ICLG The International Comparative Legal Guide to: Cartels & Leniency 2018 11th Edition

A practical cross-border insight into cartels and leniency

Published by Global Legal Group, in association with CDR, with contributions from:

Affleck Greene McMurtry LLP Lakshmikumaran & Sridharan Attorneys AGON PARTNERS MinterEllisonRuddWatts Borenius Attorneys Ltd Morais Leitão, Galvão Teles, Soares da Silva & Associados, Sociedade de Advogados, R.L. Camilleri Preziosi Advocates Nagashima Ohno & Tsunematsu Crowell & Moring Pachiu & Associates Debarliev, Dameski & Kelesoska, Attorneys at Law Paul, Weiss, Rifkind, Wharton & Garrison LLP Drew & Napier LLC Preslmayr Rechtsanwälte OG ELIG, Attorneys-At-Law Rahmat Lim & Partners Gowling WLG SBH Law Office Hannes Snellman Attorneys Ltd Shearman & Sterling LLP INFRALEX Skadden, Arps, Slate, Meagher & Flom LLP King & Wood Mallesons Steptoe & Johnson LLP The International Comparative Legal Guide to: Cartels & Leniency 2018

General Chapters:

1 The Legal Parameters of the Commission’s Investigative Powers and the Imposition of Parental Liability in Cartel Cases – Elvira Aliende Rodriguez & Geert Goeteyn, Shearman & Sterling LLP 1

2 Individuals as Whistleblowers – Ingrid Vandenborre & Thorsten Goetz, Skadden, Arps, Slate, Meagher & Flom LLP 8

Contributing Editors 3 UK Competition Enforcement Outside the EU Single Market – Bernardine Adkins, Gowling WLG 14 Geert Goeteyn & Matthew Readings, Shearman & Sterling LLP Country Question and Answer Chapters: Sales Director 4 Australia King & Wood Mallesons: Sharon Henrick & Wayne Leach 20 Florjan Osmani 5 Austria Preslmayr Rechtsanwälte OG: Mag. Dieter Hauck & Marco Werner 30 Account Director Oliver Smith 6 Belarus SBH Law Office: Elena Selivanova & Ekaterina Shkarbuta 38 Sales Support Manager Toni Hayward 7 Belgium Crowell & Moring: Thomas De Meese 43 Sub Editor 8 Canada Affleck Greene McMurtry LLP: W. Michael G. Osborne & Michael Binetti 49 Hollie Parker 9 China King & Wood Mallesons: Susan Ning & Hazel Yin 56 Senior Editors Suzie Levy, Rachel Williams 10 European Union Shearman & Sterling LLP: Elvira Aliende Rodriguez & Geert Goeteyn 65 Chief Operating Officer Dror Levy 11 Finland Borenius Attorneys Ltd: Ilkka Aalto-Setälä & Henrik Koivuniemi 74

Group Consulting Editor 12 France Steptoe & Johnson LLP: Jean-Nicolas Maillard & Camille Keres 81 Alan Falach 13 Germany Shearman & Sterling LLP: Mathias Stöcker 88 Publisher Rory Smith 14 India Lakshmikumaran & Sridharan Attorneys: Abir Roy 96 Published by Global Legal Group Ltd. 15 Italy Shearman & Sterling LLP: Paolisa Nebbia 103 59 Tanner Street London SE1 3PL, UK 16 Japan Nagashima Ohno & Tsunematsu: Eriko Watanabe 109 Tel: +44 20 7367 0720 Fax: +44 20 7407 5255 17 Macedonia Debarliev, Dameski & Kelesoska, Attorneys at Law: Dragan Dameski & Email: [email protected] Jasmina Ilieva Jovanovik 116 URL: www.glgroup.co.uk 18 Malaysia Rahmat Lim & Partners: Raymond Yong Chin Shiung & GLG Cover Design Penny Wong Sook Kuan 124 F&F Studio Design GLG Cover Image Source 19 Malta Camilleri Preziosi Advocates: Ron Galea Cavallazzi & Lisa Abela 129 iStockphoto 20 New Zealand MinterEllisonRuddWatts: Jennifer Hambleton & Alisaundre van Ammers 135 Printed by Ashford Colour Press Ltd 21 Portugal Morais Leitão, Galvão Teles, Soares da Silva & Associados, Sociedade de November 2017 Advogados, R.L.: Inês Gouveia & Luís do Nascimento Ferreira 141 Copyright © 2017 Global Legal Group Ltd. 22 Romania Pachiu & Associates: Remus Ene 153 All rights reserved No photocopying 23 Russia INFRALEX: Artur Rokhlin & Victor Fadeev 159

ISBN 978-1-911367-81-9 24 Singapore Drew & Napier LLC: Lim Chong Kin & Corinne Chew 166 ISSN 1756-1027 25 Spain King & Wood Mallesons: Ramón García-Gallardo 173 Strategic Partners 26 Sweden Hannes Snellman Attorneys Ltd: Peter Forsberg & Haris Catovic 187

27 Switzerland AGON PARTNERS: Prof. Dr. Patrick L. Krauskopf & Fabio Babey 194

28 Turkey ELIG, Attorneys-At-Law: Gönenç Gürkaynak & Öznur İnanılır 200

29 United Kingdom Shearman & Sterling LLP: Matthew Readings & Shirin Lim 209

30 USA Paul, Weiss, Rifkind, Wharton & Garrison LLP: Charles F. (Rick) Rule & Joseph J. Bial 216

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Disclaimer 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.

WWW.ICLG.COM Chapter 1

The Legal Parameters of the Commission’s Investigative Powers and the Imposition of Elvira Aliende Rodriguez Parental Liability in Cartel Cases

Shearman & Sterling LLP Geert Goeteyn

potential fines. The current system is therefore based on I. Introduction cooperation between NCAs, as clarified in the Commission Notice on Cooperation within the ECN.3 It is a system There are three essential tools through which the European which is flawed: it is not binding upon NCAs and, despite Commission (the “Commission”) obtains extra information the availability of the ECN model application, every national during the course of a cartel investigation: leniency; dawn raids; leniency application is legally independent. and requests for information (“RFIs”). Whilst recent judgments The DHL case4 illustrates the problems that can arise from the European Court of Justice (the “ECJ”) have sought to due to lack of harmonisation of national leniency set boundaries on the Commission’s exercise of these traditional programmes. The case involved leniency applications investigative powers, the Commission has also introduced before the Italian competition authority (the Autorità new tools and legislation to enhance their effectiveness and Garante della Concorrenza e del Mercato or “AGCM”) efficiency. This article will examine recent developments related and the Commission. DHL applied for leniency before to the Commission’s investigatory powers in cartel proceedings, the Commission in June 2007 in relation to a cartel in the including: international maritime, air and road freight forwarding sector, and a month later, submitted a summary leniency ■ the possibility of creating a “one stop shop” for leniency application to the AGCM in relation to a cartel in the applications throughout the EU, as well as the recent maritime and air freight forwarding sector in Italy, without introduction of the anonymous whistleblower tool in March mentioning the road sector. In 2008, DHL complemented 2017; its initial application to the AGCM, extending it to the ■ recent case law developments related to dawn raids, and the international road freight forwarding sector. Prior to this, need to balance the rights of undertakings under investigation another participant, Schenker, had submitted a summary with the Commission’s powers; and immunity application to the AGCM concerning road freight ■ recent developments related to the Commission’s most forwarding in Italy. Although the Commission granted commonly used investigative tool – RFIs. DHL full conditional immunity for the entire sector, the This article will also discuss recent case law developments on the AGCM issued a decision concerning only the road freight attribution of parental liability in cartel infringements, following the forwarding sector giving DHL a fine reduction of 49% and granting immunity to Schenker. ECJ judgment in Akzo Nobel.1 DHL claimed that it should have received full immunity before the AGCM, since it was the first to submit a summary II. Leniency and Whistleblowers leniency application to it under the ECN procedure which should have been assessed in light of its leniency application a. Towards a “one stop shop” for leniency applications to the Commission. By failing to make such an assessment, the AGCM did not respect the binding principles set out in The Commission’s leniency programme is one of the the ECN materials. main investigative tools used in its fight against cartels. Undertakings that have participated in a cartel can be granted Following a request for a preliminary ruling by the Italian full immunity or a reduction of a fine that would have Council of State, the ECJ clarified that leniency applications otherwise been imposed, provided they disclose sufficient to the Commission and summary applications to NCAs are information for the Commission to find an infringement of independent and that the ECN instruments are not binding competition law. on NCAs. NCAs therefore have no obligation to assess a The current model of the Commission’s leniency programme summary application on the basis of a leniency application does not provide for a harmonised application throughout made to the Commission, regardless of the level of similarity the EU. The European Competition Network (“ECN”) between such applications. The AGCM was therefore not Model Leniency Programme,2 however, introduced a required to assess DHL’s summary application in light of summary application system making it procedurally easier DHL’s main leniency application to the Commission. In order for undertakings to file leniency applications in multiple to secure full immunity before the AGCM, DHL should have jurisdictions. Nonetheless, national competition authorities been the first to apply to the AGCM for leniency regarding (“NCAs”) have their own leniency programmes in place, the Italian road cartel. with requirements and conditions that differ from one DHL shows the difficulties that can arise from divergences jurisdiction to another. When an undertaking wishes to apply in leniency programmes across Europe, which could in turn for leniency, they therefore must ensure that they submit discourage companies from applying for leniency. The leniency applications in multiple national jurisdictions to Commission aims to tackle this concern in its proposed protect themselves to the maximum extent possible from

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directive to extend NCA powers published in March 2017,5 can be subsequently used as evidence either in the same or a which refers specifically to leniency in Chapter VI and is different case, particularly since Article 28(1) of Regulation based on the ECN Model Leniency Programme of 2012. The 1/2003 states that information collected in accordance with proposal sets out: rules on conditions for undertakings to be Article 20 can be used “only for the purpose for which it was eligible for leniency; the form of leniency applications; a acquired”. marker process; and summary applications to NCAs. Article As a result, and as indicated in case law, the Commission 21 provides that applicants who have applied for leniency to generally cannot carry out so called “fishing expeditions”. the Commission, either by way of a marker or a full application, This, together with the importance of complying with the should be able to file summary applications in relation to the requirements set out in Article 20 when issuing an inspection same cartel to the NCAs they consider well placed to deal with decision, is set out in the Nexans and Prysmian cases.11 In the case, who should then accept such applications provided 2009, the Commission raided Nexans and Prysmian in relation they contain a minimum set of information. The applicants to potentially anti-competitive agreements in the supply of are then responsible for informing such NCAs if the scope power cables. Both undertakings challenged the legality of of their leniency application with the Commission changes. the inspection decision before the General Court (“GC”). If the Commission decides not to pursue the investigation, The appeal was partially upheld due to the excessively broad the undertakings should be entitled to submit full leniency product scope of the inspection decisions, amongst other applications before the relevant NCAs. This initiative will reasons. On appeal to the ECJ, Nexans challenged only help to improve the effectiveness of the Commission’s the Commission’s allegedly broad geographic scope in the leniency programme and to encourage companies to continue inspection decision, where it had stated that the agreements to submit leniency applications. “probably [had] a global reach”.12 In particular, Nexans b. The new anonymous whistleblower tool claimed that this vague reference failed to precisely identify In March 2017, the European Commission introduced a new how suspected anti-competitive conduct outside of the EU anonymous whistleblower tool to fight against cartels and market could actually have an effect on the EU market, other anti-competitive practices. This tool allows individuals thereby prejudicing their rights of defence. to report competition law infringements while remaining However, the ECJ found that the Commission was not anonymous, and provides a secure channel using an required to limit its investigations to documents related encryption system that enables individuals to communicate to conduct with an effect on the EU market, particularly information without disclosing any personal data. The where, as in this case, it considered the anti-competitive messaging system is run by an external provider, making it conduct to have a global scope. The ECJ also confirmed that impossible to identify the sender. the geographic scope did not need to be defined any more The tool comes as part of the Commission’s initiative to precisely in inspection decisions, meaning the Commission’s enhance investigative powers and improve cartel detection: broad reference in Nexans’ inspection decision was 13 as Commissioner Vestager stated, “[i]nside knowledge can sufficient. However, given that the judgment of the GC still be a powerful tool to help the Commission uncover cartels stands, a limitation still applies to the Commission’s reference and other anti-competitive practices”.6 The Commission to categories of products in its inspection decisions. On this therefore hopes that this initiative will increase the number of point, the GC confirmed the requirement for the Commission detections of cartels as well as the quality of the information to have “reasonable grounds” to order an inspection in certain provided. Moreover, the new tool is broader in scope than product areas, and it held that an unduly broad product scope, leniency applications, by allowing individuals to report cartel particularly when the inspection itself focused on a more conduct. In addition, the potential prevalence of national narrow set of products, was not permissible. As such, the damages actions given the entry into force of the Damages products concerned by an inspection need to be precisely Directive7 and its almost full transposition8 means companies delineated in the inspection decision, and the Commission may be more reluctant to participate in the leniency is unable to conduct an inspection beyond such products in programme, allowing the whistleblower tool to be used more the hope of finding evidence of a broader infringement. The extensively. However, the full impact on the interaction ECJ judgment does, however, leave open the possibility for between the new tool and the Commission’s existing leniency broader powers as regards the Commission’s specification programme remains to be seen. of the geographic scope of the alleged infringement in an inspection decision. Other limitations on Commission investigatory powers, III. Dawn Raids particularly where numerous dawn raids are concerned, were more recently illustrated in Deutsche Bahn.14 The Under Article 20 of Regulation 1/2003,9 the Commission enjoys Commission raided Deutsche Bahn three times between important powers to “conduct all necessary inspections” to ensure March and July 2011. On the first occasion, the inspection the effective enforcement of competition rules, including the ability decision concerned Deutsche Bahn itself, with no mention to carry out unannounced inspections, also known as dawn raids. of its subsidiary, DUSS, though inspectors had been briefed on alleged competition law violations by DUSS. The ECJ has recently issued a number of judgments relating to Such inspectors then allegedly coincidentally came across dawn raids, outlining the limits on the Commission’s powers. In evidence concerning such violations, and used such evidence addition to this, concerns regarding how the Commission stores data as the basis for issuing a new inspection decision for DUSS captured during the course of a dawn raid and how the data privacy implemented in parallel to the first raid. This was followed by rights of affected individuals are respected have also been raised. a third raid on DUSS a few months later. Although the raids were ordered on the basis of a suspected abuse of dominance, a. The need to clearly define the scope of inspection decisions the judgments focused on the scope of inspection decisions in When carrying out dawn raids the Commission must specify general. the subject matter and purpose of the inspection, and the Deutsche Bahn appealed the inspection decisions, alleging grounds on which it suspects there is an infringement.10 The a breach of its fundamental rights and rights of defence, Commission is also required to clearly state the scope of the which was rejected by the GC. On appeal to the ECJ, the inspection in the inspection decision. As a result, one question Commission attempted to invoke the Dow Benelux doctrine,15 that often arises is whether evidence found during a dawn according to which inspectors are not required to be blind raid that falls outside the scope of the inspection decision to the evidence found during a dawn raid of a previously

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undiscovered violation. As a result, where inspectors on and use as evidence documents legally transmitted to it “happen to obtain” incriminatory evidence, the Commission by national authorities who are not NCAs. In Bananas, the can commence an investigation into the new matter to which ECJ confirmed the admissibility of evidence transmitted to such evidence relates. However, this can only apply in the Commission by the Italian financial police (the Guardia exceptional circumstances; the core principle remains that di Finanza), who had found the personal notes of one of the evidence falling outside the scope of an inspection decision entity’s employees during the course of a tax investigation cannot be used by the Commission, as an undertaking’s rights related search at the employee’s home. The ECJ upheld the of defence and rights to business secrecy would otherwise finding of the GC, which had held that such documents were be compromised. The ECJ also clarified that, equally, Dow admissible provided they had not been declared unlawful Benelux did not prevent the Commission from initiating under national law, and it reaffirmed the general principle that further inquiries to verify or supplement information obtained “evidence may be freely adduced and that the only relevant in a prior inspection, where such information indicates a criterion for the purpose of assessing the evidence adduced is 18 breach of competition law. its credibility”. 19 On the scope of the particular inspection decisions in the This principle was also applied in the Goldfish case, where Deutsche Bahn and DUSS case, the ECJ found that the lack the Commission had based its findings on evidence which of reference to the DUSS complaint in the subject matter included telephone conversations that had been secretly description of the first inspection decision breached the recorded. The undertakings argued that since the evidence Commission’s obligation to state reasons and infringed the had been illegally obtained, it could not be admissible as part undertakings’ rights of defence. As a result, the first inspection of the Commission’s file. The GC, however, found that the was vitiated by irregularity due to the Commission’s seizure Commission could use secret audio recordings of telephone of documents falling outside the scope of the inspection, and conversations between competitors obtained in the context of the legality of the second and third inspection decisions were a dawn raid as evidence, irrespective of their legality under national rules. The GC again reaffirmed that the general consequently affected. The ECJ therefore set aside the GC requirement was for evidence to be credible. Although judgment and annulled each of the inspection decisions. the GC recalled that reviewing the lawfulness of contested The case law shows that, although the Commission enjoys evidence does not relieve EU institutions of their obligation broad powers of inspection with a generally wide margin to respect the fundamental rights of individual applicants, it of discretion, such powers must still be used diligently and concluded that recordings of telephone conversations which in compliance with the limits established by law. This is were created by a party to the conversations and which were particularly the case when defining the products subject to collected lawfully in the course of a dawn raid constituted the investigation, and in cases involving multiple dawn raids evidence properly obtained by the Commission that was and different investigations. admissible in a cartel investigation. b. Digital evidence gathering The GC considered that in any case, the use of such evidence The Commission is entitled to search for evidence as part of did not conflict with the principles of fairness laid down an inspection, irrespective of the medium in which it is stored. in Article 6(1) ECHR and Article 47 of the Charter of As much of the evidence relevant to Commission cartel Fundamental Rights, even where that evidence was obtained investigations is now stored in digital form, Commission in breach of the privacy requirements of Article 8 ECHR. officials are entitled to search electronic devices, as introduced This was subject to two conditions: the applicant was not by the Commission’s explanatory note on inspections dated deprived of a fair trial or of his rights of defence; and the September 2015.16 evidence at issue was not the only proof relied on in support of the conviction. The Commission begins by locating target devices and extracting potentially relevant files which are then copied d. Data privacy issues and uploaded onto its Nuix server. The Commission must While the Commission has extensive investigate powers to then carefully select the search terms to be applied, in order examine all business records and inspect private property to avoid any risk of being accused of fishing expeditions in under certain strict conditions, paragraph 16 of the light of the case law discussed above. The collected data is explanatory note on Commission inspections20 recalls that then indexed and reviewed by officials. The data identified as such inspections shall respect personal data and the right to relevant is tagged and copied onto an encrypted data carrier, private life. The note states that any personal data located a copy of which is provided to the undertaking, together in documents copied or obtained during the inspection will with a list of the documents copied. Once the inspection is be processed in compliance with the EU data protection over, the Commission ‘wipes’ its equipment (i.e. removes all rules. Undertakings being controllers of data under this the data included), making it impossible for the data to be regulation must weigh up the risks of unnecessary personal reconstructed. During this process, the Commission must data disclosure against the risks of not cooperating with the also be quick enough to avoid disruption to the company’s Commission in the case of a dawn raid. daily business. In January 2012, the Commission proposed to reform data If the Commission fails to complete its task on site due to protection rules in the EU in order to give citizens control of their personal data. The resulting text, the General Data lack of time, it may store the data, seal it in an envelope and 21 take it to its premises. If the Commission wishes to review Protection Regulation, entered into force in May 2016 and will apply from May 2018. It stresses the principle of data its content, the undertaking can then be invited to attend quality, most notably in relation to the Commission’s powers the opening of the sealed envelope at the Commission’s of investigation. Any personal data processed should be premises. Otherwise, the sealed envelope will be returned to limited to what is necessary for a defined purpose. The new the company unopened. regulation should also reduce the possibility for public bodies c. Admissibility of evidence: credibility as the key criterion to rely on a legitimate interest exception to control personal Recent cases have reviewed the admissibility of certain data (i.e. where the processing of the data is necessary for evidence used by the Commission in its cartel investigations, the purposes of a controller’s legitimate interests which may where the credibility of the evidence has been highlighted be outweighed by an individual’s fundamental rights and as the key factor to be satisfied. FSL and others’ appeal freedoms). More generally, the regulation reinforces the of the Bananas GC judgment led to an ECJ ruling in April EU’s stricter approach towards data protection by providing 201717 that confirmed that the Commission is entitled to rely a high and uniform level of such protection across Member States.

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RFIs (in particular RFIs by decision); and when the Commission has IV. Requests for Information had time to develop detailed allegations, the importance of ensuring that the allegations are precise, non-generic and properly motivated. The Commission also has the power under Article 18 of Regulation This is demanded in practice by the burdensome and costly nature of 1/2003 to directly ask undertakings to provide relevant information responding to RFIs. The Commission should therefore ensure such during its investigations through RFIs. These are generally used requirements are taken into account and that all RFIs are clearly by the Commission to obtain the necessary information to identify defined in scope prior to their issuance. an infringement of competition law, as well as to better outline the factual and legal scope of the conduct under investigation. The Commission may issue two different types of RFIs: either a V. When the Commission’s Power to Impose simple request sent by letter; or a request by decision. A simple a Fine on the Subsidiary is Prescribed, is a RFI is not binding and undertakings therefore have no formal Fine on the Parent Company Precluded? obligation to respond. Undertakings are obliged to respond to RFIs by decision, where a failure to do so within the required time limit It is generally the case that a parent company’s liability does not either intentionally or negligently can lead to fines of up to 1% of extend beyond that of its subsidiary when its liability derives solely 22 the undertaking’s total turnover. The undertaking may also receive from the direct involvement of the subsidiary in the infringement.28 a similar fine if incorrect or misleading information is provided Recently, however, the Courts appear to have widened the scope of intentionally or negligently in response to both simple requests liability of a parent company through attribution, confusing it with and requests by decision, or if a response is incomplete to a request a situation in which liability arises from direct involvement in an by decision. Periodic penalty payments of up to 5% of the total infringement.29 turnover may also be imposed to compel undertakings to provide In the Heat Stabilisers decision30 the Commission considered complete and correct information requested in an RFI by decision.23 that Akzo Nobel Chemical GmbH and Akzo Nobel Chemical However, the Commission’s power to request information from B.V. (hereinafter “Akzo Nobel’s Original Subsidiaries”), had undertakings is not absolute: it must comply with the principle of directly participated in the cartel during an initial period, and that proportionality and the principle against self-incrimination; it is subsequently another Akzo Nobel subsidiary, Akcros Chemicals under an obligation to state reasons; and, in order to uphold the Ltd, directly participated for the remainder of the cartel. Akzo parties’ rights of defence, it must clearly define the scope of any Nobel was fined as parent company of those subsidiaries for the RFI. The Commission must therefore explain the perimeters of the entire duration of the cartel. investigation in the RFI so as to assist the relevant undertaking in On appeal, the GC disagreed with the Commission’s conclusions. gathering the most relevant information. As set out in Article 18(2) It found in the Akzo Nobel31 judgment that Akzo Nobel’s Original and (3) of Regulation 1/2003, when issuing an RFI the Commission Subsidiaries ended their participation in the cartel in 1993 (the “shall state the legal basis and the purpose of the request, specify participation by the Original Subsidiaries in the cartel is hereinafter what information is required and fix the time limit within which referred to as “the first infringement period”) and that the participation the information is to be provided”. Undertakings are entitled to by Akzo’s Akcros Chemicals Ltd subsidiary was separate from challenge an RFI by decision before the ECJ if the Commission fails – rather than a continuation of – the Original Subsidiaries’ to adhere to such procedural requirements. cartel involvement.32 The GC annulled the fines imposed by the The boundaries of the Commission’s powers as regards RFIs were Commission on Akzo Nobel’s Original Subsidiaries on the basis 24 defined in the Cement cases, where the Commission had carried that the limitation period for imposing such fines had expired, in line out dawn raids at the premises of several companies in 2008 and with Article 25 (1) (b) of Regulation 1/2003. This article provides 2009, before formally opening proceedings in 2010 and later for a five-year limitation period on the Commission’s power to issuing several detailed RFIs by decision in March 2011. The impose fines. The Commission had therefore been time-barred applicants lodged an appeal before the GC against the RFIs on since 1998 from imposing a fine on Akzo Nobel’s Subsidiaries for the grounds that the information request was disproportionate and the first infringement period. breached their right of defence by lacking an adequate statement However, the GC rejected the appeal by the parent company, Akzo of reasons, allegations which were later dismissed. On appeal to Nobel, to annul its parental liability fine in so far as it derived the ECJ, the applicants argued that the Commission had failed to from cartel actions by the Original Subsidiaries during the first state reasons and to correctly identify the necessity of its request. infringement period. The GC found that, although the parent This was upheld by the ECJ who subsequently quashed the GC’s company had been held liable for cartel activity during the first judgment, confirming that “the obligation to state specific reasons infringement period exclusively as a result of the direct involvement is a fundamental requirement, designed not merely to show that the in the infringement of Akzo Nobel’s Original Subsidiaries, its own request for information is justified but also to enable the undertakings limitation period had not expired.33 concerned to assess the scope of their duty to cooperate whilst at the same time safeguarding their rights of defence”.25 On this basis, the On appeal to the ECJ, Akzo Nobel requested a partial annulment ECJ ruled that since “the necessity of the information must be judged of its fine on the grounds that as the parent company, its in relation to the purpose stated in the request for information”,26 liability derived solely from its subsidiaries’ participation in the the RFI must be sufficiently precise. The ECJ further ruled that the infringement. Since the fine of Akzo Nobel’s Original Subsidiaries RFI did not comply with the requirements set out in Article 18(3) for the first infringement period had been annulled by the GC, the of Regulation 1/2003 in that it was “excessively succinct, vague parent company’s fine for cartel activity by the Original Subsidiaries and generic – and in some respects, ambiguous”,27 even though it should also be annulled as its liability could not exceed that of its had been issued more than two years after the first inspection, at a subsidiaries. time when the Commission already had information allowing it to The ECJ disagreed and held that: (i) since Akzo Nobel fully owned present its suspicions of an infringement more precisely. Akzo Nobel’s Original Subsidiaries during the first infringement The Cement cases usefully clarify the importance for the period, it was individually responsible for the infringing conduct Commission to respect the parties’ rights of defence: when issuing during this period; (ii) although Akzo Nobel’s Original Subsidiaries’

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participation had ceased at the end of the first infringement period, the parent “participated” in the cartel throughout the entire cartel VI. Conclusion period through its liability for the cartel actions of the Original Though the Commission’s investigative powers in cartels are Subsidiaries and subsequently the Akcros Chemicals subsidiary; and traditionally broad, the EU courts continue to impose limitations (iii) this was a factor justifying a different and separate assessment in an aim to uphold the procedural rights of undertakings. New of the parent company’s liability.34 As a result, the ECJ considered legislative proposals introduced by the Commission, however, that the parent company was “personally” responsible and jointly attempt to extend such powers to ensure efficient cartel and severally liable for the entire infringement period and that the investigations, whilst other proposals focus on maintaining Commission’s power to impose a fine on it was not time-barred, protection of key rights, such as data privacy. Undertakings should despite the ECJ’s acceptance that fines could no longer be imposed therefore remain aware of the limitations on the Commission’s on Akzo Nobel’s Original Subsidiaries for the first infringement investigative powers in cartel proceedings, as well as the changing period. shape of such powers through developing legislation. AG Wahl’s opinion, disregarded by the ECJ, found that the parent Parent companies should also remain cognisant of the possibility for company’s fine should be annulled since the Commission’s power stand alone determinations of their liability in certain circumstances, to fine it was time-barred.35 AG Wahl acknowledged that there have without simply relying on general principles dictating a reflection of been cases in which specific individual factors relating to substantial liability between parent companies and their subsidiaries in cartel matters or parameters regarding the setting of the fine have justified cases. the application of different fines to the parent company and the subsidiary.36 However, AG Wahl suggested that such cases may have been the result of judicial ambiguity regarding whether Endnotes the nature of the liability of a parent company that is not directly involved in the anticompetitive infringement is personal or derived 1. Judgment of 27 April 2017 in Case C-516/15 P, Akzo Nobel from the liability of its subsidiary.37 AG Wahl argued that when NV and others (“Akzo Nobel”). the court has stated that the parent has ‘personal liability’, this is 2. ECN Model Leniency Programme (as revised in November in fact a misnomer used to emphasise that the parent is responsible 2012), available at: http://ec.europa.eu/competition/ecn/mlp_ revised_2012_en.pdf. for its subsidiary’s conduct pursuant to the single economic entity principle.38 AG Wahl’s conclusion was that, since the parent’s 3. Commission Notice on cooperation within the Network of Competition Authorities of 27 April 2004 O.J. C 101, liability derives from its subsidiary’s liability, the fine imposed on 27.04.2004, pp. 43–53. the parent should reflect any annulment or reduction in fine of its 4. Judgment of 20 January 2016 in Case C-428/14, DHL Express subsidiaries.39 (Italy) and DHL Global Forwarding (Italy). The ECJ’s decision is regrettable, in particular as it fails to 5. Proposal of the Commission of 21 March 2017 for a Directive sufficiently explain the circumstances under which “factors specific of the European Parliament and of the Council to empower to the parent company may justify assessing the parent company’s the competition authorities of the Member States to be more liability and that of its subsidiary differently, even if the liability effective enforcers and to ensure the proper functioning of the of the former is based exclusively on the unlawful conduct of the internal market. latter”.40 This is worrying since, as pointed out by AG Wahl, the 6. See the Commission’s Press Release of 16 March 2017, logic of the GC is difficult to reconcile with the established case law available at: http://europa.eu/rapid/press-release_IP-17-591_ on the single economic entity which establishes that parent company en.htm. liability cannot go beyond that of the subsidiary when its liability is 7. Directive 2014/104/EU on certain rules governing actions attributed to the sole ground of the subsidiaries’ participation in the for damages under national law for infringements of the infringement.41 competition law provisions of the Member States and the European Union, O.J. 2014 L 349/1. The ECJ failed to distinguish between the concept of liability 8. At the time of writing, the Directive has been fully transposed through direct involvement in an infringement, and attributed parent in twenty Member States: http://ec.europa.eu/competition/ company liability arising from a subsidiary’s direct participation in antitrust/actionsdamages/directive_en.html. the infringement. The judgment’s conclusion that since Akzo Nobel 9. Council Regulation (EC) No 1/2003 of 16 December 2002 on formed a single economic entity with its subsidiaries this justified the implementation of the rules on competition laid down in its involvement throughout the whole infringement period, despite Articles 81 and 82 of the Treaty (“Regulation 1/2003”). the expiration of the limitation period, effectively circumvents the 10. See Regulation 1/2003, Article 20 (3) for requirements when expiration of the limitation period for the parent company. This the dawn raid is carried out on the basis of an authorisation; is what AG Wahl pointed to when he opined that “in so far as the and Regulation 1/2003, Article 20 (4) for requirements when Commission can address a decision imposing a fine to the parent the dawn raid is carried out on the basis of a binding decision. company, without being required to establish that parent company’s 11. Judgment of 14 November 2012 in Case T-140/09, Prysmian; actual — and therefore direct — involvement in an infringement, the Judgment of 14 November 2012 in Case T-135/09, Nexans inevitable quid pro quo of availing of that option is, in my opinion, France and Nexans; and Judgment of 25 June 2014 in Case that any errors vitiating the findings in relation to the subsidiary’s C-37/13 P, Nexans (“Nexans”). specific liability for the infringement — and, consequently, the 12. Nexans, para. 17. calculation of any fine imposed on that basis — should also benefit 13. Nexans, para. 39. the parent company”.42 14. Judgment of 18 June 2015 in Case C-583/13 P, Deutsche The Akzo judgment could therefore be seen as an expansion Bahn e.a. of parent company liability and it may represent a problem for 15. Judgment of 17 October 1989 in Case 85/87, Dow Benelux. companies’ rights of defence in future proceedings. 16. Explanatory note on Commission inspections pursuant to Article 20(4) of Council Regulation No 1/2003, 11 September 2015 available at: http://ec.europa.eu/competition/antitrust/ legislation/explanatory_note.pdf.

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17. Judgment of 27 April 2017 in Case C-469/15 P, FSL Holdings Akzo Nobel N.V. should be liable for Akzo Nobel Chemicals’ NV and others (“FSL”). GmbH and Akzo Nobel Chemicals’ BV direct participation 18. FSL, para. 38. in the infringements and for their respective periods until the creation of Akcros Chemicals which was the successor 19. Judgment of 8 September 2016 in Case T-54/14, Goldfish. of the tin stabiliser and ESBO/esters businesses of the Akzo 20. Explanatory note on Commission inspections pursuant to Group”. Article 20(4) of Council Regulation No 1/2003, 11 September 33. The GC reasoned that Akzo Nobel’s limitation period 2015 available at: http://ec.europa.eu/competition/antitrust/ was not time barred since: (i) the expiry of the limitation legislation/explanatory_note.pdf. period benefits each legal person separately within the 21. Regulation (EU) 2016/679 of the European Parliament and same economic unit when they are subject to Commission of the Council of 27 April 2016 on the protection of natural proceedings; and (ii) the expiry of the limitation period for persons with regard to the processing of personal data and Akzo Nobel’s Subsidiaries did not extinguish the parental on the free movement of such data, and repealing Directive liability, as limitation and liability are separate concepts, see 95/46/EC. GC Akzo Nobel, paras. 125–126. 22. Regulation 1/2003, Article 23(1)(a) and (b). 34. Akzo Nobel, para. 67 and paras. 71–75. 23. Regulation 1/2003, Article 24(1)(d). 35. Opinion of Advocate General Wahl of 21 December 2016 in 24. Judgments of 10 March 2016 in cases C-247/14 P, Heidelberg case C-516/15 P Akzo Nobel (“Akzo Nobel Opinion”), para. Cement; C-248/14 P, Schwenk Zement; C-267/14 P, Buzzi 90. Despite citing the same case law as well as the Advocate Unicem; and C-268/14 P, Italmobiliare “Cement” cases. General’s Opinion itself in paragraph 74 of its judgment, 25. Judgment of 10 March 2016 in cases C-247/14 P, Heidelberg the ECJ diverged from the conclusions made by AG Wahl Cement, para. 19 (“Heidelberg case”). by stating that the fact that the Commission was time barred from fining the Akzo Nobel subsidiaries did not preclude 26. Heidelberg case, para. 24. it from finding the parent liable for the first infringement 27. Heidelberg case, para. 39. period. 28. Judgment of 17 September 2015 in Case C-597/13 P, Total 36. Akzo Nobel Opinion, paras. 58–59. v Commission and Judgment of 22 January 2013 in case 37. Akzo Nobel Opinion, paras. 60–61. C-286/11, Commission v Tomkins. 38. Akzo Nobel Opinion, para. 68. 29. Judgment of 27 April 2017 in Case C-516/15 P, Akzo Nobel NV and others. 39. Akzo Nobel Opinion, para. 69. 30. Commission Decision of 11 November 2009, COMP/38589- 40. Akzo Nobel, para. 74. Heat Stabilisers (“Heat Stabilisers”). 41. Akzo Nobel Opinion, para. 66, in which AG Wahl references 31. Judgment of the General Court of 15 July 2015 in case established case law, in particular judgment of 17 September T-47/10 Akzo Nobel (“GC Akzo Nobel”). 2015 in Case C-597/13 P, Total v Commission and Judgment of 22 January 2013 in case C-286/11, Commission v Tomkins, 32. See GC Akzo Nobel, paras. 121–129, in which the GC failed stating that “…the parent company must, in principle, benefit to explain the reason why this first infringement period had from any reduction in the liability of its subsidiary which had ended, merely stating that it was undisputed that it ended for been imputed to it”; and Akzo Nobel Opinion, para. 88, in these subsidiaries on 28 June 1993, as explained in GC Akzo which AG Wahl explains “The expiry of the limitation period Nobel at para. 121: “It is undisputed that the Commission, cannot have, in relation to one and the same unlawful action, in the contested decision, held Akzo GmbH liable for the an effect limited to the entity that has directly carried out that infringement relating to tin stabilisers and Akzo BV liable action, but must extend to the entities to which liability for the for the infringement relating to the ESBO/esters sector same action is attributed. Where it is no longer possible for only until 28 June 1993”. The GC therefore followed the the Commission to fine an undertaking for particular conduct arguments of the plaintiffs in which they considered that the precisely because of the expiry of the limitation period, the Commission had established that Akzo Nobel’s Subsidiaries removal of that possibility must benefit all the legal entities had ceased to participate in the first infringement period on whose liability in respect of that conduct has been engaged.” 28 June 1993, without an additional explanation. This is difficult to reconcile with the Commission’s understanding 42. Akzo Nobel Opinion, para. 69. that the Akcros subsidiary was the succeeding entity of the tin stabilisers and ESBO/esters business of the Akzo group as stated in the Decision Heat Stabilisers at recital 519: “It is Acknowledgment concluded that Akzo Nobel N.V. constituted one undertaking The authors would like to thank their colleagues Caroline Préel and with the subsidiaries Akzo Nobel Chemicals GmbH and Patricia Sanchez-Calero Barco, both Associates, for their invaluable Akzo Nobel Chemicals BV. On the basis of recital (503), contributions in the preparation of this chapter.

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Elvira Aliende Rodriguez Geert Goeteyn Shearman & Sterling LLP Shearman & Sterling LLP Avenue des Arts 56 Avenue des Arts 56 1000 Brussels 1000 Brussels Belgium Belgium

Tel: +32 2 500 9837 Tel: +32 2 500 9823 Email: [email protected] Email: [email protected] URL: www.shearman.com URL: www.shearman.com

Elvira Aliende Rodriguez is a partner in the firm’s Brussels office Geert Goeteyn, a partner in the firm’s Brussels office, advises on all where her practice focuses on Spanish and EU competition law. areas of EU competition, merger and regulatory law. He is qualified to practise law in Belgium as well as in England and Wales, and holds an Elvira advises clients across a range of sectors, including air transport, LL.M. in European Law. chemicals, telecommunications, energy, pharmaceuticals, steel, hotel accommodation, textiles and financial services. She has extensive Mr. Goeteyn has represented a large number of clients in a wide experience in advising clients on Article 101 TFEU (restrictive variety of industries including agricultural seeds, automotive, aviation, agreements) and the equivalent provisions under Spanish law. She biotechnology, consumer goods, oil, paper, telecommunications and has also participated in state aid procedures and in Article 102 TFEU high-tech. He advises clients on complex antitrust issues including (abuse of dominance) cases before the EU competition authorities. merger remedy cases, cartel-related issues (both in the context of She has in-depth knowledge of working before the European European Commission investigations and private damages actions) Commission and the European courts. and abuse of dominance cases.

As one of the first law firms to establish a presence in key international markets, Shearman & Sterling has led the way in serving clients wherever they do business. This innovative spirit and the experience we have developed over our 140-year history makes us the ‘go-to’ law firm for seamless service. An elite antitrust practice Shearman & Sterling wins antitrust cases and successfully defends multinational companies’ transactions before the US and European antitrust authorities, as well as coordinating the multijurisdictional antitrust defence of transactions and global investigations. We deliver practical and effective solutions to the most challenging antitrust issues and are committed to achieving success for our clients. Consistently recognised as among the leaders in the field, clients come to us for our: ■■ Top quality advocacy to maximise the persuasiveness of a client’s position. ■■ Deep experience with antitrust authorities. Our partners, including several former officials, have the knowledge and experience to facilitate dealings with the key antitrust authorities. ■■ M&A experience. Clients entrust us with their most important transactions to assure maximum chances of swift approval with the minimum of conditions. ■■ Behavioural expertise with a track record in investigations relating to dominant firm conduct, cartels, and cooperation agreements. ■■ Litigation abilities, including in antitrust class action lawsuits and jury trials. ■■ Breadth. Our team consists of over 70 lawyers, including 18 partners, representing over 10 nationalities. We advise on all aspects of US and EU antitrust law and practice, in a wide range of sectors, and in many languages. ■■ Transatlantic and international coverage.

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Individuals as Whistleblowers Ingrid Vandenborre

Skadden, Arps, Slate, Meagher & Flom LLP Thorsten Goetz

and third party complaint procedures, open to competitors and 1. Introduction consumers harmed by anticompetitive practices. Most cartel activities are secretive by nature and thus difficult to We provide below a brief overview of recent developments in uncover. This is why most competition authorities around the world relation to those whistleblowing procedures for individuals in rely heavily on cartel participants to come forward and confess selected jurisdictions. their wrongdoings in exchange for either full immunity from or a reduction of the fines that would otherwise be imposed. 2. European Union Whilst in a number of jurisdictions leniency programmes are open to companies only (e.g., the European Union, Hong Kong, Italy, In March 2017, the European Commission (the “Commission”) Norway), in others, individuals who might otherwise be subject to introduced a new online anonymous whistleblower tool to make it sanctions for their participation in a cartel can apply for leniency easier for individuals to alert the Commission about past, ongoing or independently of their employer (e.g., Belgium, Canada, China, planned cartels and other antitrust infringements while maintaining Germany, Japan, the Netherlands, Portugal, Romania, Spain, the their anonymity. (See http://ec.europa.eu/competition/cartels/ United Kingdom). In some jurisdictions, there is no need for a whistleblower/index.html.) separate leniency application by an individual if the employer has The tool is specifically designed to protect informants’ anonymity applied for leniency, if the application by the company covers all of through an encrypted messaging system that allows two-way its employees (potentially) involved in the conduct (e.g., Germany, communication and the use of an external service provider, SecWay, the United Kingdom). that acts as an intermediary. The tool allows individuals to provide In order to benefit from full immunity, most leniency programmes information to the Commission and gives them the option of asking require that applicants: disclose their identity; are the first to for the Commission to reply to their messages, and allows the come forward to the authority; confess their involvement in a Commission to seek clarifications. The intermediary relays only the cartel; provide the authority with evidence of the cartel conduct content of received messages without forwarding any metadata that allowing the authority, e.g. to conduct on-site inspections or prove could be used to identify the informant. an infringement; put an end to their participation in the cartel; and The tool is designed for informants wishing to remain anonymous, continuously cooperate fully and consistently with the authority whilst individuals willing to reveal their identify can contact the throughout the investigation. Subsequent applicants can benefit Commission through a dedicated phone number and email address, from a reduction of fines if they meet the necessary requirements, and individuals empowered to represent a company involved in e.g., provide information of significant value. a cartel can apply for leniency under the Commission’s leniency However, there are situations where an individual who has inside programme. knowledge or specific information about a cartel, with or without To date, most cartels have been detected through the Commission’s having a direct involvement in the practices, might be reluctant to leniency programme, which allows companies to report their alert competition authorities openly or to disclose his or her identity involvement in a cartel in exchange for immunity from, or a for fear of severe consequences for their career and personal life, reduction of, fines. including potential retaliations from their employer. Because individuals are not subject to sanctions and penalties To alleviate the limitations of existing reporting mechanisms for pursuant to Article 101 of the Treaty on the Functioning of the these individuals, an increasing number of competition authorities, European Union (“TFEU”) and Article 23 and 24 of Regulation including within the EU, have developed anonymous whistleblowing 1/2003, protection under the Commission’s leniency programme tools designed to make it easier for individuals to alert authorities is not open to individual whistleblowers. By introducing the about secret cartels and other antitrust violations while maintaining new whistleblowing tool for individuals, the Commission aims to their anonymity (e.g., Denmark, the European Union, Germany, provide opportunity to individuals who have inside knowledge of Poland, Romania, Spain). the existence or functioning of a cartel or other types of antitrust Some competition authorities have even moved a step further by violations to help the Commission discover and end such practices. offering attractive financial rewards for whistleblowers (e.g., The Commission is hopeful that the new tool will increase the Singapore, Slovak Republic, South Korea, the United Kingdom). likelihood of detection and prosecution and will further deter These new reporting mechanisms for individuals exist alongside companies from entering or remaining in a cartel or carrying the traditional leniency programmes open to cartel participants, out other anticompetitive practices. The tool therefore aims to

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complement and reinforce the effectiveness of the Commission’s if necessary, but the CMA will always prefer to know the identity leniency programme, which remains in place. of the informant from the start. The CMA guidelines provide that There has been no change in legislation as a result of the “at [that] meeting we will need to know your identity as an essential introduction of the new whistleblowing tool. However, in March part of assessing your credibility and the likely reliability of the 2017, the Commission issued a proposal for a Directive of the information you may be able to give us. … People may be tempted European Parliament and of the Council (COM(2017) 142 final) to to give information for all sorts of reasons and it is important that empower the competition authorities of the Member States to be we can explore all of your motivations for approaching us. This is more effective enforcers, and to ensure the proper functioning of the for our protection as well as that of any persons or businesses which internal market. Article 22 of the proposal provides for the protection might otherwise be susceptible to unfounded allegations” (see of current and former employees, and directors of applicants for https://www.gov.uk/government/publications/cartels-informant- immunity from fines against criminal and administrative sanctions, rewards-policy). provided that they cooperate with the authorities. The proposal The informant reward policy further provides that the CMA will stipulates, inter alia, that: “Member States shall ensure that current only use information as intelligence so as to protect the informant’s and former employees and directors of applicants for immunity from identity from disclosure. As such, the informant’s employer should fines to competition authorities are protected from any criminal never know that the informant assisted the CMA. Moreover, the and administrative sanctions and from sanctions imposed in non- Public Interest Disclosure Act 1998 on the Public Concern at Work criminal judicial proceedings for their involvement in the secret provides that an employer cannot dismiss or otherwise penalise an cartel covered by the application, if these employees and directors employee for whistleblowing on illegal activity. actively cooperate with the competition authorities concerned Whilst the reward policy applies to individuals who are not involved and the immunity application predates the start of the criminal in a cartel, individuals who have been directly involved can apply proceedings”. The provision is designed to alleviate the risk that for leniency under the CMA’s leniency programme to avoid personal the information provided by individuals be used against them in sanctions. criminal proceedings. In the UK, cartel activities are illegal under both civil and criminal In addition to the proposed Directive, in May 2017, the law. Under civil law, undertakings may be subject to fines of up Commission’s DG Justice and Consumers consulted a broad range to 10% of their turnover if found guilty of cartel activity. Under of interested parties to gather views on the need for horizontal or criminal law, individuals who engage in cartel activity may commit further sectoral action at EU level to ensure minimum standards an offence and may be imprisoned for up to five years and may be of protection of individuals as whistleblowers against retaliations. given an unlimited fine. Any company directors implicated in cartel The consultation paper defines ‘whistleblowers’ as individuals activities could also be disqualified from acting as a director in the who report or disclose information about acts or omissions which future for up to 15 years. represent a ‘threat or harm to the public interest’, that they may A business which has participated in a cartel may receive total or have come across in the course of their work. (See http://ec.europa. partial immunity from fines if it comes forward with information eu/newsroom/just/item-detail.cfm?item_id=54254.) Whilst the about the cartel, provided certain conditions are met. It may also consultation is now closed, the Commission has yet to issue its be granted immunity from criminal prosecution for any of its conclusions. cooperating current or former employees or directors, and protection from director disqualification proceedings for all of its cooperating 3. United Kingdom directors. An individual who has directly participated in cartel activity may In March 2017, the UK Competition and Markets Authority also apply for leniency, independently of their employer, and obtain (“CMA”) launched its first advertising campaign specifically full immunity from prosecution though a ‘no-action letter’, provided designed to encourage individuals who have information about a that they are the first to report and confess their involvement in the cartel, whether they are directly involved or have witnessed one, to cartel and that they satisfy certain conditions, including admitting report it to the CMA. (See https://stopcartels.campaign.gov.uk/.) taking part in the cartel, not having coerced others, and cooperating To those who are not directly involved, the CMA offers a financial completely and continuously with the CMA throughout the reward of up to £100,000, in exceptional circumstances and at investigation. The CMA may treat the identity of the individual the CMA’s discretion. The CMA also promises whistleblowers immunity applicant as secret where the safety of the individual anonymity. Adverts have appeared in social media feeds such as would be in jeopardy or other serious adverse consequences would Twitter and LinkedIn as well as on key websites. follow if the person’s approach to the CMA were to be disclosed. The financial reward programme was introduced in 2008 by the then The CMA does not consider that an individual in such circumstances Office of Fair Trading (“OFT”) for an initial period of 18 months, but should ordinarily also obtain a financial reward. However, there it was kept in place thereafter and continued by the CMA when it took may be circumstances where the CMA will consider a reward in over the OFT’s competition enforcement functions in April 2014. addition to immunity from sanction under the leniency policy. This In contrast with the EU approach, the CMA does not use an is most likely to be considered where the role of the individual in the online portal that would guarantee absolute anonymity through cartel was relatively peripheral – for example, that of an employee an encrypted messaging system. However, the CMA recognises who was occasionally directed by his superiors to attend a cartel that informants will only be prepared to come forward if there is meeting and who was not asked to take an active part in decision- a guarantee that their identity as a whistleblower will not become making about the cartel. known to third parties. For this reason, the CMA informant reward policy provides that 4. Germany only specially trained officers, typically with a law enforcement background, will deal with the informant and will carefully safeguard In Germany, the Bundeskartellamt introduced an anonymous any information provided to protect the whistleblower’s identity whistleblowing system in 2012 in response to situations where an from disclosure. Conversations can be initiated on a no-name basis

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individual with insider knowledge or specific information about a Both the European Commission and the Danish competition cartel might be reluctant to alert the authorities for fear of reprisals. authority use the same software system provided by external For such cases, the Bundeskartellamt has set up a standardised supplier, SecWay, which offers the opportunity of a two-way online whistleblowing portal that guarantees the anonymity of the communication system whilst ensuring complete anonymity of the informant (see http://www.bundeskartellamt.de/EN/Banoncartels/ informant (see http://www.kfst.dk/konkurrenceforhold/karteller/ kontakt/ and http://secway.info/index.php). Whistle-blower/whistle-blower_node.html and www.business- keeper.com). The information provided cannot be traced back to According to the Danish competition authority, when the the informant as long as the informant does not enter any data that board initiates an investigation based on information reported allows inferences about their identity. This online tool has been anonymously, it does not imply that the case will be investigated on certified by a publicly appointed and sworn expert and is used in a narrower basis than if the board was aware of the identity of the the anti-corruption systems of companies, and police authorities. informant. On the contrary, the board imposes higher demands on Anonymous tip-offs can still be submitted by post or telephone, the value of the information and the level of documentation when provided the name and address, phone number or other indicators of the identity of the informant is not known. the identity of the informant are not discernable. Romania’s Consiliul Concurentei introduced a system of anonymous The Bundeskartellamt reported on its website that the very first tip- whistleblowing for individuals in December 2015. The system protects the informant’s identity and also protects them from any off it received since the launch of the portal led to the investigation alleged breach of confidentiality obligations under employment against and, in 2015, the imposition of a total fine of EUR 75 rules. (See http://www.consiliulconcurentei.ro/ro/despre-noi/ million, on five automotive parts manufacturers. contact/contact-ccr.html.) When it receives an anonymous tip-off, the Bundeskartellamt While aimed primarily at employees of companies involved in cartel makes sure that the information provided is factually accurate, activities who may otherwise be reluctant to come forward for fear sufficiently detailed, accompanied by conclusive factual evidence of retaliation, the authority anticipates that the platform will also be of the infringement, and has been confirmed by further research by used by competitors or trading partners. the authority. The system uses the same external supplier as the European Although the Bundeskartellamt recognises the importance of Commission and Denmark’s competition authority, SecWay. anonymous tip-offs in its fight against cartels, it invites informants Similarly to the EU and Denmark, the tool is specifically designed to to disclose their name and relationship (business or personal) to the protect an informants’ anonymity through an encrypted messaging cartel, stating that such information is usually of higher information system that allows two-way communications and the use of an and evidential value than anonymous tip-offs. external service provider that relays the information between the Individuals who have participated in a cartel may be subject to a fine informant and the authority, ensuring complete anonymity as long of up to €1 million and, under German rules, are invited to apply for as the informant does not disclose any information that would infer leniency, independently of their employers in exchange of immunity their identity. from fines. However, as in the UK, there is no need for a separate In other EU Member States, whistleblower systems for individuals application by an individual if the company has already applied for have been developed, but without encrypted tools that would leniency, because the company’s application will typically cover all guarantee full anonymity of the informants. of its employees involved in the cartel. In 2014, Spain’s Comisión Nacional De Los Mercados Y La To benefit from immunity, the individual will have to be the first to Competencia (“CNMC”) set up a dedicated email address for come forward to the Bundeskartellamt and reveal the existence of individuals to report, informally and confidentially, anticompetitive the cartel. Immunity from fines can also be granted at a later stage, practices (see https://sede.cnmc.gob.es/en/tramites/competencia/ if the Bundeskartellamt is provided with decisive evidence without colaboracion-para-la-deteccion-de-carteles). The identity of the which the existence of a cartel could not have been established. The person who provides the information is not registered unless the sole ringleader of the cartel, and cartel members who coerced others corresponding boxes on the online form are filled in. The tool is to participate in the cartel, however, cannot be granted immunity designed to complement existing procedures, including formal from fines. The fine can be reduced by up to 50% for all other complaints and leniency applications. leniency applicants depending on the value of their contributions to According to a senior official at the CNMC: “Many cartel cases in proving the offence. the last few years have come from workers who were upset with the Leniency applications cannot be submitted anonymously or via the way things were going in the company. … They came (to us) and whistleblowing system. said ‘I’m leaving this company but I want you to know this and this. I want you to have emails’ … We had a couple of cases like that and it was very useful to have them there with the inside information.” 5. Denmark, Spain, Romania, Slovak (American Bar Association on Antitrust Law 2017 Spring Meeting Republic and Poland in Washington, March 2017, as reported by Mlex). In 2014, Slovak Republic’s Protimonopolný úrad (“Antimonopoly Similar online encrypted messaging systems run by an external Office”) introduced a financial reward system for individuals who service provider have been developed in other EU Member States. report information and evidence on cartel activities. (See http:// In 2013, Denmark’s Konkurrence- og Forbrugerstyrelsen developed www.antimon.gov.sk/cartel-informant-reward/.) An individual an anonymous online whistleblower tool on which the European who is the first to provide the authority with significant evidence on cartel activity is entitled to a reward of up to 1% of the fines, Commission tool is modelled. Thorgaard Soerensen, the deputy imposed with a maximum of €100,000. director general of the Danish authority, explained that “around 10 percent of what we get ends up in something that we investigate” If requested by the informant, his or her identity will be protected (American Bar Association on Antitrust Law 2017 Spring Meeting from disclosure. To that effect, the informant is allocated a single in Washington, March 2017, as reported by Mlex). contact person by the authority, and his or her consent is sought explicitly as and when additional employees of the authority are appointed to the case.

