in violation of the Sherman Act. In March 2020, the DOJ extradited a Korean national, a former executive for an auto-parts manufacturer from Germany, for violating the Sherman Act. The former manager pleaded guilty for his role in an international market-allocation and bid-rigging conspiracy involving the sale of instrument-panel clusters to several automobile producers. The DOJ imposed a USD130,000 criminal fine and sentenced him to nine months in prison.

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Developments in private enforcement of antitrust laws U.S. antitrust laws are widely enforced through private lawsuits and often through class actions. These highly complex cases can last for many years and potentially involve billions of dollars in treble damages. Under Section 4 of the Clayton Act, “[a]ny person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor in any district court of the United States”. The term “persons” also includes the state governments, who can bring action under state antitrust statutes (as well as under federal antitrust laws) on behalf of the state’s citizens or directly on behalf of the state as a purchaser. One baseline issue in many private disputes is the plaintiff’s standing. According to the Supreme Court’s decision in Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977), a longstanding precedent, only “direct purchasers” have statutory standing to bring claims for damages under federal antitrust laws. Although indirect purchasers are generally prohibited from bringing claims for damages under federal antitrust laws, several court-made exceptions to Illinois Brick have emerged over the years. In addition to federal statutes, state statutes may provide a private right of action for antitrust violations. Some state antitrust statutes and consumer-protection laws provide more expansive rights for private litigants, such as states that permit indirect purchasers of allegedly price-fixed goods to collect damages. State laws that authorize recovery by indirect purchasers are known as Illinois Brick repealers. In terms of class actions, given the high stakes and the tremendous significance of the class- certification decision, federal district courts in the U.S. are empowered to act as gatekeepers to seriously consider whether the plaintiffs satisfy the requirements for an antitrust claim to proceed as a class action. For one thing, the putative class representatives must prove that causation can be established for all members of a putative class at trial (Walmart v. Dukes, 564 U.S. 338 (2011)) and that damages can be established using a common method and on a class- wide basis (Comcast v. Behrend, 569 U.S. 27 (2013)). In more recent years, some courts have continued to find that material inconsistency between the named plaintiffs’ theory of damages and theory of liability precludes certification. Members of a putative or certified antitrust class action seeking damages have the right to exclude themselves (i.e., “opt out”) from the class action proceeding and pursue their own individual claims directly against the defendants. In private litigation, codefendants or participants in a conspiracy that have acted in concert and have violated Section 1 of the Sherman Act are liable jointly and severally. Each defendant is responsible for the full damages attributable to all the others, and an injured antitrust plaintiff may seek the total amount of its damages from any or all of the defendants that caused the injury. There is no right to contribution between the defendants.

Reform proposals The beginning of 2021 saw a shift in administration that will likely lead to an increase in criminal enforcement, particularly in the wake of the COVID-19 pandemic, as such crises tend to increase the opportunities and incentives for companies to collude. The DOJ has made clear that it will hold accountable anyone who violates U.S. antitrust laws in connection with the manufacturing, distribution, or sale of public-health products as well as for any anticompetitive employer agreements regarding COVID-19 frontline workers. In February 2021, Senator Amy Klobuchar introduced the Competition and Antitrust Law Enforcement Reform Act of 2021. The bill proposes, among other things, to (i) give enforcement agencies the adequate structural resources to enforce the antitrust laws, (ii) strengthen the laws governing anticompetitive conduct and unlawful mergers, (iii) make reforms to improve enforcement, and (iv) allow the FTC and the DOJ to seek additional civil penalties.

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Endnotes 1. Dep’t of Justice, Justice Manual (Antitrust), 7-1.000 Antitrust Div., https://www.justice. gov/jm/jm-7-1000-policy; see also Dep’t of Justice, Antitrust Primer (“Price Fixing, Bid Rigging, and Market Allocation Schemes: What They Are and What to Look For”), https://www.justice.gov/atr/file/810261/download. 2. U.S. Dep’t of Justice, “Department of Justice Applauds Congressional Passage of Reauthorization of the Antitrust Criminal Penalty Enhancement and Reform Act” (June 26, 2020), https://www.justice.gov/opa/pr/department-justice-applauds-congressional- passage-reauthorization-antitrust-criminal-penalty. 3. See Deferred Prosecution Agreement, United States v. Fla. Cancer Specialists & Research Inst., LLC, No. 2:20cr-00078-TPB-MRM (M.D. Fla. Apr. 30, 2020), https:// www.justice.gov/atr/case-document/file/1281681/download. 4. See Deferred Prosecution Agreement, United States v. Argos USA LLC, 4:21-002-RSB- CLR (S.D. Ga. Jan. 4, 2021), https://www.justice.gov/opa/press-release/file/1350481/ download. 5. Criminal Antitrust Anti-Retaliation Act of 2019, S. 2258, 116th Cong. (2019), available at https://www.congress.gov/bill/116th-congress/senate-bill/2258/text.

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Jeffrey J. Amato Tel: +1 212 294 4685 / Email: [email protected] Jeffrey Amato is a partner in the New York office. He handles complex multi-forum disputes, principally in the areas of international cartel litigation, class actions, arbitration, and government investigations. Jeffrey has been involved in legal disputes concerning a wide range of issues in federal, state, administrative, and arbitral forums. Prior to joining Winston, he served as law clerk to the Honorable Arthur D. Spatt, U.S. District Judge for the Eastern District of New York. Before his clerkship, Jeffrey was an attorney with the U.S. Department of Homeland Security, where he prosecuted numerous civil enforcement actions against individuals, air carriers, shippers, and other regulated entities. During his tenure at the U.S. Department of Homeland Security, he received an interim appointment as Special Assistant to the Chief Counsel of the Transportation Security Administration.

Sofia Arguello Tel: +1 212 294 5304 / Email: [email protected] Sofia Arguello is a partner in Winston’s New York office. She focuses her practice on civil antitrust litigation, international cartel investigations led by enforcement agencies around the world, white-collar criminal defense, and corporate internal investigations focusing on anticorruption, FCPA compliance issues, antitrust, and other potential regulatory violations. She has expertise advising clients on cross-border issues and dealing with disputes and investigations in Latin America. Sofia has acted as plaintiff and defense counsel in cases involving monopolization, price fixing, price discrimination, group boycotts, and other restraints of trade. She has also defended clients in criminal investigations brought by the U.S. Department of Justice and international competition authorities.

Molly M. Donovan Tel: +1 212 294 4692 / Email: [email protected] Molly M. Donovan is a partner in Winston’s New York office. She represents clients subject to criminal and other antitrust investigations in the United States, Brazil, Japan, Korea, Taiwan, China, Singapore, and other jurisdictions around the world, and runs the associated internal investigations. Molly represents those same clients in the large class and other private litigations that regularly follow criminal/administrative enforcement. Molly also counsels clients on a variety of antitrust issues finding practical ways to address antitrust risks while meeting business needs. She is the host of Winston’s Competition Corner podcast.

Winston & Strawn LLP 200 Park Avenue New York, NY 10166-4193 USA Tel: +1 212 294 6700 / URL: www.winston.com

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