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To ensure the protection of the informant, the legislation explicitly liability (in relevant part) where a person knowingly presents a false guarantees that by providing information to the authority, the or fraudulent claim for payment, or knowingly makes or uses a false individual does not breach any confidentiality obligations,e.g. , under record or statement that is material to a false or fraudulent claim. In the governing employment laws. The informant may also withdraw order for the qui tam relator to be successful, there must have been the notification at any point without negative consequences. injury to the government. Direct harm to consumers as a result of Poland’s Office of Competition and Consumer Protection anti-competitive activity may be insufficient for aqui tam suit under (“UOKiK”) launched a pilot whistleblowing programme for the False Claims Act, absent proof of this harm. individuals in April 2017 (see http://konkurencja.uokik.gov.pl/ Regardless of their leniency eligibility, individual whistleblowers in zglos-naruszenie/ and https://www.uokik.gov.pl/news.php?news_ the United States may be protected from an employer’s retaliatory id=13103&news_page=2) for the reporting by individuals of cartel behaviour by state and federal laws. Typically, companies adopt activities and any other types of competition law breach. The anti-retaliation policies across the board in response to federal anti- UOKiK currently uses a hotline and email address, but it is working retaliation statutes and therefore strictly prohibit any retaliatory to introduce a dedicated online encrypted tool which will provide behaviour. However, at the state level, protections are often a fully secure form of communication similar to that used by the provided by state whistleblower statutes or through legal precedent.2 European Commission, Germany, Denmark and Romania. Many states have employee protection statutes that prohibit There have been no legislative changes as a result of this initiative retaliatory behaviour as a matter of public policy, or carve out a 3 but the UOKiK is working on integrating the concept of individuals public policy exception to at-will employment. At the federal level, as whistleblowers into national competition law, and on ensuring the most commonly referenced whistleblower protection law is the whistleblowers’ adequate protection. UOKiK is also working on False Claims Act, which covers whistleblower claims relating to developing a financial incentive scheme. corporate fraud or misconduct that causes the government financial harm. There are also whistleblower protection provisions in the Dodd Frank/Wall Street Reform Act and the Sarbanes-Oxley Act 6. United States which cover whistleblower claims relating to fraud or misconduct in the sale or trading of securities or commodities. Finally, if passed, In the United States, there are a number of programmes and policies the Criminal Antitrust Anti-Retaliation Act of 2017 would create that encourage and protect whistleblowers. The most well-known antitrust-specific federal protection for whistleblowers, further of these is the Department of Justice (“DOJ”) Antitrust Division’s shielding individuals from retaliation by employers.4 Leniency Programme, which offers protection to companies and individuals who have been involved in anticompetitive activities in exchange for early reporting and cooperation with the government. 7. Australia Most applicants that receive leniency through this programme are directly involved in a conspiracy and would not benefit from the The Australian Competition and Consumer Commission’s ability to report anonymously, since the programme offers immunity (“ACCC”) immunity policy for cartel conduct is designed to to those who confess and comply with an investigation. Individuals provide incentives for applicants to disclose cartel conduct by who do not satisfy the criteria for the DOJ’s Leniency Programme making a company or individual eligible for conditional immunity could either report possible violations of antitrust laws to the DOJ’s from ACCC proceedings (but not from private actions) in Antitrust Division or, alternatively, pursue a qui tam action, which specified circumstances. However, under current Australian law, allows a private individual to sue on behalf of the government and individual whistleblowers have only minor protections. Under the collect a reward if the government has been harmed by a company’s Competition and Consumer Act 2010 (“CCA”), informants (who conduct. have knowledge of the conduct but are not directly involved) and complainants (who have some limited knowledge of the conduct The Antitrust Division’s Citizen Complaint Center allows private and wish to report the matter to the ACCC) are protected from individuals to submit concerns and complaints by email, regular intimidation or other coercive conduct they may be subjected to as mail, or phone. The Center asks complainants to fully describe a result of cooperation with the ACCC (Section 162A of the CCA). the nature of the concern and identify the involved companies and potential competitors, the relevant product and geographic Whilst there is a hotline available for parties wishing to apply for market, and the harm caused by the alleged violations. Although or enquire about immunity, it is unclear how individuals fit into the complaint process is not anonymous, the identity of the the current immunity and cooperation system. This fact has been complainants and the information they provide is kept confidential recognised by the ACCC. In his evidence to the Parliamentary Joint by the Department. If the complaint raises sufficient concern Committee on Corporations and Financial Services, in February under Federal laws, additional research is conducted and a formal 2017 – as part of the latter’s inquiry into ‘Whistleblower protections investigation may be opened. in the corporate, public and not-for-profit sectors’ – ACCC chairman Rod Sims noted that the success of ACCC investigations A qui tam statute authorises a private individual to file a legal action, is heavily reliant upon the cooperation of individuals, particularly individually and on behalf of the government, to prosecute third in respect of alleged contraventions which involve coercive or parties that violate their statutory obligations to the government, covert behaviour (see http://www.aph.gov.au/Parliamentary_ and to receive a share of any proceeds recovered. Unlike private Business/Committees/Joint/Corporations_and_Financial_Services/ antitrust actions, individual whistleblowers in qui tam actions WhistleblowerProtections/Submissions [submission 12]). He need not have been a victim of the misconduct giving rise to explained that existing protections would not adequately extend to the litigation. As such, qui tam suits are a potential avenue for circumstances outside of the ACCC’s control which can result from employees, competitors or consumers to report anti-competitive assistance being provided to the ACCC, including, e.g., contractual activity. However, the action must be brought under one of the actions against the individual. According to the ACCC chairman, four federal qui tam statutes: the False Claims Act, the Patent Act, the lack of whistleblower protections under the CCA has led to or one of two Indian Protection laws.1 Generally, qui tam antitrust cases being directly impacted, with witnesses unwilling to provide fraud suits are brought under the False Claims Act, which attaches information (or cooperate fully) with the ACCC due to a range of

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commercial and safety concerns. He proposed that the current law South Korea’s Public Interest Whistleblower Protection Act, which be reformed so as to: came into effect on 30 September 2011, upon which the KFTC ■ increase penalties for intimidation and coercive conduct reward programme is based, provides whistleblowers who report so as to provide sufficient deterrence against intimidating violations of the public interest with protection from retaliatory whistleblowers; and measures by employers. A ‘violation of the public interest’ includes ■ provide a formal third party whistleblower regime in a similar acts that could harm consumer interests and fair competition. manner to the Corporations Act, which provides that a third party whistleblower can be protected from civil or criminal liability, as well as from liability or termination arising from 10. Conclusion enforcement of any other form of right or remedy, such as a contract. Competition authorities around the world are showing It is not yet clear whether a formal third party whistleblower regime resourcefulness in their determination to strengthen their will be implemented in response to these suggestions. enforcement activities by increasingly making it easier for individuals to report cartel activities, or other breach of competition law, anonymously. Should these new reporting mechanisms and 8. Canada financial incentive schemes prove successful over time, businesses should expect an increase in investigations. Canada’s Competition Act contains criminal provisions that prohibit The success of these tools will depend on the quality and reliability anti‑competitive business activities. These include conspiracies of the information supplied. The volume of information that can be that prevent or lessen competition unduly (e.g., price-fixing or supplied via the online tools is rather limited. The EU and Danish market-allocation agreements), bid-rigging, and false or misleading tools, for example, do not allow the uploading of files. Competition representations. There are also civil provisions relating to mergers, authorities have therefore the challenging task of verifying the abuse of dominant position and false or misleading representations. accuracy and good faith of the information received through their A party implicated in criminal anti‑competitive activity which own resources. violates the Act may offer to cooperate with the Bureau and request The success of these tools also supposes adequate and effective immunity. A company may, but does not have to, initiate an protection of informants against retaliations, and a guarantee application on behalf of its employees. Employees may approach of their anonymity. In most jurisdictions, these new reporting the Competition Bureau on their own behalf. (See http://www. mechanisms have been introduced without legislative changes. competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03155.html.) Whilst in some jurisdictions steps are under way to fully integrate The Competition Bureau does not offer monetary incentives to these new whistleblower programmes in the competition legislative whistleblowers who report possible competition law violations. framework, it is not the case everywhere and the interaction between However, the Competition Bureau has an ongoing whistleblowing these tools and the rules on confidentiality under employment law initiative that allows members of the public to provide information remain unclear in a number of jurisdictions. to the bureau regarding possible criminal activities under the It remains to be seen how the success of individual whistleblower Competition Act (see http://www.competitionbureau.gc.ca/eic/site/ tools will impact on the effectiveness of leniency programmes for cb-bc.nsf/eng/04043.html). companies, which typically rely on employees coming forward The Competition Act provides certain protections to in the context of internal investigations and often on the basis of whistleblowers, including protecting the identities of people carefully designed company compliance programmes that may who report competition law offences to the Competition Bureau incentivise employees that are involved in or know of illegal activity and prohibiting employers from dismissing or retaliating against to self-report within the company, often also on an anonymous employees who, acting in good faith and on the basis of reasonable basis. Competition authorities should be mindful to clarify the rules belief, report potential competition law offences. on protection of individual whistleblowers, as well as the interaction between whistleblower programmes for individuals and leniency 9. South Korea programmes for companies.

The Korean Fair Trade Commission (“KFTC”) operates a leniency Endnotes programme for cartels under the Monopoly Regulation and Fair Trade Act (“MRFTA”) which provides immunity from civil fines or 1. Vermont Agency of Natural Resources v. United States ex rel. corrective measures for applicant undertakings. Individuals are not Stevens, 529 U.S.. 765, 768-9 n.1 (2000). subject to civil fines for competition law breaches under the regime 2. For example, in Lewis v. Bay Industries, Inc., 51 F.Supp.3d and hence there is no separate leniency programme for individuals 846 (E.D. Wis. 2014), the court notes that the Wisconsin (see https://uk.practicallaw.thomsonreuters.com/3-500-5604?trans Supreme Court established a narrow public policy exception itionType=Default&contextData=(sc.Default)&firstPage=true&bh to the rule of employment at-will where an employee is cp=1). fired for his refusal to violate a constitutional or statutory provision. The plaintiff asserted that he was wrongfully The KFTC has implemented a reward programme for whistleblowers discharged as a result of asserting that he would testify to encourage people to report anti-competitive practices. The KFTC truthfully about antitrust matters, but failed to offer evidence offers a reward of up to KRW 3 billion for those reporting cartels that he was directed to violate any antitrust statute. See also and issued awards totalling KRW 835 million (approximately US$ Risk v. Allstate Life Ins. Co., 2006 WL 2021597 (N.D. Ok. 711,000) to 54 whistleblowers who provided critical information 2006) (noting that in order to state a claim for wrongful in 2016, with 87.4% of the total amount being paid in relation discharge as a whistleblower, the plaintiff must state that he to cases involving cartel activities (see http://www.mlex.com// was fired for complaining about violations under Oklahoma Attachments/2017-019_4H2D4K827V7ZBI77/KFTC_statement_ law, and reporting violations of IRS and federal treasury Awards_19JAN.PDF). regulations do not implicate the employer in any wrongdoing under Oklahoma law); Blackburn v. United Parcel Service,

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Inc., 3 F.Supp.2d. 504 (D.N.J. 1998) (considering whether where it was unanimously passed by the Senate each time, an employee established a prima facie case of whistleblower but never addressed by the House. The recent legislation has retaliation for reporting alleged antitrust violations under been referred to the Committee on the Judiciary. See Debra New Jersey’s Conscientious Employee Protection Act). S. Katz, The Senate ‘Makes Good’ On Congress’ Antitrust 3. Id. Promises, Law 360 (Aug. 6, 2015), available at: https:// www.law360.com/articles/684611?scroll=1; see also Baker 4. The Criminal Antitrust Anti-Retaliation Act of 2017 Donelson, Antitrust “Whistleblower” Protection Legislation (“CAARA”) is an amendment to the Antitrust Criminal Reintroduced in the Senate, JDSupra (May 5, 2017), Penalty Enhancement and Reform Act (“ACPERA”) which available at: http://www.jdsupra.com/legalnews/antitrust- offers protection to any “employee, contractor, subcontractor, whistleblower-protection-38344/. or agent of an employer” who provides information to the federal government about potential violations of antitrust laws. ACPERA was recently criticised by the GAO for Acknowledgment providing no protections or incentives to innocent third parties who reported criminal cartels and other antitrust violations. The authors wish to thank Tiffany Rider, a Counsel in Skadden Arps’ On April 4, 2017, Sens. Grassley and Leahy re-introduced Washington, D.C. office, for her contribution to the US section of the newest iteration of the legislation. Similar legislation this chapter. had been introduced in both the 114th and 113th Congress,

Ingrid Vandenborre Thorsten C. Goetz Skadden, Arps, Slate, Meagher & Flom LLP Skadden, Arps, Slate, Meagher & Flom LLP 523 Avenue Louise, Box 30 An der Welle 3 1050 Brussels 60322 Frankfurt Belgium Germany

Tel: +32 2 639 0336 Tel: +49 69 74 220 167 Fax: +32 2 641 4036 Fax: +49 69 133 839 167 Email: [email protected] Email: [email protected] URL: www.skadden.com URL: www.skadden.com

Ingrid Vandenborre is the partner in charge of Skadden’s Brussels Thorsten Goetz is a European Counsel in Skadden’s Frankfurt and office. Her practice focuses on EU and international merger control Brussels offices. Prior to joining Skadden, Mr. Goetz worked in the and competition law enforcement. She has consistently been named London office of a leading UK firm. He has wide-ranging experience as a leading practitioner in Who’s Who Legal guides in both competition in European Union and international merger control cases, as well and life sciences and was recognised by Global Competition Review as cartel enforcement and abuse of dominance matters. His clients on various occasions. In 2016, she received the ILO Client Choice are from a broad range of industries, including pharmaceutical/ Award for the category of EU Competition and Antitrust, awarded by life sciences, chemicals, financial services, energy, travel and The International Law Office in recognition of individual partners who telecommunications, among others. Mr. Goetz advises clients on excel across the full spectrum of client service. antitrust aspects of complex cross-border M&A and joint ventures. He has worked on numerous transactions requiring international antitrust Ms. Vandenborre also has successfully assisted companies in merger control approvals both in Europe and worldwide. Mr. Goetz obtaining conditional immunity with the European Commission also advises clients in cartel cases, as well as competition law issues and other competition law agencies in and outside the EU. Recent relating to vertical agreements and dominance. He has represented representations include the immunity and leniency applicants in the clients in Article 101 investigations in relation to cartels, strategic EU power cables and car battery recycling cartel investigations, alliances, distribution arrangements and other vertical agreements, respectively. Ms. Vandenborre also represents companies in as well as in Article 102 investigations, both before the European proceedings before the European General Court against European Commission, the European Courts and national competition Commission findings of cartel infringements, and is involved in the authorities. defence against civil claims arising from these findings.

With approximately 1,700 attorneys in 22 offices on five continents, Skadden serves clients in every major financial centre. For more than 60 years, Skadden has provided legal services to the corporate, industrial, financial and governmental communities around the world in a wide range of high- profile transactions, regulatory matters, and litigation and controversy issues. Our clients range from small, entrepreneurial companies to the largest global corporations. Skadden’s Antitrust and Competition Group is a global leader in its field. Chambers Global: The World’s Leading Lawyers for Business recognises Skadden as one of the top-tier firms in the area of antitrust and competition. Skadden’s European competition law practice advises and represents clients on a wide variety of cutting-edge EU competition law issues, including both conduct cases (abuse of dominance proceedings under Article 102 TFEU and cartel proceedings under Article 101 TFEU), as well as mergers and acquisitions. Our attorneys work closely with in-house counsel to advise on compliance and defend against enforcement actions brought by the European Commission or Member State authorities and, where necessary, represent clients in appeals before the European courts.

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UK Competition Enforcement Outside the EU Single Market

Gowling WLG Bernardine Adkins

The UK competition enforcement system has been closely modelled and for merger control. At the least, provisions allowing the on the EU regime for nearly two decades. This has – intentionally exchange of information in Europe-wide cartel (and merger control) – allowed businesses operating in the UK, a near seamless system investigations will be required. There will also be an ongoing need for competition regulation, regardless of whether ‘jurisdiction’ over to co-ordinate on leniency applications and outcomes (both in civil the merger or behaviour being investigated falls under UK or EU (administrative) and in criminal cases). 1 competition rules. Will this system change and, if so, how far after The likely need for in depth co-operation will, however, vary the UK leaves the EU Single Market? according to the type of proceedings being conducted. We start with an overview of how the UK’s competition authorities Where the European Commission is investigating a Europe-wide have played a leading role in this development of international co- cartel, it will be quite likely that the CMA will need to conduct a operation in competition enforcement and what changes are likely parallel investigation where the UK market is affected. The CMA to be needed after Brexit. Then we consider how European and would have more choice than now as to whether to use its civil global influences might over time lead to changes in emphasis and (administrative) or criminal powers. We will return to this below. enforcement practice in the UK by the Competition and Markets But reaching an outcome which differed markedly from that reached Authority and even to possible changes in UK law. For example, by the European Commission would be unfortunate and leave the State aid to industry is a particular area which has recently emerged CMA procedure open to serious challenge. as a key focus for the European Commission’s competition For vertical agreements and regional cartels, we think it is less likely enforcement effort: will the UK follow this lead?2 that parallel investigations will be needed. However, bundles of ‘Private enforcement’ of competition law has also increased in vertical agreements which restrict trade to and from the UK will importance over the last decade and London is one of the leading not be outside the CMA’s investigation remit simply because the centres in Europe for damages claims for competition infringements. European Commission is also investigating. In particular, the CMA We consider how the UK leaving the EU may affect competition will need to take action against vertical agreements which seek to damages claims in the English courts. discriminate between EU and UK retail markets unjustifiably, by Finally, we highlight some of the possible effects on businesses charging UK consumers higher prices than those available in the based in the UK which could arise from the changes we have EU.4 identified and suggest what (if any) preparation might be helpful. There may also be a need for a CMA investigation if a neighbour national competition authority is investigating a cartel with UK International Convergence and Co-operation effects. And again there will be a need for close working together to avoid inconsistency. The current role of the European Commission in Competition Enforcement to act as a moderator between any two national authorities where differences emerge would disappear.5 Over the last 15 years or so, the importance of effective competition enforcement has been increasingly recognised, not only by advanced In contrast it is unlikely that many abuse of dominance cases will market economies but also more recently with developing countries. need to be investigated in parallel with the European Commission. There has been a corresponding growth in international inter-state There are relatively few dominant positions which extend over the agreements and organisations working on competition policy. whole EU (these appear limited to various internet-related services, etc.). Even in cases where wide-ranging abuse affecting the UK is The CMA currently has close relationships with other competition being investigated by the European Commission, there would be authorities in the EU – primarily (but not only) the European no necessity for the CMA to conduct a parallel investigation unless Commission – through the European Competition Network. The the dominant undertaking is domiciled in the UK.6 In other cases, CMA will not be able to remain a full member of the ECN after the European Commission’s finding will require the abuse to cease. Brexit; the membership is limited to the competition authorities of The decision will be directly binding on the infringer and victims EU Member States and the European Commission, although some should have the option of suing for damages in the UK courts if they form of observer status might be negotiated.3 are affected.7 ■ Cartels and abuse of dominance ■ Merger control The collaborative working between the CMA and its European For merger control, there will also be some change, but its scale is counterparts will need to be carried forward after Brexit for both difficult to predict. UK government industrial policy, which appears behavioural competition work (cartels, abuse of market dominance) set to become more interventionist in the coming years, may imply

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a change in the substantive test which the CMA is required to use to to co-operate with non-EU competition authorities is already assess mergers, perhaps reverting to the pre-2003 ‘public interest’ test. considerable. There are in depth relations between the CMA and But even assuming there is no substantive change to the competition the US Department of Justice and Federal Trade Commission, for based test currently used, there will be changes in jurisdiction and example. Nevertheless, new agreements will be needed between procedure for the largest mergers affecting UK markets. the CMA and competition (anti-trust) authorities in third countries The CMA has estimated that, depending on the economic cycle, outside Europe, especially those where the UK builds closer there may be between 30 and 50 additional merger cases a year trading relationships, where the CMA currently uses the framework which could fall within its jurisdiction after Brexit when the EU provided by EU mediated memoranda of understanding in areas 11 Merger Regulation ceases to cover some mergers affecting the UK.8 such as enforcement co-operation and information exchange. The EUMR’s ‘one-stop-shop’ will no longer apply to these cases The high degree of UK competition co-operation internationally may and there is potential for parallel procedures by the CMA and the even increase post-Brexit. Where (and with whom) will probably European Commission. However, the actual number of mergers depend significantly on the free trade arrangements which the UK requiring serious investigation will be fewer than those which the may be able to negotiate with third countries. ‘Last-generation’ free CMA could investigate.9 This is not least as parties may choose trade agreements, for example, that between the EU and Canada, not to notify the CMA of the merger if there is no real competition contain provisions allowing, and even requiring, close co-operation issue in the UK. National merger notification remains ‘voluntary’ in in competition enforcement matters.12 the UK, although the CMA can intervene for a limited period post- merger, in contrast to mandatory pre-notification under the EUMR. Given the other calls on the CMA’s resources in the period after the Global Anti-trust Policy Development and UK leaves the EU, we believe it is highly unlikely that this position UK Competition Law will change, at least in the short term. Within the current UK legislative framework, the CMA has Clearly, however, after the UK leaves the EU there will be an increase considerable discretion as to how it will carry out its tasks. The CMA in regulatory burden on parties to some larger mergers (those having will continue to influence what might be called ‘global competition an EU dimension) which raise significant competition concerns in policy’ through its work and international interventions, but will a UK market (that is, they may give rise to a significant lessening also be influenced by world policy thinking. of competition in the UK). Notification of these mergers to the CMA, as well as the European Commission, is likely to be prudent, Public competition enforcement thinking has led to the rise in the use even if not mandatory. It is difficult to say how great this increase of criminal law sanctions for competition breaches – an area where in regulation will be, as it may depend on how far the CMA will the UK was a pioneer outside the US and already has substantive be willing to accept a copy of a notification (including supporting legislation – and to the increased use of public competition law documents) to the European Commission also as a notification to rules to control the effects of industrial policy – notably by applying competition analysis to mergers and State aids to industry. The the CMA itself. third main trend, an increased emphasis on private court actions for The likelihood of different outcomes from a CMA and European compensation, is likely to be mainly affected by the UK’s future Commission review of the same merger transaction will depend arrangements for recognising and enforcing judgments with the EU, on the merger test used. If, as at present, the EU test and the UK as we discuss further a little later. test remain broadly aligned, then the risk of divergence should be ■ Criminal law sanctions for competition infringements minimal. However, in ‘national interest’ cases, there is clearly a far greater risk of divergence – a risk which is increased if the national The UK is among the first European jurisdictions to have specific interest categories for prohibiting a merger are expanded by the criminal offences for serious infringement of competition laws. The CMA. We will consider this further in a moment. criminal powers – available since 2003 – are limited to concealed price fixing and market sharing cartels, but do allow individuals Where decisional outcomes diverge – in the most extreme case, organising cartels to be prosecuted rather than leaving all liability to where the CMA prohibits a merger approved by the European the companies for which they work.13 Commission – the CMA may not always be in a position to enforce its prohibition order. For example, where a foreign conglomerate The trend since 2003 has been for more countries to introduce sells a business which includes UK activity to another foreign and enforce criminal sanctions for competition non-compliance. 14 company, it may be difficult to prevent the buyer and the seller from Many EU Member States criminalise bid rigging in tenders or 15 completing their merger outside the UK. In these circumstances, the where fraud can be shown. And some – Denmark in 2013 for 16 UK business may have to be divested subsequently, if an alternative example – have adopted more comprehensive criminal offences buyer can be found, which may itself have a negative effect on UK for competition law breaches. competition. Although EU competition law must be applied in substance in ■ Co-operation outside Europe the same way across the EU, even now, when the UK is still an EU Member State, there is no requirement for convergence of As well as the need to replace the ECN relationship with an enforcement procedure. The main procedural obligation in EU law effective alternative if regulatory burden on UK business is to is simply for national authorities and courts not to prejudice EU be minimised, the CMA will also need to engage with the other investigations being carried out by the European Commission.17 available international organisations10 to develop autonomous Even so, a significant degree of ‘soft convergence’ of procedure has relationships with its peers outside Europe. But Brexit is unlikely taken place over the years, not least through the influence of the ECN. to have a material adverse impact on the UK’s considerable positive There is therefore significant scope for improving the procedural influence on the development of global competition policy. That efficiency of UK competition enforcement after March 2019. influence depends to a significant degree on the quality of the policy In particular, the use of the UK’s criminal enforcement powers arguments made in international fora, and on the CMA’s visible for ‘hardcore’ competition infringements by individuals will no enforcement track record at home. longer need to be so closely co-ordinated with EU administrative Developing new relationships, and improving existing ones, is proceedings. Since the timescales of the two types of case, the unlikely to be politically difficult for the CMA. The UK’s ability subject of them (undertakings for the EU proceedings, usually

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individuals for the UK criminal investigations) and the outcome come in two types: aid to support infrastructure (in a broad sense, may all differ substantially, the potential for conflict at present is so including R&D support); and more targeted aid to individual considerable. companies or local industries. This second type is motivated to After Brexit, clearer legislative provision on how criminal and either attract firms to your country in the first place or sustain them other types of competition enforcement will work together would through difficult periods. be possible. Even if this is not achieved due to the pressure on Both of these types of aid are subject to control by the EU to ensure Parliament’s time, the UK courts will have a broader discretion that Member States do not tilt the European ‘playing field’ in their to use better the established principles for co-ordinating civil and own industries’ favour by using public funds to subsidise them.20 criminal cases. This is likely to mean that the CMA will be able to General aids for infrastructure or R&D are normally viewed more rely to a greater extent than at present on criminal law enforcement. favourably than aid to individual companies. Where individual aid We suggest that it is likely to do so – this would be in line with the is permitted as a short-term measure, the aid will normally have direction of travel of international cartel enforcement, and would to cease promptly after restructuring or other measures have been 21 possibly free up resources within the CMA which would otherwise implemented. need to be devoted to the more cumbersome (for the CMA) It is likely that the EU will insist on State aid rules in any UK-EU administrative decision-making procedure, and is likely to have a free trade agreement (UKFTA). The scope of those rules and their more significant deterrent effect for personnel thinking of engaging enforcement will necessarily depend on the degree of access to the in cartel behaviour. EU single market that the UKFTA gives to UK based business: the ■ Industrial policy and merger control: a ‘public interest’ greater the access, the more stringent the State aid rules will need test? to be. The UK government will look to ensure exact reciprocity of Leaving the EU should give the UK greater leeway to craft an these rules, so that UK business can be sure that EU Member State industrial policy better suited to UK circumstances than the EU’s subsidies are subject to at least the same level of control as UK regional and industrial policy permits. Both merger control and subsidies. State aid to industry may be affected. A minimum set of rules are in Chapter 7 of the EU-Canada free trade 22 In theory, as we noted above, the scope for UK review of takeovers agreement (CETA). This commits the contracting states to good of UK business by non-UK companies may be enhanced if the UK faith inter-state discussion to eliminate the negative effects of state is no longer as closely bound to the EU’s ‘substantial impediment subsidies on the industry of other contracting states. In practice, to effective competition’ test (through its UK statutory equivalent subsidy controls in any UKFTA will probably need to go further ‘substantial lessening of competition’). Additional public interest and are likely to require the introduction of an effective means of criteria for assessing mergers could be introduced to promote domestic enforcement of State aid rules. specific industrial policy goals. The need for and powers of a domestic State aid authority will Nevertheless, in practice, the scope for introducing different tests to depend on the scope of UK State aid rules. Assuming that some the current ‘significant lessening of competition’ yardstick into UK form of enforcement mechanism is required by a UKFTA, an merger control after Brexit appears fairly limited: independent body to (at least) monitor and report on State aids, possibly by way of a registration requirement, in the interests of ■ outside the very narrow exceptions of national security and transparency, will be needed. media plurality, the ‘direction of travel’ for merger control tests internationally over the last two decades has been Even if no UKFTA is put in place on Brexit, the WTO Subsidies and towards using only a competition based test; Countervailing Measures Agreement (SCM) will apply to UK-EU 23 ■ even under the pre-2003 ‘public interest’ test in the Fair trade in the absence of any other agreement. This requires WTO Trading Act 1972, the effect on competition was the only contracting states to ensure that the proper application of subsidies consideration in the vast majority of mergers examined; and countervailing measures permitted under WTO rules is subject 24 ■ any changes to the test may be seen by potential foreign to review by an independent tribunal. The UK government will investors in the UK economy as a protectionist step, which not therefore have a fully free hand to create a subsidy regime on could adversely affect their investment decisions; a large scale for particular sectors or companies without attracting the possibility of WTO-based intervention from our main trading ■ any free trade agreements entered into by the UK are likely to (indirectly) require the use of a competition based merger partners claiming that the subsidies are unfair and wishing to impose control test since they will have significant international countervailing duties on UK experts. investor protection provisions in them, with protection against discrimination, for “nationals” from the contracting states who invest in the other’s economies;18 and England and Wales as a Centre for ■ the statutory definition of the ‘national interest’ criteria – for Competition Claims example, the protection of employment – will be difficult and likely lead to numerous appeals. The impact of Brexit on private competition damages actions in the UK will primarily depend on the broader arrangements for Since amending the UK merger regime would be difficult and jurisdiction and enforcement of civil law judgments applying after internationally controversial, it is unlikely to be a high priority Brexit. If the UK accedes to the 2007 Lugano Convention in this for the legislature. Most industrial policy goals can be achieved area, or indeed manages to reach an agreement to be associated with by using existing powers under the Enterprise Act to investigate the latest EU ‘Brussels Regulation’,25 we believe that the impact of markets as a whole or through specific legislation to address discrete Brexit should be reduced. issues as they arise.19 The continued attractiveness of the UK as a jurisdiction will also ■ State aid to industry: not too much…. depend on continuing to have an expert Competition Appeal In addition to protecting ‘national champions’ from unwanted Tribunal, with wide powers of evidence gathering (disclosure) and takeovers, the other mainstay of a ‘traditional’ industrial policy is flexibility to manage complex competition claims appropriately, the use of public subsidies to support industry. These generally for example in relation to expert economic evidence. The relative

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cost of proceeding in UK courts and the CAT compared with other But the EU will still be able to attack UK tax practices which it countries is also a significant consideration. thinks may breach either the UK’s future FTA commitments or (if At present, perhaps the greatest attraction of proceeding in the CAT there is no FTA) the WTO rules. Court action will probably not be for claimants looking for a place to obtain redress for competition the method used; however, most FTAs and the WTO system require infringements is the ability of the CAT to make a ‘collective disputes to be put to binding arbitration. The possibility that UK proceedings order’ creating a UK class action.26 This procedure tax breaks and subsidies might be struck down is therefore still a allows a representative to bring a collective claim on behalf of all real one and UK business will need to be cautious before accepting those affected. Depending on the type of order made by the CAT, direct industrial assistance under the UK’s new strategy whereby this can include all of those harmed by the competition infringement compliance with the State aid rules must be factored into the subsidy in the UK who do not actively ‘opt out’ of the case. This procedure, scheme. How an adverse finding in a subsidy arbitration will impact allied with a well developed UK litigation funding regime and the business receiving the ‘unfair’ subsidy will need to be dealt with competitive funding terms, is likely to ensure the continued in future UK legislation. It is likely, however, that repayment of the attractiveness of UK competition dispute resolution into the future. subsidy will be required. Little change in purely domestic legislation is therefore needed The use and transfer of information between competition authorities in this area. However, there will probably be express legislative in the UK and the EU (and third countries) after Brexit will depend provision that decisions of non-UK competition authorities may on the agreements the UK reaches on trade and on data protection. It be used as evidence in the CAT or courts and, where the cases are is in most businesses’ interests to consent to authorities exchanging similar, the CAT is likely to accept a (final) European Commission evidence in a merger situation: not doing so may lead to the decision without the need for a claimant or defendant to re-prove the merger approval being delayed or even denied. However, for other content of the decision. This will ensure that redress is available for competition enforcement cases, information exchange is likely to all infringements affecting UK businesses – even where the CMA become a major issue. So, for example, where a business applies has not reached a decision itself on whether competition law has for leniency to one national competition authority that application been infringed. is normally confidential and cannot be passed to another authority without legislative permission. Without international agreement to transfer confidential information between competition authorities in What is the Impact for Business? different countries (and the ECN regime provides for this in some circumstances), it cannot happen without consent of the relevant party. Should business consider reviewing its trading practices and Businesses should therefore bear competition law enforcement in mind compliance procedures? when reviewing their information management and disclosure policies. Answering this question clearly depends on a number of currently The introduction of the EU ‘general data protection’ Regulation ‘known unknown’ outcomes to the ‘Brexit’ negotiations and, of from May 201828 and the associated UK legislation currently before course, the sector in which the business is active. Parliament,29 will require review in these areas in any event. Ensuring However, given the possible direction of travel of UK competition the appropriate treatment and storage of data relating to competition enforcement policy after Brexit: increased criminal sanctions for compliance should be factored into this planning. competition law; increased focus on State aid policy arising from a Finally, is there any need to review agreements for competition law more active UK industrial policy; and the decoupling of the CMA compliance after Brexit? Again, this will depend on the business’s from the ECN leading to possible changes to the flow of business activities, competitive position and whether it has substantial trade information between competition authorities – some preparatory with the ‘remaining’ EU, as well as on the eventual terms on which action may need to be considered now. the UK eventually exits the EU. One area where care might be Preventing individuals working for a business from engaging in needed is in justifying any price increases to customers – consumers criminal cartel practices is probably only sensibly addressed through particularly – which arise as a result of increased UK trade costs training and compliance. As it is unlikely that the legislation after Brexit. Differential pricing between neighbouring EU states relating to cartel crimes will be amended in the near future – it and the UK is likely to attract the attention of the CMA, and is the likelihood of investigation which might increase – existing businesses should ensure that they can properly explain (on cost competition training programmes should be adequate but may need grounds) any price differences to avoid a suggestion of unlawful to be repeated. In particular, procedures for dealing with CMA resale price discrimination. ‘dawn raids’ may need to be reviewed if the information collected is to be used more often as evidence in a criminal investigation. Summary The impact of industrial policy changes and State aid compliance will depend significantly on the exposure of business to the public To summarise, major ‘cliff edge’ change in competition enforcement sector. Those businesses which are heavily reliant on public in March 2019 is unlikely. There may well be changes in priorities sector customers may be more at risk of challenge in relation to for the UK CMA as it adapts to not being part of the EU ‘family’ of alleged infringements of State aid rules in the UK’s new free trade competition authorities, and it may also acquire new responsibilities arrangements (with the EU or third country) by those customers in – notably in the area of State aid compliance. There are some their procurement decisions. preparatory steps which business might sensibly take now – as noted The recent use of EU State aid rules by the European Commission above – but some of them (data retention policies, for example) to challenge national tax practices, for example, advance tax rulings should be prompted in any case by non-competition changes in the and other ‘sweetheart’ deals, is also an area which will not disappear overall regulatory regime. entirely from the UK landscape after Brexit. The European In the medium to longer term, it is possible that the UK’s Commission has been taking action in the CJEU against States competition enforcement system may move more to resemble that which have granted these kinds of aid requiring the subsidy to be of Australia, Canada and even the US, with greater emphasis on recovered from the recipients.27 private enforcement of competition rules and on criminal sanctions. But these changes will not happen overnight on 20 March 2019.

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12. EU-Canada Comprehensive Economic and Free Trade Endnotes Agreement, Chapter 17 (http://www.international.gc.ca/ trade-commerce/trade-agreements-accords-commerciaux/ 1. S. 60 Competition Act 1998 requires UK behavioural agr-acc/ceta-aecg/text-texte/17.aspx?lang=eng). competition law to be applied as far as possible consistently with EU competition law. 13. Enterprise Act 2002 ss. 188-190. 2. For example, in cases SA 38944 Luxembourg: aid to Amazon 14. See, for example, German Criminal Code, section 298; (tax base reduction); SA 38373 Ireland: and aid to Apple (tax Austrian Criminal Code, section 168b; Italian Criminal Code, base reduction). Article 353; Polish Penal Code (Act of 6 June 1997), Article 305. 3. Commission Notice – network of competition authorities [2004] OJEU C101/3, para. 1; CMA written response the 15. French Commercial Code, Article L420-6; Greek Law House of Lords EU Internal Market sub-Committee inquiry 3959/2011, Article 44. into competition law, 15 September 2017, at http://data. 16. The Danish Competition Act (Consolidation Act No. 700 of parliament.uk/writtenevidence/committeeevidence.svc/ 18 June 2013), section 22(3). evidencedocument/eu-internal-market-subcommittee/brexit- 17. Regulation (EC) 1/2003 [2003] OJEU L1/1, Art 11(6). competition/written/69571.html. 18. As in the EU Canada FTA, (n 12). 4. See decision of the Swiss Federal Supreme Court, case 2C- 19. The acquisition of HBOS by Lloyds Bank required the 180/2014, 28 June 2016: clauses in contracts restricting addition of financial stability to the public interest exceptions ‘grey’ trade between EU and Switzerland infringe Swiss for merger control permitted under the Enterprise Act 2002: competition laws by object. SI 2008/2645. 5. Regulation (EC) 1/2003 [2003] OJEU L1/1, Art 11(1) and 20. Treaty on the Functioning of the EU, Art. 107. (5). 21. For example, in April 2017, the European Commission put 6. We assume that EU Commission infringement decisions the UK government on notice of an investigation into failure will not in future apply to breaches of competition law by by RBS to divest in accordance with the conditions attached UK domiciled undertakings unless they have participated in to the Commission approval for aid during the financial crisis: behaviour having an appreciable effect on competition in the case SA 47702 (letter of 4 April 2017 at http://ec.europa.eu/ EU (so, excluding the UK after March 2019): see Art 101(1) competition/state_aid/cases/269022/269022_1889564_8_2. TFEU. pdf). 7. Unless European Commission infringement findings become 22. N 12. wholly inadmissible as evidence as a matter of law in the UK, which we think is highly unlikely. 23. At https://docs.wto.org/dol2fe/Pages/FE_Browse/FE_B_009. aspx?TopLevel=8093#/. 8. CMA submission to House of Lords EU sub-committee (n 3), para. 31. 24. Ibid Art 23. 9. Ibid para. 34. 25. Regulation 1215/12: the Lugano Convention is at [2009] OJEU L147/5; the Regulation is at [2012] OJEU L351/1. 10. In particular the International Competition Network (http:// www.internationalcompetitionnetwork.org/) and the OECD 26. Competition Act 1998, s. 47B. competition committee (http://www.oecd.org/competition/). 27. For example, against Apple and Amazon, n 2. 11. For example, the EU has agreements with the US on anti- 28. Regulation (EU) 2016/679 [2016] OJEU L119/1. trust co-operation and enforcement; [1995] OJEU L95/47and 29. Data Protection Bill HL Bill 66, introduced 13 September Council and Commission decision 98/386, [1998] OJEU 2017. 173/26.

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Bernardine Adkins Gowling WLG 4 More London Riverside London SE1 2AU United Kingdom

Tel: +44 370 733 0649 Email: [email protected] URL: www.gowlingwlg.com

Partner, Bernardine Adkins is head of EU, trade and competition at international law firm Gowling WLG. Bernardine is utterly client-focused and brings technical cutting edge advice to every matter, with a proven ability to keep sight of the ‘bigger picture’. A graduate of the College of Europe, Bruges, Bernardine has a wealth of over 25 years’ EU, trade and competition law experience, providing clients with strategic advice before the European Commission and the Competition and Markets Authority (formerly, the Office of Fair Trading and the Competition Commission). Bernardine has a strong reputation as an innovative competition litigator, advising on some of the most high-profile and complex cases in the Competition Appeal Tribunal, the High Court and the Court of Appeal. Consistently recognised as a ‘leading individual’ by legal directories, she is described in Chambers as a ‘heavyweight antitrust specialist’. Bernardine is a member of Gowling’s Brexit Unit which comprises a cross-disciplinary team of lawyers who monitor and advise as to the impact of Brexit for clients. Visit Gowling WLG’s Brexit Untangled hub – your essential Brexit resource.

Gowling WLG is an international law firm created by the combination of Gowlings, a leading Canadian law firm, and Wragge Lawrence Graham & Co (WLG), a leading UK-based international law firm. With more than 1,400 legal professionals in 18 cities across the UK, Canada, Continental Europe, the Middle East and Asia, Gowling WLG provides clients with top-tier legal advice at home and abroad in a range of areas. Our clients have access to in-depth expertise and experience in key global sectors including advanced manufacturing, energy, financial services, infrastructure, life sciences, natural resources, real estate and tech. We see the world through our clients’ eyes, and collaborate across countries, offices, service areas and sectors to help them succeed, no matter how challenging the circumstances. Our culture is, above all, about people and teams, based on our belief in the power of relationships in delivering tangible business results.

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Australia Sharon Henrick

King & Wood Mallesons Wayne Leach

The CCA also contains two civil prohibitions on price signalling. 1 The Legislative Framework of the Cartel They currently only apply to the banking sector. The prohibitions Prohibition provide that: ■ a corporation must not make private disclosures to 1.1 What is the legal basis and general nature of the competitors of pricing information if the disclosure is not in cartel prohibition, e.g. is it civil and/or criminal? the ordinary course of business; and ■ a corporation must not make disclosures about prices, Cartel conduct (as defined by Part IV of the Competition and capacity or strategy for the purpose of substantially lessening competition in a market. Consumer Act 2010 (Cth) (CCA)) may result in civil or criminal consequences. The Australian Federal Government is proposing to repeal the prohibitions on price signalling and replace them with a civil prohibition on concerted practices and to simplify the legislation 1.2 What are the specific substantive provisions for the that defines and prohibits cartel provisions. On 30 March 2017, the cartel prohibition? proposed amending legislation was introduced for the first time to the Australian Parliament, and is expected to take effect in late 2017, The CCA prohibits corporations and persons making and/or giving subject to any changes and its passage through both houses of the effect to a contract, arrangement or understanding that contains a Australian Parliament. cartel provision, or attempting to do so. A cartel provision is defined as a provision of a contract, arrangement or understanding between actual or potential competitors that have 1.3 Who enforces the cartel prohibition? either: ■ the purpose, effect or likely effect of fixing, controlling or The Australian Competition and Consumer Commission (ACCC) maintaining a price, or component of a price, of goods or is responsible for investigating cartel conduct, managing services supplied or acquired by the actual or potential applications for immunity and leniency, prosecuting breaches competitors; or of the civil prohibitions and referring serious cartel conduct to ■ the purpose of: the Commonwealth Director of Public Prosecutions (CDPP) for ■ preventing, restricting or limiting production, capacity consideration for criminal prosecution. The ACCC and CDPP can or supply of goods or services by the actual or potential initiate proceedings in the Federal Court for breach of the civil competitors; prohibitions on cartel conduct. Civil proceedings are commenced ■ allocating actual or potential customers, suppliers or before a single Judge of the Federal Court, and do not involve a trial territories of the potential or actual competitors; or by jury. ■ bid-rigging by the actual or potential competitors. The ACCC cannot initiate criminal prosecutions. The CDPP is responsible for initiating criminal prosecutions. The CDPP must The civil and criminal prohibitions have a common sub-set of initiate criminal prosecutions in the Federal Court. The prosecutions elements. involve a trial by jury. In addition, to demonstrate that an individual employee or officer The CDPP has commenced one criminal prosecution (in July 2016) of a corporation was knowingly involved in a civil breach by for cartel conduct since the CCA was amended in 2009 to include the corporation, or to demonstrate that the criminal prohibitions criminal offences for cartel conduct. It involved an admission of guilt have been breached by a corporation, it is necessary to show two by NYK, a global shipping company, in respect of cartel conduct additional elements. The two additional elements are: for the transportation of vehicles, including cars, trucks and buses, ■ an intention to make or give effect to the contract, arrangement to Australia between July 2009 and September 2012. In August or understanding; and 2017, the Federal Court convicted NYK and ordered it to pay A$25 ■ knowledge or belief that the contract, arrangement or million in penalties, the second highest penalty ever obtained by understanding contains a cartel provision (as defined). the ACCC. The penalty reflected the serious and prolonged nature Different standards of proof apply to the criminal and civil of the offence, the fact that the offending conduct was engaged in prohibitions. The standard of proof for civil prohibitions is “on by senior managers and sanctioned by senior executives, and the the balance of probabilities”. The standard of proof for criminal profit NYK derived from its cartel conduct. It also took into account offences is “beyond reasonable doubt”.

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mitigating factors including NYK’s early guilty plea, the fact that ■ for conduct which is the subject of a collective bargaining NYK did not have a prior record of corporate criminal conduct, notice accepted by the ACCC; the penalties already imposed on NYK in other jurisdictions, the ■ where the only parties are related bodies corporate; measures NYK undertook to rehabilitate itself, and NYK’s past and ■ where the conduct is for the purposes of a production and/or future cooperation with the ACCC. The case did not involve the supply joint venture (under the current proposed amendments prosecution of any individual employees or officers of NYK. to Australia’s competition laws, it is proposed to widen NYK has been found guilty of criminal violations in the US for the this exemption to include conduct for the purposes of an same conduct (with one of its executives extradited from Japan to acquisition joint venture); the US and sentenced to 15 months in prison). ■ for collective acquisitions of goods or services where the cartel provision relates to the price at which the goods or In November 2016, the CDPP laid charges against another alleged services will be collectively acquired, or where the cartel Australia participant in the cartel, K-Line, also a Japanese shipping company. provision relates to the joint advertising of the price at which The ACCC’s investigation is continuing. goods or services collectively acquired will be re-supplied; Ultimately, the Federal Court determines whether there has been a ■ anti-overlap exemptions where the conduct constitutes resale breach of the civil or criminal prohibitions on cartel conduct and the price maintenance or a maximum vertical price or exclusive penalty for the breach. dealing or directly provides for the acquisition of shares or assets; ■ for certain covenants in respect of real property; 1.4 What are the basic procedural steps between the opening of an investigation and the imposition of ■ for certain conduct that relates to dual listed companies; sanctions? ■ for conduct which is specifically authorised by State, Territory or Commonwealth legislation; The ACCC may commence an investigation either on its own ■ for the Crown in the right of the States, Territories or initiative or following a complaint or immunity application. Most Commonwealth while they are not carrying on business investigations for cartel conduct are said to be commenced as a (under proposed amendments to Australia’s competition laws, result of a whistle-blower providing information to the ACCC it is proposed to narrow this exemption so that it is limited to during an application for immunity or leniency. conduct on the Crown outside of trade or commerce); ■ for restraints in contracts for the sale and purchase of a The ACCC’s policy is to commence all investigations into potential business where the sole purpose of the restraint is to protect cartel conduct to the criminal standard. goodwill acquired by the purchaser; The ACCC has extensive evidence-gathering powers (see section 2). ■ for acts done in relation to the remuneration, conditions Where conduct appears to involve serious cartel conduct, the ACCC of employment, hours of work or working conditions of will refer it to the CDPP for consideration for criminal prosecution. employees; Serious cartel conduct is conduct that can cause large-scale or serious ■ for provisions of certain contracts of service which impose economic harm. In assessing whether conduct can cause large-scale restrictions; or serious economic harm, the ACCC will consider whether: ■ for provisions obliging a person to comply with standards ■ the conduct was long-standing or had, or could have, a of dimension, design, quality or performance prepared by significant impact on the market; Standards Australia; ■ the conduct caused or could cause significant detriment to the ■ for certain provisions between partners in an unincorporated public or customers; partnership; and ■ any of the participants have previously participated in cartel ■ for certain provisions that relate to the export of goods from conduct; Australia, or the supply of services outside Australia which have been notified to the ACCC. ■ the value of the affected commerce exceeded or would exceed A$1 million a year; and ■ in the case of bid rigging, the value of the bid(s) exceeded 1.6 Is cartel conduct outside your jurisdiction covered by A$1 million within a year. the prohibition? On referral from the ACCC, the CDPP will decide whether to commence a criminal prosecution. Yes, the CCA applies to cartel conduct outside of Australia where the person who engaged in the conduct is: If the ACCC decides not to refer cartel conduct to the CDPP or the CDPP advises that a criminal prosecution will not be commenced, ■ an Australian corporation; the ACCC may decide to commence civil proceedings in the ■ a foreign corporation carrying on business in Australia; Federal Court seeking civil pecuniary penalties and other orders ■ an Australian citizen; or (see section 3). ■ a person ordinarily resident in Australia. Concurrent civil proceedings would usually be stayed where a Three recent cases examining whether foreign companies are criminal prosecution is commenced. “carrying on business” in Australia demonstrate that the CCA can have a broad extraterritorial ambit, even when the cartel conduct 1.5 Are there any sector-specific offences or exemptions? occurs outside Australia. In the Prysmian case in 2016, the Federal Court found that one There are no sector-specific exemptions, although there are some company, Nexans SA, was carrying on business in Australia by general exemptions, including: providing services (including administrative services and research ■ for conduct which is authorised by the ACCC based on public and development) to its Australian subsidiary. The other company, benefits; Prysmian, admitted that it was a registered foreign company and that it was carrying on business in Australia at the relevant time.

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The second case, ACCC v Yazaki Corporation (No 2) [2015] FCA Investigatory Power Civil/Administrative Criminal 1304, involved collusive conduct in relation to the supply of wire ■ Right to require harnesses to Toyota in Australia. Notwithstanding that much of an explanation Yes* Yes* the conduct occurred in Japan, the Court found that Yazaki, the of documents or parent company, was subject to the CCA as it carried on business information supplied in Australia. Yazaki’s Australian subsidiary was not party to ■ Right to secure premises overnight Yes* Yes* proceedings. Yazaki was found to have carried on business in (e.g. by seal) Australia because of: the degree of direction and control it exercised over the supply of wire harnesses to Toyota Australia; its Please Note: * indicates that the investigatory measure requires responsibility for the global tender to Toyota, which determined the authorisation by a court or another body independent of the

Australia level of quotations that its Australian subsidiary could provide; and competition authority. its role in approving price down reductions to Australia submitted to it by its Australian subsidiary. 2.2 Please list specific or unusual features of the The most recent case is Air New Zealand Ltd v ACCC; PT Garuda investigatory powers referred to in the summary table. Indonesia Ltd v ACCC [2017] HCA 21, which involved two airlines being parties to understandings that amounted to price fixing. The The ACCC cannot use its investigatory powers to override legal understandings related to the surcharges and fees for cargo carrying professional privilege. services from ports in Hong Kong, Singapore and Indonesia to ports in Australia. One of the issues on appeal was whether that conduct occurred in a market in Australia, such that it fell within 2.3 Are there general surveillance powers (e.g. bugging)? the jurisdiction of the Trade Practices Act 1974 (Cth) (TPA) (the predecessor to the CCA). The ACCC can obtain warrants for telephone interception and The High Court of Australia upheld the majority decision of the Full surveillance, but only for the purposes of investigating possible Court of the Federal Court of Australia that the price fixing occurred criminal cartel conduct. in a market in Australia, notwithstanding that the market may also have encompassed Hong Kong, Singapore and Indonesia. The 2.4 Are there any other significant powers of airlines’ services were destined for ports in Australia in response investigation? to demand generated in Australia. The airlines marketed their services to Australian shippers, and ‘tousled’ to obtain orders from The ACCC is party to a number of cooperation agreements with Australian customers. The Court found the substitutability of goods international competition and consumer agencies and governments and services is the driver of competitive rivalry which the TPA (now (including those in Canada, China, Chinese Taipei, the European Union, the CCA) looks to when identifying a market, not the circumstances Fiji, India, Japan, New Zealand, Papua New Guinea, the Philippines, of substitution itself. That is, the place where the act of substitution the Republic of Korea, the United Kingdom and the United States) occurs does not necessarily locate the geographical area of rivalry. providing for, among other things, the exchange of information and Therefore, while the decision to switch between freight distribution documents relating to investigations of international cartels. services may have occurred in foreign jurisdictions, the interplay of the forces of supply and demand encompassed Australia (and, 2.5 Who will carry out searches of business and/or therefore, the market was held to be in Australia). residential premises and will they wait for legal advisors to arrive? 2 Investigative Powers The ACCC has responsibility for conducting searches of business and/or residential premises and may request the assistance of the 2.1 Summary of general investigatory powers. Australian Federal Police. The ACCC will usually be accompanied by its forensic experts, which may be a third party contracted to Table of General Investigatory Powers assist the ACCC. The ACCC is not obliged to wait for legal advisors to arrive before commencing a search. The ACCC is not required to Investigatory Power Civil/Administrative Criminal give advance notice of its intention to conduct a search and would Order the production not usually do so. of specific documents Yes Yes or information Carry out compulsory 2.6 Is in-house legal advice protected by the rules of interviews with Yes Yes privilege? individuals Carry out an unannounced search Yes* Yes* The CCA expressly prohibits the ACCC from procuring production of business premises of documents that would disclose information that is subject to a Carry out an claim for legal professional privilege. unannounced Yes* Yes* Legal professional privilege only applies to in-house advice to the search of residential premises extent that, at the time in-house counsel gave the advice, they were ■ Right to ‘image’ acting in their legal capacity (and not in some other capacity, such computer hard drives as company secretary) and were sufficiently independent from their Yes* Yes* using forensic IT employer to be giving independent legal advice. tools ■ Right to retain Yes* Yes* original documents

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Directors and executives cannot be indemnified for their defence 2.7 Please list other material limitations of the investigatory costs or any civil pecuniary penalty or fine by either their employer powers to safeguard the rights of defence of companies or an insurer. If found guilty of a cartel offence (civil or criminal), and/or individuals under investigation. individuals may also be excluded from managing Australian companies. A person is not excused from giving answers to questions or providing documents or information to the ACCC during the investigatory process on the basis that doing so will incriminate 3.3 Can fines be reduced on the basis of ‘financial them and expose them to a penalty. However, any self-incriminating hardship’ or ‘inability to pay’ grounds? If so, by how material is not admissible in any evidence against them in criminal much? proceedings. In imposing a penalty, the Federal Court will consider the financial Australia position of the defendant as well as a range of other factors. 2.8 Are there sanctions for the obstruction of investigations? If so, have these ever been used? Has the authorities’ approach to this changed, e.g. 3.4 What are the applicable limitation periods? become stricter, recently? There is no limitation period for criminal offences but the criminal A person is liable for a fine up to a maximum of A$4,200 or prohibitions on cartel conduct only commenced on 24 July 2009 imprisonment for 12 months if they: without retrospective effect. ■ refuse or fail to comply with a statutory notice if they are capable of complying with it; or For civil pecuniary penalties, actions must be brought within six years of the contravention. ■ knowingly provide information or give evidence to the ACCC that is false or misleading. These sanctions have been used in the past, demonstrating the 3.5 Can a company pay the legal costs and/or financial importance the ACCC places on strict compliance with its statutory penalties imposed on a former or current employee? notices to compel the production of documents and information and oral evidence. Previous penalties on individuals have included A company can indemnify its officers and employees for legal costs a fine of A$3,500 (ACCC v Boyle), a fine of A$2,160 along with incurred during an investigation by the ACCC and for legal costs 200 hours of community service (ACCC v Neville), 200 hours of of successfully defending proceedings commenced by the ACCC. community service (ACCC v Davies) and imprisonment for six However, a company cannot indemnify its officers for civil months (ACCC v Rana). pecuniary penalties or criminal fines or the costs of defending the Under the proposed amending legislation to the CCA, which proceedings that resulted in the penalty or the fine. The indemnity is currently before Parliament, the maximum penalty for non- would result in a criminal offence. compliance with a statutory notice will be increased to match the It is less clear whether a company can indemnify its employees for the penalties for breaches of similar notice-based investigative powers costs of defending proceedings that result in civil penalties or fines. under the Australian Securities and Investments Commission Act 2001 (Cth). Those penalties are currently a maximum of A$21,000 A company can enter into a loan agreement with its officers and and/or imprisonment for two years (for an individual). employees for the costs of defending proceedings which provides that the loan must be repaid in the event of a finding of guilt.

3 Sanctions on Companies and Individuals 3.6 Can an implicated employee be held liable by his/her employer for the legal costs and/or financial penalties 3.1 What are the sanctions for companies? imposed on the employer?

The Federal Court can impose civil pecuniary penalties or criminal In theory, a company may have an action against an officer or fines on a corporation for each breach up to the greater of: employee in negligence or for breach of their contractual obligations to the company in relation to cartel conduct, although, depending on ■ A$10 million; the loss suffered by the employer and the financial position of the ■ three times the value of the benefit from the conduct; and officer or employee, only limited practical benefit may result from ■ if the benefit cannot be ascertained, 10% of the corporate pursuing such action. group’s annual turnover attributable to Australia in the previous year. The CCA does not provide an employer with the ability to hold an employee liable for legal costs and/or financial penalties imposed Corporations may be required to disgorge the proceeds of their on the employer. crime.

3.2 What are the sanctions for individuals (e.g. criminal 4 Leniency for Companies sanctions, director disqualification)?

4.1 Is there a leniency programme for companies? If so, Individuals who are knowingly involved in a breach of the civil please provide brief details. prohibitions on cartel conduct can be liable for civil pecuniary penalties of up to A$500,000 per breach. Yes, there are immunity and leniency programmes for companies. Individuals who are knowingly involved in a breach of the criminal These are contained in the 2014 Immunity and Co-operation Policy prohibitions on cartel conduct can be liable for imprisonment for for Cartel Conduct (Policy). up to 10 years, a criminal record and/or fines of up to A$420,000 per breach.

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Immunity programme Similarly, the CDPP may revoke immunity if the ACCC recommends All applications for civil and criminal immunity must be made to that the CDPP do so and the CDPP agrees with that recommendation the ACCC. or the CDPP believes, on reasonable grounds, that the applicant has provided false or misleading information or not fulfilled the Under the Policy, a company will be eligible for, and may be conditions of its undertaking. granted, conditional civil immunity where: Leniency programme ■ it is or was a party to a cartel; ■ it admits that its conduct in respect of the cartel may constitute The Policy provides that civil leniency for applicants who are a contravention of the CCA; ineligible for immunity will be considered where the applicant: ■ it is the first person to apply for immunity in respect of the ■ has approached the ACCC in a timely manner seeking leniency;

Australia cartel; ■ it has not coerced others to participate in the cartel; ■ has either ceased their involvement in the cartel or indicates to the ACCC that they will do so; ■ it has ceased its involvement in the cartel or indicates to the ACCC that it will do so; ■ has not coerced any other person/corporation to participate in the cartel; ■ its admissions are a truly corporate act (as opposed to isolated confessions of individual representatives); ■ acts in good faith in its dealings with the ACCC; ■ it undertakes to provide full disclosure and cooperation to the ■ provides significant evidence regarding the cartel conduct; ACCC; and ■ provides full, frank and truthful disclosure, and cooperates ■ at the time of the immunity application, the ACCC has fully and expeditiously on a continuing basis through the ACCC’s investigation and any ensuing court proceedings; not received legal advice that it has sufficient evidence to and/or commence proceedings in relation to a contravention of the CCA arising from the cartel conduct. ■ (for an individual leniency applicant) agrees not to use the same legal representation as the corporation which employs The company must also provide ongoing full disclosure and them. cooperation to the ACCC for conditional civil immunity to remain eligible for final civil immunity. If leniency is offered, the ACCC’s practice is to agree to make a recommendation to the court regarding the reduction in civil If the applicant meets the immunity criteria, the ACCC will grant sanctions, and the Policy provides that, in determining that final civil immunity after the resolution of any proceedings against reduction, the ACCC will consider: cartel participants (or, at its discretion, at an earlier stage). ■ the nature and extent of cooperation with the ACCC; The Policy implicitly contemplates that a leader of a cartel may ■ whether the contravention arose out of the conduct of senior receive immunity. management, or at a lower level; The Policy provides that the ACCC will, “as a matter of course” (but ■ whether the corporation has a corporate culture conducive to subject to its discretion), require applicants for immunity or leniency compliance with the law; to grant the ACCC a confidentiality waiver to facilitate the exchange ■ the nature and extent of the contravening conduct; of information regarding international cartel investigations with ■ whether the conduct has ceased; foreign competition regulators. ■ the amount of loss or damage caused; The ACCC may recommend to the CDPP that it grant criminal ■ the circumstances in which the conduct took place; immunity. The Policy provides that the CDPP may grant applicants for criminal immunity a ‘letter of comfort’ at the same time the ■ the size and power of the corporation; and ACCC offers conditional civil immunity. ■ whether the contravention was deliberate and the period over which it extended. The CDPP must independently decide whether to grant criminal immunity by applying the same criteria outlined in the Policy (set Criminal leniency will be considered by the CDPP in accordance out above). If the CDPP grants criminal immunity, it will provide a with its Prosecution Policy, having regard to any recommendation written undertaking to the applicant that, subject to fulfilment of the made by the ACCC. Although the CDPP will acknowledge the applicant’s ongoing obligations, the applicant will not be prosecuted cooperation of a defendant subject to leniency, the sanctions for the relevant cartel offence. The conditions for immunity will imposed will ultimately be determined by the court. include that the applicant provide ongoing full cooperation during In August 2017, the ACCC announced a review of its immunity and the investigation, and for individuals, that they will appear as a cooperation policy, which will focus on maximising the benefits and witness for the prosecution where requested in any proceedings incentives for parties to provide full and continuing co-operation against the other cartel participants and will give evidence truthfully, in its investigations and enforcement cases. The outcome of this accurately and not withhold anything of relevance. review is yet to be announced. If a company qualifies for conditional civil immunity, all current and former directors, officers and employees of the company who 4.2 Is there a ‘marker’ system and, if so, what is required admit their involvement in the cartel and provide full disclosure and to obtain a marker? cooperation to the ACCC will be eligible for civil immunity. Similarly, if a company is granted conditional criminal immunity, Yes. A person who intends to make an immunity application can all current and former directors, officers and employees who request request a marker from the ACCC. To obtain a marker, the person immunity, admit their involvement in the conduct and undertake to must provide a description of the cartel conduct in sufficient detail provide full disclosure and cooperation will be eligible for criminal to allow the ACCC to confirm that no other person has applied immunity. for immunity or obtained a marker for the same conduct and the ACCC has not received legal advice that it has sufficient evidence The ACCC may revoke the grant of conditional or final civil to commence proceedings in relation to the cartel. The person does immunity if it decides, on reasonable grounds, that the applicant not have to satisfy all the requirements for conditional immunity at does not or did not satisfy the conditions for immunity. the time of the request for a marker.

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The ACCC will inform the person if a marker is available. If a As noted in question 4.1 above, the ACCC also has a separate marker is available, the ACCC and the person will discuss the time ‘leniency policy’, whereby if a person is ineligible for immunity required by the person to complete their internal investigation and because they are not first-in-line but cooperates with the ACCC’s provide the ACCC with the information required to satisfy the cartel investigation, the ACCC may recommend to the court a requirements for conditional immunity. Generally, a marker will be reduced penalty in civil proceedings and recommend to the CDPP a valid for a maximum of 28 days. reduced fine or sentence in criminal matters. Holding a marker means that no other cartel participant can take Under the ‘amnesty plus’ policy, if the person also reports a second the person’s place in the immunity queue while the marker is valid. cartel that is independent and unrelated to the first cartel, and that person is granted conditional immunity in relation to the second cartel, then the person may seek amnesty plus for the first cartel.

4.3 Can applications be made orally (to minimise any Australia subsequent disclosure risks in the context of civil If amnesty plus is granted, the ACCC will recommend to the court damages follow-on litigation)? that any penalty in civil proceedings, and recommend to the CDPP that any fine or sentence in criminal matters, be further reduced in Yes. Applications can be made orally, but the ACCC will create its relation to the first cartel. own records of all requests for markers, applications for immunity, The criteria for immunity and leniency stated above will apply to a discussions between the ACCC and the applicant about the conduct, party seeking amnesty plus. and the applicant’s responses to the ACCC’s questions. Immunity is not available as a form of leniency for parties seeking amnesty plus. 4.4 To what extent will a leniency application be treated confidentially and for how long? To what extent will documents provided by leniency applicants be 5 Whistle-blowing Procedures for disclosed to private litigants? Individuals

Information provided by immunity applicants may be used by the 5.1 Are there procedures for individuals to report cartel ACCC in civil proceedings and may be shared with the CDPP conduct independently of their employer? If so, for criminal prosecutions. However, the ACCC will not use the please specify. information received in support of an immunity application as evidence in proceedings against the applicant in respect of the cartel, Yes. Individuals can report cartel conduct independently of their unless the immunity is subsequently revoked because the applicant employer under the ACCC’s immunity policy. The conditions civil failed to comply with the requirements for immunity. immunity for an individual are the same as those for a corporation, Immunity applicants may request anonymity and may ask the subject to two differences: ACCC to treat information as confidential (or as protected cartel ■ as opposed to being a party to a cartel, the individual must be information). The ACCC’s immunity policy provides that it will use a director, officer or employee of a corporation that is or was its best endeavours to protect any confidential information provided a party to a cartel; and by immunity applicants. ■ the individual’s application for immunity need not be a truly Section 157B of the CCA provides that the ACCC is not required corporate act. to produce a document containing “protected cartel information” or disclose “protected cartel information” to a court (e.g. in follow-on actions commenced by private litigants) except with the leave of the 6 Plea Bargaining Arrangements court. Protected cartel information is information that was given to the ACCC in confidence and relates to a breach of the prohibitions 6.1 Are there any early resolution, settlement or plea on cartel conduct. In deciding whether to grant leave, the court must bargaining procedures (other than leniency)? Has have regard to a list of factors specified in section 157B. the competition authorities’ approach to settlements changed in recent years? In follow-on actions, private litigants may seek orders requiring the leniency applicant(s) to provide copies of any documents provided to the ACCC (including witness statements, etc.). Private litigants Australian Courts determine the penalties for breaches of the will also likely be able to gain access to any documents that have prohibitions on cartel conduct. been filed by the ACCC in the Federal Court. As set out in section 4 above, the ACCC and applicants for immunity or leniency may make joint submissions to the court, including as to the appropriate penalty. While the ACCC and applicants may seek 4.5 At what point does the ‘continuous cooperation’ to adopt a joint approach on a range of issues (see section 4 above), requirement cease to apply? the ultimate decision on penalties rests with the court. The continuous cooperation requirement continues throughout the The ACCC has stated that a person will not be allowed to seek to ACCC’s investigation and any ensuing court proceedings. ‘trade off’ a possible criminal prosecution with a civil settlement. This means that the ACCC will not engage in discussions with parties under investigation as to possible resolution of civil 4.6 Is there a ‘leniency plus’ or ‘penalty plus’ policy? proceedings until it has formed a view about the seriousness of the conduct and either decided not to refer the matter to the CDPP for Yes, the ACCC has a ‘leniency plus’ or ‘penalty plus’ which is consideration for criminal prosecution or received advice from the referred to as the ‘amnesty plus’ policy. CDPP that a criminal prosecution should not be commenced.

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submissions filed by the ACCC and defendants will typically only 7 Appeal Process be binding on the prosecution in which they are made and may not be binding in any follow on action for civil damages. 7.1 What is the appeal process? The ACCC has stated that it supports companies bringing stand alone legal proceedings, including by means of litigation funding Decisions of the Federal Court may be appealed to the Full Court of arrangements, as well as follow on actions. However, the ACCC has the Federal Court. been cautious in emphasising that it will respect the confidentiality of information provided during investigations under the ‘protected cartel information’ regime, as discussed above in question 4.4. 7.2 Does an appeal suspend a company’s requirement to pay the fine? Australia 8.2 Do your procedural rules allow for class-action or The hearing to determine the liability is separate to the hearing to representative claims? determine the penalty. Typically, an appeal on liability is made before the penalty hearing. That is, the penalty hearing typically Yes. Part IVA of the Federal Court of Australia Act 1976 (Cth) occurs after all appeals on liability have finished. Therefore, in sets out the requirements for the commencement and conduct of practice, penalties tend not to be determined until all appeals as to proceedings, and provides that: liability have been exhausted. The recent Flight Centre case is an ■ at least seven persons must have claims against the same exception to this (see question 9.1 for further details). person or persons; Once a penalty is imposed, an appeal would not have the effect of ■ the claims must arise out of the same, similar or related suspending the requirement to pay the penalty. In such cases, the circumstances; and person or company who is ordered to pay the penalty may (and ■ the claims of all of those persons must give rise to at least one typically does) seek a court order to stay the penalty until the appeal common issue of law or fact. is heard. Proceedings may be commenced by a single party and then converted to a representative proceeding after commencement, provided these 7.3 Does the appeal process allow for the cross- criteria are met. The Australian regime is technically an ‘opt-out’ examination of witnesses? system and there is a presumption that litigation will continue on a representative basis unless the respondent establishes that it would No. The appeal process does not allow for cross-examination of be inappropriate for claims to be pursued in this way. witnesses. Any cross-examination of witnesses would have occurred Under section 87(1B) of the CCA, the ACCC also has the power in the initial Federal Court proceedings. The appeal process is limited to bring representative proceedings on behalf of persons who to points of law. Findings of fact cannot, generally, be appealed. have suffered, or are likely to suffer, loss or damage by conduct in contravention of the competition provisions of the CCA or an applicable industry code. However, the ACCC has yet to initiate 8 Damages Actions a representative proceeding seeking compensation for those who suffered loss or damage as a result of a contravention of the CCA’s competition provisions. 8.1 What are the procedures for civil damages actions for loss suffered as a result of cartel conduct? Is the position different (e.g. easier) for ‘follow-on’ actions 8.3 What are the applicable limitation periods? as opposed to ‘stand alone’ actions? The limitation period is six years from the day on which the cause of Any person who has suffered loss or damage caused by a action relating to the conduct accrues. contravention of the prohibitions against cartel conduct in the CCA has standing to bring a claim for damages in the Federal Court against a party involved in the contravention. Damages may be 8.4 Does the law recognise a “passing on” defence in civil damages claims? sought from the person who engaged in the contravening conduct, or any other person involved in the contravention. Australian courts are yet to have determined the availability, The CCA may assist persons seeking to recover damages to prove or otherwise, of a passing on defence in private competition their case for ‘follow on’ actions. In particular, section 83 of the CCA enforcement actions. Any such defence could operate to reduce the provides that a finding of any fact by a court made in proceedings in quantum of damages, but could not operate as a defence to breach of which the person has been found to contravene a provision of Part the cartel provisions of the CCA. IV of the CCA is prima facie evidence of that fact and the finding may be proved by production of a document under the seal of the court in which the finding was made. Under the proposed changes to 8.5 What are the cost rules for civil damages follow-on the CCA (expected to be passed in late 2017), section 83 would be claims in cartel cases? extended so that admissions of facts made by a person are also prima facie evidence of that fact if the admission is made in proceedings, In Australia, the usual rule is that ‘costs follow the event’. That and the admission may be proved by production of a document from is, the unsuccessful party will be required to pay the costs of the which the admission appears that is filed in the court (as well as successful party. proved production of a document under the seal of the court). In representative proceedings, costs orders can only be made against However, there are some limits on the application of section 83. the group member who commenced the proceedings pursuant to For instance, facts derived from agreed statements of facts or joint section 43(1A) of the FCCA.

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supply cables around the world, was brought into jurisdiction 8.6 Have there been any successful follow-on or stand by the CCA’s application to corporations carrying on business alone civil damages claims for cartel conduct? If there Australia. have not been many cases decided in court, have ■ The jurisdiction of the CCA was further confirmed by the there been any substantial out of court settlements? High Court in June 2017, when the Court found that Air New Zealand and Garuda had engaged in price fixing conduct There have yet to be any private actions that have continued to the that took place in a market in Australia, notwithstanding award of damages in Australia. However, several cases have been that the conduct had occurred in Hong Kong, Singapore and settled for substantial amounts. For instance: Indonesia. See question 1.6 for further details. ■ in June 2014, the Federal Court approved the settlement of a ■ In April 2016, the ACCC secured an A$18 million penalty class action against a number of international airlines relating against Colgate-Palmolive Pty Ltd for its role in an output Australia to their involvement in the air cargo cartel for A$38 million; restriction cartel involving laundry detergents. The penalty ■ in September 2011, the Federal Court approved the settlement is the third largest ordered by an Australian court for breach of the cartel laws. One of the cartel participants, Unilever, of a class action against chemical manufacturers Bayer and obtained immunity, while a retailer of the laundry detergents Chemtura for A$1.5 million, with each paying A$750,000; was found guilty of being knowingly concerned in the ■ in May 2011, the Federal Court approved the settlement of a cartel and was ordered to pay A$9 million in penalties as class action against cardboard box manufacturers, Amcor and an accessory to the cartel. The third participant, Cussons, Visy, for A$95 million, with Amcor paying A$63.3 million contested the allegations in the Federal Court and is awaiting and Visy paying A$31.7 million; and judgment. ■ in October 2006, a class action involving vitamin ■ In December 2016, the ACCC successfully appealed to the manufacturers was settled for A$30.5 million following civil High Court of Australia to overturn the Full Federal Court’s proceedings brought by the ACCC. decision as to whether Flight Centre (a travel agency) was ‘in competition’ with airlines that sold airfares directly to consumers. The High Court found that the relevant market 9 Miscellaneous was for the supply of contractual rights to international air carriage (i.e. a market for international airline tickets), and that Flight Centre competed with the airlines in this market, 9.1 Please provide brief details of significant recent or notwithstanding that it supplied in this market as an agent for imminent statutory or other developments in the field each airline. Consequently, the High Court found that Flight of cartels, leniency and/or cartel damages claims. Centre breached the CCA by ‘attempting to induce’ airlines to enter into arrangements aimed at ensuring that airfares Cartel conduct is an enduring priority under the ACCC’s Compliance sold by airlines directly to consumers would not be below the and Enforcement Policy. prices offered by Flight Centre. The High Court returned the case to the Full Federal Court to determine a penalty. There have been a number of recent, notable developments relating to the ACCC’s cartel enforcement efforts: The Competition and Consumer Amendment (Competition Policy Review) Bill 2017, currently before Parliament, is aimed at ■ In August 2017, the Federal Court clarified to some extent how civil pecuniary penalties may be calculated, including in simplifying and narrowing the cartel laws through the following respect of multiple contraventions of the CCA. In Australian amendments: Building and Construction Commissioner v Construction, ■ the application of the cartel provisions will be expressly Forestry, Mining and Energy Union [2017] FCAFC 113 at confined to cartel conduct affecting competition in Australia, 148-149, the Court stated that it is not required “to impose or between Australia and other places; a single penalty in respect of multiple contraventions of a ■ the burden of proof for the joint venture exceptions will pecuniary penalty provision”. In appropriate cases involving require the defendant to prove the elements of the relevant multiple contraventions, “the Court should consider whether exception on the balance of probabilities; the multiple contraventions arose from a course or separate ■ the prohibition on exclusionary provisions will be removed, courses of conduct” but is not required to impose a single and the cartel provisions will be broadened to include penalty in respect of each course of conduct. Further, restrictions on acquisitions of goods or services; “the Court should, after fixing separate penalties for the contraventions, consider whether the aggregate penalty is ■ the joint venture exceptions will be broadened to apply to excessive”. Finally, “in an appropriate case, however, the agreements or understandings (in addition to contracts), and Court may impose a single penalty for multiple contraventions to joint ventures for the acquisition of goods and services (in whether that course is agreed or accepted as appropriate by addition to the production or supply of goods and services); the parties” (but the Court is not compelled to accept such a and proposal and should only do so if appropriate). ■ the joint venture exceptions will also be amended so that ■ In July 2016, Australia’s first criminal prosecution for they only apply to cartel provisions for the purposes of, and cartel conduct occurred when a Japanese global shipping reasonably necessary for, undertaking the joint venture, company (NYK) pleaded guilty to the criminal offence. In and to joint ventures that are not carried on for the purpose August 2017, NYK was ordered to pay A$25 million in of substantially lessening competition (which potentially penalties. The ACCC’s investigations may lead to the CDPP narrows the scope of the exception). filing further criminal charges against other companies and The Competition and Consumer Amendment (Competition Policy potentially individuals involved in the cartel. Review) Bill 2017 is expected to take effect in late 2017. ■ In July 2016, the ACCC’s power to enforce Australia’s cartel laws in respect of arrangements made outside Australia was 9.2 Please mention any other issues of particular interest confirmed by the Federal Court. The Court found that an in your jurisdiction not covered by the above. Italian corporation (Prysmian Cavi E Sistemi S.R.L) engaged in bid rigging in relation to the supply of high voltage cables in Australia. The cartel, which involved agreements between In July 2016, Australia saw its first criminal prosecution (against Japanese and European cable manufacturers affecting bids to NYK) under the criminal cartel prohibitions introduced in 2009, the

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A$25 million fine imposed on NYK in August 2017 incorporated conduct (with one of its executives already extradited from Japan to a global discount of 50% for NYK’s early plea of guilty, its past the United States and sentenced to 15 months in prison). and future assistance and cooperation, and the contrition inherently As such, there is an open question as to whether the introduction of demonstrated by this early plea and cooperation. The Federal Court criminal sanctions delivers the significantly greater deterrence than noted that but for NYK’s early plea and past and future cooperation, existed under the civil regime. The ACCC has publicly stated that its the fine would have been A$50 million. Of the 50% discount applied, “criminal cartel machine is now built, and running at its appropriate 10% related specifically to future cooperation. These factors meant capacity”. If the ACCC’s investigation into the NYK cartel leads to the that NYK was not exposed to any greater financial penalties that CDPP filing criminal charges against other companies and individuals existed under the civil regime, and none of NYK’s executives involved in the cartel, it will be interesting from a practitioner’s were sentenced to jail in Australia. Australia’s prosecution was in perspective, to see how any admissions associated with NYK’s guilty Australia circumstances where a foreign-based company has already been plea may be used as evidence against other cartel participants. found guilty of criminal violations in the United States for the same

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Sharon Henrick Wayne Leach King & Wood Mallesons King & Wood Mallesons Level 61, Governor Phillip Tower Level 61, Governor Phillip Tower 1 Farrer Place 1 Farrer Place Sydney NSW 2000 Sydney NSW 2000 Australia Australia

Tel: +61 2 9296 2294 Tel: +61 2 9296 2327 Fax: +61 2 9296 3700 Fax: +61 2 9296 3700 Email: [email protected] Email: [email protected] URL: www.kwm.com URL: www.kwm.com

As the Head of KWM’s Australian highly awarded Competition Law and Wayne Leach is a partner in the Competition Law & Regulatory Group Australia Regulatory Group, Sharon advises clients on large-scale commercial at King & Wood Mallesons in Sydney, Australia. transactions and investigations with a competition law application in Wayne regularly advises large corporations in relation to competition law Australia or the Asia-Pacific Region. issues associated with mergers, joint ventures, industry collaborations, Sharon’s experience includes working closely with clients in relation to access to essential infrastructure, cartel investigations and other market a range of competition agencies, including the Australian Competition conduct issues. and Consumer Commission, the National Competition Council, the Wayne represents clients in a wide range of industries, including the coal, New Zealand Commerce Commission, the Competition Commission gas/LNG, financial services, export infrastructure, telecommunications, of Singapore, the Malaysian Competition Commission, the Japan agricultural, FMC, education and aviation sectors. Fair Trade Commission and the Korea Fair Trade Commission. She has been instrumental in building KWM’s leading Competition Law Wayne is recognised on the Who’s Who Legal website and the Global capability in Hong Kong and has spent time living in Beijing and Competition Review 2015 as being “amongst the world’s leading working with our market leading Competition Law Team in the People’s competition lawyers”. He is also recognised in Chambers, IFLR, Asia Republic of China. Pacific Legal 500, Doyles and in AFR Best Lawyers (Competition and Regulatory). Sharon works with clients across a number of sectors, including those with leading positions in infrastructure (including port-related infrastructure and oil and gas infrastructure), mining, energy, manufacturing, aviation, health (including agricultural chemicals and pharmaceuticals, financial services, food and beverages, technology and media). Sharon is ranked as an elite practitioner by Global Competition Law Review and listed as a leader in numerous directories, including the Asia Pacific Legal 500 and IFLR and as a “Best Lawyer” by The Australian Financial Review. Sharon is listed as one of the world’s top 100 advisors by Deal Makers; one of the world’s top 500 lawyers by the Intercontinental Finance Magazine; has won Global Competition Law Review’s Merger Control Matter of the Year – Asia-Pacific, Middle East and Africa; Euromoney’s Women in Business Law Award for Competition – Australia and Lawyer Monthly’s Competition/Antitrust Lawyer of the Year – Australia. In 2016, Sharon was the exclusive winner of Lexis Nexis’ Client Choice Awards for Antitrust/Competition Law in Australia and was listed as one of 100 elite women in competition law by Global Competition Review. As well as being ranked as Tier 1 by Chambers & Partners, the team Sharon leads is described as “exceptional” by Global Competition Law Review and rated as Australia’s top competition team by various publications, including Lawyers’ World Magazine and the Intercontinental Finance Magazine.

Recognised as one of the world’s most innovative law firms, King & Wood Mallesons offers a different perspective to commercial thinking and the client experience. With access to a global platform and a team of over 2,000 lawyers in 26 locations around the world, we work with clients to help them understand local challenges, navigate through regional complexity, and find commercial solutions that deliver a competitive advantage for our clients. As a leading international law firm headquartered in Asia, we help clients to open doors and unlock opportunities as they look to Asian markets to unleash their full potential. Combining an unrivalled depth of expertise and breadth of relationships in our core markets, we are connecting Asia to the world, and the world to Asia. We take a partnership approach in working with clients, focusing not just on what they want, but how they want it. Always pushing the boundaries of what can be achieved, we are reshaping the legal market and challenging our clients to think differently about what a law firm can be.

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Austria Mag. Dieter Hauck

Preslmayr Rechtsanwälte OG Marco Werner

as their object or effect the prevention, restriction or distortion 1 The Legislative Framework of the Cartel of competition (i.e. cartels). Sec. 1 para. 2 of the Cartel Act Prohibition states typical cases which restrict competition, such as (i) price fixing, (ii) limitation or control of production, markets, technical development or investment, (iii) share markets or sources of supply, 1.1 What is the legal basis and general nature of the cartel prohibition, e.g. is it civil and/or criminal? (iv) application of dissimilar conditions to equivalent transactions with other trading parties, and (v) conclusion of contracts subject to acceptance of supplementary obligations by other parties which The legal basis for Cartel Prohibition in Austria is the Cartel Act have no connection with the subject of such contracts. Sec. 1 para. (Kartellgesetz 2005), as amended. 3 of the Cartel Act declares agreements or decisions violating the Sec. 1 paras. 1 to 3 of the Cartel Act correspond to Art. 101 paras. Cartel Prohibition to be void. 1 and 2 of the Treaty on the Functioning of the European Union Sec. 1 para. 4 of the Cartel Act prohibits so-called “recommendation (TFEU). Sec. 2 para. 1 of the Cartel Act corresponds to Art. cartels” (Empfehlungskartelle), which are unilateral practices 101 para. 3 TFEU. Furthermore, the Austria-specific de minimis providing recommendations such as the usage of fixed prices. exception in Sec. 2 para. 2 widely corresponds to the “De minimis However, there is an explicit exemption for such recommendations, if Notice” of the European Commission. Accordingly, cartel they are explicitly marked as non-binding and for the implementation agreements of competing undertakings with an aggregate market of which neither economic nor social pressure is applied. share not exceeding 10 per cent of the market share or of non- competing undertakings not exceeding 15 per cent of the market share on any of the relevant markets affected by the agreement, are 1.3 Who enforces the cartel prohibition? exempted from the cartel ban, unless the agreement in question aims to fix prices, limit production or sale or share markets. Please note, The Higher Court of Vienna as the Cartel Court (Kartellgericht) however, that, for example, the notion of the cumulative foreclosure and in second instance the Supreme Court as the Higher Cartel effect has not been included into the Cartel Act. Court (Kartellobergericht), are the competent courts to decide on violations of the Cartel Act or other antitrust regulations. Sec. 3 of the Cartel Act empowers the Minister of Justice to issue ordinances to except certain groups of cartels of the Cartel The Cartel Court does not decide ex officio. The Federal Competition Prohibition. Those ordinances can refer to the ordinances issued Authority (FCA), the Federal Cartel Prosecutor (FCP), regulators according to Art. 101 para. 3 TFEU. As Austria is an EU Member of certain economic branches, the Chamber of Commerce, the State, the Council Regulation 1/2003 allows the authorities to Chamber of Labour, the Presidential Conference of the Austrian enforce the Cartel Prohibition under Art. 101 TFEU. Chamber of Agriculture and any other undertaking or association of undertakings with legal or economic interest in a decision can file The Cartel Prohibition under the Cartel Act is addressed to petitions to the Cartel Court. entrepreneurs (companies and individuals); sanctions for infringements are not regarded strictu sensu as criminal law. The FCA is Austria’s independent investigating authority and However, regarding the specific area of tendering procedures, therefore files most of the petitions. The FCP represents the public Sec. 168b of the Austrian Criminal Code (Strafgesetzbuch) still interest in competition matters and is accountable to the Minister of provides for up to three years’ imprisonment (“bid-rigging”). Very Justice. The FCA and the FCP together are referred to as “Official Parties” in the law and in the Cartel Court’s proceedings. Only these few convictions on that basis have occurred so far. Further, cartel Official Parties may move to the Court for fines to be imposed or a collusion, in particular “bid-rigging”, could also be prosecuted merger to be prohibited; these and the other bodies may move to as serious fraud, carrying a maximum sentence of 10 years’ petition to stop infringements or to establish the existence of (past) imprisonment. infringements under certain circumstances.

1.2 What are the specific substantive provisions for the cartel prohibition? 1.4 What are the basic procedural steps between the opening of an investigation and the imposition of sanctions? Sec. 1 of the Cartel Act prohibits – with wording very close to Art. 101 TFEU – agreements between entrepreneurs, decisions by The opening of an investigation is usually conducted by the FCA, associations of undertakings and concerted practices which have Austria’s investigating authority. The FCA has been quite active

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recently and opened investigations in various industries, including Investigatory Power Civil/Administrative Criminal retailers for food and electronic appliances. In many cases the FCA ■ Right to require started the investigations by unannounced on-site inspections (“dawn an explanation Partly applicable, see Yes* raids”). The FCA – or any of the other authorised parties – can file a of documents or question 1.1 petition to the Cartel Court. This petition can aim towards a decision information supplied ■ Right to secure for fines (if filed by the FCA or the FCP) or towards the determination Partly applicable, see premises overnight Yes* of an infringement or a judicial order to cease an infringement. The question 1.1 (e.g. by seal) Cartel Court then conducts the proceedings and files a judicial order or dismisses the petition. Against this decision, parties may appeal to Please Note: * indicates that the investigatory measure requires the Supreme Court acting as the Higher Cartel Court. the authorisation by a court or another body independent of the Austria competition authority. 1.5 Are there any sector-specific offences or exemptions? 2.2 Please list specific or unusual features of the Sec. 2 para. 2 of the Cartel Act lists sector-specific exemptions from investigatory powers referred to in the summary table. the cartel ban. Exempted from the cartel ban are: 1) agreements with retailers of books, art prints, music, journals and newspapers, The right of the parties to object to the access or seizure of documents fixing the retail price and further agreements necessary for a wide- is limited. Such is possible only if recognised confidentiality spread and non-discriminatory distribution of newspapers and obligations and rights to refuse to give evidence according to Sec. journals; 2) certain restrictions of competition among members of 157 para. 1 no. 2–5 Criminal Procedure Act (Strafprozessordnung) cooperative societies as well as between cooperative societies and could be violated. These are the right of attorneys in law, notaries or their members; and 3) certain agreements, decisions and attitudes medical specialists such as psychiatrists or psychologists to refuse between producers of agricultural products or their interest groups. to testify. Further, the person claiming a violation of the right to refuse to 1.6 Is cartel conduct outside your jurisdiction covered by give evidence must concretely identify each specific document the prohibition? concerned. If this is not possible (e.g. because it would unreasonably delay the search), the person may identify respective categories of The Austrian Courts decide on violations of the Cartel Act with documents which will then be separately stored by the FCA in a an impact on the Austrian market irrespective of whether the way to protect it from any unauthorised inspection. Following this, infringement against the cartel ban was conducted in Austria or within a period set by the FCA and not shorter than two weeks, the abroad. person concerned may identify the specific documents. The definition of the relevant market is not limited to the Austrian In addition, during a house search, the FCA has the right to territory. The relevant market may also be defined as European or request from all employees and representatives of the undertaking even worldwide, thus including the Austrian market. This is of great concerned, information on all documents and matters connected to importance regarding the abuse of a market-dominant position as the subject matter of the investigation. well as in merger control. In respect of “dawn raids”, the Austrian Supreme Court ruled that if a company or individual voluntarily allows the FCA to conduct inspections, e.g. not demanding any “search warrant”, and only 2 Investigative Powers on that basis tolerates the search as imposed by law, it will not be protected under the Cartel Act provisions because a “voluntary 2.1 Summary of general investigatory powers. inspection” (freiwillige Nachschau) does not affect the legally protected positions of those searched (16 Ok 7/11 et al.). Table of General Investigatory Powers 2.3 Are there general surveillance powers (e.g. bugging)? Investigatory Power Civil/Administrative Criminal Order the production Partly applicable, see of specific documents Yes Surveillance powers are only foreseen for violations of criminal question 1.1 or information offences. The Austrian Cartel Act contains no criminal law Carry out compulsory provisions. Apart from violations of Sec. 168b of the Austrian Partly applicable, see interviews with Yes question 1.1 Criminal Code (“bid-rigging”), which qualifies certain competition individuals violations regarding tendering procedures as criminal offences, Carry out an Partly applicable, see and Sec. 146 et seq. of the Austrian Criminal Code (fraud, serious unannounced search Yes* question 1.1 of business premises fraud), there are no competition-related infringements legitimising Carry out an surveillance powers. unannounced Partly applicable, see Yes* search of residential question 1.1 premises 2.4 Are there any other significant powers of investigation? ■ Right to ‘image’ computer hard drives Partly applicable, see Yes* using forensic IT question 1.1 The FCA is empowered to examine potential restraints on tools competition on a case-by-case basis and undertake general ■ Right to retain Partly applicable, see Yes* examinations of entire business sectors if impediment of competition original documents question 1.1 is suspected. During its investigations, the FCA may also call upon and question companies or individuals and examine relevant business documentation. According to a Supreme Court’s decision

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(16 Ok 7/11 et al.), the investigation of the FCA is not limited to information relating to the requirements of a specific cartel law 2.8 Are there sanctions for the obstruction of offence but may also include legal and economic information investigations? If so, have these ever been used? Has the authorities’ approach to this changed, e.g. relevant to the evaluation of the alleged infringement. The become stricter, recently? investigatory powers of the FCA are not hierarchical – that is, an information request by the FCA is not a prerequisite for conducting The FCA can – without an order by the Cartel Court – by way a house search. Rather, these two investigation instruments are independent from each other, such that the possibility to receive of a respective decision, order an undertaking or an association documents by way of an information request does not preclude the of undertakings to present documents – including such stored on FCA from obtaining an (extended) search warrant. Further, upon off-site servers but normally accessible from the searched site, Austria accidentally discovered documents, it is up to the FCA to decide provide information and copy files for further investigations. In whether it should request a new search warrant for a new proceeding case of disobedience of such an order, the FCA can impose penalty or an extension of the current search warrant (16 Ok 1/13). payments at the maximum of 5 per cent of the average daily turnover of the undertaking or the association of undertakings in the last The Cartel Court’s permission is needed to allow the FCA to carry business year for each day of delay with the ordered measures. In out dawn raids. case the information provided is incorrect, incomplete, misleading There exists also the possibility to conduct “competition monitoring” or was not provided at all, the FCA can impose a fine of up to EUR even without suspicion of competition distortion in a business sector. 75,000 (Sec. 11a Competition Act). The intention is to collect from public sources relevant data as to the development of competition intensity in specific markets, which The FCA can also request the owners of the undertakings or their may then make a basis for further decision-making and course of representatives and, in the case of legal persons, companies or firms, action, e.g. to undertake a more detailed examination of an entire or associations having no legal personality, the persons authorised business sector. to represent them by law or by their constitution, to provide information, unless they would risk a criminal prosecution thereby. Such a request can be made with or also without a respective 2.5 Who will carry out searches of business and/or decision by the FCA (a so-called “simple request”). In the absence residential premises and will they wait for legal of a formal decision, a delay or refusal to provide information is not advisors to arrive? sanctioned. However, incorrect or misleading information can be sanctioned with a fine of up to EUR 25,000. If a formal decision is Searches of business and/or residential premises are generally passed, it can be enforced (see question 8.1). There is no obligation carried out by employees of the FCA. If necessary, and requested upon the FCA to request the relevant information by way of a simple by the FCA, they are assisted by experts and/or the police. The request first. undertaking concerned has the right to ask for legal advisors or other confidants to attend; however, the FCA is not obliged to wait for Generally, the extent or lack of cooperation will be regarded by the their arrival to start the search. FCA and the Cartel Court in moving for, and in deciding on the amount of, a fine imposed for infringing cartel law.

2.6 Is in-house legal advice protected by the rules of privilege? 3 Sanctions on Companies and Individuals

No. Legal professional privilege under Austrian law is regulated differently than under European law. However, according to both 3.1 What are the sanctions for companies? laws, in-house legal advice is not protected by rules of privilege. Differently to European law, Austrian law also does not explicitly According to Sec. 1 para. 3 of the Cartel Act, agreements and provide for legal professional privilege covering correspondence decisions that infringe the cartel ban and that are not exempted are between the client and his external (EU) lawyer outside the void. Apart from that, the Cartel Court can impose fines of up to a immediate possession of the lawyer. Under Austrian law, a lawyer maximum of 10 per cent of the undertaking’s, or the associations need not testify against his client unless so authorised, which of undertakings’, turnover of the last business year. The highest includes the protection of any lawyer-client communication as fine to date was EUR 75.4 million for an entire case (five elevator stored in the lawyer’s office. The protection of the confidentiality companies) and EUR 30 million for a single company. (16 Ok 2/15b of the correspondence between a client and his lawyer is a European of October 8, 2015.) With this decision relating to a food-retail group, standard, obviously to be observed when Austrian authorities act where the Higher Cartel Court increased the fine by a factor of 10, for the European Commission. European law may also imply such an important change as to fine calculation in Austria was introduced. protection for Austrian cartel proceedings enforcing European cartel The maximum of 10 per cent global group turnover achieved during law. There are tendencies by the FCA to follow that view. the last business year no longer constitutes a cap but – contrary to European practice – the basis for the calculation of the fine. In this 2.7 Please list other material limitations of the respect, the Court explicitly deviated from the Fining Guidelines of investigatory powers to safeguard the rights of the European Commission, which have also had quite a practical defence of companies and/or individuals under impact in Austria so far. This view was also repeated in later cases investigation. (6 OK 7/15p of March 31, 2016). Since 2016, other companies have been fined about EUR 15 million (29 Kt 34/15; 25 Kt 6/16; 26 Apart from general limitations, such as domestic authority, which Kt 2/16; 26 Kt 4/16; 26 Kt 11/16; 27 Kt 12/16). Additionally, third may be ignored under certain circumstances, there are no other parties can claim compensation for damages incurred due to cartel material limitations of the investigatory powers. infringements in civil courts. Under certain conditions, criminal sanctions (fines) may be imposed on companies for “bid-rigging”

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(see the answer to question 1.1) or other criminal infringements by enough information for that – request a fine; (ii) have stopped their employees under the Act on Responsibility of Legal Entities for participation in an infringement of the cartel ban (violations of Art. Criminal Acts (Verbandsverantwortlichkeitsgesetz), which so far 101 para. 1 TFEU or Sec. 1 para. 1 of the Cartel Act); (iii) cooperated has rarely been applied. with the FCA to fully clarify the facts of the case and supplied all evidence available to them; and (iv) have not forced any other undertaking to participate in the infringement. Additionally, for 3.2 What are the sanctions for individuals? (e.g. criminal sanctions, director disqualification)? undertakings not coming first but still providing useful information and/or evidence, the FCA may demand a significantly reduced fine, provided that the other prerequisites have been met. If the individual is an entrepreneur violating cartel law, the Cartel

Act is applicable to him, as it is to any other undertaking. If the The FCA has set forth the procedure for gaining leniency in the so- Austria individual is a representative of an undertaking, such as a director or called “Leniency Handbook” according to which a full reduction general manager, there is no specific sanction against the individual of a fine will only be granted to the first applicant notifying a according to the Cartel Act. Criminal sanctions against individuals violation to the FCA. This has already led to discussions amongst are only possible in case of “bid-rigging” or fraud (see question 1.1). competition law practitioners as, according to the wording of the law as set out above, it is possible that one undertaking, as the first, provides information and evidence enabling the FCA to move for a 3.3 Can fines be reduced on the basis of ‘financial search warrant and another undertaking, while the first [undertaking] hardship’ or ‘inability to pay’ grounds? If so, by how provides information allowing the FCA to request a fine before the much? Cartel Court. In any case, the extent of a potential reduction of fines depends significantly on the time of the application. The timing of These arguments could play a role in determining the amount of a leniency application is, therefore, of the essence. fines. However, there is no case law showing clear tendencies. Together with the Leniency Handbook, the FCA has published a “notification form”. 3.4 What are the applicable limitation periods? The Cartel Court decided, as confirmed by the Supreme Court (16 Ok 5/10, October 4, 2010), that it has no jurisdiction to evaluate The Cartel Court can impose sanctions when applications referring the application of the law by the FCA, but the Court may use its to violations of the Cartel Act were filed within five years after the own discretion in determining the amount of the fine, except that it termination of the violation. The end of a continuous infringement cannot be higher than requested by the FCA. is considered when the last infringing action is completed. Under criminal law, different limitation periods, also depending on the type of damage caused, may apply. For further information, see question 4.2 Is there a ‘marker’ system and, if so, what is required 8.3 below. to obtain a marker?

Yes, the Leniency Handbook provides for the possibility to obtain 3.5 Can a company pay the legal costs and/or financial a “marker” upon submitting certain essential information on the penalties imposed on a former or current employee? infringement. This information includes: the name and address of the undertaking seeking the marker as well as of the undertaking As said above, costs/penalties imposed on employees can only participating in the alleged infringement; information on the occur within the limited area of criminal infringements (see question products and area concerned, the duration and the type of the alleged 1.1). In this respect, it is questionable whether a company can pay infringement; and information on whether it is intended to apply those costs/penalties. However, an ex ante agreement to do so may for leniency with other competition authorities or what competition be void and tax questions could arise. Generally, cartel fines are authorities have been already contacted. In this regard, the FCA considered to be not tax-deductible. recommends using its form attached to the Leniency Handbook. The FCA sets a period of a maximum of eight weeks to provide 3.6 Can an implicated employee be held liable by his/her the additional information necessary to fulfil the requirements employer for the legal costs and/or financial penalties for leniency according to Sec. 11b para. 1 of the Competition Act imposed on the employer? (as stated above in question 4.1). If the undertaking provides the additional information within the time it will be considered as Under general rules, yes. However, there are special privileges for submitted at the time of setting the marker. employees in respect of their liability towards their employer. In “Network cases”, i.e. in cases in which the European Commission is particularly well-placed to deal with the case and 4 Leniency for Companies the leniency applicant intends to apply or has already applied for leniency with the European Commission, the FCA may grant the leniency applicant a so-called “Summary Application Marker”. The 4.1 Is there a leniency programme for companies? If so, Summary Application Marker confirms that this leniency applicant please provide brief details. will be given a time limit to complete its application in case the FCA should become active in this case. To effectively implement the Cartel Law, Austria introduced regulations for a leniency programme in line with the (older) European model. Under the regulations of the leniency programme 4.3 Can applications be made orally (to minimise any subsequent disclosure risks in the context of civil (Sec. 11b Competition Act), the FCA can refrain from demanding damages follow-on litigation)? the imposition of a fine against enterprises which, coming first: (i) provide to the FCA information and evidence enabling the As mentioned above, leniency applications are generally made by FCA to move for a search warrant or – if the FCA already has using the notification form published by the FCA, which must be

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filed with the FCA via fax or email. According to the Leniency Handbook, however, the information required in the notification 5 Whistle-blowing Procedures for form can also be provided orally at the FCA (minutes will be taken Individuals by the FCA). 5.1 Are there procedures for individuals to report cartel 4.4 To what extent will a leniency application be treated conduct independently of their employer? If so, confidentially and for how long? To what extent please specify. will documents provided by leniency applicants be disclosed to private litigants? The Amendment 2017 allowed the FCA to install an internet whistle-blower system for anonymous information on competition Austria As the leniency application procedure is an administrative procedure, law infringements. Otherwise, any information provided by an the respective administrative law principles apply. Based on these individual to the FCA may and will be considered under the general principles, the FCA is fundamentally obliged to keep information rules on evidence. Employees are not subject to individual fines, confidential to the extent that access to such information by third except under criminal law (see question 1.1). Rules on leniency in parties would interfere with the parties’ interests. In past leniency criminal procedure, in particular relating to infringements of cartel cases, the FCA has kept this confidentiality to the extent known. As law, were introduced at the end of 2010 (Sec. 209a and 209b of soon as the FCA has applied to the Cartel Court to fine the members the Criminal Procedure Code). These provisions on leniency in of a cartel, the parties of the Court proceeding (i.e. the FCA, the FCP criminal procedure are marked to expire, the end date was extended and the members of the cartel) will have access to the files of the to December 31, 2021. Cartel Court. However, it is important to know that in case criminal behaviour is suspected (e.g. bid-rigging), the Official Parties are obliged by law to notify the public criminal prosecutor of such 6 Plea Bargaining Arrangements suspicion. This notification and supporting documents may be quite easily accessible to third party victims in the Court files during a 6.1 Are there any early resolution, settlement or plea criminal investigation/procedure. The Supreme Court ruled (16 Ok bargaining procedures (other than leniency)? Has 3/10, June 22, 2010) that the Cartel Court is obliged to provide its the competition authorities’ approach to settlements files – that may include leniency documents as presented by the FCA changed in recent years? or the parties to the Court – to the Public Prosecutor, if so requested. This may also apply to other Courts requesting a file, based on rules There are no explicit early resolution, settlement or plea-bargaining regulating assistance amongst courts and administrative authorities, procedures foreseen in the Cartel Act and the Competition Act. respectively. However, the FCA in recent years has extensively used, and There has been case law by the European Court of Justice (ECJ) further promotes, negotiated settlements which may be combined on the protection of leniency documents – partly originating from with leniency applications. In response to widespread criticism Austrian cases – generally giving national judges a wide discretion on on settlements, especially regarding a lack of information and such disclosure questions. See also EU Directive (2014/104/EU of transparency of settlement decisions, the FCA published in November 26, 2014). The Directive was incorporated into national September 2014 guidelines on its settlement policy. The benefit Austrian law on April 25, 2017 with the Cartel and Competition of such settlement is seen in the reduction of procedural costs for Law Amendment Act 2017 (Kartell- und Wettbewerbsrechts- the FCA and the defendant(s) and a low PR profile, as well as in Änderungsgesetz 2017), published in BGBl. I Nr. 56/2017. This reduced fines and less detailed reasoning in published decisions. new law provides for quite a differentiated system on the disclosure The latter could have a significant impact on civil follow-on of documents from the files of competition authorities, including damage claims. A different situation may occur in a criminal leniency documents, upon a respective order by a national court. procedure, where certain possibilities exist to close the procedure without a formal conviction by paying a fine proposed by the public criminal prosecutor (“Diversion”). For criminal leniency, 4.5 At what point does the ‘continuous cooperation’ see question 5.1 above. For third parties, such settlements cause requirement cease to apply? difficulties in understanding the legal and economic background of the infringement and the decisions, thereby making it more According to Sec. 11b para 1/3 of the Competition Act and complicated to provide legal advice for eventually similar the Leniency Handbook, the entrepreneur or association of situations, e.g. vertical practices relating to resale prices. undertakings must cooperate with the FCA until the end of its investigation. According to the letter of the law this would mean that the obligation to cooperate ends with the beginning of the Court 7 Appeal Process procedure. However, since it is standard practice that the FCA only states the exact amount of the fine requested during a later stage of the Court procedure, until then a certain amount of cooperation 7.1 What is the appeal process? would be required. Decisions of the Cartel Court can be appealed to the Supreme Court acting as the Higher Cartel Court. The Higher Cartel Court is the 4.6 Is there a ‘leniency plus’ or ‘penalty plus’ policy? highest instance in cartel matters and its decision is legally final. Normally, the Higher Cartel Court will only consider questions No, there is no ‘leniency plus’ or ‘penalty plus’ policy in Austria. of law. The Amendment 2017 has tried to provide a basis for a The new rules on damage actions (see section 8 below) provide limited review of important question of fact by the Supreme Court. for certain limited privileges for leniency applicants (Sec. 37e para However, the Supreme Court traditionally is reluctant to do so. 3 Cartel Act) in respect to the otherwise joint liability of cartel (Sec. 49 para. 3 Cartel Act.) members being defendants in follow-on damage claims.

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However, Austrian law knows of two ways by which claims 7.2 Does an appeal suspend a company’s requirement to of several injured parties can be brought together in one court pay the fine? proceeding: ■ The injured parties can assign their individual claims to a Yes, it does. collective plaintiff which then opens the Court proceeding against one and the same defendant. 7.3 Does the appeal process allow for the cross- ■ Under certain preconditions, the injured parties can join examination of witnesses? their claims for damages in one single court procedure. A precondition therefor is, amongst others, that the claims of the injured parties result from the same set of facts or the

As the procedure at the Higher Cartel Court is a written procedure claims are based on the same legal title. Austria on questions of law, the cross-examination of witnesses is not possible. Despite some amendments to the law in 2017, the Higher Cartel Court can and will only to a very limited extent consider 8.3 What are the applicable limitation periods? questions of fact. Only if the Higher Cartel Court believes the taking of evidence was faulty or incomplete and thus remands the The generally applicable limitation period for damages is three procedure to the Cartel Court, will (further) cross-examination of years. The period starts to run as soon as the injured party has witnesses be allowed. gained sufficient knowledge of the damage which occurred and the injuring party. Different rules may apply in cases of criminal behaviour relating to natural persons. However, the limitation 8 Damages Actions period was regulated differently for antitrust law. Compensation for damages becomes time barred five years after knowledge of damage, damaging party, damaging activities and the fact that these activities 8.1 What are the procedures for civil damages actions are in violation of competition law. It is not possible to claim damage for loss suffered as a result of cartel conduct? Is the 10 years after occurrence of damage (Sec. 37h para. 1). The time position different (e.g. easier) for ‘follow-on’ actions limits run from the end of the infringement. These limitation periods as opposed to ‘stand alone’ actions are paused during proceedings for (1) decision of a Competition Authority, (2) investigation measures of a Competition Authority, or Austrian Cartel Law provides for specific rules as to limitation (3) settlement negotiations until one year after a final legally binding periods, passing-on of damage, interest and binding effects of decision or the end of negotiations (Sec. 37h para. 2). decisions by competition authorities in “follow on” actions. This may result in an advantage for follow-on actions. These rules 8.4 Does the law recognise a “passing on” defence in have been significantly modified by the EU Directive (2014/104/ civil damages claims? EU) of November 26 2014. The Directive was incorporated into national Austrian law (belated) on April 25 2017 with the The law now explicitly allows the passing-on defence. Also, as a Cartel and Competition Law Amendment Act 2017 (Kartell- und logical balance, indirect customers are stated to have a claim against Wettbewerbsrechts-Änderungsgesetz 2017), published in BGBl. I the cartelists. Nr. 56/2017. Cases to the old legal situation, where these questions may be dealt The Cartel Act now clarifies that there is a claim for compensation with in some detail, are currently under trial. We note that the for the resulting damage (Sec. 37c para. 1). Sec. 37c para. 2 states a German Federal Supreme Court has generally accepted the defence legal presumption that a cartel causes damage. The Cartel Act also (KZR 75/10, June 28, 2011) and a certain reference to this decision specifies that interests for the damage start to run from the time of was made by the Austrian Supreme Court (4 Ob 46/12m, August the occurrence of the damage (Sec. 37d para. 1 and 2). 2, 2012). Furthermore, the Supreme Court has explicitly accepted Moreover, Sec. 37i para. 2 of the Cartel Act clarifies that the civil the standing of the indirect purchaser to sue for damages (7 Ob courts are bound to the Cartel Court’s, the European Commission’s 48/12b, October 17, 2012) and has implied certain acceptance of the or the Competition Authority’s final decision that an undertaking passing-on defence in additional cases. culpably and illegally infringed the provisions specified in the respective decision. Consequently, the burden of proof of whether 8.5 What are the cost rules for civil damages follow-on the plaintiff suffered damage by the defendant’s infringement, and claims in cartel cases? to what exact damage, remains with the plaintiff. The Court can estimate the damage caused by a cartel infringement (Sec. 37d). The cost rules for civil damages follow-on claims in cartel cases Furthermore, the Court can order – subject to complex rules - parties are based on the general cost rules of the Code of Civil Procedure. of the case or third parties, including competition authorities, to Thus, the losing party of the civil procedure must pay its own costs disclose documentary evidence and shall act to protect confidential and the costs of the winning party. If one party is only partially information contained therein (Sec. 37j). If parties fail to follow successful, such party’s legal costs will only be reimbursed by the such Court orders, the Court can hand out fines up to EUR 100,000 other party in proportion to its success. The amount of the costs is (Sec. 37m). based on the (statutory) lawyers’ tariff. The assessment base of the costs is the amount in dispute.

8.2 Do your procedural rules allow for class-action or representative claims? 8.6 Have there been any successful follow-on or stand alone civil damages claims for cartel conduct? If there have not been many cases decided in court, have The Austrian procedural rules do not explicitly provide for class there been any substantial out of court settlements? action or representative claims such as, for example, US class proceedings. In Austria, only one successful (very minor) follow-on civil damages claim for cartel conduct has taken place so far. In 2006,

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the Cartel Court identified some driving schools as cartel members if the damage has not yet occurred. As to the extent of publication, and imposed a total fine of EUR 75,000 on them. The driving Austrian Courts follow European practice that business secrets will schools had identical prices for the most demanded driving courses. be protected (16 Ok 6/14i). After the fines became final, cartel damage claims (very low, the individual claim not reaching EUR 500) against the cartel members 9.2 Please mention any other issues of particular interest were assigned by potentially injured parties to the Austrian Federal in your jurisdiction not covered by the above. Chamber of Workers and Employees. According to price observations of the Chamber, prices for driving The FCA has conducted raids and fined several companies courses in Graz decreased by 22 per cent after the breaking up of after settlement procedures, mostly concentrating on vertical

Austria the cartel. Thus, the Court stated that the damage can be equated infringements. with the price differential between the cartel price and the price Several big cartel damage cases are still under trial. The Cartel after breaking up the cartel. Hence the Court ruled that the driving Court files, including any leniency documents that may be included schools must pay back course fees in that amount. there, are not finally protected in case an administrative authority Currently, several big cases following up the Cartel Court’s decision (e.g. Public Prosecutor) or a (criminal) court requests to receive a in a banking cartel and an elevator cartel case (see question 3.1) are file based on rules on assistance amongst courts and administrative under trial. Several complex questions of law are being discussed authorities (see also question 4.4). at different levels of the Court system. We are not aware of any The FCA has some history in researching specific industries settlements for substantial parts of material claims made to date. (“Branchenuntersuchungen”) and has recently developed a tendency for competition monitoring. In the past, affected areas were energy, 9 Miscellaneous gasoline prices, food retailers, cement and mobile phone services. When presenting the FCA report for 2015 in parliament (June 2016), Dr. Theodor Thanner, the head of the FCA, named for future 9.1 Please provide brief details of significant recent or activities (besides monitoring of banks, etc.) explicitly the “health imminent statutory or other developments in the field care sector” to be the focus of the FCA. In December 2016, Dr. of cartels, leniency and/or cartel damages claims. Theodor Thanner announced that for 2017 the budget for the FCA had almost doubled, the number of employees had increased and Each final decision (whether to grant, dismiss or overrule the that the FCA has “their sights on the business with health”. Further, claim) on the prohibition or establishment of infringements and the Dr. Theodor Thanner was quoted stating that the health sector, in his adjudication of fines, on a merger and further measures imposed opinion, is an industry “affected by fixed prices, area protection and after clearance of a merger, as well as action for an injunction shall (assumed) monopolies, which make billions of turnover”. Practical be published by the Cartel Court via the respective public medium implications were named to be problems to get certain services in of communication of the Court (the so-called “Ediktsdatei”) and time (MRT-examination), practices by pharmaceutical undertakings on the FCA website. Such publication shall include the names in respect to giving free medicines to hospitals and buying stakes of the parties and the essential content of the decision, including in pharmacies. On January 17, 2017, Dr. Theodor Thanner was the imposed sanctions, whereas, at the same time, the justified quoted in a newspaper to the effect that this year there should be interest of the undertakings to protect their business secrets shall four major areas for general investigations, i.e. ATMs, the health be observed (Sec. 37 Cartel Act). Under certain circumstance, the sector, undertakers and airlines. courts can determine an obligation to pay for future damages, even

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Mag. Dieter Hauck Marco Werner Preslmayr Rechtsanwälte OG Preslmayr Rechtsanwälte OG Universitätsring 12 Universitätsring 12 1010 Vienna 1010 Vienna Austria Austria

Tel: +43 1 533 1695 Tel: +43 1 533 1695 Fax: +43 1 535 5686 Fax: +43 1 535 5686 Email: [email protected] Email: [email protected] URL: www.preslmayr.at URL: www.preslmayr.at Austria Mag. Dieter Hauck earned his Master of Laws from the University Marco Werner earned his Master of Laws in 2016 from the Vienna of Vienna in 1989. After completing a postgraduate course in University of Economics and Business. He was also an associate International Studies at the University of Vienna in 1990, he began in a small law firm after a three-month legal internship with the practising as a lawyer, and has been a partner in the firm since May Constitutional Court of Austria. In June 2017, he joined Preslmayr 1995. A member of the Studienvereinigung Kartellrecht e.V. (Cartel Rechtsanwälte as an associate. Law Academic Society), he specialises in EU, public procurement, merger and cartel law and follow-on cartel damage procedures. In all these matters, sound legal and tactical advice – in and out of court – is for Dieter Hauck as essential as a solution-oriented direct approach, effective case management and quick reactions to challenging situations.

Preslmayr Rechtsanwälte are experts in business law. Our clients, both from Austria and around the world, are primarily large and medium-sized businesses in manufacturing, banking, trade, information technology, advertising, tourism and telecommunications. We also advise investors. A large number of our clients have depended on us to solve their complex legal problems for many years. We regard this as a sign of our clients’ trust and satisfaction. Close cooperation with our clients is an essential element of our mutual success. In advising our clients, we consider not only legal aspects but, above all, commercial objectives as well. We view ourselves as legal guides and problem-solvers with a knack for business, who work together with experts from other disciplines whenever necessary. This synergy of legal expertise, business sense and service-oriented management will also ensure the excellence of our services in the future.

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Belarus Elena Selivanova

SBH Law Office Ekaterina Shkarbuta

■ other circumstances which eliminate or may restrict 1 The Legislative Framework of the Cartel competition, or hinder its establishment and development. Prohibition Both formal (written) and informal agreements are covered by Article 13 of the Law. 1.1 What is the legal basis and general nature of the In exceptional cases, agreements or coordinated actions may be cartel prohibition, e.g. is it civil and/or criminal? considered legally valid if the economic effect of actions exceeds the negative consequences for a given commodity market or the The main legal acts in antimonopoly legislation of the Republic of economy of Belarus, and competition is restricted only to the extent Belarus are: wherein the above restrictions are inevitable for the achievement of ■ the Law of the Republic of Belarus “On Counteraction to the given economic effect. Monopolistic Activities and Development of Competition” The law also prescribes for a special type of permitted agreement: No. 94-З of December 12, 2013 (“the Law”); “vertical agreements” – agreements between economic entities ■ Edict of the President of the Republic of Belarus No. 188 that are not competitors, one of which acquires the goods or is its July 3, 2016 “On the organs of antimonopoly regulation and potential consumer, and another provides the goods or is its potential trade” (“Edict No. 188”); and seller. Those agreements are permitted if such agreements are ■ Edict of the President of the Republic of Belarus “On Some contracts of an integrated entrepreneurial licence (franchising), and Measures to Strengthen State Anti-Monopoly Regulation and the share of each economic entity that is a party to such agreement Control” No. 114 of February 27, 2012 (“Edict No. 114”). in any commodity market does not exceed 15%. Although antimonopoly legislation of Belarus does not have Economic entities intending to conclude competition-restrictive a legal definition of “cartel”, provisions of the Law still cover agreements may apply to the antimonopoly authority for cartel prohibition. Cartels are considered to be a type of unfair examination of compliance of these agreements with antimonopoly competition prohibited by the Law. The Law forbids competition- legislation. The procedure is non-mandatory, and resolutions of an restrictive agreements and arrangements between economic entities anti-monopoly body are issued within one month from the filing that are considered as an administrative offence. Criminal liability date and may be appealed in court. for antimonopoly infringement is also provided, but there is no court practice in this sphere. 1.3 Who enforces the cartel prohibition?

1.2 What are the specific substantive provisions for the The Ministry of Antimonopoly Regulation and Trade (referred to as cartel prohibition? MART) is vested with powers to enforce state antimonopoly policy and to control the activities of economic entities in the territory of Article 13 of the Law prohibits conclusion and performance of the Republic of Belarus according to the Resolution of the Council any agreements between legal entities and any coordinated actions of Ministers dated 06.09.2016 № 702. agreed or performed by such legal entities, provided that the above are aimed at or may result in the following: ■ market sharing by territorial principle, by type and amount of 1.4 What are the basic procedural steps between the transactions, by type and volume of commodities and their opening of an investigation and the imposition of prices, by customers; sanctions? ■ exclusion or limitation of market access by other legal entities; Investigation may be opened ex officio or based on an application of any person or economic entity. Such application with a set ■ setting, raising, reduction or maintenance of prices, including on tenders and auctions; of documents is considered within one month and in the result a decision on admission of antimonopoly infringement or on absence ■ economically or technologically unjustified restriction of unfair competition is issued. The process of consideration on of production of commodities, as well as control over distribution of goods; antimonopoly infringement is based on written evidence provided by the applicant and the documents that MART may request from ■ economically or technologically unjustified refusal to the applicant and other persons and entities. conclude agreements with certain sellers or customers; or

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1.5 Are there any sector-specific offences or exemptions? 2.2 Please list specific or unusual features of the investigatory powers referred to in the summary table. No, there are not. Antimonopoly authorities are entitled to carry out extraordinary inspections in order to rapidly detect and prevent violations of 1.6 Is cartel conduct outside your jurisdiction covered by the antimonopoly legislation. Extraordinary inspections could the prohibition? be initiated by the Minister of Antimonopoly Regulation and Trade or his/her deputies. During an investigation procedure, the Antimonopoly legislation of Belarus applies to all actions of antimonopoly authorities are entitled to send official “warning

economic entities obstructing competition in the territory of Belarus letters” to the entities that violated the antimonopoly law. Such Belarus or abroad, which have led or are leading to a restriction of warning letters include a statement of facts of the violation of the competition, or any other unfavourable conditions on commodity antimonopoly legislation, possible consequences of the violation markets. and set time limits to provide the antimonopoly authorities with the Nevertheless, according to publicly available information, the measures taken to remedy the violation. Department and authorised local executive bodies have not yet started such procedures against the conduct of economic entities abroad. 2.3 Are there general surveillance powers (e.g. bugging)? It shall also be noted that the Treaty on Eurasian Economic Union, Surveillance powers are only foreseen in the case of a criminal to which Belarus is a party, also imposes cartel prohibition for trans- offence. For example, bugging is carried out only as special border markets. investigation means in case of opened criminal proceedings or if there is enough information on the crime commitment. The 2 Investigative Powers surveillance shall be sanctioned by the Public Prosecutor, the President of the Investigative Committee of the Republic of Belarus, or the Head of Body of Inquiry. 2.1 Summary of general investigatory powers.

2.4 Are there any other significant powers of Table of General Investigatory Powers investigation? Investigatory Power Civil/Administrative Criminal Order the production The investigative bodies are also allowed to perform other measures of specific documents Yes Yes* relating to the subject matter and the purpose of an inspection; or information among others, they also have the power to enter into and inspect Carry out compulsory business premises, the right to review documents in order to identify interviews with Yes Yes* persons, as well as the right to temporarily seize items and business individuals documents. Carry out an unannounced search Yes Yes* of business premises 2.5 Who will carry out searches of business and/or Carry out an residential premises and will they wait for legal unannounced Yes Yes* advisors to arrive? search of residential premises ■ Right to ‘image’ Search of business or residential premises is allowed only in a computer hard drives criminal proceeding by authorised investigative bodies, such as Yes Yes* using forensic IT officials of the Investigation Committee, internal affairs bodies tools and the State Control Committee. Presence of internal or external ■ Right to retain Yes Yes* legal advisors during inspections is not obligatory, thus, search of original documents business or residential premises may be carried without waiting for ■ Right to require an explanation the arrival of legal advisors. Yes Yes* of documents or information supplied 2.6 Is in-house legal advice protected by the rules of ■ Right to secure privilege? premises overnight Yes Yes* (e.g. by seal) There are no such provisions in Belarusian antimonopoly law. The Please Note: * there is no court practice of bringing criminal cases rules of privilege cover only the advice of the advocate. for breach of antimonopoly law in Belarus.

2.7 Please list other material limitations of the investigatory powers to safeguard the rights of defence of companies and/or individuals under investigation.

There are no other limitations of the investigatory powers to safeguard the rights of defence of companies and/or individuals under investigation.

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The Code on Administrative Offences (art. 11.25) also provides 2.8 Are there sanctions for the obstruction of deprivation of the right to carry out certain economic activities investigations? If so, have these ever been used? for individual entrepreneurs and company officials in the case of Has the authorities’ approach to this changed, e.g. restriction of competition (market-sharing agreements, agreements become stricter, recently? on elimination of market competitors and other competition- restrictive agreements). According to the antimonopoly legislation of Belarus, the failure to provide information (documents, explanations, evidence) in Criminal liability for violation of antimonopoly legislation is time, which is necessary for the investigation carried out by state stipulated in the Criminal Code (art. 247), but these provisions have authorities, or the provision of misleading information result in an never been applied in Belarusian legal practice.

Belarus administrative fine of 330 to 1,200 USD (the amount of the fine is set at the discretion of the particular antimonopoly body). 3.3 Can fines be reduced on the basis of ‘financial hardship’ or ‘inability to pay’ grounds? If so, by how much? 3 Sanctions on Companies and Individuals The list of mitigating circumstances prescribed by either the Code 3.1 What are the sanctions for companies? on Administrative Offences or Criminal Code does not prescribe such ground for reduction of liability. Edict No. 114, which was adopted on February 27, 2012 and revised on June 3, 2016, amends the amount of sanctions stipulated in 3.4 What are the applicable limitation periods? the Code on Administrative Offences, and Edict No. 114 will be applied until relevant changes are made to the Code. The maximum An administrative fine may be imposed not later than three years penalty under Edict No. 114 for a legal person amounts to 10% from the date the offence was committed, and not later than six of the turnover realised by the respective economic entity in the months from the date of finding that an offence had been committed. particular market, where infringement was established, of the last business year (the minimum amount of administrative fine for legal 3.5 Can a company pay the legal costs and/or financial person is 4,700 USD) for the following violations of antimonopoly penalties imposed on a former or current employee? legislation: ■ unfair competition; Belarusian legislation does not provide for such possibility. ■ conclusion and execution of agreements or concerted actions; and ■ an agreement to perform or actually performing other 3.6 Can an implicated employee be held liable by his/her employer for the legal costs and/or financial penalties coordinated competition-restrictive activities. imposed on the employer?

3.2 What are the sanctions for individuals (e.g. criminal Belarusian antimonopoly law does not have such provisions. sanctions, director disqualification)? However, the Labour Code of the Republic of Belarus prescribes that a Director of a legal entity is materially liable for the damages Edict No. 114 provides for an administrative fine in the amount caused by him/her to the legal entity. Thus, there is a possibility to of 330 to 1,200 USD due to be paid by company officials for the hold the Director liable for the financial penalties; however, there is following violations of antimonopoly legislation: no such court practice. ■ avoidance to fulfil orders or other requirements of antimonopoly authorities; ■ improper or late fulfilment of orders or other requirements of 4 Leniency for Companies antimonopoly authorities; ■ failure to provide information (documents, explanations) 4.1 Is there a leniency programme for companies? If so, necessary for the investigation carried out by antimonopoly please provide brief details. authorities; ■ submission of misleading information to antimonopoly Belarusian antimonopoly law does not contain details of a leniency authorities; programme. ■ unfair competition; However, leniency provisions for companies are prescribed by the ■ conclusion and execution of agreements or concerted actions; Code on Administrative Offences, which stipulates the mitigating and circumstances for the offence, for example, in the case of prevention ■ an agreement to perform or actually performing other or compensation of damage caused by the offence. The Code on coordinated competition-restrictive activities. Administrative Offences and the Criminal Code also contain According to Edict No. 114, individual entrepreneurs are subject to analogical provisions for individuals. an administrative fine in the amount of 1,200 to 2,300 USD for the following violations of antimonopoly legislation: 4.2 Is there a ‘marker’ system and, if so, what is required ■ unfair competition; to obtain a marker? ■ conclusion and execution of agreements or concerted actions; and There is no ‘marker’ system in Belarus. ■ an agreement to perform or actually performing other coordinated competition-restrictive activities.

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4.3 Can applications be made orally (to minimise any 7.2 Does an appeal suspend a company’s requirement to subsequent disclosure risks in the context of civil pay the fine? damages follow-on litigation)? Appeal of a decision made by the antimonopoly authority does not No, there is no such possibility. per se suspend obligation to pay fines or enforce necessary actions provided by a decision of antimonopoly authority. Nevertheless, 4.4 To what extent will a leniency application be treated motion for the suspension of a decision may be filed to the court. confidentially and for how long? To what extent will documents provided by leniency applicants be 7.3 Does the appeal process allow for the cross- disclosed to private litigants? Belarus examination of witnesses?

Belarusian legislation does not have such provisions. Yes. However, the party summoning the witness and the other party to the process may only examine the witness after the court has 4.5 At what point does the ‘continuous cooperation’ conducted its own examination of this witness. It should be taken requirement cease to apply? into account that preference is usually given to the documentary evidence. Belarusian legislation does not have such provisions. 8 Damages Actions 4.6 Is there a ‘leniency plus’ or ‘penalty plus’ policy?

Belarusian legislation does not have such provisions. 8.1 What are the procedures for civil damages actions for loss suffered as a result of cartel conduct? Is the position different (e.g. easier) for ‘follow-on’ actions 5 Whistle-blowing Procedures for as opposed to ‘stand alone’ actions? Individuals Civil damages caused as a result of violation of antimonopoly legislation are reimbursed according to civil legislation in general 5.1 Are there procedures for individuals to report cartel order. conduct independently of their employer? If so, please specify. 8.2 Do your procedural rules allow for class-action or representative claims? There is no such special procedure established in Belarusian legislation. Belarusian antimonopoly law does not have such provisions. However, any individual may inform the antimonopoly organs on the violations of cartel prohibition. Such reporting may be done anonymously, only if it concerns the criminal offence. 8.3 What are the applicable limitation periods?

In this case, a general limitation period of three years is applicable. 6 Plea Bargaining Arrangements

8.4 Does the law recognise a “passing on” defence in 6.1 Are there any early resolution, settlement or plea civil damages claims? bargaining procedures (other than leniency)? Has the competition authorities’ approach to settlements Belarusian legislation does not have such provisions. changed in recent years?

The Criminal Code and the Code on Criminal Procedure prescribe 8.5 What are the cost rules for civil damages follow-on claims in cartel cases? the possibility to conclude a so-called “pre-court agreement on cooperation” in order to reduce or exclude the responsibility on the agreed terms. However, this is only possible for individuals and is The question of cost rules for civil damages is regulated by general quite a new procedure (established in 2015), used primarily in cases provisions for filing a claim to the court. The amount of legal charge of organised crime. In recent years, to the best of our knowledge, due to be paid for filing a claim is 5% of the value of the claim for there were only a couple of such cases, and such cases are strictly damages. confidential and were not related to antimonopoly regulation. 8.6 Have there been any successful follow-on or stand alone civil damages claims for cartel conduct? If there 7 Appeal Process have not been many cases decided in court, have there been any substantial out of court settlements?

7.1 What is the appeal process? To the best of our knowledge, there has been no court practice on this matter in Belarus. Appeal process is regulated by the Code of Economic Procedure. Decisions made by antimonopoly authority may be appealed to the economic court.

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Currently, the Republic of Belarus is strongly developing 9 Miscellaneous cooperation with other CIS countries’ antimonopoly authorities, as well as having the view of harmonising antimonopoly regulations 9.1 Please provide brief details of significant, recent or within the framework of the Common Economic Space of Belarus, imminent statutory or other developments in the field Russia and Kazakhstan. of cartels, leniency and/or cartel damages claims.

9.2 Please mention any other issues of particular interest Practice of competition-restrictive agreements and concerted in your jurisdiction not covered by the above. actions is quite limited. Generally, investigations carried out by antimonopoly authorities are opened by third parties affected by Belarus It should be noted that the Treaty on Eurasian Economic Union, to such restrictive practices rather than by antimonopoly authorities. which Belarus is a party, also prescribes the cartel prohibition. On Over the last 10 years, the number of cartel cases has not exceeded April 4, 2017, the Court of Eurasian Economic Union issued the two to three cases per year, mostly concerning vertical cartel Advisory opinion on request of Ministry of Justice of the Republic agreements. of Belarus, which concerned the interpretation of the provision on “vertical agreements”, stipulated by the Treaty, and its correlation with domestic legislation of the Republic of Belarus.

Elena Selivanova Ekaterina Shkarbuta SBH Law Office SBH Law Office 20А/1 Krasnoarmeiskaya str., office 26 20А/1 Krasnoarmeiskaya str., office 26 Minsk, 220030 Minsk, 220030 Republic of Belarus Republic of Belarus

Tel: +375 17 327 53 77 Tel: +375 17 327 53 77 Email: [email protected] Email: [email protected] URL: www.sbh-partners.com URL: www.sbh-partners.com

Advocate, Member of the Minsk Region Bar Association Ekaterina is a legal assistant at SBH Law Office in the area of Corporate Law. She has the following professional experience: Elena is a leading specialist of SBH Law Office in the area of Corporate Law. She has extensive knowledge and practical ■■ drafting and legal review of contracts; experience in conducting legal due diligence (LDD) of companies, ■■ incorporation of companies in the Republic of Belarus, including supporting mergers and acquisitions, restructuring of business and companies with foreign shareholding; assets, in issues of corporate governance and settlement of corporate disputes, as well as drafting international commercial contracts. ■■ preparation of legal opinions and memorandums on the retail Elena has provided legal assistance on a wide range of investment trade, status of real estate and land law issues, on doing business projects, including the attraction of foreign investments to the Republic in the Chinese-Belarusian Industrial Park “Great Stone”, as well as of Belarus. Ability to work in a team, including as coordinator and on the results of Legal Due Diligence; supervisor, a clear understanding of the client’s interests and ways to ■■ drafting of judicial claims; obtain the necessary results for the client within the legal field make consultations of Elena especially valuable. She has been practising ■■ participation in the appealing of non-normative legal acts of state since 2009. bodies; and ■■ participation in the representation of clients in commercial arbitration. She has been practising since 2015.

Today SBH Law Office is one of the leading Belarusian law offices, combining high-level skills, expertise and a staunch commitment to the principles of the legal profession to drive continuous innovative development and provide the highest value to our clients. Our partners and senior legal professionals have been advising clients for over 20 years – practically since the inception of the legal system of Belarus as an independent state. SBH Law Office has offices in Minsk and Kiev, with strategic alliances in Russia and the Baltics. Our lawyers and attorneys have been providing foreign and Belarusian companies and entrepreneurs, as well as sovereigns, with detailed and groundbreaking advice in various fields of business and commercial activities, working on cases and transactions which have shaped Belarusian law and business practice. Importantly, the lawyers at SBH Law Office are competent to advise clients not only on Belarusian issues, but also provide cross-border legal support for local and international companies.

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Belgium

Crowell & Moring Thomas De Meese

a case-by-case basis in alphabetical order from a list of 20 1 The Legislative Framework of the Cartel academics, economists, in-house counsel and members of Prohibition the Bar who have been selected to act as Assessor in cases submitted to the Competition College. ■ The Management Committee (Directiecomite/Comité 1.1 What is the legal basis and general nature of the de Direction), which consists of the President, the Chief cartel prohibition, e.g. is it civil and/or criminal? Economist, the Chief Legal, and the Chief Prosecutor. It is tasked with setting the policy objectives of the BCA and The cartel prohibition is laid down in Book IV “Protection of issuing guidelines and notices, such as fining guidelines. Competition” of the Code of Economic Law (the “BPC”). The ■ The College of Prosecutors, which is the investigatory prohibition is civil in nature. Criminal sanctions are only indirectly arm of the BCA operating under the direction of the related to the cartel prohibition. They relate to issues such as the Chief Prosecutor (Auditeur-generaal/Auditeur-général). improper use of information obtained in the context of an antitrust It is composed of members of the BCA allocated by the investigation. Management Committee to the College of Prosecutors. The cartel prohibition can also be enforced by the national courts, 1.2 What are the specific substantive provisions for the which can impose injunctions and award damages in the context of cartel prohibition? private enforcement. The national courts do not have comparable investigatory powers and cannot impose fines on the infringers. Article IV.1 §1 BPC prohibits agreements between undertakings, decisions by associations of undertakings and concerted practices, 1.4 What are the basic procedural steps between the the aim or effect of which is to significantly prevent, restrict or opening of an investigation and the imposition of distort competition in the relevant Belgian market or in a substantial sanctions? part thereof. Article IV.1 §§1-3 BPC are substantively similar to article 101 of the Treaty on the Functioning of the European Union. Investigations can be opened ex officio, following a complaint or Article IV.1 §4 BPC provides that it is prohibited for individuals following a request or instruction to the Chief Prosecutor by the acting on behalf of an undertaking or association of undertakings competent Minister or a sector regulator. to negotiate with competitors or enter into agreements with them The opening of the investigation leads to the designation by the Chief regarding: Prosecutor of a Prosecutor, a team of investigators composed of ■ the determination of the sales price of products and services members of the College of Prosecutors and a “Case Cell” consisting to third parties; of the Chief Prosecutor, the Prosecutor and a member of the College ■ output restrictions and sales restrictions regarding products or of Prosecutors who is not part of the team of investigators. The services; and/or investigation is conducted by the team of investigators under the ■ market allocation. direction of the Prosecutor and the Chief Prosecutor. The Case Cell can reject a complaint if it believes it has no merit or is inadmissible. It can also reject a complaint on grounds relating to 1.3 Who enforces the cartel prohibition? enforcement priorities and the allocation of resources.

The cartel prohibition is enforced by the Belgian Competition It will inform the complainant of the rejection in a reasoned decision, Authority (the “BCA”) (Autorité belge de la Concurrence/Belgische which will be notified to the complainant. It may organise a meeting Mededingingsautoriteit) which is composed of: with the complainant prior to taking the rejection decision. ■ The President of the BCA, who is the Chair of the Competition The complainant can appeal the rejection decision with the College and of the Management Committee. President of the Competition College within 30 days following the ■ The Competition College (Mededingingscollege/Collège notification. The President can invite the parties to submit written de la concurrence), which is the decision-making body of observations. The Competition College will take a decision based the BCA. It consists of the President and two Assessors. on the written elements on file. The decision of the Competition The Assessors are not full timers. They are appointed on College cannot be appealed.

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If the Case Cell believes the investigation reveals the existence of an infringement, the Chief-Prosecutor will issue a statement of 2 Investigative Powers objections (the “SO”) informing the undertakings and individuals investigated of the infringement invoked against them. The 2.1 Summary of general investigatory powers. addressees of the SO are given access to all evidence on which the SO relies, and to non-confidential versions of all documents and Table of General Investigatory Powers information gathered during the investigation. The Chief Prosecutor will give the addressees of the SO at least one month following the Investigatory Power Civil/Administrative Criminal communication of the SO to respond to it. Order the production of specific documents Yes N/A Within one month following receipt of the responses or the expiry of

Belgium or information the deadline to respond, the Prosecutor will submit a draft reasoned Carry out compulsory decision to the President of the BCA, together with a procedural file, interviews with No N/A containing all evidence relied upon by the Prosecutor. The President individuals will subsequently set up the Competition College that will take the Carry out an case. unannounced search Yes* N/A of business premises The Prosecutor will send a copy of the draft reasoned decision to Carry out an the undertakings and individuals investigated. The complainant unannounced Yes* N/A will be informed of the fact that a draft reasoned decision has been search of residential issued. The Competition College can, however, decide to send a premises non-confidential version of the draft decision to the complainant and ■ Right to ‘image’ computer hard drives to third parties demonstrating a sufficient interest to be heard at the Yes N/A using forensic IT oral hearing. tools The undertakings investigated are given full access to the ■ Right to retain No N/A procedural file and to non-confidential versions of all documents original documents and information gathered during the investigation. The Competition ■ Right to require an explanation College can decide to grant access to the procedural file to the Yes N/A of documents or complainant and to third parties demonstrating a sufficient interest information supplied to be heard at the oral hearing. ■ Right to secure The parties have two months, which can be extended by the premises overnight Yes N/A President, as of the moment the undertakings investigated have (e.g. by seal) had access to the file, to submit their written observations and add Please Note: * indicates that the investigatory measure requires documents to the procedural file. They are not entitled to submit the authorisation by a court or another body independent of the new evidence except if needed to rebut a fact or an objection that competition authority. they were not previously aware of. The President will organise an oral hearing during which the parties and the Prosecutor will be heard. This hearing will take place within 2.2 Please list specific or unusual features of the investigatory powers referred to in the summary table. two months following the submission of the written observations. Following the hearing, the Competition College is required to issue a decision within one month. The BCA has issued guidelines on the conduct of inspections, which are available on its website.

1.5 Are there any sector-specific offences or exemptions? 2.3 Are there general surveillance powers (e.g. bugging)? There are no national sector-specific offences or exemptions. However, the European Commission’s block exemption regulations No, there are not. also apply in the context of the BPC. 2.4 Are there any other significant powers of investigation? 1.6 Is cartel conduct outside your jurisdiction covered by the prohibition? The Chief Prosecutor can call upon external experts in the course of Cartel conduct outside Belgium will only be caught by article IV.1 the performance of an investigation. BPC if and to the extent that it has a noticeable effect on the Belgian market concerned or on a substantial part thereof. Agreements 2.5 Who will carry out searches of business and/or between undertakings located in Belgium, the effects of which are residential premises and will they wait for legal exclusively felt outside of Belgium, will in principle not be caught advisors to arrive? by the BPC. The searches are carried out by the Prosecutor together with officials from the BCA. The Prosecutor can ask for the assistance of police forces. There is no legal requirement to wait for the arrival of legal advisors.

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on the level of the fine. The new guidelines entered into force on 1 2.6 Is in-house legal advice protected by the rules of November 2014. privilege?

Article 5 of the Act of 1 March 2000 regarding the creation of the 3.2 What are the sanctions for individuals (e.g. criminal sanctions, director disqualification)? Institute of In-House Counsel (Institut des Juristes d’Entreprise/ Instituut voor Bedrijfsjuristen), provides that legal advice provided by a member of the Institute of In-House Counsel to his employer Infringements of the prohibition contained in article IV.1 § 4 BPC is legally privileged. can give rise to an administrative fine of up to €10,000. In its guidelines on the conduct of inspections, the BCA explicitly Criminal sanctions may be imposed on individuals for the acknowledges that correspondence with an in-house counsel improper use of information obtained in the context of an antitrust Belgium member of the Institute of In-House Counsel is legally privileged. investigation.

2.7 Please list other material limitations of the 3.3 Can fines be reduced on the basis of ‘financial investigatory powers to safeguard the rights of hardship’ or ‘inability to pay’ grounds? If so, by how defence of companies and/or individuals under much? investigation. There are no provisions in the BPC dealing with financial hardship Searching business or residential premises requires a mission and/or the ability to pay. statement from the Prosecutor and a prior authorisation by a judge (Juge d’Instruction/Onderzoeksrechter). 3.4 What are the applicable limitation periods? The right to secure premises (seals) is limited in time to a maximum of 72 hours if the seals are affixed in premises other than those of the The Chief-Prosecutor cannot open an investigation into facts that undertakings or associations of undertakings concerned. are more than five years old. For continued infringements, the Searches can only be conducted between 8am and 6pm. limitation period starts when the last infringement ceases. The Competition College’s decision must in principle follow within 2.8 Are there sanctions for the obstruction of five years from the opening of the investigation. investigations? If so, have these ever been used? A new five-year limitation period starts whenever the BCA takes Has the authorities’ approach to this changed, e.g. a procedural step with respect to the facts (e.g. a decision to open become stricter, recently? an investigation, a request for information, a decision to conduct a dawn raid, the issuance of a draft decision). The total (extended) If an undertaking or individual gives inaccurate, untimely, limitation period can in principle never exceed 10 years. It will, misleading or incomplete information or obstructs the investigation, however, be further extended with the duration of any appeals a fine of up to 1% of the Belgian turnover can be imposed. A formal against decisions of the BCA with the Court of Appeal of Brussels. request for information can also be made subject to a periodic penalty payment of up to 5% of daily Belgian turnover, per day the response is delayed. 3.5 Can a company pay the legal costs and/or financial penalties imposed on a former or current employee? We are not aware of any instance in which the sanctions were applied in the context of a cartel investigation. On 5 April 2012, Yes. It should, however, be emphasised that agreements to do so the Competition Council imposed a fine of €75,000 to Belgacom for made prior to the facts that give rise to the cost/penalty would run the provision of misleading responses to a request for information in the risk of being considered as running against public order and the context of merger proceedings (Case MEDE-C/C-11/0010), and hence being null and void. on 1 October 2015 the Competition College fined Sanoma Belgium €50,000 for having provided market information too late, again in merger proceedings. 3.6 Can an implicated employee be held liable by his/her employer for the legal costs and/or financial penalties imposed on the employer? 3 Sanctions on Companies and Individuals There are no provisions in the BPC dealing with employee liability. Under general employment law, employees can only be held 3.1 What are the sanctions for companies? liable towards their employer in case of bad faith or serious fault. Depending on the circumstances, participation by an employee in a The Competition College can impose a fine of up to 10% of the cartel could amount to bad faith or serious fault and, hence, give rise Belgian turnover of the undertaking concerned for infringement of to liability towards the employer. article IV.1 of the BPC. The turnover is determined based on the last published consolidated annual accounts. It takes into account turnover from sales on the Belgian market and export sales made 4 Leniency for Companies from Belgium.

On 26 August 2014, the Management Committee of the BCA 4.1 Is there a leniency programme for companies? If so, adopted new fining guidelines laying out the approach towards please provide brief details. the calculation of fines for infringements of competition law. The new guidelines bring the fine calculation in line with the fining The current leniency notice was published in the Belgian Official guidelines of the European Commission. The main consequence Journal on 22 March 2016 (“the Belgian Leniency Notice”). It of the change is a greater impact of the duration of the infringement

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is based on the Model Leniency Programme developed by the In its final decision on the merits, the Competition College will grant European Competition Network. It applies exclusively to cartels. full or partial leniency on condition that the applicant has continued The leniency applicant can obtain full immunity for fines if: to comply with the conditions for leniency. ■ it is first to provide evidence which enables the competition authority to carry out targeted inspections in connection with 4.2 Is there a ‘marker’ system and, if so, what is required the alleged cartel and the competition authority does not, to obtain a marker? at the time of the application, have enough information to justify an inspection; or A marker system is available for all leniency applicants. In order ■ it is first to provide evidence which enables the finding of to obtain a marker, the applicant will have to file a written or oral an infringement in respect of the alleged cartel and (i) the request providing the Chief-Prosecutor with its name and address Belgium competition authority does not, at the time of the application, as well as the reason for its marker request and information about have enough evidence to establish this infringement, and (ii) no other undertaking has already obtained immunity in the parties to the alleged cartel, the affected product(s) and territory respect of the same cartel; and concerned, the estimated duration of the alleged cartel and the nature of the alleged cartel conduct. The Chief-Prosecutor will make a ■ it meets all other conditions to qualify for immunity (no ring leader, continued cooperation, no destruction of evidence, decision with respect to the request and, if granted, determine the etc.). deadline by which the application must be completed. Applicants who do not qualify for immunity can obtain a reduction of fines if they provide the competition authority with: 4.3 Can applications be made orally (to minimise any ■ evidence of the alleged cartel which represents significant subsequent disclosure risks in the context of civil added-value relative to the evidence already in the authority’s damages follow-on litigation)? possession at the time of the application; and ■ evidence that they meet all other conditions to qualify for Yes, leniency applications can be made orally, unless the leniency leniency (continued cooperation, no destruction of evidence, applicant has already disclosed its content to third parties. Oral etc.). corporate statements will be recorded and transcribed by the BCA. The reduction will be in the range of 30% to 50% for the first The applicant will be given the opportunity to verify the accuracy of applicant for a reduction, 20% to 40% for the second applicant and the recording and to make necessary adjustments. between 10% and 30% for the subsequent applicants. A leniency application by an individual (see below) does not 4.4 To what extent will a leniency application be treated preclude the grant of full immunity to an undertaking. confidentially and for how long? To what extent will documents provided by leniency applicants be Potential leniency applicants can contact the Chief Prosecutor disclosed to private litigants? orally and on a no-name’s basis to determine whether immunity is still available. If the availability of immunity is confirmed, The leniency applications will be treated confidentially. Access the undertaking concerned is expected to immediately submit an to the leniency application is restricted to the addressees of the application or request a marker. statement of objections and granted subject to the condition that it Leniency applicants are required to contact the Chief Prosecutor, will not be used for any other purposes but the procedure in which orally or by email, to set up a meeting. This meeting request must the leniency application was made. Third parties and/or private identify the name and address of the applicant, the identity of the litigants do not get access to the leniency applications. participants to the cartel, the products and territories concerned, the nature of the cartel and its estimated duration. The leniency 4.5 At what point does the ‘continuous cooperation’ application is deemed to be submitted on the date of the meeting requirement cease to apply? with the Chief Prosecutor. The leniency applicant will need to submit a written corporate The requirement of continuous cooperation ends on the date of statement containing (i) name and address of the applicant and name issuance of the decision on the merits by the Competition College. and position of its employees involved in the cartel, (ii) name and address of the other participants to the cartel and name and position of their employees involved in the behaviour, and (iii) a detailed 4.6 Is there a ‘leniency plus’ or ‘penalty plus’ policy? description of the cartel (objectives, operation, products and services concerned, geographic scope, duration, market volume, place and No, there is not. date of meetings, nature, etc.). The statement must be accompanied with substantiating evidence. 5 Whistle-blowing Procedures for If the corporate statement is submitted in English, it must be Individuals translated into one of the national languages within two working days, unless agreed otherwise by the Chief-Prosecutor. Applicants that have, or are in the process of filing an application 5.1 Are there procedures for individuals to report cartel for, immunity with the European Commission may file summary conduct independently of their employer? If so, applications with the Chief-Prosecutor. Summary applications can please specify. be filed without substantiating evidence. Yes, under the BPC, individuals can apply for immunity Following receipt of a leniency application, the Chief-Prosecutor independently of their employer. Immunity can also be granted to or a Prosecutor selected by him will submit a draft decision on the individuals collaborating to a leniency application by their employer. leniency application to the Competition College. The leniency applicant can file written observations regarding this request with In order to be eligible for immunity, the individual applying for the Competition College. If the Competition College agrees that all immunity must either provide new information to the BCA or admit conditions are met it will grant provisional leniency to the applicant. the existence of an infringement.

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6 Plea Bargaining Arrangements 8 Damages Actions

6.1 Are there any early resolution, settlement or plea 8.1 What are the procedures for civil damages actions bargaining procedures (other than leniency)? Has for loss suffered as a result of cartel conduct? Is the the competition authorities’ approach to settlements position different (e.g. easier) for ‘follow-on’ actions changed in recent years? as opposed to ‘stand alone’ actions?

Yes. The Case Cell can initiate the settlement procedure prior to the Directive 2014/104/EU was implemented in Belgian law by the Act issuance of the draft decision. The settlement procedure requires the of 6 June 2017 which has inserted a new Chapter 3 in Book XVII of undertaking concerned to acknowledge the infringement and accept the Code of Economic Law. Belgium to be fined. In consideration for the settlement, the undertaking Plaintiffs can file a complaint with the national courts, typically the can obtain a 10% reduction of its fine. The commitment of the commercial courts. They will need to establish the existence of a undertaking to compensate the victims of the infringement can fault (contractual or in tort), damage and causal link. The burden of also be taken into account for the calculation of the fine. If the proof essentially rests on the plaintiffs and should primarily be met settlement discussions are successful, the Case Cell will issue a by documentary evidence. The Court can order the defendant and/ settlement decision. This settlement decision cannot be appealed. or third parties to produce specific documents. Follow-on actions The Prosecutor-General adopted its first settlement decisions should normally be easier than stand alone actions because of the in cartel investigations on 22 June 2015 (Supermarkets – Case fact that the findings of infringement decisions of the BCA or the CONC-I/O-06/0038), 27 May 2016 (River Cruises – Case CONC- European Commission will be binding for the Court. Decisions of I/O-14/0028) and 3 May 2017 (Railway equipment – Case CONC- competition authorities of other Member States must be considered I/O-13/0031). as indications of the existence of an infringement. It should be noted that the College of Prosecutors has expressed a The quantification of damages will typically be done by acourt- certain reluctance to consider hybrid cases in which some parties to appointed expert based on input provided by both parties. Only the cartel settle while others do not. damages actually incurred will be compensated. There are no double, treble or punitive damages but interests will be awarded as 7 Appeal Process from the date of the facts giving rise to liability.

8.2 Do your procedural rules allow for class-action or 7.1 What is the appeal process? representative claims?

An appeal can be lodged with the Market Court – which is a Since 1 September 2014, a collective redress mechanism is available specialised chamber within the Brussels Court of Appeal – within in Belgium to consumers that have been injured by infringements 30 days of the notification of the Competition College’s decision. of competition law. The collective actions can be opt-in or opt- The Court is entitled to decide on both the facts and the law and out. The consumers must be represented by an accredited consumer can substitute its own decision to that of the Competition College association acting as (non-profit) group representative. (except in cases where the Court establishes the existence of an infringement of article 101 TFEU in a situation in which the Competition College did not). New facts and developments that 8.3 What are the applicable limitation periods? occurred after the issuance of an appealed decision can be taken into account, but cannot form a basis for “new” formal objections that The limitation period for claims in tort is five years as from the were not raised before the Competition College. Although some moment the plaintiffs knew or should have known of the facts giving uncertainty exists in this respect, it seems clear that the Court cannot rise to liability (or their aggravation) and the identity of the person impose fines in cases where the Competition College did not, nor liable, without ever exceeding 20 years as from the facts giving rise can it increase the amount of the fine imposed by the Competition to liability. Except for specific subject matters, the limitation period College. for contractual claims is 10 years. The BCA will be represented during the appeals by its President, assisted by the Chief Legal. 8.4 Does the law recognise a “passing on” defence in civil damages claims?

7.2 Does an appeal suspend a company’s requirement to pay the fine? The courts will have to look into the passing on defence. The burden of proof of ‘passing on’ rests on the defendant. However, in cases of complaints by indirect purchasers, the burden of proof that the The appeal does not suspend the decision against which it is made. overcharge was passed on to them rests on the plaintiffs. The Court can nevertheless order such suspension pending the appeal provided (i) serious arguments are made with respect to the nullity of the appealed decision, and (ii) it is shown that the 8.5 What are the cost rules for civil damages follow-on enforcement of the decision pending the appeal would be likely to claims in cartel cases? have serious consequences for the appellant. The losing party has to bear the legal costs (bailiff, registry, court- appointed expert, etc.). It also has to cover the legal fees of the 7.3 Does the appeal process allow for the cross- examination of witnesses? winning party. The amount to be paid for legal fees is, however, based on a pre-determined scale and varies according to the amount of the claim without ever exceeding €36,000. No, it does not.

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8.6 Have there been any successful follow-on or stand Thomas De Meese alone civil damages claims for cartel conduct? If there Crowell & Moring have not been many cases decided in court, have Rue Joseph Stevens 7 there been any substantial out of court settlements? 1000 Brussels Belgium

Several follow on civil damages claims are currently pending with Tel: +32 2 282 4082 the Belgian courts (e.g. in the lifts cartel and in the payment cards Fax: +32 2 230 6399 interchange fee cases). The claim for compensation filed by the Email: [email protected] URL: www.crowell.com European Commission and the Belgian Government in the lifts

Belgium cartel were rejected by the Commercial Court of Brussels on 24 November 2014 and 24 April 2015, respectively. Appeals against Thomas De Meese is a partner in the Brussels office of Crowell & Moring and has been a member of the Brussels Bar since 1993. He these decisions are said to be currently pending. We are not aware specialises in competition, telecommunications, media and technology of the existence of any final decisions or major settlements. law. Thomas’ expertise includes day-to-day counselling on distribution issues, technology licensing, patent pools, joint bidding, standard setting, pricing strategies by dominant companies, the activities of 9 Miscellaneous trade associations, etc. He represents clients in merger filings with the Belgian Competition Authority and the European Commission. He has developed and implemented pan-European antitrust compliance 9.1 Please provide brief details of significant recent or and training programmes for multinational companies. He represents imminent statutory or other developments in the field complainants and defendants in competition investigations with the Belgian Competition Authority and the European Commission. of cartels, leniency and/or cartel damages claims. Thomas regularly litigates competition cases before national courts.

The Government is currently working on a draft Act expanding the scope of the existing class action system so as to allow class actions on behalf of liberal professions and SMEs.

9.2 Please mention any other issues of particular interest in your jurisdiction not covered by the above.

There are none.

From transformational mergers and acquisitions to sophisticated antitrust litigation and pragmatic counselling and risk management, Crowell & Moring’s Antitrust Group has earned an enviable reputation and client list by offering unparalleled quality and client service. We invest in understanding your business, your industry focus, and your company’s culture and risk tolerance. Our clients are leading global companies in virtually every industry, from chemicals, aerospace, and health care to technology and telecommunications. We represent the largest multi-national companies in the world, where we partner with sophisticated in-house legal departments, but are just as experienced working with technology start-ups and other companies, where we deal directly with the business team. We stand with our clients from start to finish, providing counselling and training on compliance issues, audit programmes, handling the most sensitive criminal andcivil investigations, and representing them in all forms of antitrust civil litigation.

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Canada W. Michael G. Osborne

Affleck Greene McMurtry LLP Michael Binetti

Tribunal can issue an injunction if price maintenance is having an 1 The Legislative Framework of the Cartel adverse effect on competition in a particular case (s. 76). No other Prohibition penalties or damages are available. Both individuals and corporations can be held criminally responsible 1.1 What is the legal basis and general nature of the for cartel offences. Canada has codified the rules for attributing cartel prohibition, e.g. is it civil and/or criminal? criminal liability to corporations. The Criminal Code provides that a corporation is criminally responsible where one of its “senior Hard-core cartels involving price-fixing, market allocation, output officers” (essentially, a manager) is a party to the offence. restriction and bid-rigging agreements between competitors are per se indictable criminal offences in Canada. Other agreements 1.3 Who enforces the cartel prohibition? between competitors that lessen or prevent competition substantially can be annulled by a special court, the Competition Tribunal. Canada’s legal system divides responsibility for investigating, prosecuting, and adjudicating in criminal cases. 1.2 What are the specific substantive provisions for the Led by the Commissioner of Competition, the Competition Bureau cartel prohibition? is responsible for investigating suspected cartel activity and other matters under the Competition Act. The conspiracy provision (s. 45) makes it an offence for competitors, or potential competitors, to agree: to fix, maintain or control prices The Director of Public Prosecutions (DPP) is responsible for for the supply of a product; to allocate customers, territories or prosecuting criminal offences, through lawyers with the Public markets; or to fix maintain, control, prevent or lessen the production Prosecution Service of Canada (PPSC). or supply of a product. Criminal prosecutions can be brought before the superior courts in Agreements that are (i) ancillary to a broader agreement that each province, as well as the Federal Court. does not itself offend the main part of section 45, and (ii) directly The Commissioner has the authority to bring applications under related to, and reasonably necessary to, giving effect to that broader the civil provisions of the Competition Act, including the anti- agreement, are exempt. competitive agreements provisions. The Competition Tribunal has Penalties are severe: the offence is an indictable offence punishable exclusive jurisdiction to hear cases under this provision. by up to 14 years in jail, a maximum fine of $25 million, or both. Bid-rigging is dealt with in a separate provision (s. 47) and carries 1.4 What are the basic procedural steps between the equally stiff penalties: up to 14 years in jail or a fine at the discretion opening of an investigation and the imposition of of the court. sanctions? There is also a special offence created for corporations that implement in Canada directives from foreign parents that give effect The Commissioner can commence a formal inquiry under the to foreign conspiracies (s. 46). Competition Act if (among other things) he has reason to believe that a person has violated the Act. Private parties that suffer losses as a result of cartels can sue for recovery (s. 36). The Commissioner uses both informal and formal investigative tools. Formal investigative powers, including search warrants, Other agreements between competitors can be prohibited by the production orders, orders for the examination of witnesses under Tribunal if they lessen or prevent competition substantially (s. 90.1). oath and wiretaps, require judicial authorisation. The Act mandates a competitive effects analysis, including factors such as foreign competition, barriers to entry, removal of a renegade Once an inquiry under the Competition Act’s criminal provisions competitor and the extent of change and innovation in the market. is complete, the Commissioner refers the matter to the PPSC. The Efficiency gains that outweigh any competitive harm provide a PPSC has the discretion to determine whether or not to prosecute. complete defence. No penalties or damages can be imposed on The PPSC applies a two-fold test: (1) is there a reasonable prospect parties to such anti-competitive agreements; the only remedy is an of conviction; and (2) does the public interest require a prosecution injunction. to be pursued? Price maintenance (for example, the imposition of minimum resale Once charges are laid, a preliminary inquiry will be held before a prices by a supplier) is presumptively lawful in Canada, but the provincial court judge to determine whether the case should proceed

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to a full trial. If the accused is committed for trial, the matter then Investigatory Power Civil/Administrative Criminal proceeds to trial before a superior court judge. The PPSC has ■ Right to retain Yes* Yes* the ability to skip the preliminary inquiry by preferring a direct original documents indictment. ■ Right to require an explanation At trial, the prosecution must prove the charges beyond a reasonable No No of documents or doubt. If the accused is found guilty, a sentencing hearing will then information supplied be held. ■ Right to secure premises overnight Yes* Yes* (e.g. by seal) 1.5 Are there any sector-specific offences or exemptions? Canada Please Note: * indicates that the investigatory measure requires Yes. the authorisation by a court or another body independent of the The Competition Act contains two sector-specific offences: competition authority. (1) Conspiracies relating to professional sport: it is an offence to conspire to limit unreasonably the opportunities for a person 2.2 Please list specific or unusual features of the to participate as a player or to negotiate with and play for a investigatory powers referred to in the summary table. team or club. (2) Conspiracies between federal financial institutions: it is an All of the investigative powers referred to in the table require prior offence for federal financial institutions (including banks) judicial authorisation. to conspire on things, including interest rates on deposits or loans. The Competition Bureau has no right to require an explanation of documents or information supplied during a dawn raid. Explanations The Competition Act contains three sector-specific exemptions: of documents or information can be obtained through the use (1) Collective bargaining between trade unions and employers. of orders to examine witnesses under oath or to require written (2) Underwriting of securities. returns under oath (essentially interrogatories) under section 11 of (3) Agreements relating to amateur sport. the Competition Act. Witnesses are not excused from answering questions that may incriminate themselves, but their answers cannot be used against them. 1.6 Is cartel conduct outside your jurisdiction covered by the prohibition? Warrantless searches are permitted only in exigent circumstances that make it impracticable to obtain a search warrant. Section 46 of the Competition Act makes it an absolute liability The “plain sight” doctrine allows Bureau officers to seize documents offence for a corporation to implement a foreign conspiracy in during a search that are not described in a search warrant but contain Canada. evidence of other crimes and are in plain sight. The plain sight Neither section 45 (conspiracy) nor section 47 (bid-rigging) doctrine also applies to searches of computer systems. expressly extend Canadian jurisdiction to foreign conspiracies. The Competition Bureau and PPSC have consistently taken the position 2.3 Are there general surveillance powers (e.g. bugging)? that Canada can take jurisdiction over foreign conspiracies that have effects in Canada. Courts have yet to rule on whether this Yes, sections 183 and 184.2 of the Criminal Code of Canada permit assumption of jurisdiction is valid. the Competition Bureau to obtain a warrant from the court to intercept private communications using wiretaps. 2 Investigative Powers 2.4 Are there any other significant powers of investigation? 2.1 Summary of general investigatory powers. Canada can seek investigative assistance from 35 other countries Table of General Investigatory Powers under Mutual Legal Assistance Treaties (MLATs), including the Investigatory Power Civil/Administrative Criminal United States and the United Kingdom. Order the production of specific documents Yes* Yes* or information 2.5 Who will carry out searches of business and/or residential premises and will they wait for legal Carry out compulsory advisors to arrive? interviews with Yes* Yes* individuals Carry out an Competition Bureau officers carry out the search, typically during unannounced search Yes* Yes* business hours (although a search warrant can be executed any time of business premises between 6:00am and 9:00pm). In special circumstances, police Carry out an officers may assist. unannounced Yes* Yes* search of residential While the search team is under no obligation to wait until legal premises counsel arrive before they commence the search, they will typically ■ Right to ‘image’ wait for a reasonable period of time if asked. The search team computer hard drives Yes* Yes* may take immediate steps to secure the premises and to ensure that using forensic IT no records subject to the search are concealed or destroyed in the tools meantime.

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C$25 million for each count. Fines for bid-rigging (s. 47) and 2.6 Is in-house legal advice protected by the rules of implementing foreign conspiracies (s. 46) are at the discretion of privilege? the court. The highest fine imposed to date for bid-rigging is C$30 million. Yes, communications with in-house counsel containing legal advice Prohibition Orders prohibiting the continuation or repetition of the or for the purpose of obtaining legal advice are subject to solicitor- offence can also be imposed on companies. client privilege. Recovery of damages through private litigation is also possible, through a statutory cause of action found in the Competition Act, 2.7 Please list other material limitations of the as well as economic torts (principally civil conspiracy and unlawful investigatory powers to safeguard the rights of

interference with economic relations). In late 2013, the Supreme Canada defence of companies and/or individuals under Court of Canada released a trilogy of cases that confirmed the right investigation. of indirect purchasers to claim for antitrust damage. Companies may also be subject to debarment from bidding on Canadian law provides for a number of limitations that safeguard the government contracts. Companies convicted of conspiracy offences rights of defence of companies and individuals under investigation: under the Competition Act are ineligible to do business with the Judicial authorisation: to obtain a search warrant, the Commissioner federal government under federal government procurement policies. must satisfy a judge that there are reasonable grounds to believe that someone has committed an offence under the Competition Act. The test for obtaining orders for the production of documents, 3.2 What are the sanctions for individuals (e.g. criminal examinations under oath, and written returns is less stringent, but sanctions, director disqualification)? courts require the Commissioner to explain the basis for believing that an offence has been committed. Individuals convicted of conspiracy or bid-rigging face the same penalties and can be sentenced to jail for up to 14 years. The court Solicitor-client privilege: the Competition Act contains procedures can impose a fine of up to C$25 million in addition to, or instead of, for dealing with records over which privilege is claimed. Typically jail. Debarment sanctions may also be applied to individuals under an agreement is reached between the Bureau and counsel on claims federal government procurement policies. of privilege. If no agreement is reached, a judge will make the determination. Privilege against self-incrimination: section 11 of the Canadian 3.3 Can fines be reduced on the basis of ‘financial hardship’ or ‘inability to pay’ grounds? If so, by how Charter of Rights and Freedoms and section 5 of the Canada much? Evidence Act protect individuals from being forced to incriminate themselves. Witnesses cannot refuse to answer a self-incriminatory Claims of financial hardship or inability to pay will be factors that question, but their answer cannot be used against them in any will be considered by the court in determining the amount of the criminal proceedings. fine. In the case of an organisation, theCriminal Code’s sentencing Inspection and copying of seized documents: parties whose provisions require the court to consider the impact that a fine would documents are seized are entitled to inspect them. In practice, have on the economic viability of an organisation and the continued copies are typically made, either during the search or afterwards. employment of its employees (s. 718.21). In the case of individuals, Confidentiality: the Competition Act requires the Bureau to the court can only impose a fine if it is satisfied that the individual conduct inquiries in private, and to keep the information it receives is able to pay it. confidential. The Bureau may disclose information for the purpose of enforcing the Act, however. 3.4 What are the applicable limitation periods? Updates from the Commissioner: targets of an inquiry are entitled to receive an update on the progress of the inquiry upon request. There are no limitation periods for criminal prosecution of cartel offences under the Competition Act. 2.8 Are there sanctions for the obstruction of A two-year limitation period applies to actions to recover damages investigations? If so, have these ever been used? under the Competition Act’s statutory cause of action. Has the authorities’ approach to this changed, e.g. become stricter, recently? 3.5 Can a company pay the legal costs and/or financial The Competition Act makes it a criminal offence to obstruct penalties imposed on a former or current employee? investigations. Obstruction is punishable by up to 10 years in jail, a fine at the discretion of the court, or both. It is also an offence to Corporations can indemnify their employees for legal costs and fines fail to produce documents in response to a production order, to fail only in limited circumstances. Corporate statutes typically provide to appear in response to an order for oral examination or to fail to that a corporation can only indemnify an employee who has been answer questions in an order for written returns. convicted of an offence if the employee was acting honestly and in good faith with a view to the best interests of the corporation, and The Competition Bureau warns that it takes obstruction seriously, had reasonable grounds for believing that the conduct was lawful. It and has laid obstruction charges in the past. is not uncommon, however, for corporations to pay the legal costs of employees for whom independent counsel is retained. 3 Sanctions on Companies and Individuals 3.6 Can an implicated employee be held liable by his/her employer for the legal costs and/or financial penalties 3.1 What are the sanctions for companies? imposed on the employer?

Companies found guilty of conspiracy (s. 45) can be fined up to The defence of ex turpi causa will likely block most claims by

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companies that are convicted of a conspiracy offence against their by the Bureau to the PPSC. Subsequent leniency applicants may employees who were responsible for the wrongdoing. benefit from reductions to the fine that would have otherwise been recommended. 4 Leniency for Companies 4.2 Is there a ‘marker’ system and, if so, what is required to obtain a marker? 4.1 Is there a leniency programme for companies? If so, please provide brief details. Yes. In cartel cases, markers are obtained from the Senior Deputy Commissioner of Competition, Criminal Matters. The request for

Canada There are two programmes under which a cooperating individual a marker is typically communicated by an applicant’s lawyers, who or company may obtain protection: an immunity programme; outline a hypothetical situation and identify the criminal offence and and a leniency programme. The leniency programme is for those the specific product involved. The Bureau will determine whether individuals or companies that do not qualify for full immunity. the party seeking immunity is “first in” (i.e., immunity is available) Immunity programme: the immunity programme offers full and advise whether a marker is available. immunity from criminal prosecution, to the first individual or company to admit involvement in criminal activity and agree 4.3 Can applications be made orally (to minimise any to cooperate with the Bureau’s investigation and subsequent subsequent disclosure risks in the context of civil prosecutions. To qualify for immunity, the party must terminate or damages follow-on litigation)? have terminated its participation in the criminal activity and must not have coerced the participation of other parties. Where the party Yes. As discussed in question 4.1 above, proffers are usually made seeking immunity is the only participant in the criminal activity, orally to minimise the risk that there will be subsequent disclosure immunity is not available. of admissions in a civil case. However, in that full cooperation is In order to secure immunity, an applicant must request an immunity required in order to obtain immunity (or leniency), an immunity “marker” from the Bureau. There is only one immunity marker per applicant is usually required to provide all relevant documentary offence under the Competition Act. The immunity applicant must evidence to the Competition Bureau for use in its prosecution of thereafter, usually within 30 days, provide a detailed description the other parties. Since parties to civil litigation, including follow- of the criminal activity – or “proffer”. Sufficient information on damages claims, have an obligation to disclose all relevant must be disclosed that would allow the Bureau to conclude that documents to the opposing party, the provision of these documents the applicant qualifies for immunity otherwise a marker may be to the Competition Bureau does not materially change a party’s cancelled. The proffer is usually made orally and on a hypothetical disclosure obligations. basis; it may include information on documents and records that are available to support the allegations made and evidence or testimony 4.4 To what extent will a leniency application be treated that potential witnesses can give. In some instances, the Bureau confidentially and for how long? To what extent may request an interview with individuals or production of some will documents provided by leniency applicants be documentary evidence. disclosed to private litigants? While the Bureau is tasked with determining whether or not an applicant qualifies for immunity based on the facts, it is another While there are controls governing confidentiality, applicants organ of government – the Public Prosecution Service of Canada must know that the information they provide will eventually be (“PPSC”) – that actually grants immunity. A recommendation disclosed once charges are laid, as part of Crown disclosure. Crown for immunity from the Bureau to the PPSC includes all relevant disclosure may even include notes taken by Competition Bureau information provided during the proffer process. A party granted officers during the proffer. immunity must also disclose any additional criminal activities under Before that time, however, the Competition Act effectively draws the Competition Act known to it or in which it has participated. Full under its protection nearly all information that is provided to or and ongoing cooperation is required, in the form of production of obtained by the Bureau in the course of executing its mandate. documentary evidence, securing the cooperation of current and The Bureau has the discretion to communicate information in four former officers, directors, employees and agents and facilitating circumstances: their attendance at interviews with the Bureau officers and the ■ to a Canadian law enforcement agency; provision of testimony in any subsequent judicial proceedings. ■ for the purposes of administration or enforcement of the Act; Leniency programme: once a party has claimed an immunity marker, ■ where the information has been made public; or other parties that are willing to cooperate may receive leniency. The ■ when it has been authorised by the person who provided the Bureau’s Leniency Bulletin clarifies the considerations relevant to a information. recommendation for leniency and the leniency discounts that will be recommended. Leniency recommendations are not binding on the The Competition Bureau treats applications for immunity and PPSC or on the court. Successful leniency applicants will receive leniency as confidential until charges are laid and disclosure is reductions in fines and sentences of up to 50 per cent. Immunity provided to the accused. However, information provided to the may also be offered to the current directors, officers and employees Bureau at the proffer stage of its Immunity and Leniency Programs of “second in” leniency applicants. may not be protected from disclosure to other accused persons by settlement privilege if there is no risk of prejudice to the party whose The first leniency applicant is eligible for a reduction of 50 per cent information it is. of the fine that would otherwise have been recommended, provided that the applicant meets the requirements of the leniency programme, When the Competition Bureau seeks a search warrant or section 11 including providing full, frank, timely and truthful cooperation. order based on information obtained from an immunity or leniency The second leniency applicant is eligible for a reduction of 30 applicant, the Bureau seeks (and invariably obtains) a sealing order per cent of the fine that would have otherwise been recommended protecting the identity of the applicant.

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The Competition Bureau expects an immunity or leniency applicant of responsibilities between the Competition Bureau as investigator to provide it with consent – or a “waiver” – to communicate with and the DPP as prosecutor, negotiations toward a resolution are foreign competition enforcement agencies where the leniency unlikely to be entertained before the Bureau’s investigation is applicant has made a similar application. Such waivers are to be complete, except in the case of leniency applicants. provided immediately and are expected to cover both substantive It is the PPSC that has the authority to negotiate and approve plea and procedural information. bargains. Discussions will typically involve the Competition Private litigants can obtain evidence collected by the Competition Bureau, however. Bureau, but they must seek a court order in order to do so. The A settlement involves a guilty plea in court followed by a joint Supreme Court of Canada has ruled that the Competition Act does submission on sentencing. The court will review the proposed not protect wiretap intercepts as confidential information under

sentence and can reject it if it considers that it is not in the public Canada section 29 of the Act, though this ruling may be limited to instances interest and impose a different sentence. where the parties to the civil litigation are the same as those in the criminal proceeding, and where disclosure was already made The broad trend in Canada is toward higher fines and longer to the defendants in the criminal proceeding. Since the Supreme sentences for competition offences. Court’s decision, at least one lower court has held that the right of disclosure to civil litigants does not extend to information collected 7 Appeal Process by the Bureau from third parties, as this information is subject to public interest privilege. Moreover, the Supreme Court has held that Competition Bureau officers cannot be made to testify on discovery 7.1 What is the appeal process? in follow-on damages actions. Both the offender and the DPP can appeal from the verdict of the 4.5 At what point does the ‘continuous cooperation’ superior court to the court of appeal for the province in which the requirement cease to apply? trial was held, or to the Federal Court of Appeal if the trial was held before the Federal Court of Canada. The offender can appeal as of The continuous cooperation requirement ceases to apply at the right from a conviction on questions of law and mixed fact and law, conclusion of the Competition Bureau’s investigation and the but needs leave to appeal on questions of fact or from the sentence. conclusion of criminal prosecutions and all appeals therefrom. The DPP’s appeal rights are more limited. The decision of the court of appeal can be appealed to the Supreme Court of Canada. If there is a dissenting opinion in the court of 4.6 Is there a ‘leniency plus’ or ‘penalty plus’ policy? appeal, the appeal is as of right. Otherwise, leave is required. The Supreme Court only grants leave in cases that it considers raise Leniency applicants can also obtain immunity for offences if they issues of national importance. are the first to disclose information relating to another offence. This concept is known as “Immunity Plus”. Immunity Plus encourages Committal for trial following a preliminary inquiry is not appealable, targets of ongoing investigations to consider whether they may but can be challenged by certiorari on very limited grounds relating qualify for immunity for other offences, or the same offence in other to jurisdiction and fairness of the proceeding. markets. While the target will not receive immunity for the first offence, it will receive an additional discount on top of the usual 7.2 Does an appeal suspend a company’s requirement to leniency discount for that offence. This is the “Plus”. pay the fine?

5 Whistle-blowing Procedures for There is no automatic suspension of the requirement to pay the fine. The appeal court can order the suspension of any obligation to pay Individuals fines, restitution, etc., pending the determination of the appeal.

5.1 Are there procedures for individuals to report cartel 7.3 Does the appeal process allow for the cross- conduct independently of their employer? If so, examination of witnesses? please specify. Generally, no. Witnesses are cross-examined at the preliminary Yes. Individuals can apply for immunity or leniency in the same inquiry and then again at trial. In exceptional circumstances, the manner as corporations. An individual who is the first-in leniency appeal court may allow an appellant to tender fresh evidence as applicant receives special treatment: he or she will not be prosecuted part of an appeal, where the evidence was not previously available. for an offence. Where the appeal court allows fresh evidence, it may also allow The Competition Act’s whistleblowing provisions require the cross-examination of witnesses. Competition Bureau to keep the identity of whistleblowers confidential, and prohibit reprisals against whistleblowers. 8 Damages Actions 6 Plea Bargaining Arrangements 8.1 What are the procedures for civil damages actions for loss suffered as a result of cartel conduct? Is the 6.1 Are there any early resolution, settlement or plea position different (e.g. easier) for ‘follow-on’ actions bargaining procedures (other than leniency)? Has as opposed to ‘stand alone’ actions? the competition authorities’ approach to settlements changed in recent years? The Competition Act contains a statutory cause of action permitting anyone who has suffered a loss caused by criminal conduct under Plea bargaining is not formalised in Canada. Because of the division the Act, including price-fixing, to sue for damages.

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Plaintiffs typically also plead various ancillary common law and equitable causes of action in bringing private actions under the 9 Miscellaneous Competition Act. Since these other causes of action are not available in the Federal Court, private actions are almost always commenced 9.1 Please provide brief details of significant recent or in provincial superior courts. imminent statutory or other developments in the field The Competition Act provides that proof of a criminal conviction of cartels, leniency and/or cartel damages claims. can be used as proof of the offence in a subsequent private action. Thus follow-on actions are easier. Parliament enacted major changes to the Competition Act in 2009, including: ■ The current dual track approach to conspiracy, involving a Canada 8.2 Do your procedural rules allow for class-action or per se criminal offence of price fixing, market allocation and representative claims? production fixing (s. 45), and a civil remedy for other anti- competitive agreements (s. 90.1). These provisions came Private actions can be structured as class actions in any of Canada’s into force in 2010. 14 legal jurisdictions (10 provinces, three territories, and the Federal ■ Price maintenance was decriminalised, but can be prohibited Court), although each jurisdiction has its own particular rules. in particular cases if competition is adversely affected. In 2013, the Competition Bureau obtained its first guilty verdict in 8.3 What are the applicable limitation periods? a contested conspiracy trial in many years when three individuals were convicted of fixing retail gasoline (petrol) prices after a trial. As the conduct predated the new conspiracy provisions, the Crown Private actions under the Competition Act must be brought within had to prove that the accused conspired to lessen competition two years of the later of when the conduct was engaged in or when unduly, the conspiracy provision in effect before 2010. criminal proceedings were finally disposed of. Two appellate courts have held that this limitation period can be extended by the doctrine In 2015, however, the Bureau suffered two major losses. First, a of discoverability. jury acquitted several individuals and companies that were charged with rigging bids for federal government contracts. Then, the PPSC Ancillary causes of action, such as the torts of civil conspiracy stayed charges against several accused in the chocolate price-fixing and unlawful interference with economic relations, are subject to prosecution. provincial statutes of limitations, which in most provinces are two In June 2015, the Competition Bureau published a revised years from the date of discovery. Corporate Compliance Programs bulletin. The bulletin sets out basic requirements for a credible and effective corporate compliance 8.4 Does the law recognise a “passing on” defence in programme. It also provides that the Bureau will take into civil damages claims? consideration the existence of a credible and effective compliance programme as a mitigating factor when making recommendations In principle, no, but in practice, yes. The Supreme Court of Canada on sentencing. The existence of a compliance programme will has rejected the passing on defence. In 2013, that Court ruled that also be taken into account in determining whether a matter should indirect purchasers, including consumers, have standing to assert be pursued along a criminal or civil track (where both options claims for damages suffered as a result of price-fixing or other are available) and in assessing the magnitude of Administrative criminal anti-competitive conduct. The rejection of the passing- Monetary Penalties in a reviewable matter. on defence does not prevent indirect purchasers from asserting that In November 2015, the Competition Bureau published a Competition unlawful overcharges were passed on to them. As a practical matter, and Compliance Framework bulletin. The bulletin outlines the plaintiff class action counsel in Canada tend to advance direct Bureau’s various approaches to promoting compliance with the and indirect purchaser claims in the same lawsuit. The court can Competition Act, through outreach, enforcement, and advocacy. apportion the damages among the various distribution levels and In July 2016, the Bureau and the American Department of Justice make adjustments to avoid double recovery. agreed that an automotive manufacturer’s guilty plea in the United States would cover its participation in an international bid-rigging 8.5 What are the cost rules for civil damages follow-on conspiracy affecting both the United States and Canada. This claims in cartel cases? coordinated approach was employed because the conduct primarily targeted US consumers, and the fine levied by the US court was deemed by the Bureau to effectively address the adverse effects of Canada has a “loser pays” legal system whereby a successful party the conduct in Canada. in most cases is entitled to recover a portion of its legal costs from the unsuccessful party. The Competition Act also provides for The Bureau plans to publish draft revisions to its Immunity and recovery of the costs of the investigation. Leniency Programme in 2016/2017. It is unknown at this time what changes are being contemplated by the Bureau.

8.6 Have there been any successful follow-on or stand alone civil damages claims for cartel conduct? If there 9.2 Please mention any other issues of particular interest have not been many cases decided in court, have in your jurisdiction not covered by the above. there been any substantial out of court settlements? There are no other issues to report. Settlements of price-fixing class actions now total around $630 million in Canada. To date, no price-fixing class action has gone to Acknowledgment trial. A few claims by individual plaintiffs for damages under the Competition Act have gone to trial. Most have been unsuccessful due The authors would like to acknowledge the assistance of their to the high burden of proof under pre-2010 conspiracy provisions. colleagues David Vaillancourt, Kyle Taylor, and Fiona Campbell in the preparation of this chapter.

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W. Michael G. Osborne Michael Binetti Affleck Greene McMurtry LLP Affleck Greene McMurtry LLP 365 Bay Street, Suite 200 365 Bay Street, Suite 200 Toronto, Ontario, M5H 2V1 Toronto, Ontario, M5H 2V1 Canada Canada

Tel: +1 416 360 5919 Tel: +1 416 360 0777 Fax: +1 416 360 5960 Fax: +1 416 360 5960 Email: [email protected] Email: [email protected] URL: www.agmlawyers.com URL: www.agmlawyers.com Canada Michael Osborne leads Affleck Greene McMurtry LLP’s competition Michael Binetti is a litigator with a focus on competition law, commercial law team. He also practises commercial litigation, international litigation and administrative law. A partner of Affleck Greene McMurtry arbitration, and anti-corruption law. LLP, he appears regularly in all levels of court in Ontario. Michael regularly represents clients targeted by Competition Bureau Michael represents clients who are targeted by the Competition cartel and other investigations, as well as defendants in class actions. Bureau and defends multinational corporations in Canadian class He has also acted as trial and appellate counsel before all levels of actions, often as part of larger, multijurisdictional class actions. court, the Competition Tribunal, and domestic and international arbitral Michael was called to the Bar in Ontario in 2006 after articling with tribunals. Affleck Greene McMurtry LLP. He graduated with a Juris Doctor from Michael was called to the Bar in 1998, after completing his articles as the French Common Law Section of the University of Ottawa, Canada. a Law Clerk to the late Justice John Sopinka of the Supreme Court He obtained an Honours Bachelor of Arts from Glendon College of of Canada. He received his LL.B. from Dalhousie University in 1996, York University in Toronto and was a visiting student at the Institut his M.A. from the University of Toronto in 1991, and his B.A. from the d’Études Politiques de Rennes in France. University of Saskatchewan in 1988. Michael is an active member of the Canadian Bar Association and the Michael is an active member of several legal associations. He writes Advocates’ Society and is proud to be part of Big Brothers and Big and speaks frequently on competition law and commercial litigation Sisters of Toronto. topics.

Affleck Greene McMurtry LLP is a highly respected competition law and commercial litigation boutique firm. AGM’s competition law team is one of Canada’s leading competition law practices. We defend businesses and individuals facing Competition Bureau inquiries and criminal and administrative prosecutions in the courts and the Competition Tribunal. We act for businesses involved in price-fixing class actions and other private litigation. We prepare merger notifications. We also help businesses comply with the Competition Act by providing practical advice. AGM’s commercial litigation practice extends to all aspects of commercial litigation and arbitration. We are accomplished litigators with extensive trial and appeal experience before courts, arbitrators, administrative tribunals and regulatory authorities. We have particular expertise in handling complex cases and legal emergencies such as injunction proceedings.

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China Susan Ning

King & Wood Mallesons Hazel Yin

In addition, the AML prohibits certain vertical agreements. Article 1 The Legislative Framework of the Cartel 14 prohibits the following monopoly agreements between business Prohibition operators and trading counterparts: 1. fixing the price of commodities for resale to third parties; 1.1 What is the legal basis and general nature of the 2. fixing the lowest price for resale of commodities to third cartel prohibition, e.g. is it civil and/or criminal? parties; and 3. any other monopoly agreements as defined by the anti- Currently, a number of different laws contain different provisions monopoly enforcement agency of the State Council. governing cartel arrangements in the PRC. These laws include the Article 15 sets out conduct that is exempt from Articles 13 and 14 Anti-unfair Competition Law of 1993, the Price Law of 1998, the above. Where a business operator is able to prove that conduct falls Bidding Law of 2000 and the Anti-monopoly Law of 2008 (the under any of the following categories, articles 13 and 14 will not “AML”). apply: Among all the laws containing cartel provisions, the AML, which 1. where the objective is for technological improvement or became effective as of 1 August 2008, is regarded as the main research and development of new products; legislation that governs cartel arrangements in the PRC. 2. where the objective is to raise product quality, lower costs, Cartel arrangements do not attract criminal liability in the PRC. improve efficiency, standardise product specifications and Where a business operator has violated the AML by entering standards or implement specialisation; into a cartel arrangement, the National Development and Reform 3. where the objective is to raise business efficiency of small Commission (“NDRC”, in charge of price cartels) and the State and medium business operators and to strengthen the Administration for Industry & Commerce (“SAIC”, in charge of competitiveness of small and medium business operators; non-price-related cartels) may impose administrative sanctions. 4. where the objective is to fulfil public interest, such as energy conservation, environmental protection and disaster relief, A business operator that has violated the AML by entering into a etc.; cartel arrangement which causes others to suffer losses shall also bear civil liability pursuant to the AML. 5. where the objective is to alleviate a serious drop in sale quantity or obvious overproduction in times of recession; 6. where the objective is to protect the legitimate interests in 1.2 What are the specific substantive provisions for the foreign trade and economic cooperation; or cartel prohibition? 7. any other circumstances stipulated by the laws and the State Council. According to the AML, a “cartel” refers to agreements, decisions, A business operator relying on the exceptions from item (1) to item or other collaborative acts to eliminate or restrict competition. The (5) must also prove that the agreement it has entered into would not AML prohibits specific types of horizontal cartel arrangements. severely restrict competition in the relevant markets and that the Article 13 prohibits the following monopoly agreements between agreement would bring about benefits for consumers. competing business operators: As detailed rules to Article 13(1) of the AML, Article 7 of the Rules 1. fixing or altering the prices of commodities; on Anti-price Monopoly (issued by NDRC) prohibits competing 2. restricting the production quality or sale quality of business operators from entering the following agreements: commodities; 1. fixing or altering the price level of commodities or services; 3. dividing sales markets or procurement markets of raw materials; 2. fixing or altering the price-change margin; 4. restricting the procurement of new technologies and new 3. fixing or altering processing fees, discounts or other charges equipment or restricting the development of new technologies that have an impact on prices; and new products; 4. applying an agreed price as the basis for transacting with a 5. jointly boycotting transactions; and third party; 6. any other monopoly agreements as defined by the anti- 5. agreeing to apply a standard formula as a basis to calculate monopoly enforcement agency of the State Council. prices; 6. agreeing that a price shall not be changed without the consent of other business operators participating in the agreement; or

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7. applying other measures to fix or alter a commodity price in a 4. within the scope of its authorisation, the provincial price disguised form. authority may delegate the municipal price authorities to As detailed rules to Article 13(2)-(5), Articles 4-7 of the Rules on investigate the suspected price-related monopoly conducts; the municipal price authorities shall not sub-delegate other Prohibition of Acts involving Monopoly Agreement (issued by administrative agencies, organisations or individuals to SAIC) further elaborate that competing business operators shall not conduct such investigation. enter into the following agreements: Article 3 of the Provisions and Procedures on Investigation and 1. restricting the production volume of commodities, or Handling Cases of Monopoly Agreements and Abuse of Dominant restricting the production volume of specific kinds or types of Market Position by Administration for Industry and Commerce commodities by means of limiting production volume, fixing establishes that the provincial Administration of Industry and

production volume, stopping production, etc.; China Commerce (“AIC”) may be authorised, on a case-by-case basis, 2. restricting the sales volume of commodities or restricting to investigate and punish the monopolistic acts. The authorised the sales volume of specific kinds or types of commodities by means of refusing to supply, limiting the supply of Provincial AIC shall not delegate the authority to lower-level AICs. commodities, etc.; 3. segmenting the sales regions, sales targets or categories and 1.4 What are the basic procedural steps between the volume of commodities; opening of an investigation and the imposition of 4. segmenting the procurement regions, categories and volume sanctions? of raw materials, such as (basic) raw materials, semi-finished products, parts and components, and related equipment, etc.; According to the AML, the Provisions and Procedures on 5. segmenting the suppliers of raw materials, such as the (basic) Investigation and Handling Cases of Monopoly Agreements raw materials, semi-finished products, parts and components, and Abuse of Dominant Market Position by AIC, the Rules for and related equipment, etc.; Prohibition of Monopoly Agreements by AIC, and the Rules on 6. restricting the procurement or use of new technologies or Administrative Enforcement Procedure regarding Anti-price new processes; Monopoly, the following are the basic procedural steps in an anti- 7. restricting procurement, lease or use of new equipment; monopoly investigation: 8. restricting investment in R&D of new technologies, new ■ Accepting the reporting materials and verifying the content processes or new products; of the reporting materials. 9. refusing to use new technologies, new processes or new ■ Initiating an investigation: equipment; ■ An investigation is usually initiated by reporting on cartel 10. refusing to adopt new technical standards; arrangements. 11. jointly refusing to supply or sell commodities to particular ■ SAIC or NDRC may themselves initiate an investigation business operators; into an alleged cartel if they believe that a business operator has violated Article 13 or 14 of the AML. 12. jointly refusing to procure or sell the commodities of ■ Investigation: particular business operators; or According to Article 39 of the AML, SAIC or NDRC may 13. jointly preventing particular business operators from dealing adopt the following measures in the investigation of an with their competitors. alleged monopolistic act: ■ enter the business premises or any other relevant premises 1.3 Who enforces the cartel prohibition? of the business operator which is under investigation to carry out inspection; There are two anti-monopoly enforcement agencies that enforce ■ question the business operator which is under cartel provisions: (1) the National Development and Reform investigation, the interested parties or any other related Commission (“NDRC”), which is responsible for investigating organisations or individuals and require them to provide and sanctioning the price-related cartel arrangements; and (2) the the relevant explanation; State Administration for Industry and Commerce (“SAIC”), which ■ inspect or make copies of the relevant documents and is responsible for investigating and sanctioning non-price-related materials, such as certificates, agreements, accounts cartel arrangements. books, business correspondence, and electronic data, of the business operator which is under investigation, the Article 10(2) of the AML establishes that the anti-monopoly interested parties or any other related organisations or enforcement agencies of the State Council may, pursuant to work individuals; requirements, delegate anti-monopoly enforcement tasks to the ■ seal up or retain the relevant evidence; or local corresponding agencies of the People’s Governments of ■ enquire into the bank accounts of the business operator. the provinces, autonomous regions and centrally administered ■ Commitments may be accepted: municipalities. ■ According to Article 45 of the AML, where a business Article 3 of the Rules on Administrative Enforcement Procedure operator under investigation undertakes or commits to regarding Anti-price Monopoly specifies the following jurisdictional eliminate the allegedly infringing conduct within a period hierarchy regarding price monopoly: approved by NDRC or SAIC, these authorities may 1. NDRC is in charge of nationwide enforcement; suspend investigations. 2. the provincial price authorities delegated by NDRC are in ■ Resumption of investigations: NDRC or SAIC may resume charge of enforcement within their respective administrative investigations pursuant to the following circumstances: regions; ■ should the business operator fail to perform the 3. the interprovincial price monopoly cases are to be investigated promised undertaking; and adjudicated by provincial price authorities designated by ■ should there be significant changes to the facts on NDRC; and which the decision to suspend the investigation is based; or

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■ if the decision to suspend the investigation was based on 23 March 2016 the draft Guidelines on Anti-Monopoly in the on incomplete or untrue information provided by the Automobile Industry for public comments (hereinafter referred to business operator. as “Draft Automobile Industry Guidelines”). ■ On 2 February 2016, NDRC issued the draft Guidelines For exemptions which are available to all sectors, please refer to the for Operator Commitment in Anti-monopoly Cases response to question 1.2. for public comments (hereinafter referred to as “Draft Commitment Guidelines”), which provide specific procedures for commitment applications and also set out 1.6 Is cartel conduct outside your jurisdiction covered by the legal consequences for suspension and termination of the prohibition? an investigation during a commitment procedure. China ■ Leniency considerations: Yes. Article 2 of the AML states that the AML applies to ■ On 2 February 2016, NDRC issued the draft Guidelines monopolistic conduct outside the PRC as long as such conduct for the Application of Leniency Programme to Cases eliminates or restricts market competition in the PRC. involving Horizontal Monopoly Agreements for public comments (hereinafter referred to as “Draft Leniency Guidelines”), which specify the required documents, 2 Investigative Powers materials and procedures when business operators apply for leniency. ■ Determining the specific amount of fine: 2.1 Summary of general investigatory powers. ■ According to Art 10(3) of the Rules for Prohibition of Monopoly Agreements by AIC, SAIC must take the Table of General Investigatory Powers following factors into account when determining the Investigatory Power Civil/Administrative Criminal specific amount of the fine: Order the production ■ the nature of the illegal acts; of specific documents Yes N/A ■ the details of the illegal acts; or information ■ the degree of illegality; and Carry out compulsory interviews with Yes N/A ■ the duration of the illegal acts. individuals ■ The Draft Guidelines on the Identification of Illegal Carry out an Proceeds Derived by Operators from Monopolistic unannounced search Yes N/A Practices and the Determination of Fines issued by of business premises NDRC for public comments on 17 June 2016 (hereinafter Carry out an unannounced referred to as “Draft Fines Guidelines”) provide the basic Yes N/A methods for determining a fine. search of residential premises ■ According to the Draft Fines Guidelines, the portion ■ Right to ‘image’ of fines and the sales volume of the operator inthe computer hard drives Yes N/A preceding year are essential elements for determining the using forensic IT amount of fines. Typically, Article 16 of the Draft Fines tools Guidelines further clarifies that the enforcement agency ■ Right to retain Yes N/A shall determine the above-mentioned two elements before original documents calculating the amount of fines. First, the enforcement ■ Right to require agency shall determine the sales volume of the preceding an explanation Yes N/A year of the operator, who is in violation of the AML; of documents or second, the enforcement agency shall consider all the information supplied relevant factors including the nature and duration of such ■ Right to secure illegal activity to determine a final proportion of fines. premises overnight Yes N/A ■ Determinations: (e.g. by seal) Article 44 of the AML provides that, at the end of an investigation, should NDRC or SAIC conclude that the conduct amounts to a monopoly agreement, they will make 2.2 Please list specific or unusual features of the a determination pursuant to the AML and make a public investigatory powers referred to in the summary table. announcement. The approach towards the searching of business premises by NDRC or SAIC is different from the searching of business premises 1.5 Are there any sector-specific offences or exemptions? by investigators in public security departments and People’s Procuratorates. The administrative officers of NDRC or SAIC Yes. Article 56 of the AML provides that the AML shall not apply may obtain relevant information via observation, and may inspect to cooperative or collaborative acts between agricultural producers or make copies of relevant information with the cooperation of the and rural economic organisations in business activities, such as parties under investigation. However, they cannot break the locks the manufacture, processing, sale, transportation and storage of on filing cabinets or locked doors. agricultural products. Apart from the above, currently there are no sector-specific offences 2.3 Are there general surveillance powers (e.g. bugging)? or exemptions available under the AML. In the meantime, NDRC is in the process of drafting sector-specific No laws or regulations provide SAIC or NDRC with general rules. For example, in the automobile industry, NDRC issued surveillance powers to carry out investigations.

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to state their opinion. The anti-monopoly enforcement agency 2.4 Are there any other significant powers of shall verify the facts, reasons and evidence raised by the business investigation? operator which is under investigation and the interested parties. AML investigations shall also be in compliance with the Yes. According to Article 39 of the AML, SAIC or NDRC can Administrative Penalty Law by which the hearing procedure is enquire into the bank accounts of the business operator. They provided. According to Article 42 of the Administrative Penalty cannot, however, seize or freeze the bank accounts of the business Law, the anti-monopoly enforcement agencies, before making a operator. decision on the administrative punishment, such as ordering a large fine, shall advise the party of the right to a hearing. If the party so

2.5 Who will carry out searches of business and/or requests, the anti-monopoly enforcement agencies shall organise the China residential premises and will they wait for legal hearing. The party shall not be charged for convening such hearing. advisors to arrive?

2.8 Are there sanctions for the obstruction of The administrative officials from SAIC or NDRC will carry out investigations? If so, have these ever been used? searches of premises. Has the authorities’ approach to this changed, e.g. There are no legal provisions under the AML that mandate the become stricter, recently? administrative officials to wait for legal advisors of the business operator to arrive. Article 52 of the AML sets out the following administrative liabilities for organisations and individuals that interrupt an anti- monopoly investigation: 2.6 Is in-house legal advice protected by the rules of privilege? 1. Being ordered by the anti-monopoly enforcement agencies to make a correction within a time limit. The concept of “attorney-client privilege” does not exist under 2. Paying fines: PRC law. In other words, confidential communications between an ■ Individuals are subject to fines of no more than RMB attorney and a client are not privileged. 20,000. Where the case is serious, individuals may be subject to fines ranging from RMB 20,000 to RMB Article 33 of the Lawyers’ Law provides that attorneys must protect 100,000. the confidentiality of their clients’ private information, and if they are aware of any of their clients’ trade secrets they must also protect ■ Organisations are subject to fines of no more than RMB 200,000. Where the case is serious, organisations may them. However, this article does not exempt attorneys from being be subject to fines ranging from RMB 200,000 to RMB 1 forced to disclose this information in a judicial action. For example, million. according to Article 67 of the Civil Procedure Law, a court can order an attorney to testify about a client’s private information or trade In addition, organisations or individuals shall be subject to criminal secrets in a judicial proceeding. liability where they interrupt an anti-monopoly investigation and the interruption thereof constitutes a criminal offence. In addition, PRC law does not protect any legal document and correspondence that is marked “confidential and privileged”. “Criminal offence” refers to the crime of obstructing a functionary This fact shows that attorneys and their clients are not exempt of a State organ. According to Article 277 of the Criminal Law, from disclosing information that would otherwise be protected by whoever, by means of violence or threat, obstructs a functionary of attorney-client privilege outside of the PRC. a State organ from carrying out his functions according to the law shall be sentenced to fixed-term imprisonment of no more than three years, criminal detention, or public surveillance or a punitive fine. 2.7 Please list other material limitations of the On 18 September 2015, Anhui Administration for Industry and investigatory powers to safeguard the rights of defence of companies and/or individuals under Commerce imposed a fine of RMB 200,000 on Sunyard System investigation. Engineering Co. Ltd (“Sunyard”) for its refusal to provide relevant materials to the authority in an anti-monopoly investigation, When the administrative officials of SAIC or NDRC carry out an pursuant to Article 42 and Article 52 of the AML and Article 14 on-site investigation, they will show their authority to carry out the of the Provisions of the Industry and Commerce Administration investigation. Such an authority document will describe the scope on the Procedures for the Investigation and Penalties of Monopoly of the investigation, and the administrative officials shall not carry Agreement Cases and Abuse of Dominant Market Position Cases. out the investigation beyond that scope. In addition, Article 40 of the AML provides, when the anti-monopoly 3 Sanctions on Companies and Individuals enforcement agency investigates an alleged monopoly act, that the number of enforcement personnel assigned to the case shall not be less than two and they shall present their enforcement identity pass. 3.1 What are the sanctions for companies? Enforcement personnel shall keep written records of questioning and investigation and the interviewees shall sign the written records. According to Article 46 of the AML, where a business operator Article 41 of the AML provides that the anti-monopoly enforcement has violated the provisions of the AML by entering into and agency and its personnel shall be obligated to keep confidential the implementing a monopoly agreement, NDRC or SAIC shall order commercial secrets that have come to their knowledge during the the business operator: enforcement process. 1. to stop the illegal act; According to Article 43 of the AML, the business operator which 2. to confiscate the illegal income; and is under investigation and the interested parties shall have the right 3. to pay a fine ranging from 1% to 10% of the sale value of the preceding year.

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Where a monopoly agreement has been concluded but has yet to be it is the latter, the company could pay the legal costs and/or financial implemented, a fine of no more than RMB 500,000 may be imposed. penalties imposed on that employee, whether former or current, as Where an industry association has violated the provisions of the no rules/regulations prevent the company from doing so. AML in organising the business operators in the industry to enter into a monopoly agreement, NDRC or SAIC may impose a fine 3.6 Can an implicated employee be held liable by his/her of no more than RMB 500,000; where the case is serious, the employer for the legal costs and/or financial penalties registration and administrative authorities for social organisations imposed on the employer? may de-register the industry association pursuant to the law. Courts in China hold different attitudes toward the issue of

China whether an employer could hold an employee liable for the loss 3.2 What are the sanctions for individuals (e.g. criminal sanctions, director disqualification)? he/she caused to that employer. In certain courts, an implicated employee could be held liable by his/her employer for the loss (which may include legal costs and/or financial penalties) According to Article 12 of the AML, business operators referred to imposed on the employer, provided that in the Code of Conduct in the AML shall mean natural persons, legal persons and any other (or similar policies) which has gone through a democratic and organisations engaged in the production and sales of commodities public procedure (民主与公示程序), it has been specified that or provision of services. Therefore, the sanctions stated in Article the employee’s conducts at issue are prohibited and in case of 46 of the AML may be applicable to individuals if they constitute violation, the implicated employee would be held liable for business operators. any loss caused. In other courts, such a claim by the employer However, there are no administrative or criminal penalties imposed could not be supported even if the qualified Code of Conduct (or on employees of a company under the AML, unless they obstruct similar policies) is available. In any event, we are not aware of the investigation. any cases where the employer has successfully held its employee liable for the loss as a result of the AML enforcement or any other 3.3 Can fines be reduced on the basis of ‘financial administrative penalties which are attributable to such employee. hardship’ or ‘inability to pay’ grounds? If so, by how much? 4 Leniency for Companies Neither the AML nor its implementing rules stipulate that the fines can be reduced on the basis of a difficult financial situation of the 4.1 Is there a leniency programme for companies? If so, business operators. please provide brief details. For example, according to Article 10(3) of the Rules for the Prohibition of Monopoly Agreements by AIC, SAIC must take Article 46 of the AML provides the legal basis for a leniency the following factors into account when determining the specific regime, which gives NDRC and SAIC discretion to reduce or waive amount of the fine: punishments for business operators participating in a cartel if they: 1. the nature of the illegal acts; 1. voluntarily report the relevant facts; and 2. the details of the illegal acts; 2. provide material evidence. 3. the degree of illegality; and The basic elements of the leniency regime, pursuant to the Rules 4. the duration of the illegal acts. for Prohibition of Monopoly Agreements by AIC, are provided as follows: Financial hardship or inability to pay is not a factor for SAIC to consider when determining the fine. 1. In order to receive a full exemption from sanction by SAIC, business operators should: However, if a business operator voluntarily ceases acts amounting ■ be ‘first in’ in terms of reporting; to monopoly agreements, according to Article 10(5) of the Rules for Prohibition of Monopoly Agreements by AIC, the AIC may, ■ provide material evidence; and at its discretion, mitigate or exempt the penalty for such business ■ offer thorough and voluntary cooperation during operator. investigations. 2. Other business operators who are not ‘first in’ may not receive a full exemption but they may receive lesser punishments. 3.4 What are the applicable limitation periods? SAIC possesses the discretion to determine the parameters of these ‘lesser punishments’. According to Article 29 of the Law of the People’s Republic of China The organisers or initiators of a monopoly agreement, or business on Administrative Penalty (“Administrative Penalty Law”), where operators who force others to participate in a monopoly agreement by an illegal act is not discovered within two years of its commission, an means of threats, are not eligible for benefits from the leniency regime. administrative penalty shall no longer be imposed, unless otherwise Similarly, Article 13 of the Procedural Rules on Administrative prescribed by law. As neither the AML nor its implementing rules Law Enforcement against Price Monopoly issued by NDRC also prescribe any exceptions on the limitation periods, it is understood specifies the leniency system. For the first one that reports and that the limitation period prescribed in Article 29 of Administrative provides key evidence, the price authority may completely exempt Penalty Law also applies to the prosecution of cartel arrangements. it from penalty; for the second one that reports and provides key evidence, the price authority may grant exemption of no less than 3.5 Can a company pay the legal costs and/or financial 50% of the penalty; and for others that report and provide key penalties imposed on a former or current employee? evidence, the price authority may grant exemption of no more than 50% of the penalty. There are no administrative or criminal penalties to be imposed on Under the Procedural Rules on Administrative Law Enforcement employees under the AML, unless they obstruct an investigation. If against Price Monopoly issued by NDRC, key evidence refers to

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evidence that is pivotal for the price authority to establish a price- reports submitted by business operators for leniency applications related cartel. hereunder and documents generated therefore shall be kept in special archives by the enforcement agency and shall not be disclosed to any third party without the consent of the business operators concerned. 4.2 Is there a ‘marker’ system and, if so, what is required to obtain a marker? However, Draft Leniency Guidelines do not specify for how long such leniency application shall be kept confidential. The draft Guidelines for the Application of Leniency Programme In addition, according to Article 16, no other agencies, organisations to Cases Involving Horizontal Monopoly Agreements (hereinafter or individuals may access the undisclosed information, which can referred to as the “Draft Leniency Guidelines”) issued by NDRC be understood as not relevant documentation to leniency applicants, dated on 2 February 2016 provide a basis framework for the Chinese and shall be used in private litigations. China “market” system. Article 7 of the Draft Leniency Guidelines specifies how a “marker” 4.5 At what point does the ‘continuous cooperation’ works in the context of the AML. According to this article, “a requirement cease to apply? preliminary report” is equivalent to a “marker”. Undertakings that temporarily cannot provide complete materials when they apply for According to Article 12 of the Rules for Prohibition of Monopoly leniency may submit a preliminary report regarding the monopolistic Agreements by AIC, only when the first voluntary reporter agreements to the enforcement agencies. Undertakings should thoroughly and voluntarily cooperates with the investigations, may explicitly confess in the preliminary report that they have engaged it be exempt from penalty. Therefore, the “continuous cooperation” in monopolistic agreements in violation of the AML, and briefly may ultimately influence the determination of exemption and degree describe the basics in relation to the conclusion and implementation of mitigation of penalties. of the monopolistic agreements, including the participants to the monopolistic agreements, the products or services involved, and 4.6 Is there a ‘leniency plus’ or ‘penalty plus’ policy? the dates when these monopolistic agreements were concluded and implemented. Currently, there is no “leniency plus” or “penalty plus” policy under The enforcement agencies will provide written comments upon the AML. It is unclear whether a similar procedure may also be receiving the preliminary reports, requiring undertakings to submit adopted by NDRC or SAIC in practice. supplemental materials within a prescribed period. Commonly, that period should not be more than 30 days, and it can be extended up to 60 days under special circumstances. If undertakings have submitted 5 Whistle-blowing Procedures for the required supplemental materials within a prescribed period, the Individuals enforcement agencies will define the time when they received the preliminary reports as the time when undertakings made leniency applications. If undertakings fail to submit required supplemental 5.1 Are there procedures for individuals to report cartel materials within a prescribed period, the enforcement agencies will conduct independently of their employer? If so, please specify. hold that the undertakings have not applied for leniency. If the materials submitted by undertakings that made formal leniency Article 38 of the AML provides that any organisation and individual applications for the first time need further additions or corrections, shall have the right to report an alleged monopoly act to the anti- and if the submitted materials are sufficient for a description of the monopoly enforcement agency. The anti-monopoly enforcement basic information of the monopolistic agreements, the enforcement agency shall keep the identity of the informant confidential. agencies will take them as preliminary reports, and state that in the written comments provided to undertakings. Article 5 of the Provisions and Procedures on Investigation and Handling Cases of Monopoly Agreements and Abuse of Dominant Market Position by SAIC provides that any entity or person is 4.3 Can applications be made orally (to minimise any entitled to report suspected anti-monopoly law violations to SAIC, subsequent disclosure risks in the context of civil and SAIC shall keep the reporter confidential. damages follow-on litigation)? The report of a suspected anti-monopoly law violation should be in Article 8 of Draft Leniency Guidelines specifies that business writing, and should include the following materials: operators may submit leniency application reports or preliminary 1. Basic information of the reporter, including the name, address, reports orally or in writing. For oral reports, the enforcement and contact information in the case of a natural person, and agency shall make written records, which shall be signed by the the name, address, contact information, and industries mainly engaged in and major products or services provided in the authorised representatives of the business operators. case of a business operator. 2. Basic information of the suspected violator, including the 4.4 To what extent will a leniency application be treated name, address, and industries mainly engaged in and major confidentially and for how long? To what extent products or services provided. will documents provided by leniency applicants be 3. Relevant facts of the suspected violations, including facts disclosed to private litigants? relating to monopolistic conducts in violation of relevant laws, regulations or rules, and the time and place of the According to Article 38 of the AML, any organisation and individual suspected violation. shall have the right to report an alleged monopoly act to the anti- 4. Relevant evidence, including documentary evidence, physical monopoly enforcement agency and the anti-monopoly enforcement exhibits, testimonies, visual and audio materials, electronic agency shall keep the identity of the informant confidential. data and certification of examination, etc. Evidence shall Article 16 of Draft Leniency Guidelines provide to what extent a bear the signature of the evidence provider and the source of leniency application shall be kept confidential. All documents and the evidence shall be identified.

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5. Information on whether the same fact has been reported to enforcement agency belongs, or to file the application with SAIC any other administrative authority or filed with the People’s or NDRC, where appropriate. For example, if the decision is made Court. by the AIC of Guangdong province, the petitioner can either apply Article 5 and Article 6 of the Procedural Rules on Administrative for administrative review with Guangdong People’s Government, Law Enforcement against Price Monopoly issued by NDRC also or with SAIC. have similar provisions. If a petitioner does not accept the decision made by the administrative review organ, it can choose to file an application for award with the State Council, or to initiate an administrative lawsuit before a 6 Plea Bargaining Arrangements competent People’s Court. If the petitioner chooses the former, the

China award made by the State Council will be final. 6.1 Are there any early resolution, settlement or plea bargaining procedures (other than leniency)? Has 7.2 Does an appeal suspend a company’s requirement to the competition authorities’ approach to settlements pay the fine? changed in recent years?

Article 45 of the Administrative Penalty Law provides that if the Yes, as mentioned in question 1.4 above, Article 45 of the AML party refuses to accept the decision on administrative penalty provides that, during the process of investigation, NDRC or SAIC and applies for administrative review or brings an administrative may accept commitments from business operators in which the lawsuit, enforcement of the administrative penalty shall not be business operators undertake or commit to eliminate the allegedly suspended, except as otherwise prescribed by law. infringing conduct within a period approved by NDRC or SAIC. NDRC and SAIC may then suspend investigation of these business Article 44 of the Administrative Procedure Law provides that during operators. the legal proceedings, enforcement of the specific administrative act shall not be suspended. Enforcement of the specific administrative In addition, where business operators voluntarily cease the acts act shall be suspended under one of the following circumstances: amounting to monopoly agreements, the AIC may, at its discretion, mitigate or exempt the penalty for such business operators, 1. where suspension is deemed necessary by the defendant; according to Article 10(5) of the Rules for Prohibition of Monopoly 2. where suspension of enforcement is ordered by the People’s Agreements by AIC. However, NDRC rules do not have such Court at the request of the plaintiff because, in the view of the provisions. People’s Court, enforcement of the specific administrative act will cause irremediable losses and suspension of the In practice, both SAIC and NDRC have suspended or terminated enforcement will not harm public interests; or certain AML investigations. In November 2011, Zhejiang AIC 3. where suspension of enforcement is required by the provisions issued the decision to suspend the investigation against cartel of laws or regulations. conducts among several companies and Zhejiang Cixi Construction Project Inspection Association, as a result of the commitments made by the investigated parties would they will not engage in similar 7.3 Does the appeal process allow for the cross- conducts again. The investigation was terminated in March 2013 examination of witnesses? when Zhejiang AIC determined that the investigated parties had fulfilled their promises. Up to August 2017, there have been another There are no laws and regulations in China that specifically address nine cases where SAIC/AIC suspended the investigation, and seven cross-examination in an administrative proceeding. It is believed of them have been terminated (this statistic includes dominant that Articles 143 and 145 of the Supreme People’s Court’s judicial cases settled without sanctions). In terms of NDRC, the authority interpretation on the PRC Criminal Procedure touch on the issue of suspended the investigations against IDC, China Telecom and China cross-examination. However, it is only applicable to the criminal Unicom for their abusive conducts as a result of the rectification litigation. measures proposed by these investigated parties. It is unknown, however, whether these investigations have been terminated. 8 Damages Actions

7 Appeal Process 8.1 What are the procedures for civil damages actions for loss suffered as a result of cartel conduct? Is the position different (e.g. easier) for ‘follow-on’ actions 7.1 What is the appeal process? as opposed to ‘stand alone’ actions?

According to Article 53 of the AML, a party that disagrees with the Article 50 of the AML provides that business operators which decision of SAIC or NDRC may apply for an administrative review, implement monopoly acts and cause others to suffer losses therefrom or file an administrative lawsuit before the courts. To bemore shall bear civil liability pursuant to the law. specific, the party may either apply for an administrative review first and then bring an administrative lawsuit if it is unsatisfied with According to Article 1 of the Provisions of the Supreme People’s the result, or bring an administrative lawsuit directly without going Court on Several Issues concerning the Application of Law in the through the administrative review process. Trial of Civil Dispute Cases Arising from Monopolistic Conduct (the “Anti-monopoly Judicial Interpretation”), natural persons, If the decision is made by SAIC or NDRC, the petitioner should legal persons and other organisations can file civil lawsuits with file an administrative review application with SAIC or NDRC, the People’s Courts for disputes over losses caused by monopolistic respectively. conduct or violations of the AML by contractual provisions, bylaws If the decision is made by an enforcement agency at the provincial of industry associations, etc. level, the petitioner may choose to either file the application with The AML has established a parallel law enforcement system of the the People’s Government of the province to which the original administrative law enforcement and civil litigation. According to

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Article 2 of the Anti-monopoly Judicial Interpretation, both “stand arising from monopolistic conduct shall be calculated from the day alone” actions and “follow-on” actions are permitted. when the plaintiff knows or should have known of the infringement Because of the specialisation and complexity of the monopoly civil upon its rights and interests by the monopolistic conduct. disputes and the need for harmonisation of the judicial standard, Where the plaintiff reports the alleged monopolistic conduct to the according to Article 3 of the Anti-monopoly Judicial Interpretation, anti-monopoly enforcement agency, the statute of limitations is the jurisdiction over monopoly civil disputes of first instance shall be interrupted from the date of such a report. If the anti-monopoly with some of the Intermediate People’s Courts (“IPC”) and include enforcement agency decides not to open a case, decides to revoke a the IPCs of a city where the People’s Government of a province, case or decides to terminate investigation, the statute of limitations autonomous region, or municipality directly under the Central shall be re-calculated from the day when the plaintiff knows or

Government is located, or a city under separate state planning, or should have known of the decision not to open a case, decision to China the IPCs designated by the SPC. revoke a case, or decision to terminate investigation. If the anti- In addition, Article 3 of the Anti-monopoly Judicial Interpretation monopoly enforcement agency determines, after investigation, that provides that, with the approval of the Supreme People’s Court, a the alleged monopolistic conduct exists, the statute of limitations Basic People’s Court may have jurisdiction over civil monopoly shall be re-calculated from the day when the plaintiff knows or dispute cases as the court of first instance. should have known that the decision of the anti-monopoly law The Anti-monopoly Judicial Interpretation issued in May 2012 enforcement authority affirming the existence of monopolistic does not provide the evidentiary value of the decisions of AML conduct had come into force. enforcement authorities. Where the alleged monopolistic conduct has continued for more than So far, there has been only one follow-on antitrust private litigation, two years when the plaintiff files the lawsuit, if the defendant raises which was brought and settled in 2015. It is currently unclear as a statute of limitations defence, the compensation for damages shall to whether the court recognised NDRC’s administrative decision be calculated for the two years before the day of filing of the lawsuit. in that case, and whether the materials retained by NDRC were accessible to the parties. Thus it is hard to predict whether a follow- 8.4 Does the law recognise a “passing on” defence in on action would be easier than a stand alone action in practice. civil damages claims?

8.2 Do your procedural rules allow for class-action or The AML and the Anti-monopoly Judicial Interpretation do not representative claims? establish rules regarding a “passing on” defence. However, Article 10 of the Draft Anti-monopoly Judicial Interpretation provides, China does not have class actions, but China does have where the party alleged to having performed monopolistic conduct representative claims. Pursuant to the Civil Procedure Law, a joint alleges that the party suffered by the monopolistic conduct has lawsuit (in which there are numerous plaintiffs) may be brought by already passed all or part of his loss on to others, it shall have the representatives selected by and from the group of plaintiffs. burden to prove that effect. After obtaining special authorisation from the plaintiffs that they represent, the representatives may attend open-court trials, change 8.5 What are the cost rules for civil damages follow-on or waive claims, recognise claims of the opposing party, settle with claims in cartel cases? the opposing party or enter into a settlement agreement with the opposing party, and lodge a counterclaim or appeal. The litigation fee charged by the court for hearing cases is undertaken In addition, the Civil Procedure Law, which was amended on by the party losing the case. 31 August 2012, provides that for conduct that pollutes the Article 14 of the Anti-monopoly Judicial Interpretation provides that, environment, infringes upon the lawful rights and interests of according to the plaintiff’s claim, the People’s Court may include consumers or otherwise damages the public interest, an authority the plaintiff’s reasonable expenses on investigation and prevention or relevant organisation may bring a lawsuit in court as provided by of the monopolistic conduct in the scope of compensation for losses. law. This is the first time China has provided for the mechanism of public interest litigation. However, there are no further provisions 8.6 Have there been any successful follow-on or stand on what kind of authority or organisation is qualified to initiate alone civil damages claims for cartel conduct? If there public interest litigation. Also, it is unclear whether public interest have not been many cases decided in court, have litigation is applicable to AML private litigations. In an amendment there been any substantial out of court settlements? to the Civil Procedure Law made on 27 June 2017, the legislator further provides that for any act harming public interests such as According to publicly available information, until the end of 2014, ecological damage to the environment and resource protection, 274 antitrust private actions were accepted by courts over the as well as infringement upon the legitimate rights and interests of country and 250 of them were closed. A majority of such cases multiple consumers in the field of food and drug safety, which is concern abuse of dominance. In addition, there have been no uncovered in the performance of duties, the people’s procuratorate follow-on civil antitrust litigations in China so far. may initiate legal proceedings before a People’s Court, provided that Among the antitrust civil cases for which courts have issued rulings, there are no authorities or relevant organisations provided by law, or the authorities or relevant organisations do not file a lawsuit. If the most claims of the plaintiffs have been rejected by courts. The first authorities or relevant organisations take legal action, the people’s follow-on civil damages claim for cartel conduct was brought by a procuratorate may support such action. consumer in Zhejiang Intermediary People’s Court in early 2015. The lawsuit was brought against the insurer, Chinese insurance giant Ping An Property and Casualty Insurance, after it was fined last year 8.3 What are the applicable limitation periods? by NDRC for price collusion. The parties settled the case in the court. According to Article 16 of the Anti-monopoly Judicial Interpretation, the statute of limitations for claims for damages

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(2) NDRC development 9 Miscellaneous In 2016, NDRC mainly focused on antitrust cases in industries including pharmaceuticals, household appliances, automobiles, etc. 9.1 Please provide brief details of significant recent or NDRC published nine punishment decisions against monopolistic imminent statutory or other developments in the field cases, and imposed fines of RMB 0.35 billion (approximately of cartels, leniency and/or cartel damages claims. USD 55 million). In 2016, NDRC issued five guidelines: Draft Leniency Guidelines; Draft Commitment Guidelines; Draft Fines (1) SAIC development Guidelines; Draft Automobile Industry Guidelines; and Draft In 2016, SAIC and the local AIC investigated 1,267 cases of antitrust IP Guidelines. These guidelines provide specific procedures of

China violations involving public utilities, concluded 585 cases of them, leniency application, commitment and determination of fines, which while they mainly focused on antitrust cases in industries including would be very helpful to the enforcement of the AML. water, gas, power supply, and public transportation, which together accounted for 48.2% of the total concluded cases. In 2016, SAIC 9.2 Please mention any other issues of particular interest authorised local AICs to investigate 15 cases involving violations in your jurisdiction not covered by the above. of the AML, among which nine cases were closed, three of which concerned cartels. Please see http://www.chinalawinsight.com/articles/corporate/ On 4 February 2016, SAIC issued one draft guideline in the IP antitrust-competition/ for weekly updates on the antitrust practice sector. in China.

Susan Ning Hazel Yin King & Wood Mallesons King & Wood Mallesons 40th Floor, Office Tower A 40th Floor, Office Tower A Beijing Fortune Plaza, 7 Dongsanhuan Zhonglu Beijing Fortune Plaza, 7 Dongsanhuan Zhonglu Chaoyang District, Beijing 100020 Chaoyang District, Beijing 100020 P.R. China P.R. China

Tel: +86 10 5878 5010 Tel: +86 10 5878 5270 Fax: +86 10 5878 5599 Fax: +86 10 5878 5599 Email: [email protected] Email: [email protected] URL: www.kwm.com URL: www.kwm.com

Susan is a Senior Partner and the Head of the International Trade, Hazel is a Partner in the International Trade, Antitrust and Competition Antitrust and Competition Group of King & Wood Mallesons. She is Group of King & Wood Mallesons. She was recognised as a “Leading one of the first legal practitioners in China to set up an Antitrust & Lawyer (Up and Coming)” in the Competition Area by Chambers & Competition specialist division. Partners in the Asia-Pacific Guide of 2016. Susan’s current practice focuses on: advising merger clearance Hazel specialises in advising clients on a variety of antitrust and anti- before the Ministry of Commerce; and advising on Anti-Monopoly unfair competition law issues, experienced with China merger filings Law compliance issues. Since the enactment of the AML, Susan has across sectors including hi-tech, manufacturing, chemical, logistics, undertaken more than 120 antitrust merger control filings on behalf mining, beverages, consumers, and electronics, etc. Hazel is one of of blue-chip clients, which consist mostly of multinational companies. the few lawyers in China who has handled national security review cases in different industries and acquired clearances successfully. Susan holds a Bachelor of Laws degree from Peking University and a Master of Laws degree from McGill University. She was admitted as a Hazel received her Bachelor of Arts and Master of Laws degrees from Chinese lawyer in 1988. Southwest University of Political Science and Law. She also received an LL.M. degree from Columbia Law School and a Postgraduate For a full biography, please visit http://www.kwm.com/en/cn/people/ Diploma on EU Competition Law from King’s College London. She is susan-ning. qualified to practise law in the PRC and the State of New York. For a full biography, please visit http://www.kwm.com/en/cn/people/ hazel-yin.

Founded in 1993, King & Wood Mallesons (PRC) is one of the first partnership law firms which was approved by the Ministry of Justice. The firm aims to provide high quality and efficient legal services to Chinese and foreign clients alike. On 31 July 2013, King & Wood Mallesons (KWM) and leading international law firm SJ Berwin announced a world-first legal combination, marking the next step for their clients in building a new global law firm based in Asia. KWM has now become one of the top 25 law firms in the world. With more than 2,700 lawyers, including more than 550 partners in 30 locations across the world, which encompasses China, Hong Kong, Australia, the United Kingdom, continental Europe, the Middle East, Japan, and the United States, KWM is particularly experienced in antitrust and competition practice in multi-national jurisdictions.

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European Union Elvira Aliende Rodriguez

Shearman & Sterling LLP Geert Goeteyn

limiting or controlling production; sharing markets or sources of 1 The Legislative Framework of the Cartel supply; applying dissimilar conditions to equivalent transactions; Prohibition and subjecting the conclusion of contracts to unrelated additional obligations.

1.1 What is the legal basis and general nature of the There are two limitations to the application of the prohibition under cartel prohibition, e.g. is it civil and/or criminal? Article 101(1): ■ first, in order for EU law to apply, agreements need to have an Cartel prohibition is enshrined in EU law under Article 101 of the effect on trade between Member States, otherwise they would Treaty on the Functioning of the EU (“TFEU”), which outlaws be regulated, if at all, by national competition law; “all agreements between undertakings, decisions by associations ■ and second, although EU law recognises a de minimis rule as of undertakings, and concerted practices which may affect trade per the Commission’s 2014 Notice on agreements of minor between Member States and which have as their object or effect importance: an agreement only infringes Article 101(1) if its the prevention, restriction or distortion of competition within the effect on competition is likely to be appreciable, i.e. if it has a sufficient impact on market conditions, or if restrictions by internal market”. It is to be noted that this applies to undertakings object are not protected by the rule in that the probability of only, i.e. any natural or legal person, provided they are engaged in negative effects is so high that there is no need to demonstrate economic or commercial activity. any actual or likely anticompetitive effects. As to the nature of the prohibition, EU law only provides for civil Pursuant to Article 101(2), prohibited agreements are automatically sanctions for undertakings, and leaves it to national law to lay down void and unenforceable. criminal penalties for individual participants. However, under Article 101(3), an agreement covered by the scope of Article 101(1) can be exempted if it satisfies each of the 1.2 What are the specific substantive provisions for the following conditions: (i) it improves the production or distribution cartel prohibition? of goods; (ii) it grants a fair share of the benefit to consumers; (iii) restrictions are necessary to achieve those objectives; and (iv) it Article 101(1) TFEU prohibits three different forms of conduct, does not eliminate competition as to a substantial part of the market namely: concerned. Exemption can be granted individually or in blocks, by ■ agreements, both horizontal and vertical (between competitors category of agreement (cf. infra question 1.5). It is to be noted that and non-competitors), and whether multilateral, bilateral or although object restrictions can in theory benefit from an individual unilateral; exemption, practice shows it is unlikely that they will meet the conditions set out above. ■ decisions by associations of undertakings, e.g. rules requiring members to adhere to certain price levels; and ■ concerted practices, i.e. any direct or indirect contact 1.3 Who enforces the cartel prohibition? between competitors with the object or effect of influencing the conduct on the market of a competitor, which comes to The Council’s Regulation 1/2003 on the implementation of the rules light under the scope of Article 101 and the coordination on competition (‘Regulation 1/2003’) designates the Commission as between undertakings which knowingly substitute practical the main enforcement body, and more specifically, the Directorate cooperation between them for the risks of competition. General for Competition (DG COMP). However, the Regulation It is to be noted that this classification is not rigid: when faced with also confers enforcement rights upon national competition authorities a “whole complex of schemes and arrangements”, the Commission (NCAs): when investigating cartel conduct under national law, NCAs does not need to characterise each conduct within it as an agreement must apply Article 101 in parallel if the conduct may affect trade or a concerted practice; it need only show that the undertakings between Member States; and they cannot prohibit under national law took part in an overall plan with a single anticompetitive objective, such conduct if it would not be prohibited under Article 101. constituting a single infringement. In order to coordinate activities between competition authorities, Conduct is prohibited when it has as its object or effect “the the Regulation establishes a European Competition Network prevention, restriction or distortion of competition” within the EU. (ECN), which allows for better coordination and the exchange of Article 101(1) provides a non-exhaustive list of practices considered best practices. The Notice on cooperation within the Network of anticompetitive, specifically: fixing purchase or selling prices; Competition Authorities details its functioning.

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The Commission’s decisions are subject to judicial review by the General Court (GC) and the Court of Justice (CJEU). 1.6 Is cartel conduct outside your jurisdiction covered by the prohibition?

1.4 What are the basic procedural steps between the In order for the Commission to find an infringement, the involved opening of an investigation and the imposition of undertakings do not need to have a presence inside the EU and sanctions? practices need not have been conducted in the EU: the essential element is whether the conduct was implemented in the EU. In An investigation can be triggered in four different ways: from practice, this amounts to assessing whether the cartel may have a leniency application (the most common start); through the had an impact on trade within the EU. Therefore, a cartel may be Commission’s own market intelligence; following a complaint from found to have been implemented within the EU even where all the a third party; or after a reference from an NCA. participants are located outside the EU.

European Union The Commission starts collecting information once it decides to pursue the matter. In that regard, its powers of investigation are quite broad and it enjoys a wide margin of discretion in using them, 2 Investigative Powers provided their implementation is necessary and proportionate. In cartel cases, the Commission generally conducts what are known as ‘dawn raids’, i.e. unannounced parallel searches of business 2.1 Summary of general investigatory powers. premises, and if need be of private homes (cf. infra section 2). Table of General Investigatory Powers If, on the basis of the evidence gathered during the searches, the Commission thinks that there are sufficient grounds to initiate Investigatory Power Civil/Administrative Criminal proceedings, it will issue a statement of objections, in which it sets Order the production out the facts it relies on, the conclusions it draws and the actions it of specific documents Yes N/A proposes to take. or information Carry out compulsory The addressees of the statement of objections can then have access interviews with No N/A to the documents in the Commission’s file and expose their views in individuals both a written and an oral response. Carry out an After having heard the parties, the Commission assesses the unannounced search Yes N/A of business premises evidence to decide whether its original case still stands. If so, it Carry out an prepares a draft decision setting out its findings and possible further unannounced Yes* N/A action (e.g. fines). The final decision is adopted by the full College search of residential of Commissioners after consultation with an advisory committee premises made up of NCA representatives, and it is then notified to the ■ Right to ‘image’ computer hard drives concerned parties. Yes N/A using forensic IT The length of proceedings can vary considerably. The GC’s 2016 tools annual report shows that the average duration has gone from an ■ Right to retain No N/A average of 48.4 months in 2009 to 38.2 in 2016. According to the original documents GC’s vice president, there is a threshold under which it would no ■ Right to require an explanation longer be adequate to shorten the length of cases: with a written Yes N/A procedure of 12 months, prolonged by six months for confidentiality of documents or information supplied requests and two for translations. Given the time needed for the ■ Right to secure planning, hearing and decision, it would be difficult to go past the premises overnight Yes N/A 30-month limit and probably not desirable to do so. (e.g. by seal) The antitrust procedure was reformed in October 2011 through the Commission’s adoption of its Best Practices for the conduct of Please Note: * indicates that the investigatory measure requires antitrust proceedings and the expansion of the Hearing Officer’s the authorisation by a court or another body independent of the role so as to increase interaction with the parties and strengthen competition authority. procedural safeguards. In March 2012, in an attempt to further improve transparency, the Commission published its Antitrust 2.2 Please list specific or unusual features of the Manual of Procedures, which gives (partial) internal guidance as to investigatory powers referred to in the summary table. the conduct of investigations, but does not touch upon dawn raids. The Commission’s investigatory powers are listed in Regulation 1/2003: it can issue requests for information, take statements, and 1.5 Are there any sector-specific offences or exemptions? inspect premises. It should be noted that unlike many NCAs, the Commission can exercise these powers on the basis of internal EU competition law does not provide for any sector-specific administrative decisions, meaning that no prior warrant is needed. offences or exemptions but the Commission has adopted so-called ‘block exemption regulations’ in relation to certain categories Inspections can be carried out upon production of a written of arrangements (vertical agreements, technology transfers, authorisation or ordered by decision, in which case undertakings are specialisation agreements, R&D), shielding them from Article 101 required to submit to the inspection. In cartel cases, the Commission provided they meet certain conditions. most often conducts ‘dawn raids’, i.e. unannounced searches, at both business and residential premises, although for the latter it would need to obtain judicial authorisation and establish a reasonable suspicion that records related to the inspection are kept there.

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The Commission is empowered to examine all business records and In-house legal advice is not protected because their independence make copies thereof, including forensic images of electronic data. might be compromised due to their employment relationship. However, the Commission may only take note of documents which However, documents prepared by in-house counsel that solely report relate to the subject matter of the inspection. The Commission’s the advice of external counsel are covered by the rules of privilege Explanatory note on the conduct of dawn raids was revised in 2015 if the external counsel would have been privileged if written down. and now provides further guidance as to the Commission’s powers in relation to software and data and notably addresses the ‘Bring 2.7 Please list other material limitations of the investigatory Your Own Device’ policy under which the Commission can ask for powers to safeguard the rights of defence of companies employees’ personal devices. and/or individuals under investigation. Moreover, while searching offices, the Commission can affix seals on any relevant elements, ask staff for clarifications and record the In order to avoid irremediably impairing them, the CJEU has ruled answers provided, which it cannot in private premises. that rights of defence should be respected from the outset, including during the course of preliminary procedures. European Union

2.3 Are there general surveillance powers (e.g. bugging)? As such, parties are protected against self-incrimination to the extent that they cannot be compelled to provide the Commission with elements that might lead them to admit to participating in an EU law does not provide the Commission with any formal infringement. However, purely factual questions are not considered surveillance powers. to be self-incriminatory and must therefore be answered. Moreover, the Commission must clearly delimitate the scope of 2.4 Are there any other significant powers of the inspection by defining its subject and purpose, meaning that it investigation? cannot in theory use any information it uncovers that falls outside the scope of its search, unless the documents were found ‘by Regulation 1/2003 does not confer any additional power on chance’. However, although ‘fishing expeditions’ are not allowed, competition authorities. the Commission does not need to identify with absolute precision the product and geographic markets concerned by the search. 2.5 Who will carry out searches of business and/or residential premises and will they wait for legal 2.8 Are there sanctions for the obstruction of advisors to arrive? investigations? If so, have these ever been used? Has the authorities’ approach to this changed, e.g. Dawn raids are carried out by the Commission’s own team of become stricter, recently? officials. However, given that they do not have the power to force entry, they have to rely on national law enforcement authorities, Pursuant to Paragraph 28 of the Commission’s Guidelines on the who have the duty to actively assist them under Regulation 1/2003. method of setting fines, obstruction constitutes an aggravating Such assistance may be subject to a judicial authorisation under circumstance. national rules, in which case Member State courts can, pursuant to Obstruction has been assessed on a stand alone basis in recent years the Roquette Frères case law, review the scope of the Commission’s – Regulation 1/2003 provides for one-off financial penalties of up inspection decision in order to make sure the measures intended are to 1% of total turnover, as well as periodic penalty payments of not arbitrary or excessive. However, national authorities may not up to 5% of the average daily turnover of a company for failure to question the necessity of a search; a request for a full review of the answer a formal request fully or to submit to an inspection. The decision can be brought later on before the GC and CJEU. Commission has made an increasing use of these powers in the past The Commission can ask an NCA to carry out the inspections in its few years. For instance, in 2012 the Commission finedEnergetický place under Article 22(2) of the Regulation, although it rarely does a průmyslový holding and EP Investment Advisors €2.5 million for so. In that case, EU competition rules and not national competition failing to block an email account as requested by the Commission rules apply. and diverting incoming emails during a dawn raid. The Commission may wait for legal counsel to arrive before commencing the inspection, but it is under no obligation to do so. 3 Sanctions on Companies and Individuals The GC has held that the legality of the search is not conditional upon the presence of external legal counsel: in the Bitumen cartel case, it upheld the 10% fine uplift the Commission had imposed 3.1 What are the sanctions for companies? upon the undertaking for denying officials access to the building pending the arrival of its counsel. To ensure the effective enforcement of competition rules, Regulation 1/2003 gives the Commission, along with the NCAs, the power to impose fines for substantive and procedural infringements. 2.6 Is in-house legal advice protected by the rules of Such fines can be imposed on any undertaking or association of privilege? undertakings and a parent company can be fined for the acts of a subsidiary on which it exercises decisive influence. There is no express recognition of legal privilege in the TFEU; the As for substantive infringements, the Commission can impose fines exception was developed through case law. The CJEU recognised of up to 10% of the total turnover of the undertakings concerned if the right for undertakings to correspond with legal counsel without they are found to have participated, intentionally or negligently, in a it being used against them, meaning that written communications cartel. The Commission enjoys a wide discretion when setting the between a lawyer and his client can be covered by legal privilege, amount of the fines and its Fining Guidelines of 2006 set out the provided they relate to the investigation and counsel is external to approach it will normally follow: the company and qualified to practice in the EEA. ■ First, to reflect the “economic significance” of each party’s participation in the infringement, a basic amount of the fine

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is calculated, based on that participant’s value of sales for the social and economic context must be established. The Commission last full year of the cartel to which the infringement relates. published in 2010 an Information Note setting out the principles to An amount of up to 30% of the value of sale, depending on be applied in deciding whether to grant a reduction. the gravity of the infringement, multiplied by the duration of that party’s participation in the infringement, will form the As for the first condition, the GC recently noted in North Sea basic amount of the fine. Shrimps that the mere fact that the imposition of a fine might give rise or increase the risk of insolvency of the undertaking concerned ■ Second, the basic amount of the fine is adjusted depending on aggravating and/or mitigating circumstances. The is insufficient to substantiate a claim of inability to pay. Asfor Commission may also increase the basic amount to ensure the second condition, the GC has indicated in Donau Chemie that the fine has a sufficient overall deterrent effect. it could be fulfilled if the payment were to lead to an increase in ■ Third, the Commission will make sure the final amount of unemployment or deterioration in the sectors concerned. the fine does not exceed the legal cap of 10% and, finally, In practice many requests are unsuccessful. The Commission has, will apply leniency and/or settlement reductions when however, accepted reductions to the fines of three undertakings European Union appropriate. by 50% and 25% in the Bathroom Fittings cartel, as well as in the The Commission can, however, depart from the above methodology Prestressing Steel cartel where it granted reductions of 25%, 50% when the “particularities of a given case” justify it, an option that the and 75% to three undertakings. Commission used in the Mushroom and Envelopes cartel cases. In AC Treuhand, the CJEU confirmed that the Commission could set 3.4 What are the applicable limitation periods? the amount of the fine as a lump sum for a consultancy firm with no market activities. Regulation 1/2003 sets two types of limitation periods in Articles In 2016, the Commission imposed six fines for cartels totalling €3.73 25 and 26. billion. The automotive sector has been under the Commission’s First, the Commission’s power to impose substantive fines is subject spotlight, with a record total fine of €2.9 billion imposed on five to a five-year limitation period, while a three-year limitation period truck producers for price collusion in 2016. In 2017, three fines applies for the imposition of procedural fines. These limitation of €155 million, €68 million and €27 million were imposed in the periods start to run from the date on which the infringement is thermal systems, car battery recycling and automotive lighting committed or in the case of a single and continuous infringement cartels, respectively, two years after the imposition of a €953 from the date the infringement ended. Any competition authority million fine in the automotive bearings cartel. The Commission investigation or proceeding may interrupt the limitation period, in also readopted its decision in the Airfreight cartel case, imposing which case time will start running afresh from the date on which a total of €776 million in fines. The financial sector also remains the undertakings are notified of the authority’s interrupting act. under strict scrutiny, with the Commission having fined Crédit The limitation period may run up until the adoption of a decision Agricole, HSBC and JPMorgan €485 million at the end of 2016 in imposing a fine subject to a maximum period of 10 years for the EURIBOR investigation. substantive violations and six years for procedural infringements. As for procedural infringements, the Commission can impose fines The limitation period may also be suspended whilst a decision of of up to 1% of the total turnover of the undertakings concerned the Commission is subject to proceedings before the CJEU, which is where they supply incorrect, incomplete or misleading information. particularly valuable for the Commission when it wishes to readopt Finally, the Commission can require undertakings to bring a a decision that has been successfully challenged. cartel infringement to an end and impose behavioural or structural Interestingly, the CJEU recently confirmed inAkzo Nobel that, even remedies to that end, as well as periodic penalty payments to ensure though the Commission was time-barred from imposing fines on compliance with such instructions. Akzo’s subsidiaries, the parent company, whose liability was solely derived from the acts of its subsidiaries, could still be held liable in 3.2 What are the sanctions for individuals (e.g. criminal respect of the period for which its subsidiaries were no longer held sanctions, director disqualification)? accountable. Second, the Commission’s power to enforce both procedural and The Commission has no power to sanction an individual, except substantive fines, as well as periodic penalties, is subject toa if he is himself an undertaking. However, individuals still run the limitation period of five years, starting from the day on which the risk of being sanctioned as the majority of Member States currently decision becomes final. This limitation period may be interrupted have the ability to impose sanctions on individuals, including by the notification of a Commission’s decision or refusal to vary the administrative fines and imprisonment sentences. fine or by any action to enforce payment.

3.3 Can fines be reduced on the basis of ‘financial 3.5 Can a company pay the legal costs and/or financial hardship’ or ‘inability to pay’ grounds? If so, by how penalties imposed on a former or current employee? much? As mentioned above in question 3.2, the Commission has no power The Fining Guidelines provide that, in exceptional cases and upon to impose sanctions on individuals. request, the Commission can reduce the fine due to an undertaking’s inability to pay. Inability to pay claims can be raised during settlement discussions, as in the Mushrooms cartel case. To benefit 3.6 Can an implicated employee be held liable by his/her employer for the legal costs and/or financial penalties from this provision, undertakings must provide objective evidence imposed on the employer? that two cumulative conditions are met: (i) that paying the fine would “irretrievably jeopardise its economic viability”; and (ii) a specific See above.

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4 Leniency for Companies 4.2 Is there a ‘marker’ system and, if so, what is required to obtain a marker?

4.1 Is there a leniency programme for companies? If so, please provide brief details. The 2006 Notice establishes a marker system for immunity applicants and thus allows them to secure their position in line The procedure to apply for leniency under EU law is set out in the for leniency. It is a discretionary system in the sense that the Commission’s 2006 Notice on immunity from fines and reduction Commission grants markers on a case-by-case basis, depending of fines in cartel cases (‘Leniency Notice’) and the 2012 Antitrust on the specificities of the case and the applicant’s justifications for Manual of Procedures. applying. Full immunity is available to the first undertaking to come The applicant must provide information as to cartel participants, forward with information of secret cartel activity that will enable affected markets, the duration and nature of the conduct, any the Commission to either carry out a targeted inspection or find parallel leniency applications, and the reasons for which the grant of European Union an infringement of Article 101. A company can therefore seek a marker is necessary. Once the marker is awarded, the undertaking immunity in two cases: (i) before the Commission has sufficient needs to give the information and evidence required within a set evidence to adopt an inspection decision itself; or (ii) after it (typically short) period of time. already initiated an inspection but the applicant is the first to provide incriminating evidence proving the cartel conduct. In the 4.3 Can applications be made orally (to minimise any latter case, applications are subject to a higher evidential threshold subsequent disclosure risks in the context of civil and are rarely successful in practice: immunity would only be damages follow-on litigation)? awarded if the Commission had conducted its inspection based on its own intelligence and this inspection had not generated evidence The Leniency Notice allows for the submission of oral statements. that would allow it to find an infringement. They are recorded at the Commission’s premises and form part of To apply, undertakings must provide the Commission with all the the Commission’s file. The Commission published a Guide to the evidence they possess, along with a corporate statement comprising making of oral statements in October 2013. a detailed description of the arrangement, the exact location of the offices, and what other competition authorities they have approached or intend to approach. 4.4 To what extent will a leniency application be treated confidentially and for how long? To what extent In order to be eligible, prospective applicants must satisfy a number will documents provided by leniency applicants be of cumulative conditions, namely: (i) they cannot have coerced disclosed to private litigants? another company to join the cartel or stay in it; (ii) they cannot have tampered with evidence; (iii) they must have terminated their The identity of applicants is kept confidential from other companies involvement in the cartel before reporting to the Commission, unless subject to the cartel investigation until the issue of the statement necessary to protect the surprise element of subsequent inspections; of objections, and will become known to the general public at (iv) they cannot inform others they have applied; and (v) they must the time of the publication of the final decision. The contents of genuinely, expeditiously and fully cooperate on a continuous basis. the Commission’s file are also kept confidential throughout the Before formally applying, undertakings can approach the investigation; access is granted to the addressees of the statement of Commission anonymously and in hypothetical terms so as to objections so as to preserve their rights of defence. This covers all establish whether the evidence they hold would be sufficient to be documents obtained, produced or assembled during the proceedings, awarded immunity. except for internal Commission documents such as correspondence A company which is not entitled to full immunity may still be with other competition authorities. Moreover, access to documents able to obtain a reduction in fines where it provides evidence with containing business secrets or other confidential information may significant added value to the Commission’s existing file, i.e. facts be partially or totally restricted, and corporate statements submitted previously unknown to the Commission. Applicants for reduction by leniency applicants can only be accessed on the Commission’s need to fulfil the same conditions as for immunity (except for premises. coercion). Depending on the value of the evidence brought in, the As for disclosure in follow-on actions for damages before Member first applicant will benefit from a reduction between 30 and 50%, the States’ courts, the issue is governed by the applicable national rules second from 20 to 30% and others up to 20%. (which must be in line with the rules contained in the Damages Given that cartels usually affect more than one Member State and Directive). The CJEU held that EU law does not prevent claimants due to the lack of a central mechanism for undertakings to obtain from being granted access to leniency materials as long as they have leniency in all jurisdictions, companies usually submit applications been adversely affected by the infringement. National courts can to every relevant competition authority. In DHL Express, the CJEU thus request provision of leniency documents under national rules, ruled that leniency applications to different competition authorities while taking into account the need to strike a fair balance between for the same infringement are fully independent. An NCA that the right of effective redress and the need to ensure the effectiveness receives a leniency application referring to the undertaking’s of the leniency regime. concurrent application to the Commission does not need to consider the contents of that separate application. The Damages Directive and the Commission’s Notice on cooperation with national courts set out rules limiting access to the The ECN aims at approximating national leniency systems through Commission’s file: national courts cannot order parties to disclose its Model Programme, which although not binding, proposes key leniency statements or settlement submissions at any time, and elements such as the possibility to make summary applications certain documents such as the statement of objections can only be before all relevant NCAs. More recently, the ‘ECN+’ initiative, accessed after the closing of the file. Contemporaneous documents, which aims to empower NCAs, stresses the need for effective however, can be disclosed at any time of the process, including leniency rules (cf. infra question 9.1). before the Commission closing its investigation.

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The settlement process can be divided into three broad stages: 4.5 At what point does the ‘continuous cooperation’ ■ First, the parties and the Commission must agree to start requirement cease to apply? settlement discussions. An undertaking cannot be forced to engage in a settlement and the Commission has in turn a Under the 2006 Notice, applicants must cooperate genuinely broad discretion to determine which cartel cases are suitable and fully with the Commission from the time they submit their for settlement, taking into account factors such as the prospect application to the end of the administrative proceedings, i.e. the of saving time and resources and the probability of agreeing adoption of a final decision. on the scope of the potential objections within a reasonable timeframe. Applicants must therefore provide the Commission with accurate and complete information. More specifically, they must include any ■ Second, settlement discussions will take place on a bilateral and confidential basis to assess whether it is worth settling. relevant information and evidence relating to the case. They must The parties will have the possibility to access the file and to remain at the Commission’s disposal to answer any request as to the be heard, albeit to a more limited extent than in the standard European Union establishment of the facts, make staff available for interviews, not procedure. Participants can end the discussions at any time, tamper with evidence, and not disclose any information relating to in which case they will revert back to the normal procedure. their application before the statement of objections, unless otherwise Parties deciding to opt-out from the settlement process agreed. In the Deltafina case, the Commission had withdrawn will not be able to rely on fining indications given during conditional immunity because the applicant had breached the settlement discussions, as the Timab recent ruling shows. obligation of cooperation by disclosing its application for leniency ■ Finally, parties must submit a formal request in the form to competitors before the Commission had launched its inspection. of a settlement submission, acknowledging in “clear However the company still benefited from a 50% fine reduction and unequivocal terms” their liability, and indicating the outside of the leniency framework to reward its cooperation. maximum amount of the fine which they foresee being imposed. The Commission will then issue a formal SO and, if the parties agree with its content, will proceed with the 4.6 Is there a ‘leniency plus’ or ‘penalty plus’ policy? adoption of a final decision. Settling parties can still contest the validity of the fine ultimately The leniency programme under EU law does not provide for any imposed before the EU Courts, as did Société Générale in additional rewards or penalties. EUROLIBOR before withdrawing its appeal. More recently, in Printeos, an envelope producer successfully contested the fine imposed as the Commission had not sufficiently explained the 5 Whistle-blowing Procedures for variations in fine reductions applied to settling cartel participants. Individuals The Commission recently readopted a decision against Printeos, imposing the same fine. Printeos has again introduced an application 5.1 Are there procedures for individuals to report cartel for annulment of the Commission Decision to the General Court. conduct independently of their employer? If so, The Commission is increasingly using the settlement procedure please specify. and settlement decisions tend to be adopted more quickly. Since 2008, the Commission has taken 24 settlement decisions, including Individuals can either directly report a cartel to the Commission if six hybrid settlements, representing more than half of all the cartel they are willing to reveal their identity or use the new anonymous fines imposed. The most recent decisions concern the automotive whistle-blower tool launched by the Commission in March 2017. sector with the June 2017 settlement in Automotive lighting and the The encrypted messaging system run by an external intermediary March 2017 settlement in Thermal Systems. Interestingly, most of allows for two-way communications between individuals and the settlement decisions have stemmed from leniency applications. the Commission. Commissioner Vestager has recently outlined the importance of this new system that comes to reinforce the Commission’s cartel detection tools. 7 Appeal Process

6 Plea Bargaining Arrangements 7.1 What is the appeal process?

Commission decisions can be appealed before the GC, within two 6.1 Are there any early resolution, settlement or plea months of the decision, by the addressees of the decision and third bargaining procedures (other than leniency)? Has parties with a direct and individual interest. Actions for annulment the competition authorities’ approach to settlements can be brought on four grounds: lack of competence; infringement changed in recent years? of an essential procedural requirement; infringement of the Treaties; and misuse of powers. The GC has unlimited jurisdiction to review A settlement procedure for cartel cases was introduced in July and assess the Commission’s decisions and it may cancel, increase 2008. The rules governing the settlement process are laid down in or decrease any fine imposed. Regulation 622/2008 and the Commission notice on the conduct of settlement procedures. The core feature of the settlement procedure Following a judgment by the GC, a further appeal can be brought to is the formal acknowledgment of an undertaking’s participation in a the CJEU within two months of the notification of the GC judgment. cartel. Such admission is rewarded with a 10% fine reduction, as well The CJEU is only competent to review points of law, a breach of as a limitation on any specific increase for deterrence. Settlement procedure and an infringement of EU law by the GC. agreements can be reached with all participants involved in a cartel, or only with some of them (so-called “hybrid” settlements).

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compensatory collective redress mechanism in the Member States 7.2 Does an appeal suspend a company’s requirement to concerning violation of rights granted under Union Law, where it pay the fine? recommends the introduction of opt-in systems of collective redress as a general rule and the institution of procedural safeguards (such Fines imposed by a Commission decision must normally be paid as a prohibition of contingency fees or punitive damages) to avoid within three months of their notification. However, the payment of abuses. By the end of the summer of 2017, the Commission is the fine can be suspended if the undertaking gives the Commission supposed to have reviewed this Recommendation. an appropriate bank guarantee and agrees to pay interests in case the appeal is unsuccessful. If an undertaking is unable to provide such guarantees, it can also apply for interim measures before the 8.3 What are the applicable limitation periods? EU courts to suspend the enforcement of the contested decision. However, the majority of applications for interim measures are Limitation periods for bringing damages claims vary across unsuccessful. Member States but the Damages Directive harmonises certain European Union basic rules. It specifies that limitation periods must be for at least five years and should not start to run before the infringement has 7.3 Does the appeal process allow for the cross- ceased, and the plaintiff knows or can reasonably be expected to examination of witnesses? know of the behaviour, the fact that it constitutes an infringement and the identity of the infringer. Moreover, limitation periods The Rules of Procedure of the EU Courts provide that the Judges and must be suspended or interrupted: (i) if a competition authority has the Advocate General can, at the request of a party or on their own initiated an investigation or other proceedings in relation to that motion, ask witnesses questions. The representatives of the parties infringement, until at least one year after the infringement decision can do the same, subject to the control of the President. Cross- has become final or the proceedings are terminated; and (ii) for the examination of witnesses is thus allowed but there is no absolute duration of any consensual dispute resolution. right to cross-examination by the parties.

8.4 Does the law recognise a “passing on” defence in 8 Damages Actions civil damages claims?

In line with the right to full compensation, the Damages Directive 8.1 What are the procedures for civil damages actions makes clear that any direct or indirect purchaser in the supply for loss suffered as a result of cartel conduct? Is the position different (e.g. easier) for ‘follow-on’ actions chain can obtain compensation for the harm suffered. In turn, any as opposed to ‘stand alone’ actions? defendant in a damages action can argue that the plaintiff passed on the whole or part of the overcharge resulting from the infringement In Courage and Crehan, the CJEU established that any individual down to the supply chain, so that the loss passed on no longer or business has a right to full compensation for the harm caused to constitutes harm for which the plaintiff needs compensation (the them by anticompetitive practices. This right is an EU right but its “passing on” defence). To succeed, the defendant will have to prove exercise is governed by national rules and damages claims, either the existence and the extent of pass-on of the overcharge. following an infringement decision (so-called “follow-on” actions) As Member States now need to quantify actual loss suffered at or brought on a stand alone basis. It must be initiated before each level of the supply chain, the Commission has committed to national courts. In Manfredi, the CJEU recalled that victims must in providing guidelines for national courts. An October 2016 Study on that context prove that the harm suffered is the result of a violation the passing-on of overcharges was in this context published at the of competition rules. Commission’s request. The right to full compensation is enshrined in the 2014 Damages Directive and two provisions are aimed in particular at making 8.5 What are the cost rules for civil damages follow-on it easier for victims to substantiate damages claims. First, the claims in cartel cases? Directive introduces a rebuttable presumption that cartel victims have suffered harm. Second, the Directive makes final infringement Cost rules for civil damages in follow-on claims remain within decisions of competition authorities (or of review courts) binding on the discretion of Member States. Although the Commission their own national courts and prima facie evidence of infringement acknowledged that costs associated with damages actions can be in courts of other Member States, therefore streamlining follow-on a decisive disincentive to bringing damages claims, the Damages claims. Directive does not address that particular issue. However, the In addition, the Commission has issued a Communication on the Commission has invited Member States to reflect on their cost quantification of harm caused by competition law infringements allocation rules and highlighted the importance of the “loser pays” aimed at assisting national courts, as well as a detailed Practical principle, which prevails in Member States, and generally serves to guide covering the types of anticompetitive harm and techniques filter unmeritorious cases. available to quantify such harm. 8.6 Have there been any successful follow-on or stand 8.2 Do your procedural rules allow for class-action or alone civil damages claims for cartel conduct? If there representative claims? have not been many cases decided in court, have there been any substantial out of court settlements? Class actions or representative claims are a matter of national laws As mentioned in question 8.1, damages claims can only be initiated and the Damages Directive does not contain provisions on collective before national courts. With the coming into force of the Damages redress mechanisms. The Commission, however, issued in June Directive, it can be expected that follow-on damages will increase 2013 a Recommendation on common principles for injunctive and across the EU. To date, Germany, the Netherlands and the UK have

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been the most prominent jurisdictions. In recent years, there have harmonisation of leniency programmes to ensure certain minimum been a significant number of follow-on damages claims introduced guarantees to all leniency applicants. Member States meetings in the national courts of these three countries, often brought by are currently ongoing and the Commission aims to implement the companies and not consumers. For example, in March 2017, Directive by the end of 2019. TenneT was awarded €23 million in damages by a Dutch court due to overcharges it suffered from ABB’s participation in the Gas 9.2 Please mention any other issues of particular interest Insulated Switchgear cartel. in your jurisdiction not covered by the above.

9 Miscellaneous The Commission has showed an increasing interest in algorithms and their potential for “more effective cartels”. A paper on the impact of algorithms on pricing collusion prepared for the OECD 9.1 Please provide brief details of significant recent or was published in this regard in June 2017. European Union imminent statutory or other developments in the field of cartels, leniency and/or cartel damages claims. Acknowledgment In March 2017, the Commission proposed a new directive to The authors would like to thank their colleague Agostino Bignardi empower NCAs and make them more effective enforcers (the so- for his invaluable contributions to this chapter. called ‘ECN+ initiative’). One of the proposals consists of the

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Elvira Aliende Rodriguez Geert Goeteyn Shearman & Sterling LLP Shearman & Sterling LLP Avenue des Arts 56 Avenue des Arts 56 1000 Brussels 1000 Brussels Belgium Belgium

Tel: +32 2 500 9837 Tel: +32 2 500 9823 Email: [email protected] Email: [email protected] URL: www.shearman.com URL: www.shearman.com

Elvira Aliende Rodriguez is a partner in the firm’s Brussels office where Geert Goeteyn, a partner in the firm’s Brussels office, advises on all her practice focuses on Spanish and EU competition law. areas of EU competition, merger and regulatory law. He is qualified to

practice law in Belgium as well as in England and Wales, and holds an European Union Elvira advises clients across a range of sectors, including air transport, LL.M. in European Law. chemicals, telecommunications, energy, pharmaceuticals, steel, hotel accommodation, textiles and financial services. She has extensive Mr. Goeteyn has represented a large number of clients in a wide experience in advising clients on Article 101 TFEU (restrictive variety of industries including agricultural seeds, automotive, aviation, agreements) and the equivalent provisions under Spanish law. She biotechnology, consumer goods, oil, paper, telecommunications and has also participated in state aid procedures and in Article 102 TFEU high-tech. He advises clients on complex antitrust issues including (abuse of dominance) cases before the EU competition authorities. merger remedy cases, cartel-related issues (both in the context of She has in-depth knowledge of working before the European European Commission investigations and private damages actions) Commission and the European courts. and abuse of dominance cases.

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Finland Ilkka Aalto-Setälä

Borenius Attorneys Ltd Henrik Koivuniemi

1 The Legislative Framework of the Cartel 1.3 Who enforces the cartel prohibition? Prohibition The Finnish Competition Authority and the Finnish Consumer Agency merged into one authority, the Finnish Competition and 1.1 What is the legal basis and general nature of the cartel prohibition, e.g. is it civil and/or criminal? Consumer Authority (Kilpailu- ja kuluttajavirasto; the “FCCA”), on 1 January 2013. The aim of the merger was to increase the societal significance of competition and consumer issues and to improve Cartel prohibition is provided for under national statutory law, in the administrative efficiency. The statutory tasks of the two agencies Competition Act (Kilpailulaki 948/2011; hereinafter also the “Act”). have remained unchanged in the reform. The Competition Act entered into force on 1 November 2011. Finnish competition law is of a civil and administrative nature, Cartel prohibition is enforced by the FCCA and the Market Court and does not prescribe criminal sanctions. Only undertakings are at the first instance. The FCCA is mainly an investigative authority affected by the cartel prohibition. When a competition restriction and does not have the power to impose fines. Only the Market Court may affect trade between the EU Member States, Articles 101 and has the power to impose sanctions, but it acts upon a proposal from 102 of the Treaty on the Functioning of the European Union (the the FCCA. The FCCA’s proposals are not binding to the Market “TFEU”) are applied as well. Court; however, the Market Court cannot impose a fine ex officio. Decisions made by the Market Court can be appealed to the Supreme Administrative Court. Private enforcement matters are handled by 1.2 What are the specific substantive provisions for the general courts of first instance. cartel prohibition?

Cartel prohibition is provided for in Section 5 of the Competition 1.4 What are the basic procedural steps between the Act, which prescribes: opening of an investigation and the imposition of sanctions? “All agreements between business undertakings, decisions by associations of business undertakings and concerted practices by Cartel investigations are conducted by the FCCA either on its own business undertakings which have as their object the significant initiative or on the basis of a complaint. During its investigation, the prevention, restriction or distortion of competition or which result FCCA gathers evidence and information on the cartel by conducting in the prevention, restriction or distortion of competition shall be dawn raids, requiring undertakings to submit information and by prohibited. hearing the parties or other persons. In particular, agreements, decisions or practices which: Penalty payments based on a cartel infringement are decided by 1. directly or indirectly fix purchase or selling prices or any the Market Court on the proposal of the FCCA. Before submitting other trading conditions; the proposal, the FCCA will provide the interested parties with a 2. limit or control production, markets, technical development, Statement of Objections regarding the imposition of the penalty or investment; payment. The Statement of Objections outlines the FCCA’s 3. share markets or sources of supply; preliminary view on whether a competition infringement has taken 4. apply dissimilar conditions to equivalent transactions with place, and the grounds for the view. The FCCA determines a time other trading parties, thereby placing them at a competitive limit during which the undertakings can express their opinions on disadvantage; or the matter. Thus, the parties will be given the possibility to be 5. make the conclusion of contracts subject to acceptance by heard, either in writing or orally, regarding the claims and grounds the other parties of supplementary obligations which, by their the FCCA will present against the party in question. After the FCCA nature or according to commercial usage, have no connection has processed the obtained Statements of Objections, the FCCA with the subject matter of such contracts, shall be prohibited.” submits the proposal on penalty payments to the Market Court. In In 2004, Finnish competition legislation of the time was reformed the proposal, the FCCA determines whether the requirements to to harmonise Finnish law with EU legislation (current Articles 101 grant immunity or partial leniency have been fulfilled, if such an and 102 of the TFEU). application has been made to the FCCA. During the proceedings in the Market Court, the court will give the undertakings an opportunity to give their opinion on the FCCA’s proposal regarding the penalty

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payment. Further proceedings in the Market Court can be either to answer to incriminating questions. The FCCA can also require written or oral. The court proceedings end when the Market Court oral explanations from representatives or staff of the relevant makes its ruling on whether a competition infringement has taken undertaking when conducting a dawn raid. A search in non-business place and thereto related penalty payments. premises requires advance authorisation from the Market Court. The FCCA cannot secure non-business premises overnight.

1.5 Are there any sector-specific offences or exemptions? The company has the right to have a legal representative present during an investigation, but the presence of the representative is not The Competition Act does not provide for any sector-specific a precondition for the execution of an investigation. cartel prohibitions or sanctions. The Act does, however, exempt In addition, according to the new Competition Act, the FCCA has

agreements or arrangements which concern the labour market. the possibility to prioritise more important cases. Therefore, the Finland In addition, the Act exempts, identically to EU law, certain FCCA may allocate its resources in a reasonable way. arrangements relating to agriculture. Since March 2015, the FCCA has the right to obtain information from outsourced services, such as business information stored in 1.6 Is cartel conduct outside your jurisdiction covered by external service providers’ servers and cloud services. the prohibition? 2.3 Are there general surveillance powers (e.g. bugging)? Yes, it is. According to Section 3 of the Act, Article 101 of the TFEU shall apply when a cartel infringement may affect trade No, the FCCA does not have authority to use general surveillance between EU Member States. powers relating to cartel investigations.

2 Investigative Powers 2.4 Are there any other significant powers of investigation?

2.1 Summary of general investigatory powers. The FCCA can require an undertaking to provide the FCCA all the information and documents needed for the investigation on the Table of General Investigatory Powers content, purpose and impact of a competition restriction and for Investigatory Power Civil/Administrative Criminal clarifying the competitive conditions. Such an obligation can be Order the production enforced with a conditional fine. of specific documents Yes N/A The FCCA can oblige an undertaking which has participated or information in a cartel to continue with the infringement under the FCCA’s Carry out compulsory supervision. interviews with Yes N/A individuals Carry out an 2.5 Who will carry out searches of business and/or unannounced search Yes N/A residential premises and will they wait for legal of business premises advisors to arrive? Carry out an unannounced Yes* N/A search of residential Searches on all premises are carried out by officials of the FCCA premises or by Regional State Administrative Agencies (Aluehallintovirasto), ■ Right to ‘image’ possibly accompanied by persons they have authorised. If needed, computer hard drives Yes N/A the police may provide executive assistance during the searches. using forensic IT Searches can also be carried out by the European Commission. tools ■ Right to retain The authorities are not under obligation to wait for legal advisors to No N/A original documents arrive, but all phases of the investigation are done in co-operation ■ Right to require with the business undertakings; therefore, the authorities can agree an explanation to wait for legal advisors to arrive before commencing the search. Yes N/A of documents or information supplied ■ Right to secure 2.6 Is in-house legal advice protected by the rules of premises overnight Yes N/A privilege? (e.g. by seal) No, according to Section 38(3) of the Competition Act and Please Note: * indicates that the investigatory measure requires corresponding to the case law of the Court of Justice of the European the authorisation by a court or another body independent of the Union, only legal advice given by external legal advisors is legally competition authority. privileged.

2.2 Please list specific or unusual features of the 2.7 Please list other material limitations of the investigatory powers referred to in the summary table. investigatory powers to safeguard the rights of defence of companies and/or individuals under The FCCA has the right to summon representatives of the investigation. investigated undertaking or other persons for questioning, and the individuals are under obligation to answer truthfully to all fact- The Competition Act introduced new provisions regarding the use relevant questions. However, the person in question does not have of leniency applications and documentation. It follows from Section

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17(4) that information and evidence supplied to the FCCA regarding competition restriction. Such grounds as ‘financial hardship’ or immunity or reduction of a penalty payment cannot be used for any ‘inability to pay’ have not been applied in cartel cases in Finland, purpose other than within investigations and proceedings in the but the relevant provision seems to leave discretion to the courts in competition authorities. Therefore, such documentation cannot be this respect. However, both the FCCA’s guidelines regarding the used in, e.g., actions for damages in general courts of first instance. amount of the penalty payment and the preparatory works of the In addition, an undertaking cannot be forced to admit infringement Act point out that the purpose of the aforementioned 10% limit is to of competition law. ensure that a penalty would not be unreasonable.

2.8 Are there sanctions for the obstruction of 3.4 What are the applicable limitation periods?

Finland investigations? If so, have these ever been used? Has the authorities’ approach to this changed, e.g. become The limitation periods set in Section 19 of the Competition Act stricter, recently? correspond to the limitation periods of the EU competition law. A penalty payment cannot be imposed if the FCCA has not made its If an undertaking does not allow the FCCA to conduct a search proposal regarding the imposition of a penalty payment to the Market on its premises or allow e.g. access to its documents or does not Court within five years from the day on which the infringement has provide information requested by the FCCA, the FCCA can impose been committed, or from the day a continuous infringement has ceased. a conditional fine to enforce such obligations. If an undertaking If the FCCA has taken investigatory measures relating to a competition still fails to fulfil its obligations, the Market Court can order the infringement, a new limitation period will begin; the maximum conditional fine to be paid on the FCCA’s application. limitation period is, however, 10 years from the above-mentioned days Further, it is a criminal offence, punishable with fines or on which the infringement is considered to have ended. imprisonment, to provide the FCCA with false evidence. These sanctions have not been imposed in Finland so far. 3.5 Can a company pay the legal costs and/or financial penalties imposed on a former or current employee?

3 Sanctions on Companies and Individuals As no penalty payments regarding infringement of competition law can be imposed to employees, this issue does not arise in Finland. 3.1 What are the sanctions for companies? 3.6 Can an implicated employee be held liable by his/her The maximum administrative penalty payment allowed by the employer for the legal costs and/or financial penalties Act is 10% of the turnover of the undertaking or association of imposed on the employer? undertakings that participated in the restriction on competition. The amount of the penalty payment is calculated on the basis of the year In theory, an employer would have the right to sue an employee that the undertaking last participated in the competition restriction. for damages if the employee has caused harm to their employer. The payment is calculated based on the relevant economic entity’s According to the Tort Liability Act (vahingonkorvauslaki 412/1974) turnover, e.g. a fine to be imposed on a parent company of a company Chapter 4 Section 1, an employer is liable for damage caused by him group is calculated on the basis of the turnover of the whole group. to an amount deemed reasonable in view of the extent of the injury In Finland, the cartel infringement fines have in total amounted to or damage, the nature of the act, the status of the person causing the EUR 82 million in the asphalt cartel case and to EUR 51 million in injury or damage, the needs of the person suffering the same, and the raw wood cartel case. other circumstances. However, no damages could be claimed if the employee caused the harm with only minor negligence. A court Although the FCCA may not impose a penalty payment by itself, would be required to adjust the amount of damage according to what it has the power to order an undertaking to terminate the infringing is reasonable unless the infringement was committed intentionally. conduct. Although the Competition Act does not prescribe criminal sanctions in Finland, it is, however, possible that certain kinds of restrictions on 4 Leniency for Companies competition, such as purchase cartels, could be caught by provisions regarding fraud and hence would be subject to criminalisation 4.1 Is there a leniency programme for companies? If so, according to the Penal Code (rikoslaki 39/1889). please provide brief details.

3.2 What are the sanctions for individuals (e.g. criminal Yes, the Finnish leniency programme is regulated in Sections 14 sanctions, director disqualification)? through 18 of the Competition Act. The FCCA has issued guidelines regarding the leniency programme, the conditions for granting full Finnish competition law does not prescribe sanctions for private immunity or partial leniency and the FCCA’s procedure in these individuals. However, even a natural person can be considered a matters. business undertaking under certain conditions. The leniency system entitles the FCCA to grant an undertaking either full immunity from a penalty payment or partial leniency. 3.3 Can fines be reduced on the basis of ‘financial According to Section 14 of the Act, full immunity requires that the hardship’ or ‘inability to pay’ grounds? If so, by how business undertaking: much? ■ provides the FCCA with information and proof which enables the FCCA to conduct a dawn raid; or Section 13 of the Competition Act prescribes that all relevant ■ provides the FCCA with information after a dawn raid on the circumstances shall be considered in setting the amount of the basis of which the FCCA can state that a cartel infringement penalty payment, including the gravity, extent and duration of the has taken place.

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In addition, the business undertaking shall provide the information duties shall enter the public domain when the authority has received before the FCCA has obtained it elsewhere. it. According to Section 24(1)(15) of the act, documents containing According to Section 15, partial leniency can be granted to a business information on inspections or other supervisory tasks of authorities undertaking if it provides the FCCA with information and proof are secret if access to the official documents would compromise the which are of significance in stating the competition infringement, inspection or the achievement of its objectives. or the width or the nature of the infringement. Partial leniency can During a leniency procedure, the FCCA decides on a case-by-case be granted provided that the FCCA has not received the information basis the availability of its documents to the public in general and from other sources. to other parties to the case. The FCCA will keep the identity of the Section 15 sets forth three levels of partial leniency: after the full leniency applicant and the information supplied secret for as long as the investigation is ongoing. The identity of the leniency applicant immunity has been granted to the whistle-blower, percentage levels Finland are followed in regard to the other leniency applicants. The first will usually be disclosed at the time at which the FCCA submits to provide the FCCA with significant information can gain a 30%– Requests for Information to other undertakings. This will occur 50% reduction on the penalty payment, the second 20%–30%, and after dawn raids have taken place. a maximum reduction of 20% will be applied to other applicants. Documents containing information on inspections or other The prerequisites, which concern both the applications of full supervisory tasks of authorities are also, according to Section 24(1) immunity and partial leniency, are defined in Section 16 of the Act. (15), secret if access would, without a cogent reason, be liable to To obtain leniency, the business undertaking shall: cause injury or suffering to a party. According to this provision, if access to the application and related documents would cause ■ end its participation in the competition infringement immediately; injury to the leniency applicant, the documents will remain secret to the public even after the investigation is closed. In addition, the ■ co-operate with the FCCA through the whole investigation; Finnish Supreme Administrative Court has in its judgment 883/2006 ■ not destroy any evidence before or after the delivery of its (Metsäliitto Osuuskunta v. the Finnish Competition Authority) leniency application; and confirmed that a premature exposure of cartel investigation ■ keep the submission of its leniency application confidential. documents can endanger the whole investigation. Therefore, Both full immunity and partial leniency require an application from not even the other parties are allowed to learn the content of the the undertaking in question. At the end of its investigation, the documents in the FCCA’s possession. Before the FCCA submits FCCA will make a decision on whether the prerequisite conditions its proposal on the penalty payments to the Market Court, the have been fulfilled. Until then, leniency is granted conditionally by FCCA provides the interested parties with Statements of Objections the FCCA. regarding the imposition of penalty payments. The investigations are by this phase finished, and the documents will become available to the other interested parties. 4.2 Is there a ‘marker’ system and, if so, what is required to obtain a marker? After a cartel investigation has been ended by the FCCA, private litigants may demand access to the official (public) documents Where justified, an application can be accepted on the basis of only regarding the investigation. These documents may include, among limited information. The applicant is then granted time to complete others, documents provided by a leniency applicant. The decision the information and evidence to qualify for immunity. During this to grant access to an official document is made by the authority in time, the FCCA will not process information from other leniency possession of the document and regarding each individual document. applicants, and it will not consider other information before it has A document can be deemed as a secret official document in case decided whether the undertaking will be granted conditional full it includes e.g. business secrets of an undertaking. Only reasons immunity. defined in the Act on the Openness of Government Activities may be taken into account when defining the nature of a document; as a starting point all documents of an authority are public. Thus, there 4.3 Can applications be made orally (to minimise any is a risk that third parties may obtain the documentation provided to subsequent disclosure risks in the context of civil the authority and use that information in private proceedings against damages follow-on litigation)? a leniency applicant or other members of a cartel. Applications can be made orally, but an oral application would be recorded or its content documented and would eventually be made 4.5 At what point does the ‘continuous cooperation’ available to the public and to the interested parties. However, to requirement cease to apply? obtain full immunity, the business undertaking applying for leniency shall provide the FCCA with information on the basis of which an According to Section 16(1)(2) of the Act, continuous co-operation inspection can be executed, or a competition infringement can be must be extended until the FCCA has fully investigated the restriction stated. Therefore, the FCCA requires written evidence in addition on competition. The requirement will apply until procedures in the to an oral application. matter have been concluded at the FCCA: in practice, the obligation will end when the FCCA makes its sanctions proposal to the Market Court. 4.4 To what extent will a leniency application be treated confidentially and for how long? To what extent will documents provided by leniency applicants be 4.6 Is there a ‘leniency plus’ or ‘penalty plus’ policy? disclosed to private litigants? No, ‘leniency plus’ is not available under the Finnish leniency According to Section 7 of the Act on the Openness of Government policy. According to the preparatory works of the Competition Activities (laki viranomaisen toiminnan julkisuudesta 621/1999), a Act, the information or evidence supplied by the undertaking must document delivered to an authority for the consideration of a matter directly relate to the cartel investigation at hand for the prerequisites or otherwise in connection with a matter within its jurisdiction or for leniency to be fulfilled.

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5 Whistle-blowing Procedures for 8 Damages Actions Individuals 8.1 What are the procedures for civil damages actions 5.1 Are there procedures for individuals to report cartel for loss suffered as a result of cartel conduct? Is the conduct independently of their employer? If so, position different (e.g. easier) for ‘follow-on’ actions please specify. as opposed to ‘stand alone’ actions?

Anyone can make a complaint to the FCCA or unofficially tip off the The right to damages is stated in Section 20 of the Act: a business FCCA. Because there is no threat of competition law sanctions for undertaking, or an association of business undertakings which Finland private individuals, a private person would not directly benefit from infringe the cartel prohibition, is obliged to compensate the making a complaint. damage caused by the competition infringement. The obligation to compensate the damages is wider than in traditional tort law; among others, indirectly injured parties such as consumers may be entitled 6 Plea Bargaining Arrangements to damages. Actions for damages are handled in the general courts of first instance. 6.1 Are there any early resolution, settlement or plea bargaining procedures (other than leniency)? Has In general, damages as a consequence of a competition infringement the competition authorities’ approach to settlements are “follow on” cases: the competition infringement has already changed in recent years? been stated by an authority. A “follow on” action lightens the claimant’s burden of proof, but a “stand alone” action may provide No, the Competition Act does not empower the FCCA, which is a faster judgment. In a “stand alone” action the general court of primarily an investigatory authority, to enter into a settlement or first instance can decide to suspend proceedings until a competition plea bargaining with an undertaking. According to the preparatory authority has issued a final decision regarding the restriction of works of the Competition Act, such procedures would not offer competition at hand. The court may also ask the FCCA to give its substantial benefits for handling infringement cases and would statement in a matter regarding damages. not fit well into the existing legal framework or the Finnish legal tradition. 8.2 Do your procedural rules allow for class-action or representative claims? 7 Appeal Process Class actions have not been brought in competition infringement cases in Finland. Since 2007, class actions of a certain kind 7.1 What is the appeal process? have been possible; they can be brought only by the Consumer Ombudsman. Therefore, the grounds for the class action shall be With regard to penalty payments, their imposition and amount are within the ombudsman’s jurisdiction, e.g. concern a business’s decided on the FCCA’s proposition by the Market Court at the first practices in relation to consumers. So far, no class actions have instance. been raised in courts. The Market Court’s decisions can be appealed without leave to appeal to the Supreme Administrative Court in 30 days after 8.3 What are the applicable limitation periods? the Market Court’s decision. The decision of the Supreme Administrative Court will be final in the matter. According to Section 20(3) of the Competition Act, actions for damages must be brought before 10 years have elapsed from the 7.2 Does an appeal suspend a company’s requirement to day on which the infringement was last committed or, in the case of pay the fine? a continuing infringement, within 10 years from the day on which the infringement has ceased. Follow on actions can be brought until No, according to Section 44(2) of the Act, the Market Court’s one year has passed from the day on which the FCCA’s decision or decision is to be followed irrespective of an appeal. The Supreme a judgment of one of the courts became final. Administrative Court can, however, give a ruling to the contrary. 8.4 Does the law recognise a “passing on” defence in 7.3 Does the appeal process allow for the cross- civil damages claims? examination of witnesses? Such a defence is explicitly recognised in section 6 of the Antitrust An oral hearing is a typical part of the court proceedings in cartel Damages Act, according to which the court assesses while cases. During the oral hearing, witnesses can be cross-examined by determining damages what proportion of the overpriced overhead both the FCCA and the defence. has been transferred to the distribution chain. In that assessment, the court may take into consideration the claims for damages at the various levels of the distribution chain and the resulting rulings and the public information on the public enforcement of competition law.

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matters to be examined include, among other issues, the possibility 8.5 What are the cost rules for civil damages follow-on to challenge the legality of a dawn raid decision and the possibility claims in cartel cases? for the FCCA to prevent a person suspected of participating in a cartel from carrying on in business or to order structural changes on According to the main rule as prescribed in the Code of Judicial a company in order to restore functioning competition. The working Procedure (Oikeudenkäymiskaari 323/1969), the losing party in a group’s term of office ended in spring 2017. civil matter shall pay the winning party’s legal costs which relate to On the legislative front, the Antitrust Damages Act (1077/2016) necessary measures taken by the winning party. took effect on 26 December 2016. While the Act is inapplicable in the currently ongoing court proceeding on cartel damages claims, it 8.6 Have there been any successful follow-on or stand clarifies and facilitates the filing and processing of future damages Finland alone civil damages claims for cartel conduct? If there claims and ensures that victims of an infringement of competition have not been many cases decided in court, have law receive full compensation for damages. there been any substantial out of court settlements?

There are some interesting “follow on” cases at the moment. 9.2 Please mention any other issues of particular interest in your jurisdiction not covered by the above. In the asphalt cartel case, the Finnish state and 40 municipalities claimed ca. EUR 120 million for damages over price caused The asphalt cartel case, in which the penalty payment was almost by the asphalt cartel. In November 2013, the Helsinki District altogether EUR 83 million, the raw wood cartel, in which one party Court refused the claims of the Finnish state (due to the fact that received full immunity from penalty payments, and the automobile a governmental authority was allegedly aware of the cartel) but spare parts cartel case have been important for the development of accepted the claims of the 40 municipalities. The undertakings in the Finnish competition law and its private enforcement. the cartel were convicted to pay ca. EUR 40 million for damages. The trial is still pending in the Court of Appeal. Even though the Supreme Administrative Court held automobile spare parts cartel companies as guilty for participating in a In the automobile spare parts case, the claims for damages of the competitive restriction, the court of first instance stated that damages boycotted party amounting to EUR 57 million were rejected in the claims as a follow on case are not automatically ruled. An important Helsinki District Court. The court ruled in its verdict in March 2014 recent development related to claims for antitrust damages is the that there was no causality between the damages and the competition Finnish Supreme Court appeal case on the issue whether the infringement. This judgment is pending before the Court of Appeal. doctrine of economic succession applies to private enforcement of claims for damages in addition to liability for administrative fines. 9 Miscellaneous As the first court in Europe, the Finnish District court previously ruled in favour of the application of economic succession to antirust damages, although subsequently overruled by the Court of Appeal. 9.1 Please provide brief details of significant recent or imminent statutory or other developments in the field of cartels, leniency and/or cartel damages claims.

The Ministry of Employment and the Economy has appointed a working group to investigate a reform of the Competition Act. The

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Ilkka Aalto-Setälä Henrik Koivuniemi Borenius Attorneys Ltd Borenius Attorneys Ltd Eteläesplanadi 2 Eteläesplanadi 2 FI-00130 Helsinki FI-00130 Helsinki Finland Finland

Tel: +358 20 713 3545 Tel: +358 20 713 3269 Fax: +358 20 713 3499 Fax: +358 20 713 3499 Email: [email protected] Email: [email protected] URL: www.borenius.com URL: www.borenius.com Finland Ilkka Aalto-Setälä has worked for over 20 years with antitrust and Henrik Koivuniemi advises clients on questions related to competition merger control matters. Ilkka has defended successfully the client law and public procurement. against the Finnish Competition Authority’s first attempt (Digita/Yle/ Henrik joined Borenius in 2017, and previously worked as a Research Telia) to prohibit the deal. Officer at the Finnish Competition and Consumer Authority. Before Ilkka advises companies and governmental agencies on competition graduating, Henrik worked as an associate trainee at Hannes and marketing law issues at national and EU level, including merger Snellman and as a legal trainee at the Finnish Competition and control, abuse of dominant position, cartels, state aid and public Consumer Authority. procurement. Ilkka also litigates on a regular basis before the Finnish Market Court and the European Commission. Ilkka has advised numerous domestic and foreign clients on M&A transactions and cooperation arrangements. Important authority bodies, such as National Emergency Supply Agency, have also been among his clients. Ilkka is currently a member of the working group investigating changes to the current Competition Act which came into force in November 2011. The Ministry of Employment and Economy appointed the working group on 28 August 2015.

Established in 1911, Borenius Attorneys Ltd is one of the largest and most experienced law firms in Finland. Borenius provides services in all areas of law for corporate clients. Borenius’ commitment to clients’ success is firmly grounded in strong expertise, long-term commitment, genuine involvement, experience and innovation. Borenius’ main office in the centre of Helsinki is ideally located to serve the entire Finnish business community. Clients who are located outside of the Helsinki metropolitan area are also served from our Tampere office. Borenius consists of over 200 employees in three jurisdictions. Borenius provides easy access to full-scale business law solutions in Finland, Russia and in the USA.

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France Jean-Nicolas Maillard

Steptoe & Johnson LLP Camille Keres

1 The Legislative Framework of the Cartel 1.4 What are the basic procedural steps between the Prohibition opening of an investigation and the imposition of sanctions?

1.1 What is the legal basis and general nature of the The basic procedural steps before the FCA include: cartel prohibition, e.g. is it civil and/or criminal? ■ the opening of an investigation, at the FCA’s own initiative (upon proposal from the Rapporteur Général, e.g. following The cartel prohibition is laid down in Article L420-1 of the Code de a leniency application), upon request from the Ministry of Commerce. The aim is to protect the economic public order through Economy or a number of various professional, public and the imposition of administrative sanctions. The general nature of consumer bodies or following a complaint by a company; the cartel prohibition is thus administrative. ■ once the investigations are completed, the adversarial phase Infringement of the cartel prohibition may also expose participants of the procedure starts: to civil damages and, in rare cases, to criminal sanctions. ■ the written phase is articulated around two rounds of written submissions issued by the investigation services (Statement of Objections and Report), which 1.2 What are the specific substantive provisions for the the investigated undertakings can respond to in writing cartel prohibition? within two months. Access to the FCA files is granted upon receipt of the Statement of Objections; and Pursuant to Article L420-1 of the Code de Commerce, the cartel ■ this is followed by a hearing before the College of the prohibition covers all agreements between undertakings, including FCA; and those involving an undertaking located outside France, when they ■ finally, the College takes its decision independently (and have the object or may produce the effects of preventing, restricting may depart from the approach proposed by the investigation or distorting competition in a market. services) and may, inter alia, impose financial penalties. The cartel prohibition covers, inter alia, price-fixing, output limitation and market-sharing. 1.5 Are there any sector-specific offences or exemptions?

1.3 Who enforces the cartel prohibition? Article L420-4 of the Code de Commerce provides that the cartel prohibition does not apply to a number of agreements, including: The cartel prohibition is enforced by the Autorité de la concurrence ■ practices resulting directly from the application of a (‘FCA’). legislative text; and The FCA (formerly Conseil de la concurrence) is an administrative ■ certain practices in the agricultural sector, consisting of authority independent from the government. The FCA’s College (17 collectively defining volumes, quality of production and members) adopts final decisions once the investigation services (led commercial policy for products sold under the same brand. by the Rapporteur Général and strictly separate from the College, for independence purposes) have completed their investigations. 1.6 Is cartel conduct outside your jurisdiction covered by The Minister of Economy, through the Direction Générale de la the prohibition? Concurrence, de la Consommation et de la Répression des Fraudes (‘DGCCRF’) also has the power to: The FCA has jurisdiction over France and may sanction any ■ Investigate anticompetitive practices at a local level. The cartel conduct producing effects on the French territory, even via DGCCRF informs the FCA of all its investigations, so as to undertakings established outside of France. This is exemplified allow the FCA to take over if it wishes so. in Decision 16-D-04 (an abuse case, but fully applicable to cartel ■ The DGCCRF may issue injunctions and impose (limited) cases), where a company located in Belgium was held jointly liable penalties via settlement to address ‘micro’ anti-competitive with its French subsidiary. practices (local in scope, not falling within the scope of The FCA has no jurisdiction to consider effects produced on the Article 101 TFEU and carried out by undertakings which French overseas territories of French Polynesia and New Caledonia. individual turnovers are below €50 million and cumulated turnovers are below €200 million).

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2 Investigative Powers 2.4 Are there any other significant powers of investigation?

2.1 Summary of general investigatory powers. While legal professional privileged of external lawyers (‘LPP’) is recognised under French law, the case-law of the Cour de cassation Table of General Investigatory Powers on seizure of LPP-protected documents is rather lenient. Specifically, Investigatory Power Civil/Administrative Criminal the Cour de cassation considers that, where the FCA seizes an Order the production indivisible mailbox that includes LPP-protected documents, only the of specific documents Yes Yes* seizure of the latter documents must be annulled (see for instance France or information Cass. Crim, 11 July 2017, 16-81038). This line of cases, combined Carry out compulsory with the fact that no special procedure is imposed on the FCA to interviews with Yes Yes* prevent its agents from reviewing LPP-protected documents pending individuals a judgment on the matter, provides a lot of latitude to the FCA. Carry out an unannounced search Yes* Yes* of business premises 2.5 Who will carry out searches of business and/or Carry out an residential premises and will they wait for legal unannounced Yes* Yes* advisors to arrive? search of residential premises Article L450-1 of the Code de Commerce provides that searches ■ Right to ‘image’ computer hard drives of business and residential premises are carried out by authorised Yes* Yes* using forensic IT agents of the FCA or the Ministry of Economy. A police officer tools attends the operation and reports to the judge who authorised the ■ Right to retain Yes* Yes* operation. original documents While undertakings have a right to be assisted by legal counsel ■ Right to require an explanation during the searches, investigators are not under the obligation to Yes Yes* of documents or wait for legal counsel to arrive. information supplied ■ Right to secure 2.6 Is in-house legal advice protected by the rules of premises overnight Yes* Yes* (e.g. by seal) privilege?

Please Note: * indicates that the investigatory measure requires No. French competition law is in line with the interpretation made the authorisation by a court or another body independent of the by the European Court of Justice in Akzo according to which legal competition authority. privilege only applies to communications sent by an independent lawyer who is not bound by the client by a relationship of employment. 2.2 Please list specific or unusual features of the investigatory powers referred to in the summary table. 2.7 Please list other material limitations of the Some investigatory powers of the FCA differ from that of the investigatory powers to safeguard the rights of European Commission. In particular: defence of companies and/or individuals under investigation. ■ The FCA can conduct ordinary investigations (e.g. visit of business premises with the approval of the company’s representative) without previous judicial authorisation; for Limitations of the investigatory powers of the FCA essentially dawn raids, investigations must be authorised by a judge. Its include: powers differ depending on the type of investigation. ■ the protection of legal professional privilege; ■ A police officer attends the search of business premises as ■ the prohibition to seize documents that are outside of the a liaison officer reporting to the judge who authorised the scope of the investigation, such as defined in the judicial operation. order authorising the search; ■ Contrary to the European Commission which may conduct ■ the privilege against self-incrimination, especially in relation the dawn raid over several days by sealing the premises to interviews; and overnight, the FCA will complete the search in one go ■ the prohibition to use unfair evidence. In this regard, the without interruptions, even if it has to stay overnight in the Cour de cassation confirmed in 2011 that sound recordings premises and finish the following morning. obtained without the consent of the person being recorded amount to unfair evidence (provided that the recording was not performed in the context of a parallel criminal 2.3 Are there general surveillance powers (e.g. bugging)? investigation).

The FCA does not have general surveillance powers. 2.8 Are there sanctions for the obstruction of The FCA may occasionally be in a position to rely on sound investigations? If so, have these ever been used? recordings performed in the context of parallel criminal Has the authorities’ approach to this changed, e.g. investigations of the same facts (see for instance Decision 11-D-02 become stricter, recently? on historic monuments). Since the 2014 Loi consommation, Article L450-8 of the Code de Commerce provides that obstruction of investigations may justify

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the imposing of sanctions of up to two years imprisonment and a Commentators note that the fining guidelines have resulted in an fine up to €300,000. This is a significant increase of the sanction, overall increase of the level of fines imposed by the FCA, caused in which was previously of up to six months’ imprisonment and a fine particular by the application of the duration multiplier. By way of up to €7,500. illustration, in 2015, the FCA imposed €1.25 billion in fines on 66 Further, Article L464-2 of the Code de Commerce indicates that, companies, a 20% increase from its previous record in 2014. where a company does not defer to a convocation or does not reply Since the implementation of Directive 2014/104 into French to request for information within the requested deadline, the FCA law, the FCA may also reduce the amount of the fine where the may (1) issue an order against the company, possibly subject to investigated company indemnifies the victim of the infringement a daily fine, and (2) impose a fine of up to 1% of the company’s during the administrative proceedings. It remains to be seen how

worldwide turnover. this provision will be applied in the future. France Both provisions are – for now – rarely applied. However, the recent increase of the sanctions laid down in Article L450-8 may signal a 3.2 What are the sanctions for individuals (e.g. criminal willingness to enforce these rules more strictly. sanctions, director disqualification)?

The FCA cannot sanction executives or employees of undertakings 3 Sanctions on Companies and Individuals involved in a cartel. However, Article L420-6 of the Code de Commerce lays down 3.1 What are the sanctions for companies? criminal sanctions (four years’ imprisonment/€75,000 fine) for individuals who fraudulently took a personal and decisive part in a Article L464-2 of the Code de Commerce provides that the FCA cartel. In this case, the sanction is not imposed by the FCA, but by may: the criminal jurisdictions. ■ Order a company to put an end to the investigated practice(s) Criminal sanctions for antitrust violations remain rare in France: within a given deadline (including the power to impose a ■ e.g. historical monument case (Decision 11-D-02, and daily fine of up to 5% of the average daily turnover of the Tribunal Correctionnel de Rouen, 27 January 2011): company pending implementation). suspended sentences between three and 10 months’ ■ Order the publication of the decision, under specific imprisonment; and conditions, at the undertaking(s) own costs. ■ e.g. road signalisation case (Decision 10-D-39 and Tribunal ■ Impose fines of up to: Correctionnel de Nantes, 30 June 2011): one defendant ■ 10% of the worldwide turnover of the group (excluding sentenced to a 10-month suspended prison sentence and a tax); €50,000 fine. ■ €750,000 in ‘simplified procedure’ cases (e.g. Decision In order to preserve the attractiveness of the leniency programme, 10-D-04 on practices in the sector of operation tables); or the FCA leniency guidelines clarify that the FCA will not refer ■ €3 million ‘where the infringer is not an undertaking’ leniency cases to the public prosecutor for criminal prosecution. (Article L464-2 of the Code de Commerce). In a judgment dated 8 February 2017, the French Cour de 3.3 Can fines be reduced on the basis of ‘financial cassation confirmed that this provision applies to any hardship’ or ‘inability to pay’ grounds? If so, by how entity carrying out an economic activity without being much? formally incorporated as a company.

In imposing fines, the FCA follows a methodology set in the Code Yes. The fining guidelines allow the FCA to reduce the amount of de Commerce and in its 2011 fining guidelines. the fine on the grounds of the company’s inability to pay provided The FCA fining guidelines expand on the fining principles set out in they bring reliable, full and objective proof that the company has the Code de Commerce and provide a four-step approach to setting serious and current financial difficulties that prevent it from paying fines. a fine, in full or in part. ■ First step: the FCA sets the basic amount by reference to a The fining guidelines do not quantify the level of reduction that the percentage of the value of sales made by the undertaking FCA may grant on the basis of financial hardship, which depend on (or group) in relation to the infringement in France: for the circumstances of the case. For instance: horizontal cartels, this percentage may range from 15% to 30%, depending on the seriousness of the infringement and ■ the 2015 yogurt case (Decision 15-D-03): 30% fine reductions the extent of the harm to the economy. A multiplier based on and further reductions in appeal; the duration of the infringement is then applied (1 for the first ■ the 2015 parcel delivery case (Decision 15-D-19): very year + 0.5 for each subsequent year). significant fine reductions of up to 90%; and ■ Second step: the FCA adjusts the basic amount by taking ■ in several cases, the FCA did not impose sanctions on into account individual circumstances: (1) aggravating companies which had filed for bankruptcy (e.g. the 2016 circumstances (e.g. ring leader); (2) mitigating circumstances model agency case – Decision 16-D-20). (e.g. infringement authorised or encouraged by public authorities); and (3) other circumstances such as the large size of the group concerned (deterrence factor). 3.4 What are the applicable limitation periods? ■ Third step: the FCA may increase the amount of the fine from 15% to 50% to sanction reiteration. The FCA’s action is subject to two cumulative limitation periods (essentially laid down in Article L462-7 of the Code de Commerce ■ Fourth step: ‘final adjustments’ are made to (1) ensure that the fine does not exceed the legal limit,i.e. 10% of the worldwide and refined by case law): turnover, (2) take into account leniency and transaction, and ■ The FCA has five years to act, running from the end of the (3) examine any ‘financial hardship argument’. infringement. This limitation period may be interrupted by any act of investigation, challenge or sanction of

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anticompetitive practices. The Cour de cassation has clarified value to the information already in possession of the FCA and that, where such act affects only some of the companies under reinforces its case. In these cases, the level of exoneration investigation or only part of the practices, they still justify varies depending on the rank of the applicant: the interruption of the limitation period with regards to all ■ First: 25–50% fine reduction; companies and all facts being investigated, provided that ■ Second: 15–40% fine reduction; and there is a connexity between the practices at stake (see for instance Cass. Com, 11 January 2017, Reckitt Benckiser, ■ Others: up to 25% fine reduction. n°15-17134). In addition to the above requirements, all leniency applicants must ■ In any event, an infringement is deemed time barred if the satisfy the following substantive conditions: FCA does not adopt a final decision within 10 years from ■ end immediately their involvement in the presumed cartel. France the end of the infringement. This limitation period can be In practice, the FCA often requires that the practices be suspended when certain procedural decisions are legally continued until the dawn raids, so as to avoid tipping off other challenges. participants and ensure the efficiency of this investigative measure; 3.5 Can a company pay the legal costs and/or financial ■ cooperate genuinely, fully, on a continuous basis and penalties imposed on a former or current employee? expeditiously with the FCA, from the time it submits its application, including providing all information and evidence This is of limited relevance in France due to the scarcity of criminal available (on the impact of omissions, see the 2015 parcel delivery case, Decision 15-D-19); and actions against individuals, but it would raise a number of legal issues. ■ not have destroyed or falsified evidence of the cartel, or revealed its intention to apply for leniency (except to other competition authorities). 3.6 Can an implicated employee be held liable by his/her Companies which took steps to coerce other undertakings in employer for the legal costs and/or financial penalties participating in the cartel are not eligible to full immunity. imposed on the employer?

In cases where the employee committed a serious breach of its 4.2 Is there a ‘marker’ system and, if so, what is required obligations under employment law characterising an intention to harm to obtain a marker? his employer, it is conceivable that the employer may claim damages, although we are not aware of any such case in a cartel context. Yes. Companies willing to apply for leniency must generally arrange an appointment with the Rapporteur Général of the FCA or one of his/her deputies, although a written application by registered 4 Leniency for Companies post is also possible. During the appointment, companies are given a provisional marker, 4.1 Is there a leniency programme for companies? If so, which confirms their rank with regards to the application ofthe please provide brief details. leniency programme. The attribution of a marker requires the provision of a first (limited) set of information. The French leniency programme for companies is laid down in The applicant is then given a deadline – generally one month – to Article L464-2 of the Code de Commerce and in the 2015 FCA finalise its application and provide documentary evidence ofthe leniency guidelines. cartel. When the applicant provides the required information and The leniency programme allows the FCA to grant full or partial fine evidence, it is deemed communicated at the date of attribution of exoneration to companies providing relevant information about a the marker. cartel. Leniency is also available for hub and spoke practices, but not for vertical infringements. 4.3 Can applications be made orally (to minimise any Eligibility requirements vary depending on the rank of the applicant, subsequent disclosure risks in the context of civil as well as the previous level of information available to the FCA: damages follow-on litigation)? ■ Type 1 cases (full immunity): Yes. Applicants often require that their application is dealt with on ■ Type 1A cases: the FCA has no previous information on the alleged cartel, and the applicant is the first company an entirely oral basis. In this case, the leniency statement is recorded to provide information. The FCA will conditionally grant electronically. Minutes of the transcript of the recording are then full exoneration, provided that the evidence brought by established for the purpose of the investigation and instruction. the applicant is sufficient to carry out dawn raids. Most These minutes may not be disclosed on the context of civil damages leniency cases in France are type 1A cases. litigation (see question 4.4 below). ■ Type 1B cases: the FCA already has information on the alleged infringement, but the applicant is the first 4.4 To what extent will a leniency application be treated company to provide sufficient evidence to establish the confidentially and for how long? To what extent existence of a cartel. The FCA will conditionally grant will documents provided by leniency applicants be full exoneration to the applicant, provided that no other disclosed to private litigants? company has obtained a type 1A exoneration. Type 1B cases remain a rare occurrence (e.g. Unilever in the 2011 laundry detergents case, Decision 11-D-17). The identity of the leniency applicant must be kept confidential to the other investigated companies until the FCA sends a Statement ■ Type 2 cases (partial immunity): of Objections. The FCA’s decision at the end of the procedure will The applicant does not qualify for a type 1A or 1B exoneration, identify the leniency applicant. but provides evidence of the cartel that adds significant added

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Following the implementation of Directive 2014/104 into national reformation before the Court of Appeal of Paris, within a month law, Article L483-5 of the Code de Commerce provides that a judge from the notification of the decision. shall not order the disclosure of corporate statements (including oral Judgments of the Court of Appeal of Paris relating to prohibition statements) presented voluntarily under a leniency procedure before decisions of the FCA may then be referred to the Cour de cassation any EU competition authority. However, evidence disclosed by within one month following their notification. the leniency applicant in support of its corporate statement do not benefit from this protection. 7.2 Does an appeal suspend a company’s requirement to pay the fine? 4.5 At what point does the ‘continuous cooperation’

requirement cease to apply? No. By way of exception, the first President of the Court of Appeal of France Paris may order the suspension of the decision (and, if applicable, of The ‘continuous cooperation’ requirement applies throughout the the fine) if it has excessive consequences or if new facts have emerged. whole procedure before the FCA and immunity remains conditional until granted by the FCA in the final decision. 7.3 Does the appeal process allow for the cross- examination of witnesses? 4.6 Is there a ‘leniency plus’ or ‘penalty plus’ policy? No, it does not. No. However, note that if a type 2 leniency applicant benefiting from a reduction of fine is the first company to provide evidence concerning additional facts that have an indirect impact on the 8 Damages Actions amount of the fine, the FCA shall not take into account these facts in the calculation of the fine of this applicant. 8.1 What are the procedures for civil damages actions for loss suffered as a result of cartel conduct? Is the position different (e.g. easier) for ‘follow-on’ actions 5 Whistle-blowing Procedures for as opposed to ‘stand alone’ actions? Individuals Under French law, damages claims for antitrust infringements may 5.1 Are there procedures for individuals to report cartel be brought before civil or administrative courts: conduct independently of their employer? If so, ■ Civil courts (‘tribunaux de commerce’ or ‘tribunaux de please specify. grande instance’) are competent in most instances to deal with antitrust damage claims, essentially those arising France does not have a formal whistle blowing procedure, whereby between private operators. individuals may report cartel conduct to the FCA. However, the ■ Administrative courts are competent to hear damage claims FCA’s website clarifies that nothing prevents individuals from relating to anticompetitive behaviours which altered the engaging informal contacts with the FCA to signal a cartel (see for clauses (in particular the financial clauses) of an administrative instance Decision 09-D-17, in which an individual pharmacist alerted contract to the detriment of a public entity, typically, cases of bid-rigging in public procurement. the FCA on practices implemented by the local pharmacists Council). The complainant’s position is different depending on whether they launch a follow-on or a stand alone action, for evidentiary reasons. 6 Plea Bargaining Arrangements In particular, stand alone complainants must prove the infringement while follow-on litigants may rely on a pre-existing infringement decision by a competition authority. 6.1 Are there any early resolution, settlement or plea bargaining procedures (other than leniency)? Has the competition authorities’ approach to settlements 8.2 Do your procedural rules allow for class-action or changed in recent years? representative claims?

Yes. The 2015 Loi Macron introduced a settlement procedure in The Loi Hamon, adopted in 2014, included a two-step collective Article L464-2 of the Code de Commerce. Under this procedure, redress mechanism in Article L623-1 of the Code de la companies having received a Statement of Objections may decide consummation: not to challenge these objections, in exchange for a settlement ■ A consumer association may, without a mandate from proposal by the Rapporteur Général setting the minimum and consumers, bring an action before a judge, who rules on maximum amount of the fine. the liability of the defendant, identifies a group of affected To date, seven cases, including three cartel cases, have resulted in consumers and sets a time limit between two and six months the conclusion of a settlement. for consumers to join this group. ■ Consumers only become involved in the second phase of the procedure when they may join the group of affected 7 Appeal Process consumers (opt-in) and receive damages. To date, this mechanism has not been used in connection with antitrust damage claims, owing to a number of limitations: only a 7.1 What is the appeal process? limited number of ‘approved’ consumer associations can act; this action is available only to consumers and not to aggrieved sole The addressees of a prohibition decision of the FCA, as well as traders and small businesses; and stand alone class actions are not the Ministry of Economy, may bring an action in annulment or permitted, only follow-on actions are, etc.

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8.3 What are the applicable limitation periods? 8.6 Have there been any successful follow-on or stand alone civil damages claims for cartel conduct? If there As per Article 2224 of the Code Civil¸ damages actions are subject have not been many cases decided in court, have there been any substantial out of court settlements? to a five-year limitation period which starts running on the day the victim became aware or should have become aware of the infringement. There have been a few successful follow-on and stand alone civil damages claims for cartel conduct in France. This test raises practical interpretation issues, as illustrated by the famous Lycées d’île de France bid-rigging case, where an early For instance, in the Lysine case, Doux Aliments, an indirect purchaser of lysine, brought an action for damages against one of

France complaint before the public prosecutor (over 10 years before the case was decided by the FCA and a damage claim introduced before the cartel members. In a judgment dated 27 February 2014, the the civil court) was deemed to be the starting-point of the limitation Court of Appeal of Paris eventually sided with the plaintiff, which period. was awarded €1.6 million in damages. The limitation period may be interrupted by the opening of Although the development to date of antitrust private actions in proceedings before any NCA or the Commission, or any act by France has been fairly limited compared to other jurisdictions, the these enforcers aimed at investigating, finding or sanctioning an volume of cases is expected to grow under the new post-Damages anticompetitive practice. Directive regime. Finally, Article 2238 of the Code Civil provides for the suspension of the limitation period in cases of consensual resolution of the 9 Miscellaneous dispute.

9.1 Please provide brief details of significant, recent or 8.4 Does the law recognise a “passing on” defence in imminent statutory or other developments in the field civil damages claims? of cartels, leniency and/or cartel damages claims.

Yes. Since the implementation of Directive 2014/104 into French The most significant development in the field of cartel relates to the law the purchaser, either direct or indirect, shall not be deemed to recent implementation of Directive 2014/104 on antitrust damages. have passed-on the price increase. Therefore, it is for the defendant The Directive was implemented into French law by Order n°2017- to prove the passing-on. 303 of 9 March 2017, which introduces into French law new This rule reverses the previous line of French case-law which put rules relating to topics such as the production of evidence or the the burden of proving the absence of passing-on on the claimant quantification of harm. (Cass. Com, Les Sociétés Coopérative Le Gouessant et Sofral (11- The Order will enter into force progressively. Procedural rules 18.495). apply to actions brought before a French judge as of 26 December 2014, while substantive rules entered into force on 11 March 2017. 8.5 What are the cost rules for civil damages follow-on Going forward, it is expected that the implementation of the claims in cartel cases? Directive will stimulate the development of private antitrust actions in France. Under the Code de procédure civile, the judge may order that the losing party pay two categories of costs: 9.2 Please mention any other issues of particular interest ■ the dépends, which cover a limitative list of expenses (e.g. in your jurisdiction not covered by the above. translation fees) (Article 696 of the Code de procédure civile); and Currently, the FCA does not have the power to reject a complaint ■ the frais non compris dans les dépends, which cover a much on the grounds that they do not consider it a priority. If adopted, wider variety of expenses, including but not limited to legal the proposed ‘ECN+’ Directive would grant this power to all NCAs, fees (Article 700 of the Code de procédure civile). The judge including the FCA. may also (1) adjust the amount to be paid, depending on the economic situation of the paying party, or (2) decide that these costs should simply not be reimbursed. In practice, French judges rarely order the reimbursement of the full amount paid in legal fees.

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Jean-Nicolas Maillard Camille Keres Steptoe & Johnson LLP Steptoe & Johnson LLP 489 Avenue Louise 489 Avenue Louise 1050 Brussels 1050 Brussels Belgium Belgium

Tel: +32 2 626 0594 / +33 6 13 94 72 20 Tel: +32 2 626 0536 Email: [email protected] Email: [email protected] URL: www.steptoe.com URL: www.steptoe.com France Jean-Nicolas Maillard is a French partner in the Antitrust & Competition Camille Keres is a French qualified lawyer in Steptoe & Johnson’s Group of Steptoe & Johnson. Qualified in France and in England & Antitrust & Competition Group. Wales, he specialises in EU and French competition law. A substantial She advises clients on EU and French competition law, focusing in part of his practice focuses on cartel and behavioural cases, sector particular on cartel investigations, merger control, and compliance and inquiries, internal investigations and compliance initiatives. distribution law, drawing on a distinct background in competition, IP, Over the last years, he has represented companies in a number and distribution law experience developed both in private practice, as of prominent French Competition Authority cartel cases and well as through in-house positions at Kenzo and L’Oreal. investigations, including in the flour, yogurt, iPhone distribution, She has been working with companies across a variety of sectors, payment systems, poultry, beer distribution and railway maintenance such as the internet and media, consumer products, luxury goods, cases. He also has substantial antitrust litigation experience in food, pharmaceutical, financial services, and oil and gas. French courts, including dawn raid litigation, appeals against French Competition Authority decisions, cartel follow-on litigation and other civil and administrative claims. Throughout his career he has gained significant exposure to the food, retail, consumer electronics, IT, financial services and private equity, construction products, agriculture and pharmaceuticals sectors.

Steptoe & Johnson LLP is an international law firm widely recognised for vigorous advocacy in complex litigation and arbitration, successful representation of clients before governmental agencies, and creative and practical advice in guiding business transactions. The firm has more than 500 lawyers and other professionals in offices in Beijing, Brussels, Chicago, London, Los Angeles, New York, Phoenix, San Francisco and Washington.

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Germany

Shearman & Sterling LLP Mathias Stöcker

Infringements with regional effects are dealt with by the State Cartel 1 The Legislative Framework of the Cartel Offices (Landeskartellbehörden). However, the majority of cartel Prohibition cases are dealt with by the FCO, which is in charge of both the investigation of potential violations and the enforcement of the cartel prohibition. 1.1 What is the legal basis and general nature of the cartel prohibition, e.g. is it civil and/or criminal? In cases of bid-rigging, the state prosecutor can open proceedings against individuals on the basis of the German Criminal Code The legal basis for cartel enforcement in Germany is the Act (Strafgesetzbuch). against Restrictions of Competition (ARC), as amended by the 9th Amendment to the ARC which entered into force on 9 June 2017. 1.4 What are the basic procedural steps between the Section 1 ARC corresponds to Article 101(1) of the Treaty on the opening of an investigation and the imposition of Functioning of the European Union (TFEU) and broadly prohibits sanctions? agreements or concerted practices between undertakings that have as their object or effect the prevention, restriction or distortion of Where the FCO discovers anti-competitive conduct (through third- competition. The substantive law – which applies both to companies party complaints, a leniency application by one of the companies and individuals – can be enforced by the Bundeskartellamt (Federal involved, or an anonymous whistle-blower), it normally gathers Cartel Office, FCO) on the basis of two different proceedings. further information and evidence regarding the infringement. To Minor infringements which only require a cease and desist order collect this further information and evidence, the FCO has a broad are dealt with in administrative proceedings which are governed by range of investigative powers, which are described in more detail the ARC. In cases where the authority intends to impose fines, the below. proceedings are governed by the Code on Administrative Offences Once the FCO has completed its fact-finding, it will issue a statement (Ordnungswidrigkeitengesetz) and the Code on Criminal Procedure of objections setting out the underlying facts of the case, the alleged (Strafprozessordnung). infringements and the FCO’s preliminary legal assessment. Around the same time, those subject to the FCO’s investigation will be given 1.2 What are the specific substantive provisions for the access to the FCO’s file and have the opportunity to comment on cartel prohibition? the allegations. The final procedural step is the adoption of a formal decision by the Practices that are prohibited under Section 1 ARC include (i) FCO. In administrative proceedings, a non-confidential version of the horizontal agreements (such as fixing prices or terms and conditions, decision will be published on the FCO’s website in certain cases even allocating markets (territory, customers or quotas), bid-rigging or with an English language translation (www.bundeskartellamt.de) . exchanging sensitive market data (e.g. prices)), and (ii) vertical Fining decisions adopted under the Code on Administrative Offences agreements (such as resale price maintenance). are not normally published. However, the FCO will generally publish press releases and case reports which will describe the cases in some 1.3 Who enforces the cartel prohibition? detail.

The cartel prohibition is enforced primarily by the FCO in Bonn. 1.5 Are there any sector-specific offences or exemptions? The authority has nine independent divisions that are responsible for different industry sectors and product markets. Additionally, Section 1 ARC does not apply to certain restrictions of competition the FCO has three divisions which focus exclusively on the in the agricultural sector or in the water supply sector and to enforcement of the cartel prohibition as well as a special unit for resale price maintenance in the magazine and newspaper sector. combating cartels (SKK), which provides technical assistance to the Moreover, the 9th Amendment to the ARC introduced an exemption special cartel divisions. On 1 June 2012, the FCO established an from Section 1 ARC for cooperations between publishers of anonymous online whistleblowing system accessible through the newspapers or magazines to the extent such cooperations allows FCO’s website (www.bundeskartellamt.de) which allows the FCO the undertakings concerned to strengthen their economic basis to receive anonymous tip-offs of cartel law infringements. for intermedia competition. Since the exemption only relates to Section 1 ARC but not to Article 101(1) TFEU, it does not apply to

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cooperations which may affect trade between Member States. As Third parties are obliged to produce documents or information such, it may be expected that the exemption will primarily be relied in both administrative proceedings and administrative offence on by small and medium publishing houses. proceedings. Moreover, compulsory interviews with third parties are possible in both types of proceedings. However, third parties can withhold documents and information and do not have to respond 1.6 Is cartel conduct outside your jurisdiction covered by the prohibition? to questions which would expose them or a member of their family to the risk of prosecution. Cartel conduct outside of Germany is covered by the prohibition insofar as the conduct has an appreciable effect on Germany. The 2.3 Are there general surveillance powers (e.g. bugging)? FCO tends to interpret this rule broadly and it asserts jurisdiction Germany even in cases with little or only indirect effect on Germany. Competition authorities do not have general surveillance powers. Agreements which are concluded in Germany but have an effect only Bugging is restricted to the most serious criminal offences only and outside of Germany are not covered. Depending on the individual the cartel prohibition does not fall into this category. facts, however, export cartels may have at least a potential effect on Germany and can in such cases be covered by the prohibition. 2.4 Are there any other significant powers of investigation? 2 Investigative Powers FCO officials may seize electronic devices, such as laptops, tablet computers or smartphones, where the officials do not have access 2.1 Summary of general investigatory powers. to the device (e.g. lack of password) or where the hard drive cannot be imaged. Table of General Investigatory Powers

Investigatory Power Civil/Administrative Criminal 2.5 Who will carry out searches of business and/or Order the production residential premises and will they wait for legal of specific documents Yes No advisors to arrive? or information Carry out compulsory The searches are carried out by FCO officials who are, as a general interviews with Yes No rule, accompanied by police staff and IT experts to support the FCO individuals officials in their searches. The FCO will normally be prepared to Carry out an unannounced search Yes Yes wait for approximately 30 minutes for external legal counsel to of business premises arrive before starting the inspection. Carry out an unannounced Yes Yes search of residential 2.6 Is in-house legal advice protected by the rules of premises privilege? ■ Right to ‘image’ computer hard drives Yes Yes In-house legal advice is not protected by the German rules of using forensic IT privilege and the concept of legal privilege in Germany is not as tools broad as under the EU rules. External counsel advice kept at the ■ Right to retain Yes Yes premises of the undertaking under investigation is only protected original documents by legal privilege if the communication specifically relates to the ■ Right to require an explanation ongoing investigation (defence correspondence) and was created Yes No of documents or after the formal initiation of proceedings relating to the conduct information supplied under investigation. ■ Right to secure premises overnight No Yes (e.g. by seal) 2.7 Please list other material limitations of the investigatory powers to safeguard the rights of Please Note: * indicates that the investigatory measure requires defence of companies and/or individuals under the authorisation by a court or another body independent of the investigation. competition authority. During the investigation, the company and the individuals concerned are protected by fundamental rights of defence. Individuals, 2.2 Please list specific or unusual features of the therefore, do not have to respond to any questions asked by FCO investigatory powers referred to in the summary table. officials if they have personally been accused of a violation of the competition rules or if the answer would expose themselves The investigatory powers described under question 2.1 above or a member of their family to the risk of criminal prosecution or exclusively relate to companies and individuals who are the subject prosecution for an administrative offence. The fundamental rights of the FCO’s investigations. During the course of an investigation, of defence also include the right to legal advice and to appoint a such individuals are generally not under an obligation to produce legal representative. Moreover, the investigatory powers are strictly documents or to respond to questions (fundamental rights of limited to the object of the investigation. Officials are, therefore, not defence). However, companies are obliged to provide company- allowed to exceed this limitation (e.g. by searching files which do specific and market-specific information, in particular, information not fall within the object of the investigation). on company turnover. This requirement is meant to put the FCO in a position to calculate antitrust fines.

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of Justice found that the principle of legal certainty, which forms 2.8 Are there sanctions for the obstruction of an integral part of German constitutional law, requires the provision investigations? If so, have these ever been used? to be construed as an absolute upper limit of a substantive fining Has the authorities’ approach to this changed, e.g. framework and not as a mere cap (on an otherwise unlimited fine). become stricter, recently? The FCO uses a two-step procedure to calculate fines. First, it defines the statutory framework of fines, and second, the FCO sets Where the officials operate on the basis of administrative offence the fine within this framework. proceedings, no fines can be imposed for obstructing the search. However, individuals disturbing the search can be arrested by the In a first step, the FCO defines the statutory framework of the fine. officials until termination of the search. Suspects are not obliged to The upper limit of the framework of fines for serious intentional submit documents or answer questions, whereas other individuals cartel administrative offences amounts to 10% of the total turnover Germany (who are not accused and not under investigation) are obliged to achieved in the business year preceding the authority’s decision. do so or otherwise expose themselves to the risk of prosecution. For negligent offences, the maximum fine amounts to 5% of the Sanctions for not providing information are fines or detention. total turnover achieved. Within the scope of administrative proceedings, the FCO can impose In a second step, the FCO sets the fine within the statutory framework of fines. The scope for setting a fine in a specific case is determined fines if formal requests for information are not answered, answered with consideration to the so-called gain and harm potential (i.e. incorrectly, the answers are misleading or not submitted within the competitive gains achieved or achievable by the infringement and time limit set. The same applies if formal requests for documents the harm caused to third parties or to the national economy) on are not complied with or complied with late or the submissions are the one hand and the total turnover of the entity which infringed incomplete. competition rules on the other. The FCO generally assumes a gain So far, the FCO has not used these powers in cartel investigations. and harm potential of 10% of the domestic turnover to which the infringement relates during the entire period of the infringement. A multiplication factor is then applied to the established gain and 3 Sanctions on Companies and Individuals harm potential to account for the size of the respective group of companies. In cases in which the value calculated is below the legal 3.1 What are the sanctions for companies? upper limit, this value will represent the upper limit for the further assessment of the fine. Where the value determined is obviously too low in a specific case on account of a significantly higher gain and Prior to the 9th Amendment to the ARC, sanctions could in general harm potential, this value can exceptionally be exceeded in order only be imposed on those legal entities which participated in to set an adequate fine. Finally, aggravating and mitigating factors a cartel. As such, parent companies that did not participate in a are taken into account in order to set the final amount of the fine, cartel in which a subsidiary was involved could only be fined under including offence-related criteria (e.g. the type and duration of the exceptional circumstances, notably if management of the parent infringement and its qualitative effects) and offender-related criteria company was aware of the cartel participation of the subsidiary and (e.g. the role of the company within the cartel and its position on the th did not intervene. Under the 9 Amendment to the ARC, a parent market affected). Hard-core cartels are typically rated in the upper company is now subject to sanctions if it directly or indirectly range of the fining framework. exerted decisive influence on a subsidiary which participated in a Interest is payable on the fine, commencing four weeks from the cartel, irrespective of whether management of the parent company date of the formal notification of the FCO’s decision, even where the participated in the cartel or failed to properly supervise the subsidiary. decision is being appealed. While German administrative offence law does not allow for a rebuttable presumption to this effect in cases of (almost) wholly- There are no additional sanctions on companies (e.g. no blacklisting owned subsidiaries – as applied by the European Commission – but from bidding for government contracts or similar measures). requires proof to the free conviction of the judge, there may be in practice not much difference to the results at the European level. 3.2 What are the sanctions for individuals (e.g. criminal The legislative materials to the 9th Amendment to the ARC state that sanctions, director disqualification)? in cases where a clear majority of shares is held a high probability militates for the assumption that the business policy of the relevant The level of fines for individuals amounts up to €1 million for entity is actually determined by the majority shareholder. participation in serious infringements (i.e. hard-core cartel activity Fines can be imposed on companies up to a maximum of 10% of such as price fixing, bid rigging, allocation of quotas, customers or worldwide turnover in the last completed business year. The FCO territories) and up to €100,000 for less serious infringements. can also take into account the proceeds gained from the infringement Under the FCO’s leniency programme, individuals will not be subject when determining the level of the fine. to individual fines if the company immediately and unreservedly The Fining Guidelines of September 2006 were replaced by cooperates with the FCO and contributes to uncovering cartel “Guidelines for the setting of fines in cartel administrative offence activities. proceedings” of 25 June 2013 (available on the FCO’s website: It should be noted that German law generally does not provide for www.bundeskartellamt.de) following a landmark decision of the criminal sanctions for violations of the ARC, except for Section 298 German Federal Court of Justice (26 February 2013, KRB 20/12). of the German Criminal Code, which provides for a prison sentence The ARC provides that fines imposed against undertakings for of up to five years for bid-rigging in tender proceedings. According competition infringements may not exceed 10% of the relevant to a Federal Supreme Court (Bundesgerichtshof) decision, bid- undertaking’s group turnover. This provision was introduced rigging could, depending on the circumstances of the individual case, into the ARC in 2005 to harmonise German competition law with also be regarded as a particular form of fraud (warranting a prison the EU rules. In its previous guidelines, which adopted the EU sentence of up to five years). If the FCO discovers cases involving Commission’s method of setting fines, the FCO interpreted this as a bid-rigging, it must refer the proceedings against individuals to the cap and its former fining guidelines set out this approach in detail. state prosecutor. The corresponding proceedings against companies However, in its cement cartel decision, the German Federal Court stay with the FCO.

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There are no additional sanctions for individuals (e.g. director On appeal, the decision was annulled by the Federal Labour Court disqualification). (Bundesarbeitsgericht) in June 2017 (8 AZR 189/15) for procedural reasons, and the case was referred back for new consideration and decision. The Federal Labour Court did not comment on the 3.3 Can fines be reduced on the basis of ‘financial hardship’ or ‘inability to pay’ grounds? If so, by how question of whether the lower court was right to hold that the fine much? must not be shifted from the company to the employee. For the time being, the legal question consequently remains undecided. Fines are only reduced by the FCO in exceptional cases, where a In any event, an employer should consider that cooperation of company proves that it cannot pay the FCO’s fine in the long-run an employee in a cartel investigation will usually require an without endangering its very existence. In cases where a company indemnification of the employee, to the extent legally possible, proves that it cannot pay the FCO’s fine in the short- to medium- from any damage claims of the employer vis-à-vis the employee. Germany term, the FCO can agree to issue a debtor warrant (repayable as soon Refusal to grant such indemnification will usually lead to the loss of as the company’s finances improve) or it can agree to otherwise cooperation of that individual with the company. This may adversely defer the fine. affect the company’s ability to obtain reductions of the fine under the FCO’s leniency policy, which requires full cooperation with the FCO’s investigation by the company and its employees. 3.4 What are the applicable limitation periods?

In general, serious infringements become time-barred five years 4 Leniency for Companies after termination of the infringement, whereas less serious infringements become time-barred three years after termination of the infringement. However, investigations by the FCO, the European 4.1 Is there a leniency programme for companies? If so, Commission or competition authorities of other Member States will please provide brief details. suspend the limitation period. In order to provide companies engaged in cartel activity with an incentive to end their involvement and to inform the FCO about the 3.5 Can a company pay the legal costs and/or financial infringement, the FCO introduced a leniency programme in 2000, penalties imposed on a former or current employee? which was revised in 2006. The revised programme largely reflects the European Commission’s 2002 leniency notice. However, due In the past, companies have frequently covered the legal costs to the liability of individuals, the FCO’s leniency programme is and fines imposed on company employees or directors (including available both to companies and individuals. former employees and directors). However, this has been seen According to the FCO’s revised leniency programme, companies more critically in recent years and, in addition to potential tax involved in an illegal agreement can be entirely or partly exempted implications, it could well be possible that courts will prohibit such from a fine if they make a decisive contribution to uncovering a conduct in the future. cartel and cease their anti-competitive behaviour. In particular, a fine will not be imposed if the offender: 3.6 Can an implicated employee be held liable by his/her ■ is the first applicant to contact the FCO before it has sufficient employer for the legal costs and/or financial penalties imposed on the employer? evidence to obtain a search warrant; ■ provides the FCO with verbal and written information and, Under German employment law, legal costs and/or cartel fines can where available, evidence that enables it to obtain a search warrant; be recovered from an employee if the employee acted intentionally. If the employee was merely grossly negligent in his conduct, ■ was not the only ringleader of the cartel and did not coerce others to participate in the cartel; and recovery is more difficult. ■ cooperates fully and on a continuous basis with the FCO. It is, however, currently unclear whether competition law prevents an employer from holding an implicated employee liable for At the point at which it is in a position to obtain a search warrant, the financial penalties imposed on the employer. FCO will still grant a cartel participant immunity from a fine if it: The Higher Labour Court (Landesarbeitsgericht) of Düsseldorf ■ is the first applicant to contact the FCO before it has sufficient evidence to prove the offence; in 2015 rejected the damage claim of a company which was fined more than €190 million by the FCO for its participation in ■ provides the FCO with verbal and written information and, the rail cartel (16 Sa 459/14). The company sought to recover where available, evidence which enables it to prove the offence; from one of its managing directors this fine, plus damages which the company had already paid to a damaged customer. The court ■ was not the only ringleader of the cartel and did not coerce found that, irrespective of the question of whether the manager others to participate in the cartel; and acted intentionally or not, he is not obliged to recover the cartel fine ■ cooperates fully and on a continuous basis with the FCO. imposed on the employer. The court held that German fining rules Even where the conditions for full immunity are not fulfilled, the must be considered in that they provide for the personal liability of fine may be reduced if the offender discontinues its participation the acting individuals and the corporate liability of undertakings. in the cartel and makes a significant contribution to proving the The different nature of the two types of fines with regard to being offence by voluntarily revealing its knowledge. The FCO will take complementary, following different objectives and being subject such conditions into account when setting the amount of the fine. to different calculation methods, excludes that a fine imposed on The submission of all relevant documents, together with an explanation an undertaking for its cartel participation is ‘shifted’ to the acting of the information given, is deemed to aid the investigation. individual. The court found that this principle applies irrespective Undertakings are expected to encourage their members of staff to of whether the individual acted intentionally or not. cooperate. Individual employees will not be subject to individual

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fines if the company immediately and unreservedly cooperates with has been adopted. The obligation of the applicant to keep his the FCO and, together with its employees, contributes to uncovering cooperation with the FCO confidential applies until the FCO cartel activity. relieves the applicant of this obligation (normally after dawn raids It should be noted that the FCO’s leniency programme has no have been conducted). effect on civil cartel damages claims or on criminal investigations conducted by the public prosecution. Whistle-blowers can therefore 4.6 Is there a ‘leniency plus’ or ‘penalty plus’ policy? still be subject to follow-on damages claims and individuals could face criminal prosecution where the case involves bid-rigging. There is no ‘leniency plus’ or ‘penalty plus’ policy in Germany.

4.2 Is there a ‘marker’ system and, if so, what is required Germany to obtain a marker? 5 Whistle-blowing Procedures for Individuals The revised 2006 leniency programme introduced a marker system, under which applicants can place a marker with the FCO by declaring 5.1 Are there procedures for individuals to report cartel their willingness to cooperate. The timing of the placement of the conduct independently of their employer? If so, marker is decisive for the status of the application and the marker please specify. must contain basic information on the cartel. After having placed the marker, the FCO will set the applicant a time limit of up to eight Leniency applications can be made by individuals independently weeks for the submission of a complete leniency application. of their employers. However, there is no need for a separate The FCO will confirm immediately that a marker has been placed application by an individual if the company has applied for leniency. and that the application has been received. Once the application The application for leniency of a company automatically covers all has been filed and the requirements for immunity are satisfied, the of its employees involved in the reported conduct. However, an FCO will assure the applicant in writing that he will be granted independent leniency application by an employee can compromise conditional immunity. the position of its employer, as even in the best possible scenario for the employer, the company can only come second in its application, in which case immunity is no longer available. There are no 4.3 Can applications be made orally (to minimise any subsequent disclosure risks in the context of civil financial rewards to incentivise whistleblowing by individuals. damages follow-on litigation)? 6 Plea Bargaining Arrangements Marker and leniency applications can be made orally. Markers and leniency applications in English are accepted, provided that a German convenience translation is submitted shortly afterwards. 6.1 Are there any early resolution, settlement or plea bargaining procedures (other than leniency)? Has the competition authorities’ approach to settlements 4.4 To what extent will a leniency application be treated changed in recent years? confidentially and for how long? To what extent will documents provided by leniency applicants be disclosed to private litigants? Unlike the European Commission, the FCO does not have formal settlement or plea bargaining procedures outside of the leniency process. However, the FCO has adopted informal settlement rules The FCO may (and will in practice) infinitely refuse to disclose and the termination of cartel proceedings which, by way of settlement, leniency statements contained in its file, a leniency statement has become the rule. The FCO has set out the basic principles of being legally defined as a voluntary statement of a company vis- its informal ‘settlement procedure’ in its “Information Leaflet on à-vis a competition authority in which the company describes its the settlement procedure used by the FCO in fine proceedings” knowledge of a cartel and its participation in the cartel and which (current version of February 2016), which is available on the FCO’s was produced specifically for the purpose of gaining waiver or website (www.bundeskartellamt.de). The main characteristics reduction of a fine in the framework of a leniency programme of the are that the companies concerned confess their participation in the competition authority. anti-competitive conduct and accept the fine imposed by way of a The so protected leniency statement does not cover evidence which ‘settlement declaration’. Such declaration is considered by the FCO exists irrespective of an investigation of the FCO. Upon application as a mitigating circumstance, leading to a reduction of the fine in the by private litigants, the competent court may ask the FCO to disclose form of a ‘settlement discount’ of up to 10%. While the settlement does such evidence. For its decision in this respect, the court must take not include a waiver to file an appeal, negotiated decisions imposing into account the efficiency of public competition law enforcement, fines have usually not been appealed so far. Half of the settlements in particular the impact of the disclosure on pending proceedings are so-called “hybrid” settlements, where a settlement is agreed and on the functioning of leniency programmes. with some of the companies concerned whereas the other part of the Until complete termination of the procedure of the FCO vis-à-vis all companies refuses to settle and go through the normal proceedings. parties, disclosure of evidence is ruled out to the extent it contains Settlements are regularly used by the companies concerned in cases information which was produced by a legal entity or a natural person where leniency is no longer available to the parties. specifically for the proceedings of the FCO. 7 Appeal Process 4.5 At what point does the ‘continuous cooperation’ requirement cease to apply? 7.1 What is the appeal process? The applicant is required to cooperate with the FCO throughout the entire duration of the proceedings, i.e. until a formal decision The FCO’s decisions are subject to appeal to the Higher Regional

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Court (Oberlandesgericht) in Düsseldorf. A further appeal against With respect to damage claims of indirect purchasers against cartel the decision of the Higher Regional Court is only permitted on members, the 9th Amendment to the ARC introduced a (rebuttable) questions of law to the Federal Supreme Court (Bundesgerichtshof). presumption to the benefit of indirect purchasers that a price increase was passed on by the direct purchaser.

7.2 Does an appeal suspend a company’s requirement to Binding effect pay the fine? Final decisions adopted by the FCO (i.e. after the conclusion of any appeals), the European Commission or by competition authorities Yes, if the FCO’s decision is appealed, the fine will only become of other EU Member States have a binding effect on the German payable following the judgment of the court. However, where the civil courts both regarding facts and liability. This is intended to court confirms the fine set by the FCO, interest is payable on the fine, facilitate private follow-on actions, as national courts will not hear commencing four weeks from the date of the formal notification of further evidence on the competition law infringement after a final Germany the FCO’s decision, even where the decision is being appealed. formal decision has been made by a competition authority. Determination of damages 7.3 Does the appeal process allow for the cross- Under the German Civil Code (Section 249), damages are calculated examination of witnesses? on the basis of the difference between the financial position of the claimant after the loss has occurred and the financial position that German procedural rules do not allow for the cross-examination of the claimant would have been in had the loss not occurred. The witnesses. damage to be compensated also includes lost profits. Estimation of the loss incurred 8 Damages Actions Section 287 of the German Code of Civil Procedure entitles the judge to determine whether damages are to be awarded and estimate the amount of damages on the basis of certain facts, thereby reducing 8.1 What are the procedures for civil damages actions the standard of proof required. It is sufficient for the claimant to for loss suffered as a result of cartel conduct? Is the provide a reliable factual basis for such an estimate. In cartel cases, position different (e.g. easier) for ‘follow-on’ actions as opposed to ‘stand alone’ actions? the court can base its estimate of the loss incurred on the basis of the profit made through the illegal cartel activities by the defendants. Under German procedural law, designated courts have jurisdiction Access to records to rule on damages actions for the compensation of loss suffered as According to the 9th Amendment to the ARC, private claimants a result of cartel conduct. may (independent from cartel damage litigation) claim from Legal basis for damages actions cartel members the delivery of evidence which is necessary for Damages claims are based on Section 33a ARC. In addition, claims the assertion of cartel damage claims, provided claimants describe for damages may, under certain circumstances, be based on Section the evidence as precisely as this is possible on the basis of facts 8 and Section 9, respectively, of the German Act against Unfair accessible with reasonable efforts. The claim does not relate to Competition. A further legal basis can be found in general tort law, leniency statements. If cartel members refuse to disclose evidence, Section 823 et seq. of the German Civil Code. claimants may ask a court to order disclosure. For its decision, the court must take into account the efficiency of public competition Parties entitled to claim law enforcement. An action for civil damages can be brought by both direct and In a legal proceeding concerning a private cartel damage claim or a indirect purchasers to the extent they are concerned by the cartel infringement. claim for disclosure of evidence the court may call upon application of a party to ask the FCO to provide documents from its file if Where the direct purchaser brings an action for civil damages the applicant demonstrates that he has damage claims vis-à-vis against the cartel members, they can in turn raise the defence and another party and that he cannot get the documents suspected in counter-argument that the direct purchaser passed the effect of the the file with reasonable efforts from another party or a third party. increased cartel price on to its customers (“passing-on” defence). For its decision, the court must take into account the efficiency of In cases where the indirect purchaser has suffered direct loss public competition law enforcement, in particular the impact of through the cartel’s activity, it has previously been established that the disclosure on ongoing proceedings and on the functioning of an action for damages can be brought (i.e. in cases where the indirect leniency programmes. The FCO may (and will) refuse to disclose purchaser of goods, which were the subject of a cartel on the level leniency statements. of production, purchases these goods from a wholesaler which is a wholly-owned subsidiary of an undertaking involved in the cartel, the indirect purchaser can bring a claim for damages). 8.2 Do your procedural rules allow for class-action or representative claims? Burden of proof In principle, the claimant has to demonstrate and provide evidence In Germany, collective proceedings or class actions are not available. for the facts forming the basis of the competition law infringement, However, customers can submit damages claims via third parties as well as of the loss incurred. by assigning their claims to them. This is of particular interest for th However, the 9 Amendment to the ARC introduced a (rebuttable) smaller companies that do not otherwise have the financial resources presumption that a cartel causes damage. The presumption relates to enforce their legal rights through litigation, as well as for larger to the existence of damage and the causal link between the cartel companies facing a significant absolute cost risk in case of high infringement and the damage. By contrast, there is no presumption amounts of damage claims. that the claimant was affected by the cartel infringement. Consequently, the claimant has to prove that he purchased affected In relation to the cement cartel, in which the FCO imposed fines of products or services. approximately €660 million in Germany in April 2003, the Federal Supreme Court (Bundesgerichtshof) on 7 April 2009 admitted

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a damages claim which was submitted by the Belgian company Cartel Damages Claims S.A. (CDC). The court accepted that the 8.5 What are the cost rules for civil damages follow-on cartel victims could assign their individual claims to CDC, which claims in cartel cases? then could seek to enforce the respective claims on its own behalf. However, in December 2013 the Regional Court Düsseldorf When submitting an action, the claimant must render an advance (Landgericht) dismissed the claims brought by CDC. The court payment to cover court fees. With the formal decision, the court considered the claim to be contra bonos mores (immoral) and void allocates the legal costs of the proceedings, i.e. the court fees and as CDC, as the claimant, was not properly funded and therefore had expenses, as well as the statutory attorney fees, on a pro rata basis shifted a major part of the procedural risks to the defendant. The in relation to the outcome of the case. As a general rule, the legal court regarded this as a circumvention of the defendant’s legal rights. costs must be borne by the unsuccessful party.

Germany The judgment has been confirmed by the Higher Regional Court of Düsseldorf (Oberlandesgericht) with its decision of February 2015. 8.6 Have there been any successful follow-on or stand Therefore, vehicles, which have been merely founded to claim alone civil damages claims for cartel conduct? If there customer’s damages on their own behalf, have to be properly funded have not been many cases decided in court, have at the time of the assignment of the damages. there been any substantial out of court settlements? Following legislative measures to promote private competition law enforcement, there is increasing activity in the German market of There have been a number of successful damages claims in litigation law firms cooperating with process financiers. Several Germany, with participants of the vitamins cartel and participants cases are currently pending before German courts which involve of the cement cartel ordered to pay compensation to their respective numerous damage claims bundled by way of assignment to the customers, participants of the ready-mix concrete cartel ordered to claimant. pay damages to direct customers and a participant of the carbonless paper cartel ordered to compensate an indirect customer (due to the wholesaler being a wholly-owned subsidiary of the producer 8.3 What are the applicable limitation periods? who had participated in a cartel). There are numerous pending damages proceedings against cartel members before German courts. Following an extension of the limitation period for damage claims For instance, recently members of the truck cartel were sued for based on a violation of Section 1 ARC by the 9th Amendment to the damages. Furthermore, settlements have been agreed while court ARC, the respective limitation period is now five years instead of proceedings were pending, i.e. in the rail cartel. Additionally, it is previously three years. understood that there have been a number of out of court settlements The limitation period starts to run at the end of the year in which in cartel damages cases. In most cases, these settlements were the claim arose; and the claimant became aware, or should have entered into shortly before judgment was due to be passed by a become aware in the absence of gross negligence, of the relevant court, to prevent a precedent being created. In their nature, these circumstances and of the identity of the defendant; and the settlements are highly confidential and the details of, or even the infringement was terminated. existence of, a settlement are not disclosed. Investigations by the FCO, the European Commission or competition authorities of other Member States will suspend the limitation 9 Miscellaneous period. The limitation period will also be suspended if a cartel damage claimant files suit against the defendant for information or delivery of evidence based on the respective substantive claim 9.1 Please provide brief details of significant, recent or which was introduced by the 9th Amendment to the ARC. imminent statutory or other developments in the field of cartels, leniency and/or cartel damages claims. The suspension of the limitation period ends one year after termination of the proceedings through final and conclusive decision th or otherwise. This is meant to ensure that claimants have enough As mentioned, the 9 Amendment of the ARC entered into force in time to collect relevant information for the assertion of civil damage June 2017. Most of the amendments relate to the implementation claims. of the EU Damages Directive into German law. Important changes to the ARC relating to cartel, leniency and damages actions in Germany are described throughout the preceding text. Many of 8.4 Does the law recognise a “passing on” defence in these amendments did not significantly change German competition civil damages claims? law as it already contained corresponding provisions, or the required instruments had already been adopted by settled case law. The 9th Amendment to the ARC codified a “passing on” defence in civil damages claims which already previously was acknowledged based on a judgment by the Federal Supreme 9.2 Please mention any other issues of particular interest in your jurisdiction not covered by the above. Court (Bundesgerichtshof) in 2011 (KZR 75/10): The loss of the purchaser is compensated to the extent the purchaser passes on a price increase caused by a cartel infringement to his purchasers There is nothing to report. (indirect purchasers). If a product or service was purchased for an inflated price, the existence of a loss is, however, not excluded because the product or service was resold.

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Mathias Stöcker Shearman & Sterling LLP Bockenheimer Landstraße 2-4 60306 Frankfurt am Main Germany

Tel: +49 69 9711 1000 Email: [email protected] URL: www.shearman.com

Mathias Stöcker specialises in German and European antitrust law. Germany He focuses on advising and representing companies in merger control procedures before the German Federal Cartel Office and the EU Commission and worldwide in the context of the coordination of multi- jurisdictional filings, proceedings before antitrust authorities and courts concerning fines for cartels or abusive practices, as well as in regard to strategic corporate projects.

As one of the first law firms to establish a presence in key international markets, Shearman & Sterling has led the way in serving clients wherever they do business. This innovative spirit and the experience we have developed over our 140-year history makes us the ‘go-to’ law firm for seamless service. An elite antitrust practice Shearman & Sterling wins antitrust cases and successfully defends multinational companies’ transactions before the US and European antitrust authorities, as well as coordinating the multijurisdictional antitrust defence of transactions and global investigations. We deliver practical and effective solutions to the most challenging antitrust issues and are committed to achieving success for our clients. Consistently recognised as among the leaders in the field, clients come to us for our: ■■ Top quality advocacy to maximise the persuasiveness of a client’s position. ■■ Deep experience with antitrust authorities. Our partners, including several former officials, have the knowledge and experience to facilitate dealings with the key antitrust authorities. ■■ M&A experience. Clients entrust us with their most important transactions to assure maximum chances of swift approval with the minimum of conditions. ■■ Behavioural expertise with a track record in investigations relating to dominant firm conduct, cartels, and cooperation agreements. ■■ Litigation abilities, including in antitrust class action lawsuits and jury trials. ■■ Breadth. Our team consists of over 70 lawyers, including 18 partners, representing over 10 nationalities. We advise on all aspects of US and EU antitrust law and practice, in a wide range of sectors, and in many languages. ■■ Transatlantic and international coverage.

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India

Lakshmikumaran & Sridharan Attorneys Abir Roy

1 The Legislative Framework of the Cartel 1.4 What are the basic procedural steps between the Prohibition opening of an investigation and the imposition of sanctions?

1.1 What is the legal basis and general nature of the The procedure laid down under the Act for the opening of an cartel prohibition, e.g. is it civil and/or criminal? investigation and imposition of sanctions are given herein below: i. On receipt of information or on a suo moto basis, if the CCI Section 3 of the Competition Act, 2002 (“Act”) deals with prohibition believes that there is a prima facie case for investigation, the with respect to a cartel. The nature of the cartel prohibition under CCI issues a prima facie order under Section 26 (1) of the Act the Act is Civil and hence, the standard of proof required under the to the Director General (“DG”) to initiate an investigation. Act to show the existence of cartel is the balance of probability or as The order under Section 26(1) of the Act is an administrative a test in case of a cartel. order which lays down the issues for investigation. Section 3 of the Act provides that no enterprise or association of ii. The DG investigates the case within the contours of the enterprises or person or association of persons shall enter into any Section 26(1) order, the Act empowers the DG with wide arrangement in respect of the production, supply, distribution, investigation powers, details of which are given in our storage, acquisition, etc. that causes or is likely to cause any response to question 2.2 below. appreciable adverse effect on competition (“AAEC”) within India. iii. The DG then prepares an elaborate investigation report and Thus, the ambit of Section 3 of the Act is very wide and includes gives its recommendation in the report as to whether the both the object and the effect test. parties have acted in violation of the provision of the Act or not. (Section 26(5) or Section 26(8), as the case may be.) Further, Section 3(3) of the Act provides that any (i) horizontal iv. The said report is filed with the CCI and the CCI if it agreement entered between enterprises, or (ii) a practice carried on deems appropriate, may direct the DG to conduct further or decision taken by any association of enterprises, which: investigation. a) directly or indirectly determines purchase or sale prices; v. Upon receiving the DG report, the CCI provides a copy of the b) limits or controls production, supply, markets, technical non-confidential version of the report to the concerned parties development, investment or the provision of services; (Section 26(4) of the Act). c) shares the market or source of production or provision of vi. After the receipt of the investigation report, the parties are service by way of allocation of the geographical area of the required to file a written reply to the DG report, which may market, or type of goods or services or number of customers also lead evidence in support of or against the DG report and in the market or any other similar way; and thereafter have an oral hearing before the CCI. d) directly or indirectly results in bid rigging or collusive vii. Thereafter, the CCI will reach its final decision and if it finds bidding, that the parties have acted in violation of the Act, it may shall be presumed to cause an AAEC. impose orders under Section 27 of the Act which includes the power to levy fines, directing the parties to cease and desist, etc. 1.2 What are the specific substantive provisions for the cartel prohibition? 1.5 Are there any sector-specific offences or exemptions? Please see our response to question 1.1 above. The Ministry of Corporate Affairs, Government of India has given an exemption granted to Vessels Sharing Agreements (“VSA”) 1.3 Who enforces the cartel prohibition? of Liner Shipping Industry from the provisions of Section 3 (i.e., anti-competitive agreements) of the Act for a period of one year, The Competition Commission of India (“CCI”). with effect from 20 June 2017 (“VSA Exemption”). The VSA Exemption applies to carriers of all nationalities operating ships of any nationality from any Indian port as long as such agreements do not include concerted practices involving fixing of prices, limitation of capacity or sales and the allocation of markets or customers.

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e) requisitioning, subject to the provisions of sections 123 and 1.6 Is cartel conduct outside your jurisdiction covered by 124 of the Indian Evidence Act, 1872, any public record the prohibition? or document or copy of such record or document from any office. Yes, the CCI has extra territorial jurisdiction under Section 32 (1) Further, under section 36(3), the CCI has been empowered to call of the Act. Under Section 32 of the Act, the CCI is empowered upon such experts, from fields such as economics, commerce, to inquire into agreements entered outside India if such agreement accountancy, international trade or from any other discipline as it causes or is likely to cause an AAEC in the relevant market in India. deems necessary to assist. There are certain investigations in global auto parts which have Furthermore, under Section 36(4) of the Act, the CCI may direct

been initiated by the CCI and jurisdictional thresholds required for India any person: a) to produce before the DG or secretary or an officer invoking Section 32 is under consideration before the Hon’ble High authorised by it, such books or other documents in custody of such Court of Delhi. person so directed as may be specified, being documents relating to trade, the examination of which may be required for the purposes 2 Investigative Powers of the Act; or b) to furnish to the DG, or secretary or an officer authorised by it, as respects the trade or such other information as may be in his possession in relation to the trade carried on by such 2.1 Summary of general investigatory powers. person as may be required for the purposes of the Act.

Table of General Investigatory Powers 2.3 Are there general surveillance powers (e.g. bugging)? Investigatory Power Civil/Administrative Criminal Order the production No, the CCI has no such powers of surveillance. of specific documents Yes N/A or information Carry out compulsory 2.4 Are there any other significant powers of interviews with Yes N/A investigation? individuals Carry out an Please refer to our response to question 2.2 above. unannounced search Yes* N/A of business premises Carry out an 2.5 Who will carry out searches of business and/or unannounced residential premises and will they wait for legal Yes* N/A search of residential advisors to arrive? premises ■ Right to ‘image’ After obtaining the requisite permissions, i.e. a warrant from the computer hard drives Yes* N/A using forensic IT Metropolitan Magistrate, the DG and its officers will carry out tools the search in the business and/or residential premises. There have ■ Right to retain been only two instances of search and seizure. The first such raid Yes N/A original documents and contours of the power of the CCI with respect to conducting ■ Right to require raids has been challenged and is now pending before the Supreme an explanation Yes N/A Court of India and one must wait for the outcome of the case to of documents or necessarily lay down the process of raids going forward. The Act information supplied does have an express provision with respect to legal advisors of the ■ Right to secure premises overnight Yes* N/A companies concerned during the process of a raid and the DG would (e.g. by seal) not necessarily wait for the legal advisors to arrive.

Please Note: * indicates that the investigatory measure requires 2.6 Is in-house legal advice protected by the rules of the authorisation by a court or another body independent of the privilege? competition authority.

The legal advice given by an in-house legal team would not be 2.2 Please list specific or unusual features of the protected by privilege. investigatory powers referred to in the summary table.

2.7 Please list other material limitations of the Section 36(2) read with Section 41(2) of the Act provides the power investigatory powers to safeguard the rights of to the CCI and the DG are vested with the same powers as that of defence of companies and/or individuals under a civil court in respect to trying a suit in respect to the following investigation. matters: a) summoning and enforcing the attendance of any person and The DG must limit the investigation within the contours mentioned examining on oath; under Section 26(1) of the Act and cannot engage in a fishing b) requiring the discovery and production of documents; inquiry. If the DG believes that contours of the investigation must c) receiving evidence on affidavit; be expanded, it must go back to the CCI to pass another Section d) issuing commissions for examination of witnesses or 26(1) order to expand the scope of the investigation. In the event documents; and the DG goes beyond its mandate of investigation, the parties can approach the High Courts in India to correct the error by the DG and limit the scope of the investigation.

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Further, as a matter of practice, outside counsels are now allowed to mitigating circumstances for the reduction of penalty. There are no sit with the individuals of the companies during depositions. penalty guidelines which have been issued by the CCI which would lay down as to the exact quantum by which the penalty would be reduced/waived in case of financial hardship. As such, there have 2.8 Are there sanctions for the obstruction of investigations? If so, have these ever been used? been some instances where the CCI has completely waived the Has the authorities’ approach to this changed, e.g. penalty or reduced the quantum thereof on the ground of financial become stricter, recently? hardship and inability to pay.

Section 43 of the Act provides that if any person fails to comply, 3.4 What are the applicable limitation periods? India without any reasonable cause, with a direction given by the CCI/ DG, such person would be punishable with a fine which may extend There is no limitation period provided under the Act. of Rs. 100,000 for every day during which failure continues subject to a maximum penalty of Rs. 10,000,000. Further, Section 45 of the Act provides that if any person makes 3.5 Can a company pay the legal costs and/or financial penalties imposed on a former or current employee? a false statement or submits a false document or wilfully alters or suppresses any information/document, such penalty shall be punishable with a fine which may extend to Rs. 10,000,000. The As mentioned above, under Section 48, individuals can also be CCI have become very stringent for non-cooperation or submitting fined in their personal capacity. The CCI would pass the penalty wrong information and documents. order against the individual concerned. As such, there is no bar under the Act for the company to pay the legal cost and/or financial penalties on behalf of the former or current employee. It depends 3 Sanctions on Companies and Individuals on the policy of the company and its contractual arrangement with the employee concerned.

3.1 What are the sanctions for companies? 3.6 Can an implicated employee be held liable by his/her employer for the legal costs and/or financial penalties Section 27 of the Act provides that in the event the CCI finds that imposed on the employer? an enterprise has been indulging in cartel activities, the following orders may be passed by the CCI: This depends on the policy and the agreement entered between the 1. A cease and desist order directing the parties to refrain from company and the employee. their anti-competitive practices. 2. In the case of cartels, the CCI can levy a penalty which may extend up to 10% of the turnover of each year of the continuance 4 Leniency for Companies of the cartel or three times the profits earned by the enterprise during each year of continuance of the cartel. The Supreme Court of India has clarified that the penalty should be only on 4.1 Is there a leniency programme for companies? If so, the relevant turnover and not the total turnover. please provide brief details. 3. In the past, the CCI has asked the trade association (i.e. association of enterprises) to mandatorily follow and adopt Yes. competition law compliance policies. Under Section 46 of the Act, the CCI may, if it is satisfied that any producer, seller, distributor, trader or service provider included 3.2 What are the sanctions for individuals (e.g. criminal in any cartel has made a full and true disclosure in respect of the sanctions, director disqualification)? alleged violations and such disclosure is vital, impose upon such producer, seller, distributor, trader or service provider a lesser Section 48 of the Act provides that in event of a violation of the penalty as it may deem fit. provisions of the Act by the company, every person who at the time The CCI has notified the Competition Commission of India (Lesser of the violation was in “charge of ” and was “responsible for” the Penalty) Regulations, 2009 (the “Lesser Penalty Regulations”) conduct of the business of the company would be deemed to be pursuant to the Act. The Act and the Lesser Penalty Regulations guilty of the provisions of the Act in his individual capacity. provides the legal framework (including the conditions to be Further, in case of violation of the provision of the Act by the satisfied, procedure and quantum of leniency, etc.,) by which the company and if it can be shown that the violation can be attributable CCI can grant immunity or impose a lesser penalty than leviable to: under the Act in the case of a cartel. (i) neglect; or It should be noted that imposition of a lesser penalty/immunity is (ii) with consent and connivance. discretionary under the provisions of the Act and the Lesser Penalty On the part of the director, manager, secretary or other officer of Regulations. The operative word of the Lesser Penalty Regulations the company, such director, manager, secretary or other officer is that the CCI “may” grant a lesser penalty. The discretion of the shall also be deemed to be guilty of the provisions of the Act in his CCI with respect to reduction in monetary penalty will be exercised individual capacity. with due regard to the stage at which the applicant comes forward with the disclosure, the evidence already in possession of the CCI, the quality of the information provided by the applicant and the 3.3 Can fines be reduced on the basis of ‘financial entire facts and circumstances of the relevant case, etc. hardship’ or ‘inability to pay’ grounds? If so, by how much? As such, the statutory framework provided under the Act and the Lesser Penalty Regulations provide that a leniency application can Financial hardship can be a ground which may be agitated as be made even after a prima facie case is made out and the DG is

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investigating the matter. However, Section 46 of the Act states that the leniency application cannot be made once the DG has issued the 4.2 Is there a ‘marker’ system and, if so, what is required DG Report. to obtain a marker? The Leniency Regulations provide for priority status wherein the first leniency applicant may get up to or equal to 100% immunity, The Lesser Penalty Regulations also provides for a priority status whereas the second leniency applicant and third and subsequent depending upon its marker (marker system is discussed below). applicants may be entitled to up to or equal to 50% and 30% (a) First applicant: The applicant may be granted the benefit of immunity, respectively. reduction in penalty up to or equal to 100%, if the applicant is the first to make a vital disclosure by submitting evidence The first applicant may be granted the benefit of reduction of 100% of a cartel, enabling the CCI to form a prima facie opinion India of the penalty under the circumstances wherein: (as required under Section 26(1) of the Act) regarding the (a) it is the first to make a vital disclosure by submitting evidence existence of a cartel. of a cartel, enabling the CCI to form a prima facie opinion It must be noted that the immunity would be given only if the regarding the existence of a cartel which is alleged to have CCI did not have, at the time of application, enough evidence violated Section 3 of the Act; and to form such a prima facie opinion. Further, the CCI may (b) the CCI at the time of the application did not have sufficient also grant immunity up to 100% if the applicant is the first evidence to form such a prima facie opinion; or enterprise to make a vital disclosure by submitting evidence (c) it is the first to make a vital disclosure which establishes in a matter under investigation which establishes a cartel the contravention of Section 3 of the Act in a matter under contravention, and the CCI or the DG did not, at the time of investigation; and the first leniency application possess sufficient evidence to establish a cartel contravention. (d) the CCI or the DG did not at the time of application, have sufficient evidence to establish such a contravention. (b) Second and third applicant(s): The applicant marked as second in the priority status may be granted a reduction of The second applicant and the subsequent applicants may be given a monetary penalty up to or equal to 50% of the full penalty immunity only by submitting evidence which significantly adds leviable, and the third and the subsequent applicants may be value to the evidence already in possession of the CCI or the DG to granted a reduction of a penalty of up to or equal to 30% of establish the existence of the cartel which is alleged to have violated the full penalty leviable. It is imperative to note that each and Section 3 of the Act. Therefore, the application to the CCI must be every applicant must add value to get lesser penalty benefit. extremely specific and granular seeking leniency under the Lesser It is imperative to emphasise on the aspect that Lesser Penalty Regulations, and such application must contain all material Penalty Regulations provide, after the first applicant, second information and evidence relating to the establishment or existence and subsequent applicants, an entitlement to a reduction in a of a cartel. penalty on making disclosure by submitting evidence, which in the opinion of the CCI, provided significant added value to It is imperative that once the decision has been made by an applicant the evidence already in the possession of the CCI or the DG to apply for leniency, it should file the application or should contact, to establish the existence of a cartel. Added value has been orally or through email or fax to the Secretary, the CCI (who is the defined to mean the extent to which the evidence so provided designated authority under the Lesser Penalty Regulations) without by the concerned applicant enhances the ability of the CCI or any delay because of the priority status and the concept of significant the DG to establish the existence of a cartel, which is alleged added value. to have violated Section 3 of the Act. Regulation 3 of the Lesser Penalty Regulations under the Act It must be reemphasised that all applications ought to fulfil the provides the conditions for grant of lesser penalty, which include: criteria of vital disclosure i.e. the application, if seen in isolation (a) the applicant should not have any further participation in the must be sufficient enough, in the opinion of the CCI, to form aprima cartel, from the time of making disclosures, unless the CCI facie opinion of an existence of a cartel. directs otherwise; The procedure for the grant of leniency/lesser penalty in the relevant (b) the information provided by a leniency applicant must be a jurisdiction is elucidated below: “vital disclosure”. Vital disclosure has been defined under The first step – Application: Regulation 2(i) of the Leniency Regulation to mean full and true disclosure of information or evidence by the applicant to The applicant or its authorised representative can either: the Commission, which is sufficient to enable the Commission (a) make an application as per the stipulated format; or to form a prima facie opinion about the existence of a cartel (b) contact the designated authority (either orally or through or which helps establish the contravention of the provisions email or fax) for the furnishing of information and evidence of Section 3 of the Act. The ambit of vital disclosure is relating to the existence of the cartel. extremely specific and it should assist the CCI in forming a prima facie view that there exists a cartel and based on such Followed by the Marker system: disclosure provided in the leniency application, the CCI can The CCI shall, upon receipt of application, mark the priority status direct the offices of the DG to investigate the matter; of the applicant and the designated authority shall convey the same (c) the applicant should co-operate to the best of its ability with to the applicant. In the event the information is received orally or the CCI by providing all relevant information, documents and through email or fax, the CCI directs the said applicant to submit evidence as required; a detailed written application with all information and evidence (d) the applicant should co-operate genuinely, fully, continuously within a period not exceeding 15 days. In the event the application and expeditiously throughout the investigation and other is not received within a period of 15 days or such extended time as proceedings before the CCI; and agreed to by the CCI, the said applicant loses its priority status. The (e) relevant evidence should not be concealed, destroyed, date and time of receipt of the application by the CCI shall be the manipulated or removed by the applicant. date and time as recorded by the designated authority. Unless the In addition to the above conditions, the CCI may subject the leniency evidence submitted by the first applicant has been evaluated, the applicant to further restrictions or conditions, as it may deem fit in next applicant shall not be considered by the CCI. the facts and circumstances of each case.

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Further, the Lesser Penalty Regulations provide that the entire contents of the leniency application are confidential, so the 6 Plea Bargaining Arrangements subsequent applicant(s) do not have any visibility on the kind of evidence that has already been put forth before the CCI. Thus, 6.1 Are there any early resolution, settlement or plea to add value for the second and third applicant(s) is a Herculean bargaining procedures (other than leniency)? Has task. They should be cautious that they do not make a leniency the competition authorities’ approach to settlements application which does not add value. An application made changed in recent years? which does not add value will have twin negative effects from the applicant’s perspective: (a) not getting lesser penalty from the CCI; The Act does not provide for early resolution or the settlement of

India and (b) since the applicant has made the leniency application, they plea bargaining procedure. As such, the Madras High Court has have admitted that they are involved in a cartel, and hence their observed that there may be settlement under the provision of the Act, scope of defence gets jeopardised. Thus, if a decision has been but the CCI has not yet looked into any such settlement agreements. made to file a leniency application, the concerned applicant must act without any delay whatsoever in order to be able to clinch any leniency from the CCI. It would be ideal to approach the CCI orally 7 Appeal Process and get a priority marker along with an additional time frame of 15 days to file a detailed application. 7.1 What is the appeal process?

4.3 Can applications be made orally (to minimise any The appeal from the substantive decision of the CCI lies with the subsequent disclosure risks in the context of civil National Company Law Appellate Tribunal (NCLAT). The Act damages follow-on litigation)? provides for a second appeal from the decision of the NCLAT to the Supreme Court. Please see our response to question 4.2 above.

7.2 Does an appeal suspend a company’s requirement to 4.4 To what extent will a leniency application be treated pay the fine? confidentially and for how long? To what extent will documents provided by leniency applicants be The appeal does not ipso facto suspend the company’s requirement disclosed to private litigants? to pay the fine. As a matter of process, with the appeal from an order of fine passed under Section 27 of the Act, a stay application Please refer to our response to question 4.3 above. also needs to be filed asking the NCLAT to stay the operation of the The DG may provide certain information from the leniency order. The decisional practice suggests that a portion of the fine application to the alleged cartel participants to prepare its report, would have to be given as security deposit pending the appeal. with the leave of the CCI to ask for their response qua their participation. Further, the Leniency Regulations also specify that 7.3 Does the appeal process allow for the cross- inspection (of non-confidential information/evidence) in leniency examination of witnesses? matters will be allowed only after the CCI has forwarded a copy of the report of the DG to the parties concerned. As a matter of process, in the first appeal, i.e. from the CCI to NCLAT, the NCLAT can also look at the determination of facts and such 4.5 At what point does the ‘continuous cooperation’ determination may require for a cross examination of the witness. requirement cease to apply? Thus, with the leave/permission of the NCLAT, a cross examination of a witness may be permitted. An appeal to the Supreme Court This depends on the directive of the CCI. would lie generally on substantial questions of law which would mean that they would not re-look at the facts already decided by the 4.6 Is there a ‘leniency plus’ or ‘penalty plus’ policy? NCLAT. Thus, generally the Supreme Court would not interfere in the determination of facts and hence, cross examination would rarely be entertained unless special circumstances are shown. No, there is not.

5 Whistle-blowing Procedures for 8 Damages Actions Individuals 8.1 What are the procedures for civil damages actions for loss suffered as a result of cartel conduct? Is the 5.1 Are there procedures for individuals to report cartel position different (e.g. easier) for ‘follow-on’ actions conduct independently of their employer? If so, as opposed to ‘stand alone’ actions? please specify. Section 53 N of the Act provides for compensation for any loss or Yes, recently the Leniency Regulations were amended to allow damage shown to have been suffered as a result of any contravention individuals to report cartel conduct and file for leniency. The of the provision of the Act, which includes a violation of Section procedure to file for leniency remains the same as provided above. 3. The Act only provides for follow on claims and not stand alone action. This is the case because the applicant can only ask for compensation once the CCI has already passed an order under Section 27 of the Act.

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issue of jurisdiction in case of global auto parts cartels 8.2 Do your procedural rules allow for class-action or where the prima facie order is silent whether agreement representative claims? entered outside India had an effect in India. Thus, this is a welcome change because the CCI would only investigate Yes, they do. those cartels which, in their opinion, causes AAEC in the relevant market in India. 2. No limitation on the number of markers: Prior to the 8.3 What are the applicable limitation periods? Notification, the Leniency Regulations allowed a reduction in a penalty to a maximum of three leniency applicants on a There are no limitation periods provided under the Act. priority basis. Under the erstwhile regime, the first applicant may be granted up to 100% reduction in a penalty and the India second applicant up to 50%. The third applicant may be 8.4 Does the law recognise a “passing on” defence in granted up to 30% reduction in a penalty. Now, by way of civil damages claims? Notification, the applicant with third or subsequent (to the third) priority can get a reduction of up to 30% of the total The applicant to claim compensation needs to show loss or damage leviable penalty. suffered to it because of the anti-competitive conduct. There have a. Benefits: The Notification thus promotes enterprises/ been no cases decided by NCLAT yet on compensation to show individuals to submit with more evidence to the CCI to whether the passing on defence would be applicable or not and this assist them with investigation. Earlier, there was a risk would be an interesting issue for adjudication since in a case of that enterprises were hesitant to give self-incriminating passing on, the applicant does not suffer any damage/loss as such. evidence since they were not sure whether they would get any reduction in penalty since they may not have been ranked within the first three markers. Now, enterprises 8.5 What are the cost rules for civil damages follow-on can come with evidence anytime during investigation claims in cartel cases? by the DG to give evidence and can receive a reduction in penalty, provided that they satisfy the requirement of If the amount of compensation claimed is less than INR one lakh, the added value. The Notification, thus, is a welcome step amount of fees would be INR 1,000. If the amount of compensation and encourages more individuals/enterprises to come claimed is more than 1 lakh, the amount of fees would be INR 1,000, forward to disclose evidence. plus INR 1,000 for every additional one lakh of compensation b. Issues to ponder: claimed or fraction thereof, subject to a maximum of INR 3,000. i. The amended regulations provides some clarity that the applicants marked as third or subsequent in the priority status may be granted reduction of penalty up 8.6 Have there been any successful follow-on or stand to 30%. This clarifies that more than three enterprises alone civil damages claims for cartel conduct? If there and individuals may get immunity of up to 30%. have not been many cases decided in court, have Having said that, all applicants which are not the first there been any substantial out of court settlements? marker will be given leniency on making a disclosure by submitting evidence which satisfies the test of There are none to date. “added value”. ii. Determination of the relevant market and AAEC in the relevant market could be of “significant added 9 Miscellaneous value” information for the second and third applicants. Therefore, it would be advisable for applicants who are not first in the marker system, in addition to providing 9.1 Please provide brief details of significant, recent or evidence which can add value, to also determine the imminent statutory or other developments in the field effect or the likely effects on the relevant market in of cartels, leniency and/or cartel damages claims. India. It must be noted herein that the Supreme Court of India has noted that even in case of cartels and The Lesser Penalty Regulations were recently amended by way agreements under Section 3, relevant market needs to of notification in August, 2017 (“Notification”). Given below are be defined. the key changes brought under the Leniency Regulation by the 3. Applicant to include individuals: The protection given Notification: under the erstwhile Leniency Regulations read with Section 1. Indian nexus: The Notification provides that the leniency 46 of the Act are only applicable to a producer, seller, applicants now must expressly provide details of the volume distributor, trader or service provider. Now, the Notification of business affected “in India” by the alleged cartel as has increased the ambit of the protection and has noted that opposed to the erstwhile regime of stating only the volume of even individuals can apply for leniency. business affected. a. Benefits: This change seeks to encourage individuals to a. Issues to ponder: This is a significant change brought come forward and report the conduct to the CCI. This may about by the Notification. This is line with Section 32 be a tool for the CCI to inquire into cartel arrangements. of the Act since in global cartel investigations, the CCI Under Section 48 of the Act, directors and officers in can only assume jurisdiction if the agreement causes an charge could be held personally liable for violation by AAEC in India. Thus, it is a vital development because the company of any provision of the Act. Earlier, the in the case of leniency applications for global cartels, the Leniency Regulations were silent if individuals will get CCI needs to consider the volume of business affected in protection, but not they have made it clear that individuals India and then only initiate the investigation, if required, would get protection. in terms of Section 32 if it believes that the volumes of b. Issues to ponder: Section 46 of the Act provides that the business so affected in India shows that there is AAEC in seller, distributor, trader or service provider may be given relevant market in India. There are couple of writ petitions lesser penalty if they make vital disclosure of a cartel. which are pending before the High Court on this exact Section 46 does not provide for protection to individuals.

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The Leniency Regulations have been made in pursuance to Section 46 of the Act and they have increased the ambit Abir Roy of protection to individuals. So, an issue which may come Lakshmikumaran & Sridharan Attorneys up is whether the Notification has gone beyond the ambit No 5, Link Road of statute. Jangpura Extension New Delhi – 110014 4. Confidentiality provisions: The Notification permits that India certain confidential information/evidence may be disclosed by the DG to any party (without the applicant’s prior approval) Tel: +91 11 4129 9800 for the purposes of the investigation, should the DG deem Email: [email protected] such disclosure necessary. However, going forward, in such URL: www.lakshmisri.com India a situation, the DG may disclose such information/evidence to any third party subject to recording reasons in writing and Mr. Abir Roy is a Partner at Lakshmikumaran & Sridharan (“L&S”) and receiving prior approval of the CCI. a senior member of the competition law practice. Issues to ponder: Based in New Delhi, he has represented clients before the Competition i. Principles of natural justice mandate that an enterprise Commission of India (“CCI”), the Competition Appellate Tribunal (“COMPAT”) and the High Court on competition law-related matters. should know the: (i) charges; and (ii) the material which He has advised clients on both contentious and non-contentious the investigation agency has in possession against such matters, including merger control matters. He has rich experience in enterprise. This is required so that the concerned enterprise handling complex issues such as essential facilities and issues on the can effectively participate in the proceedings and defend interplay between competition law and intellectual property rights. He itself. There have been judicial pronouncements by the also regularly advises and provides periodic training to clients on their Supreme Court on this issue under other laws on the right business operations from a competition law perspective. of access. Thus, in line with such cases, the DG during Abir has represented clients on competition law across all industry the investigation, the evidence qua the enterprise must be segments including oil and gas, aviation, stock exchange, given so that it can defend itself. entertainment, government procurement, liquor, fast-moving consumer ii. One of the conditions to grant leniency is that the goods, chemicals and radio taxis, among others. applicant must continue to cooperate with the CCI during Abir is also a leading author, and his book, Competition law in India: an investigation genuinely and expeditiously. In this light, A practical guide, was published by Wolters Kluwer in April, 2016. He the DG/CCI may ask the leniency application to submit its has also contributed to the India chapter in the ABA Annual Legal evidence qua each alleged participant so that the DG can Update on competition law for the year 2015. Abir is also the sole contributor from India on the Kluwer competition law blog, where he then send the same to each participant for their responses. contributes periodically on the developments in competition law in The amendments are a step in the right direction; however, there India. He is also the author of a popular series on Competition Law are certain practical issues which would be settled by the courts in entitled “Competition Law in India”, published by Eastern Law House. due course. As such, it is critical that the CCI gives comfort to the industry since a robust leniency framework is essential to effectively bust cartels.

9.2 Please mention any other issues of particular interest in your jurisdiction not covered by the above.

This is not applicable.

Lakshmikumaran & Sridharan (“L&S”) was set up in 1985 and is one of the largest integrated law firms in India with over 300 professionals including 46 partners. The firm has 11 offices located across India in New Delhi, Mumbai, Bengaluru, Chennai, Hyderabad, Ahmedabad, Pune, Kolkata, Chandigarh, Gurgaon and Allahabad. L&S has specialised practice verticals handling the practices of competition law, international trade remedy laws, intellectual property laws, tax laws, dispute resolution (international arbitration & commercial litigation) and regulatory laws. The firm has handled more than 40,000 litigation cases over the last 30 years before various judicial and quasi-judicial forums in India and abroad including more than 2,000 cases before the Supreme Court of India.

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Italy

Shearman & Sterling LLP Paolisa Nebbia

217/98). Frequently, this decision is notified to the undertakings 1 The Legislative Framework of the Cartel under investigation together with the parallel decision to carry out Prohibition an inspection. According to Article 7 of Decree n. 217/98, in the course of the 1.1 What is the legal basis and general nature of the proceedings the undertakings under investigation, as well as cartel prohibition, e.g. is it civil and/or criminal? complainants and other third parties admitted to the proceedings, can file written submissions and documents and have access to the The legal basis of the cartel prohibition is of civil/administrative investigation file (with the exception of confidential information). nature. A cartel constitutes an administrative offence and no The undertakings under investigation and the complainants admitted criminal liability is triggered, unless the conduct also falls within to the proceedings can also request to be heard by the ICA’s officials. the scope of a criminal law provision (see question 3.2). Where the ICA Board considers that it has acquired sufficient evidence, it will authorise the issue of a statement of objections (Comunicazione delle risultanze istruttorie, or “CRI”) (Article 1.2 What are the specific substantive provisions for the 14(1), Decree n. 217/98). The undertakings under investigation cartel prohibition? and the complainants admitted to the proceedings can file written submissions in response to the CRI (Article 14(4), Decree 217/98). The relevant provisions are Article 101 TFEU and Article 2 of the Italian Competition Act, Law n. 287/90 (“L.287/90”). The latter If the undertakings under investigation so request, a final hearing largely reflects the provisions of Article 101(1) TFEU and prohibits takes place before the ICA board (Article 14(5-9), Decree n. agreements between undertakings, concerted practices or decisions 217/98). Complainants and other third parties admitted to the proceedings may be allowed to participate in the final hearing (but by association of undertakings that have as their object or effect do not have a right to participate) and may be heard separately in the prevention, restriction or distortion of competition within the order to safeguard confidentiality, if they so request. national market, or a substantial part of it, including conduct such as price fixing, output limitation, market sharing and discrimination Minutes of the hearing are drawn up, containing the main statements among trading partners. The main difference with the corresponding made by the parties. EU provision is the absence of the requirement of “effect on trade After the final hearing, the ICA adopts a final decision. between Member States”, i.e. the jurisdictional standard which defines the boundary between conduct that is subject to EU law and 1.5 Are there any sector-specific offences or exemptions? conduct that is governed solely by domestic law.

According to Article 4(1) L. 287/90 (which closely follows Article 1.3 Who enforces the cartel prohibition? 101(3) TFEU) agreements or categories of agreements prohibited under Article 2 L.287/1990 can be authorised, for a limited period, The Italian Competition Authority (Autorità Garante della if they lead to an improvement of the offer on the market, resulting Concorrenza e del Mercato, “ICA”) is the authority acting as both in substantial benefits to consumers. These potential beneficial an investigative and decision-making body. effects are assessed taking into account the need to guarantee to the undertakings concerned the necessary level of international competitiveness, as well as a possible increase in production, 1.4 What are the basic procedural steps between the opening of an investigation and the imposition of improvement in the quality of production or distribution, or sanctions? technical and technological progress. In any case, no exemption will be granted in connection with restrictions that are not strictly Under Article 6(1) of Decree n. 217/1998 (“Decree 217/98”), laying necessary to the attainment of these objectives, or that can eliminate down the procedural rules for antitrust proceedings, competition competition in respect of a substantial part of the national market. investigations are formally opened by means of a decision of the Article 4(3) of Law 287/1990 still provides for a system of ICA Board. individual exemptions via prior notification to the ICA pursuant to The decision to open proceedings is notified to the undertakings Article 4(1) of Law 287/90. In practice, applications under Articles allegedly involved in the infringement and to the complainants who 4(3) (as well as those under Article 13 of Law 287/90 for negative have a direct, immediate and current interest (Article 6(4), Decree clearance decisions) are usually dismissed by the ICA by reasons of

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the fact that the notified agreement falls within the scope of Article of the undertakings involved. It has formal powers to request 101 TFEU, and not within the scope of the corresponding national information and carry out inspections only after it has notified the provision. party of the formal opening of the proceedings. For the rest, the ICA relies on the block exemptions adopted by the EU Commission when applying national rules. Therefore, the 2.3 Are there general surveillance powers (e.g. bugging)? ICA is unlikely to take action against an agreement that meets the conditions of an EU block exemption regulation. There are no general surveillance powers. In addition, under Article 8(2) of Law 287/1990, national competition provisions do not apply to undertakings entrusted with Italy the operation of services of general economic interest or operate 2.4 Are there any other significant powers of on the market in a monopoly situation, only insofar as this is investigation? indispensable to perform the specific tasks assigned to them. According to Article 14 L.287/90 the ICA can produce expert Finally, according to Article 20 (5-bis) of Law 287/90, the ICA reports and economic and statistical analyses and consult experts on may, at the request of the Bank of Italy, authorise an agreement in any matter relevant to the investigation. derogation of the prohibition provided by Article 2, in the interests of the efficiency of the payments system, for a limited period of time and taking due account of the criteria provided by Article 4(1). 2.5 Who will carry out searches of business and/or residential premises and will they wait for legal advisors to arrive? 1.6 Is cartel conduct outside your jurisdiction covered by the prohibition? During the inspection, ICA officials are assisted by the Italian Customs and Excise Police (Guardia di Finanza), but searches are To the extent that an anticompetitive conduct taking place outside carried out by the ICA officials. Officials are under no obligation Italy has effects within the Italian territory or a substantial part of it, to wait for legal advisers to arrive, though in practice they do so for such conduct falls within the scope of Law n. 287/90 or, possibly, about 30 minutes. Article 101 TFEU if it affects trade between Member States. As a consequence, such conduct may be investigated and sanctioned by the ICA. 2.6 Is in-house legal advice protected by the rules of However, the case where companies established in Italy engage privilege? in cartel conduct affecting only foreign trade (including where the anticompetitive agreements or practices take place within the Communications of in-house lawyers are not protected by legal domestic territory) is outside the scope of Law 287/90. professional privilege, unless they are limited to copying the advice received by external lawyers. 2 Investigative Powers 2.7 Please list other material limitations of the investigatory powers to safeguard the rights of 2.1 Summary of general investigatory powers. defence of companies and/or individuals under investigation. Table of General Investigatory Powers Communications between external qualified lawyers and clients Civil/ Investigatory Power Criminal are protected by legal professional privilege. During an inspection, Administrative companies may be assisted by lawyers to avoid the acquisition of Order the production of specific Yes N/A documents which are covered by legal privilege or which are not documents or information directly related to the subject-matter of the proceedings. Carry out compulsory interviews Yes N/A with individuals Carry out an unannounced search Yes N/A 2.8 Are there sanctions for the obstruction of of business premises investigations? If so, have these ever been used? Carry out an unannounced search No N/A Has the authorities’ approach to this changed, e.g. of residential premises become stricter, recently? ■ Right to ‘image’ computer hard Yes N/A drives using forensic IT tools Under Article 14(5) L.287/90, the ICA may fine anyone who ■ Right to retain original No N/A refuses or fails to provide the information or exhibit the documents documents requested by the ICA without justification, of an amount up to ■ Right to require an explanation of documents or information Yes N/A 25,821 Euros, or up to 51,643 Euros in the event that they submit supplied untruthful information or documents, in addition to any other ■ Right to secure premises penalties provided by current legislation. Yes N/A overnight (e.g. by seal) 3 Sanctions on Companies and Individuals 2.2 Please list specific or unusual features of the investigatory powers referred to in the summary table. 3.1 What are the sanctions for companies?

To complete the preliminary assessment regarding a potential breach Pursuant to Article 15 of Law 287/90, if the investigation reveals an of competition law, the ICA relies on the voluntary cooperation infringement the ICA sets a deadline within which the undertakings

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and entities concerned are to remedy the infringements. It may also for companies reporting their membership to horizontal secret impose fines of up to 10% of the worldwide turnover realised by agreements since 2007 (Leniency Notice, last amended by ICA each undertaking during the previous financial year. The criteria decision n. 24506/2013). The Leniency Notice can also apply to for setting fines are set out in the ICA’s decision n. 2512/2014 vertical aspects of cartels. “Guidelines on calculation of fines imposed by the Authority According to the Leniency Notice, full immunity from a fine pursuant to Section 15 of Law 287/1990” (the “Fines Notice”). is granted to the first cartel participant who reports by its own If the infringement persists in spite of the prohibition (and the fine), initiative the illegal activity to the ICA, by providing information the ICA can impose a fine of no less than double the penalty already and documentary evidence. Immunity is granted if the following imposed, again with a ceiling of 10% of the turnover. It shall also requirements are met: the information or evidence provided must set a time limit for the payment of the fine. In cases of repeated be decisive to discover a cartel infringement, possibly through an Italy non-compliance, the Authority may decide to order the undertaking inspection; the ICA does not already have sufficient information or to suspend activities for up to 30 days. evidence to prove the cartel; the formal conditions for access to the leniency programme are satisfied. These are listed in Article 7 of the Leniency Notice and consist, basically, in ending participation 3.2 What are the sanctions for individuals (e.g. criminal sanctions, director disqualification)? in the illegal activities (unless the ICA otherwise requests), co- operating with the ICA in a continuous and complete manner and not informing anyone of the submission of a leniency application. There are no sanctions for individuals under Italian competition law. However, individuals who are involved in bid-rigging in the context A reduction of the fine, normally not exceeding 50%, may be granted of public procurement procedures may also commit a criminal offence to cartel participants who submit evidence which significantly (under Articles 353, 353-bis and 354 of the Italian Criminal Code). strengthens, by its very nature or its level of detail, the evidence Criminal liability may also be triggered by speculative conduct aimed already in the possession of the ICA, thereby appreciably contributing at limiting the output or increasing the prices of raw material, food to the ICA’s ability to prove the alleged infringement. The other products or first need products (Article 501-bis of the Italian Criminal conditions attached to leniency pursuant to Article 7 of the Notice Code). The sanctions include both fines and imprisonment. must also be met. In order to determine the appropriate level of reduction of the fine, the ICA will take into account the timeliness of cooperation provided by the undertaking (in relation both to the stage 3.3 Can fines be reduced on the basis of ‘financial of the proceedings and the level of cooperation provided by other hardship’ or ‘inability to pay’ grounds? If so, by how much? undertakings) and the evidentiary value of the material submitted.

According to para. 31 of the Fines Notice, the ICA may, upon a 4.2 Is there a ‘marker’ system and, if so, what is required reasoned request to be submitted before the CRI, reduce the fine to obtain a marker? taking into account the applicant’s limited ability to pay the fine. To this end, the applicant must submit documents and evidence capable The ICA, upon receiving an adequately reasoned request from a of proving that application of the fine according to the Fines Notice leniency applicant, may set a deadline for the completion of the would irremediably affect the applicant’s profitability and result in application, in order to enable the undertaking to acquire all the its exit from the market. necessary evidence. To this purpose, when filing the request for a marker, the undertaking shall provide: 3.4 What are the applicable limitation periods? ■ the business name and address of the applicant and of other parties to the cartel; The ICA cannot impose fines on conduct that ended five years prior ■ a description of the cartel, including its nature, geographic to the adoption of the decision. In case of a continuous infringement, scope, duration and the affected product(s); and the limitation period starts running from the day the anticompetitive ■ details of any other leniency applications the applicant conduct ceases. submitted or intends to submit, in relation to the same cartel, to other competition authorities, within or outside of the EU. If the application is completed within the deadline set by the ICA, 3.5 Can a company pay the legal costs and/or financial penalties imposed on a former or current employee? it will be deemed to have been submitted in its entirety on the date when the deadline was set. The evidence submitted by the applicant together with its request for a marker may otherwise be assessed for This is not applicable in Italy. the purposes of a reduction of the fine.

3.6 Can an implicated employee be held liable by his/her 4.3 Can applications be made orally (to minimise any employer for the legal costs and/or financial penalties imposed on the employer? subsequent disclosure risks in the context of civil damages follow-on litigation)?

Such liability would follow the rules of the Civil Code for actions The ICA may, upon a motivated request, allow applications to be for damages against members of the administrative board and the submitted orally. In this case, statements by company representatives auditors (Civil Code, Articles 2392 and 2407). shall be recorded on suitable media and put into writing by the ICA.

4 Leniency for Companies 4.4 To what extent will a leniency application be treated confidentially and for how long? To what extent will documents provided by leniency applicants be 4.1 Is there a leniency programme for companies? If so, please provide brief details. disclosed to private litigants?

The ICA has had a system of partial or total immunity from fines As against parties to whom a decision to initiate proceedings

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has been addressed, access to any oral or written disclosure statements of the applicant company’s representatives is deferred 7 Appeal Process until communication of the CRI. After that, addressees may gain access to the disclosure statements on condition that none of the 7.1 What is the appeal process? information contained therein shall be copied by any means, whether mechanical or electronic, and that such information is used Pursuant to Article 33 (1) L. 287/90, the Regional Administrative for no purpose other than in the context of legal or administrative Court of Lazio (“TAR Lazio”) has exclusive jurisdiction over proceedings concerning the competition provisions concerned by appeals from decisions of the ICA. the administrative proceedings. The decision of the ICA can be appealed before such court within Italy As against parties to whom a decision to initiate proceedings has 60 days from its notification. The judgment of first instance can been addressed, access to any documents attached to the application be appealed before the Supreme Administrative Court (“Consiglio or as a complement to the disclosure statements may be deferred di Stato”) within 30 days from its notification or three months until communication of the CRI. from its publication. Exceptionally, the judgments of the Supreme Third parties, including other participants in the proceedings, Administrative Court may be appealed before the Italian Supreme shall be denied access to disclosure statements and any annexed Court (“Corte di Cassazione”) for jurisdictional and competence documents. issues or for revocation.

4.5 At what point does the ‘continuous cooperation’ 7.2 Does an appeal suspend a company’s requirement to requirement cease to apply? pay the fine?

The obligation to cooperate fully and on a continuous basis with the No. However, the party can apply for a suspension until the ICA does not cease until a final decision is adopted. definitive judgment is issued if payment would cause itan irreparable damage.

4.6 Is there a ‘leniency plus’ or ‘penalty plus’ policy? 7.3 Does the appeal process allow for the cross- examination of witnesses? While there is no such programme in place, an undertaking under investigation can obtain a reduction of up to 50% of the basic fine No, the appeal process does not allow for cross-examination of if, during the investigation, it reveals information and submits witnesses. documents which pertain to a different infringement for which it can benefit from immunity (para. 24 of the Fines Notice). 8 Damages Actions 5 Whistle-blowing Procedures for Individuals 8.1 What are the procedures for civil damages actions for loss suffered as a result of cartel conduct? Is the position different (e.g. easier) for ‘follow-on’ actions 5.1 Are there procedures for individuals to report cartel as opposed to ‘stand alone’ actions? conduct independently of their employer? If so, please specify. Italy has implemented Directive 2014/104/EU concerning actions for damages for infringements of competition law by means of There are no provisions applicable to this specific case. Legislative Decree n. 3/2017. Claims, which are of a tortious nature, may be brought by any natural or legal person who has suffered a loss following an infringement of national competition law or 6 Plea Bargaining Arrangements articles 101 and 102 TFEU. Save for the adaptations required under Legislative Decree n. 3/2017, actions would follow the standard 6.1 Are there any early resolution, settlement or plea procedure in civil courts. bargaining procedures (other than leniency)? Has The competent courts with exclusive jurisdiction in Italy over the the competition authorities’ approach to settlements actions for antitrust damages will be the specialised business courts changed in recent years? of Milan, Rome and Naples. Though delivered in the context of an alleged abuse of dominant There is no settlement procedure under Italian competition position, a judgment of the Supreme Court (Corte di Cassazione, law. However, under Article 14-ter L.287/1990, the parties can judgment n. 11564/2015) plays an important role in reducing the offer commitments. If those are capable of removing the anti- burden of proof on claimants bringing stand alone actions, even competitive profiles of the conduct under investigation, the ICA before the implementation of Directive 2014/104/EU. The Court may accept the commitments and close the investigation without held that national courts must order full disclosure by the defendant a finding of an infringement. Commitments must be submitted in case of evidence incompletely submitted by a plaintiff where to the ICA within three months from the opening of proceedings, there is a “plausible” indication of an antitrust infringement. although this term is not mandatory and commitments are often accepted after the deadline provided by the law. 8.2 Do your procedural rules allow for class-action or Commitments are usually not accepted by the ICA in relation to representative claims? the most serious types of infringement, such as market allocation or price fixing. As from 2010, consumers have been able to bring class actions for damages suffered as a result of certain breaches of contract or torts

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on the basis of article 140-bis of the Consumer Code. In particular, class actions may be brought by individual users or consumers 8.5 What are the cost rules for civil damages follow-on having suffered damage due to the conduct of the defendant, claims in cartel cases? provided they can claim “homogenous” rights. The winning party may fully recover the expenses and costs from the National consumer associations, committees and representative losing party. However, the court may also decide for an equitable entities have locus standi only if they have received a specific judgment on this point, which usually means that each of the party mandate from members of the class. would bear its own costs. The class action procedure consists of two stages. Following an

opening hearing, the court firstly decides on the admissibility of the Italy 8.6 Have there been any successful follow-on or stand action. If the court deems the class action to be admissible, it issues alone civil damages claims for cartel conduct? If there an order setting out the rules for notification of the proceedings to have not been many cases decided in court, have the other members of the class, the description of the rights that are there been any substantial out of court settlements? subject matter of the proceedings, the deadline for the exercise of other consumers’ or users’ right to opt in and the rules governing the The number of damages claims brought in Italian civil courts ensuing investigatory phase. is low. Between 1990 and 2016, there have been 128 judgments For the rest, the proceedings follow the ordinary trial procedure adjudicating on the merits on such claims; 44 out of those have before the competent court, which shall render – based on the been delivered in follow-on claims, and 84 in stand alone actions. evidence submitted by the parties – a judgment either rejecting the There have been, in 2017, no class damages actions for antitrust action, or condemning the defendant to pay damages to the class infringements brought in Italian courts. action members. Transaction agreements between class members and defendants are possible throughout the proceedings; however, 9 Miscellaneous these agreements are exclusively binding on those class members expressly accepting them. 9.1 Please provide brief details of significant, recent or imminent statutory or other developments in the field 8.3 What are the applicable limitation periods? of cartels, leniency and/or cartel damages claims.

Legislative Decree n. 3/2017 provides for a five-year limitation A project to reform class actions, which are currently under-used, period which does not begin to run before the infringement of has been under discussion in the Senate since 2015, but little competition law has ceased and the claimant knows, or can progress has been made towards adoption. reasonably be expected to know, of the behaviour and the fact that it constitutes an infringement of the competition law, of the fact that 9.2 Please mention any other issues of particular interest the infringement caused harm to it, and the identity of the infringer. in your jurisdiction not covered by the above. Additional special rules on the beginning of the termination period apply to damages actions brought against small or medium-size Recently adopted legislation on public procurement may affect enterprises (SME) or against undertakings or persons who have the possibility to participate in public procurement procedures for been granted immunity from fines by a competition authority under undertakings found liable of bid-rigging by the Italian Competition a leniency programme. Authority (Autorità Garante della Concorrenza e del Mercato, or The five-year limitation period is suspended when a competition “ICA”). This is by virtue of Article 80, para. 5, lett. c) of legislative authority opens an investigation or proceedings in respect of an decree n. 50/2016, containing the new Italian Public Procurement infringement of competition law to which the action for damages Code, and its implementing guidelines. Article 80, para. 5, lett. relates. The suspension shall end one year after the infringement c) provides for the possibility to exclude an economic operator decision has become final or after the proceedings are otherwise where, among others, the contracting authority can demonstrate by terminated. appropriate means that the latter is guilty of serious professional misconduct, which renders its integrity or reliability questionable. The Guidelines n. 6/2017, adopted by the Anti-Corruption Authority 8.4 Does the law recognise a “passing on” defence in (Autorità Nazionale Anticorruzione, or “ANAC”) to clarify the civil damages claims? scope and application of Article 80, para. 5, lett. c), include, as an instance of serious professional misconduct (hence as a potential The provisions of Directive 2014/104 on passing on are implemented ground for exclusion), the case where an economic operator has by Title IV of Legislative Decree n. 3/2017. entered into anti-competitive agreements. In addition, in assessing the integrity or reliability of an economic operator, the contracting authority must take into account the adoption by the ICA of an infringement decision for serious antitrust violations.

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Paolisa Nebbia Shearman & Sterling LLP Via Borgognona 47 Rome Italy

Tel: +39 06 697 679 23 Email: [email protected] URL: www.shearman.com Italy

Paolisa Nebbia is a counsel, heading the Italian antitrust practice in the Rome office. Paolisa has acquired extensive experience working at the Directorate General for Competition of the European Commission (DG COMP) and at the Italian Competition Authority (Autorità Garante della Concorrenza e del Mercato). She has in-depth knowledge of the working and dynamics of public enforcers and has handled several complex and high-profile cases. Her experience spans across several sectors, ranging from media to consumer products, e-commerce to sports, and from collective rights management to Services of General Economic Interest. She has held professorial appointments in Competition Law and in EU Law at several UK universities, is a former Law Fellow of St. Hilda’s College, University of Oxford and is currently a visiting professor at the World Intellectual Property Organisation. Paolisa has had main responsibility for several high-profile cases (including the Sky UK/Hollywood Studios case) while working in public enforcement. She currently advises on a broad range of EU and Italian competition law and regulatory issues, with a specific focus on those related to the Digital Single Market and media, and on cartels.

As one of the first law firms to establish a presence in key international markets, Shearman & Sterling has led the way in serving clients wherever they do business. This innovative spirit and the experience we have developed over our 140-year history makes us the ‘go-to’ law firm for seamless service. An elite antitrust practice Shearman & Sterling wins antitrust cases and successfully defends multinational companies’ transactions before the US and European antitrust authorities, as well as coordinating the multijurisdictional antitrust defence of transactions and global investigations. We deliver practical and effective solutions to the most challenging antitrust issues and are committed to achieving success for our clients. Consistently recognised as among the leaders in the field, clients come to us for our: ■■ Top quality advocacy to maximise the persuasiveness of a client’s position. ■■ Deep experience with antitrust authorities. Our partners, including several former officials, have the knowledge and experience to facilitate dealings with the key antitrust authorities. ■■ M&A experience. Clients entrust us with their most important transactions to assure maximum chances of swift approval with the minimum of conditions. ■■ Behavioural expertise with a track record in investigations relating to dominant firm conduct, cartels, and cooperation agreements. ■■ Litigation abilities, including in antitrust class action lawsuits and jury trials. ■■ Breadth. Our team consists of over 70 lawyers, including 18 partners, representing over 10 nationalities. We advise on all aspects of US and EU antitrust law and practice, in a wide range of sectors, and in many languages. ■■ Transatlantic and international coverage.

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Japan

Nagashima Ohno & Tsunematsu Eriko Watanabe

Antimonopoly Law. The JFTC consists of a chairman and four 1 The Legislative Framework of the Cartel commissioners. The General-Secretariat (Jimu-Sokyoku), headed by Prohibition the Secretary-General (Jimu-Socho), is attached to the JFTC for the operation of its business, and it consists of the Secretariat (Kanbo), the Investigation Bureau (Shinsa-kyoku), and the Economic Affairs 1.1 What is the legal basis and general nature of the cartel prohibition, e.g. is it civil and/or criminal? Bureau (Keizai Torihiki-kyoku) (including the Trade Practices Department (Torihiki-bu)). In general, the Investigation Bureau (Shinsa-kyoku) is in charge of investigations and issuance of orders. The “Law Concerning the Prohibition of Private Monopoly and Maintenance of Fair Trade” (Law No. 54 of 1947) (the “Antimonopoly Law”), as amended from time to time, is the 1.4 What are the basic procedural steps between the legislation that prohibits cartels. In addition to the prohibition under opening of an investigation and the imposition of the Antimonopoly Law of Japan, collusion in a public bid is subject sanctions? to penalty under the Criminal Code. The Law Concerning Exclusion and Prevention of Public Bid Rigging and Actions against Involved When the JFTC believes it can find an alleged violation of the Officers provide the measures that the Fair Trade Commission of Antimonopoly Law to be an unreasonable restraint of trade by Japan (the “JFTC”) may take against the activities of government any means (e.g., a complaint by a third party, information from an officers involved in public bid rigging. employee of the suspected corporation, and/or application under the leniency programme), the JFTC first conducts a feasibility study for the investigation, and then determines whether (a) to conduct 1.2 What are the specific substantive provisions for the either an administrative investigation or the compulsory measures cartel prohibition? for criminal offences under the Antimonopoly Law, or (b) not to further proceed with the investigation. Under the Antimonopoly Law, a cartel (e.g., price-fixing, production If the JFTC, as a result of the compulsory investigation for criminal limitation, and/or market, customer allocation and bid-riggings) is offences, determines that the alleged conduct constitutes a cartel and prohibited as an unreasonable restraint of trade, i.e., an agreement the criminal sanctions are appropriate therefor, it files a criminal or mutual understanding among competitors to eliminate or restrict accusation with the Public Prosecutors’ Office. Criminal sanctions competition among them that substantially restrains competition under the Antimonopoly Law will be imposed on a corporation and/ in a particular field of trade (Article 3, Latter Part). While the or individuals through the criminal procedures under the applicable Antimonopoly Law does not explicitly limit the scope of the laws in the same way for other criminal cases. conduct in violation of the Antimonopoly Law to the conduct If the JFTC conducts the administrative investigation and issues a among competitors, the Tokyo High Court, in its March 9, 1953 cease-and-desist order and/or payment order of the administrative decision, held that only restrictions among competitors constitute an surcharge, such orders are subject to review by the judicial court. unreasonable restraint of trade. Unreasonable restraint of trade by a trade association is also prohibited under Article 8, Paragraph 1, Item 1 of the Antimonopoly Law. 1.5 Are there any sector-specific offences or exemptions? Although Article 3, Latter Part of the Antimonopoly Law, prohibits only conduct that substantially restrains competition in the relevant No requirements for conduct by an entrepreneur in a particular market, the JFTC has enforced the Antimonopoly Law as if the industry to constitute an unreasonable restraint of trade are set out Antimonopoly Law prescribes that such cartels are illegal per se. under the Antimonopoly Law or other relevant regulations. Certain activities by a small business, such as a cooperative qualified under the applicable laws, are exempt from the application of the 1.3 Who enforces the cartel prohibition? Antimonopoly Law under Article 22 thereof. Certain other joint activities among competitors are also exempt from the application of The JFTC is the sole enforcement agency established by the the Antimonopoly Law by the provisions of other individual business Antimonopoly Law. In contrast to the United States, there is no laws over particular industries (e.g., the Road Traffic Act, Maritime enforcement agency in Japan that shares the power and responsibility Traffic Act, Insurances Act, Air Aviation Act). In the foreign trade to enforce the Antimonopoly Law with the JFTC. The JFTC is the area, certain export cartels which meet the requirements provided in investigator and prosecutor with regard to the offences under the the Export and Import Act are also permitted to some extent.

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a criminal offence as listed above has taken place as a result of 1.6 Is cartel conduct outside your jurisdiction covered by the compulsory measures for criminal offences, it will then file an the prohibition? accusation with the Public Prosecutors’ Office. 2. Administrative Investigation by the JFTC The Antimonopoly Law contains no provision expressly setting forth the JFTC’s jurisdiction. However, the JFTC considers that it (1) The JFTC is empowered to take actions in order to conduct the has jurisdiction over conduct that has an “effect” on the Japanese necessary investigation of a case, as a compulsory one, such as: (i) market, irrespective of where those activities are carried out. to order persons involved in a case or any other relevant person Therefore, in summary, the JFTC may have jurisdiction over cartel to appear at a designated time and place to testify or to produce cases involving the Japanese market. documentary evidence; (ii) to order experts to appear and to give Japan expert testimony; (iii) to order persons to submit account books, documents and other material and to retain these materials; and (iv) 2 Investigative Powers to enter any place of business of persons involved in a case and any other necessary place to inspect the conditions of the business operation and property, account books, documents, and other 2.1 Summary of general investigatory powers. material. Please note that the Antimonopoly Law has no explicit provisions Table of General Investigatory Powers to allow the JFTC to conduct a dawn raid at an individual residence Investigatory Power Civil/Administrative Criminal while the term “any other necessary place” may, literally, include Order the production the residence. of specific documents Yes Yes* The Antimonopoly Law provides criminal penalties of imprisonment or information of up to not more than one year or a fine of up to 3 million Yen Carry out compulsory for any individual who refuses, obstructs or evades inspection as interviews with Yes Yes individuals provided in the Antimonopoly Law. A corporation is also subject to Carry out an a fine of up to 3 million Yen. unannounced search Yes Yes* The JFTC may also conduct investigations on a voluntary basis. of business premises Carry out an (2) The JFTC usually conducts a dawn raid, a compulsory unannounced No explicit investigation, in a cartel case. A dawn raid requires the consent Yes* search of residential authorisation of the manager on behalf of the corporation to be raided; i.e., the premises consent for the JFTC to enter the premises, unlike the investigation ■ Right to ‘image’ for criminal offences. The presence of a lawyer, including in-house computer hard drives Yes Yes* counsel, is not a legal requirement to lawfully or validly conduct using forensic IT tools the dawn raid. ■ Right to retain The JFTC takes originals of documents and materials held at the Yes Yes* original documents offices of companies that are seized during a dawn raid by either ■ Right to require an order or a request to which an investigated corporation responds an explanation Yes Yes on a voluntarily basis. Note that the Rules on Administrative of documents or information supplied Investigations provides that the persons who are ordered to submit ■ Right to secure the materials are entitled to make photocopies of such materials No explicit premises overnight Yes* unless the investigation is impeded. authorisation (e.g. by seal) It is usual for the JFTC to question employees with regard to the subject matter of the investigation, at the same time as the dawn raids Please Note: * indicates that the investigatory measure requires and, in addition, after the completion of the review of materials and/ the authorisation by a court or another body independent of the or collection of information. The questioning is usually conducted competition authority. by the JFTC on a voluntary basis with the consent of an applicable individual. 2.2 Please list specific or unusual features of the Further, the JFTC usually issues a report order requesting certain investigatory powers referred to in the summary table. information and document production during the process of the administrative investigation, and also sometimes requests the 1. Compulsory Measures for Criminal Offences information and/or documents to be submitted on a voluntary basis. The JFTC may inspect, search and/or seize materials in accordance with the warrant issued by a court judge under the Antimonopoly 2.3 Are there general surveillance powers (e.g. bugging)? Law as the compulsory measures for criminal offences. The JFTC may not arrest an individual. No. The JFTC’s power to conduct surveillance is limited to those The JFTC made public that it will initiate a criminal investigation provided under the Antimonopoly Law. See question 2.2 above. under the Antimonopoly Law where there is a considerable reason to suspect: (i) a malicious and material violation of the Antimonopoly Law, including cases involving price-fixing, restriction of supply, 2.4 Are there any other significant powers of market division, and bid-rigging; or (ii) an entrepreneur or industry investigation? that repeatedly violates the Antimonopoly Law, or an entrepreneur who does not comply with a cease-and-desist order issued, and it is No. See question 2.2 above. difficult to correct such conduct by JFTC’s administrative measures under the Antimonopoly Law. Where the JFTC is convinced that

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usual for the companies under suspicion to cooperate with the 2.5 Who will carry out searches of business and/or investigation, and there have been no material changes in the JFTC’s residential premises and will they wait for legal approach with regard to the obstruction of an investigation. advisors to arrive?

Investigators of the JFTC are authorised by the Antimonopoly Law 3 Sanctions on Companies and Individuals to carry out the searches. If the conduct also constitutes a criminal offence under the Criminal Code, the police agency and/or public prosecutors may conduct their own investigation in accordance with 3.1 What are the sanctions for companies? the Criminal Procedure Law at the same time. The attendance of Japan legal counsel is not required for the administrative investigation by 1. Criminal Sanctions the JFTC, and the JFTC usually does not wait for the arrival of legal For an unreasonable restraint of trade, the Antimonopoly Law advisors, in particular, the outside counsel. stipulates the criminal penalties, including a fine of 500 million Yen or less for a corporation. No public statistics regarding the imposed criminal fines are available. 2.6 Is in-house legal advice protected by the rules of privilege? 2. Administrative Sanctions – JFTC Enforcement (1) If a violation of the Antimonopoly Law is supported by evidence Under the Antimonopoly Law or any other relevant Japanese law obtained in the course of an investigation, the JFTC may order the such as the Criminal Procedure Law or the Civil Procedure Law, entrepreneur that committed the violation to cease-and-desist from there is no attorney-client privilege, and the correspondence between such an act and to take any other measures necessary to eliminate outside/in-house counsel and clients or advice from outside/in- such an act. The statutory limitation period for the JFTC to issue house counsel to clients is not exempt from the scrutiny of the cease-and-desist orders is five years from the time when the conduct JFTC’s investigation regardless of whether the investigation is for a ceased under the Antimonopoly Law. The cease-and-desist order is criminal offence or not, while licensed lawyers in Japan are required effective upon the service thereof to the recipient thereof and such and will usually refuse to disclose the confidential information of recipient is obligated to comply with the cease-and-desist order in their clients under the Attorneys’ Act. Furthermore, the JFTC is question even if the recipient files an action to quash such orders to not prohibited from asking an interviewee questions about advice the judicial court, unless the enforcement of such order is particularly received from outside/in-house counsel. Moreover, members of a suspended by the decision of the judicial court or the JFTC. company’s legal department in Japan who perform the role of in- (2) The JFTC is required to order payment of an “administrative house counsel but are not licensed lawyers are sometimes subject surcharge” (kachokin) by entrepreneurs who are found to have to the questioning and document production to the JFTC. There are participated in unreasonable restraint of trade which directly affects cases in which an in-house counsel who is a licensed lawyer was prices or which consequently affects prices by curtailing the volume questioned by the JFTC. of supply (i.e., (a) price fixing or (b) cartels on supply, market share or customers that affect prices). 2.7 Please list other material limitations of the The amount of the surcharge is calculated as the percentage of the investigatory powers to safeguard the rights of total sales of the product/services concerned for the period of the defence of companies and/or individuals under given cartel up to three years from the date such conduct ceased. investigation. The rate of the administrative surcharge was increased as follows: There are no other material limitations of the investigatory powers. (a) Principle: Note that a legally interested person such as the plaintiff may review (i) Manufacturers, etc.: 10%. and receive photocopies of the case records of the administrative (ii) Retailers: 3%. proceedings by the JFTC. Further, the JFTC has the policy that it (iii) Wholesalers: 2%. will provide plaintiffs with access to certain investigation records (b) Medium and small-sized corporations: which the JFTC collects during its investigation, through the request (i) Manufacturers, etc.: 4%. by the court if a damage suit is filed in the court, except for certain information such as trade secrets and privacy information. Through (ii) Retailers: 1.2%. these procedures, attorney-client privileged documents protected in (iii) Wholesalers: 1%. other jurisdictions may be produced for judicial review in Japan and An administrative surcharge at the rate of 150% of the respective can be available to the plaintiff/potential plaintiff. administrative surcharge rate is imposed on those entrepreneurs, in general, who have repeated conduct in violation of the Antimonopoly 2.8 Are there sanctions for the obstruction of Law and who have been subject to an administrative surcharge investigations? If so, have these ever been used? payment order within the last 10 years. The increased rate of the Has the authorities’ approach to this changed, e.g. administrative surcharge rates by 50% is imposed if a corporation, become stricter, recently? for example, planned conduct that constitutes an unreasonable restraint of trade in violation of the Antimonopoly Law. Further, if The Antimonopoly Law provides criminal penalties of imprisonment the corporation that played a leading role in the conduct constituting of up to not more than one year or a fine of up to 3 million Yen or an unreasonable restraint of trade is a corporation that has repeatedly less for an individual who refuses, obstructs or evades inspection as acted in violation of the Antimonopoly Law within the past 10 years, provided in the Antimonopoly Law. The Antimonopoly Law also the administrative surcharge shall be calculated at a rate double the provides criminal penalties of a fine of up to 3 million Yen or less applicable surcharge. for any corporation which refuses, obstructs or evades inspection as On the other hand, the administrative surcharge rate is decreased by provided in the Antimonopoly Law. The sanction may be imposed 20% of the respective administrative surcharge rate set out above on on investigated companies suspected to be part of a cartel. It is those entrepreneurs, in principle, if the duration of such conduct in

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violation of the Antimonopoly Law is less than two years and such the evidence therefore the suspected corporation may determine as conduct ceased more than one month before the JFTC initiates an to whether it qualifies as the leniency applicant. investigation. The Antimonopoly Law allows for five leniency applicants. The Antimonopoly Law allows the JFTC to issue an administrative If an entrepreneur committing unreasonable restraint of trade, (i) surcharge payment order against those entrepreneurs who succeed voluntarily and independently reports on the existence of cartels the offender’s business by means of a company split, business and provides related materials to the JFTC, and (ii) ceases such transfer, etc. violation before the initiation of an investigation, immunity from or The amount of the administrative surcharge imposed on the a reduction in the administrative surcharge payment shall be applied companies in 2016 FY was approximately 9.14 billion Yen in total to such entrepreneurs as follows: Japan (32 entities), and the average amount for one company in 2016 FY (A) 1st applicant filed before initiation of investigation (i.e., dawn was approximately 286 million Yen. raid): total immunity; (B) 2nd applicant filed before initiation of investigation: 50% 3.2 What are the sanctions for individuals (e.g. criminal deducted; sanctions, director disqualification)? (C) 3rd applicant through 5th applicant filed before initiation of investigation: 30% deducted; and For an unreasonable restraint of trade, the Antimonopoly Law (D) any applicant filed after initiation of investigation: 30% stipulates servitude (i.e., labour in a prison) of five years or less and/ deducted. or a criminal fine of 5 million Yen or less for an individual (e.g., an If there is a parent-subsidiary relationship or any other affiliation officer/employee in charge of a cartel). A person who was sentenced among the investigated companies, a joint application system for to imprisonment or severer penalty and who has not completed the those entrepreneurs affiliated with each other and implicated in the execution of the sentence or to whom the sentence still applies same infringement is available to such group companies under the (excluding persons for whom the execution of the sentence is Antimonopoly Law. suspended) is disqualified as a director of a company under the Corporate Act. The administrative surcharge for a “first-in” is totally exempt. The JFTC made a public announcement that the JFTC will not file a criminal accusation for an officer or employee of the “first- 3.3 Can fines be reduced on the basis of ‘financial hardship’ in” who is cooperative with the JFTC’s investigation. Because or ‘inability to pay’ grounds? If so, by how much? the JFTC has exclusive rights to file a criminal accusation with regard to the violation of the Antimonopoly Law and the Public No. The Antimonopoly Law does not allow such decrease of the Prosecutors’ Office is highly likely to respect such decision by the amount in the decision of either criminal sanctions or administrative JFTC, it practically means that the officer or employee of the first surcharges. applicant is exempt from the criminal sanctions with regard to the violation of the Antimonopoly Law. The suspension of transactions 3.4 What are the applicable limitation periods? which is customarily ordered by the relevant public offices (e.g., the ministries and local governments) with which the suspected The applicable statutory limitation period is five years from the time corporation has transactions may be shortened. Having said that, when the conduct ceased. civil liability cannot be released. The administrative surcharge is reduced by 50% for the “second- in”. However, there is no exemption from the criminal and civil 3.5 Can a company pay the legal costs and/or financial penalties imposed on a former or current employee? liability for “second-in”.

The company may pay the legal costs. However, the payment of 4.2 Is there a ‘marker’ system and, if so, what is required legal fees and expenses in order to defend such employee may to obtain a marker? trigger the liability of the management of the corporation under the shareholders’ derivative suits unless such payment is for the purpose The Leniency Rules make prior consultation available anonymously. and effect of mitigating the company’s liability. A company may not If a leniency applicant files an application using Form 1by bear the penalties. facsimile, the JFTC informs of the expected order (i.e., the marker) of the leniency application and deadline of the submission of the 3.6 Can an implicated employee be held liable by his/her materials/evidence. The leniency applicant is required to file the employer for the legal costs and/or financial penalties Form 1 with the JFTC by facsimile in order to prevent the JFTC imposed on the employer? from receiving more than one written report at the same time. The products/services that are subject to the violation and the types of To our knowledge, no discussion has been made. Although it seems conduct in violation of the Antimonopoly Law are required to be set possible in theory, under the Japanese law it should be examined on forth in the Form 1 upon submission thereof. The applicant will be a case-by-case basis. required to submit the materials before the designated deadline using Form 2 and the evidence to show the illegal conduct for which the leniency application was filed. If the JFTC so determines, certain 4 Leniency for Companies parts of the material may be provided to the JFTC orally; however, it is essential to submit the evidence. Before an investigation begins, the JFTC will give priority to the entrepreneur who submitted the 4.1 Is there a leniency programme for companies? If so, please provide brief details. initial report by facsimile earlier than other entrepreneurs to request the application of a leniency programme. As soon as the corporation identifies the alleged facts and obtains

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4.3 Can applications be made orally (to minimise any 5 Whistle-blowing Procedures for subsequent disclosure risks in the context of civil Individuals damages follow-on litigation)?

No. See the answer to question 4.2. 5.1 Are there procedures for individuals to report cartel conduct independently of their employer? If so, please specify. 4.4 To what extent will a leniency application be treated confidentially and for how long? To what extent Article 45, Paragraph 1 of the Antimonopoly Law provides that any

will documents provided by leniency applicants be person may report a possible infringement of the Antimonopoly Japan disclosed to private litigants? Law to the JFTC and request that necessary action be taken. An officer/employee may file a report with regard to the violation of While the Antimonopoly Law provides the confidential obligation the Antimonopoly Law under this Article. Moreover, the Whistle- under the Antimonopoly Law for the JFTC officials in general, blowers Act provides that no employer may unfavourably deal with there are no specific provisions with regard to the confidentiality for such individual and retaliation is prohibited. leniency applicants under the Antimonopoly Law. The JFTC made a public announcement that the JFTC discloses the names of the applicants to which administrative surcharge 6 Plea Bargaining Arrangements is exempted or reduced and the exemption/reduced ratio thereof under the leniency programme if the JFTC issues an administrative 6.1 Are there any early resolution, settlement or plea surcharge payment order for the case involving such an applicant bargaining procedures (other than leniency)? Has on and after June 1, 2016. Before May 31, 2016, only when the the competition authorities’ approach to settlements applicants so desired, the JFTC made such information public so changed in recent years? that applicants may request the period for the suspension of the transactions with the relevant ministries and/or local governments No, there are no settlement procedures with regard to the is to be shortened. (See question 4.1 above.) administrative/criminal investigation such as those in the EU, or The JFTC requests that applicants keep the application and contact plea bargaining procedures such as those in the US. with the JFTC in strict confidence, so that the JFTC may successfully investigate the case. 7 Appeal Process The documents are to be submitted with the JFTC as evidence. The JFTC takes procedures to collect the same documents through the investigation, and these may be disclosed to a person who has a 7.1 What is the appeal process? legal interest in the proposed violation (e.g., potential plaintiffs). The documents filed with the JFTC upon the leniency applicant 1. Criminal case may be subject to discovery in US litigation, and the JFTC allows If the JFTC, as a result of the compulsory investigation for criminal an application with an oral explanation in certain circumstances. offences, determines that the alleged conduct constitutes a cartel However, the application itself must be filed in written format with and the criminal sanctions are appropriate, the JFTC files a criminal the material/evidence, and it is difficult to proceed with the entire accusation with the Public Prosecutors’ Office. Criminal sanctions process of the leniency application without written materials. under the Antimonopoly Law will be imposed on an individual and a corporation through the criminal procedures under the applicable 4.5 At what point does the ‘continuous cooperation’ laws in the same way for other criminal cases. The appeals for requirement cease to apply? criminal cases are the same as those for other criminal offences. 2. Administrative case Leniency will not be granted if: (a) any of the application documents If the JFTC conducts the administrative investigation and issues a or materials contain false information; (b) the applicant fails to cease-and-desist order and/or payment order of the administrative cooperate with the JFTC which cooperation may be requested by surcharge, the defendant corporation which has an objection against the JFTC throughout the investigation (e.g., request to submit a the JFTC’s administrative orders may file a complaint, within six report or additional materials), or submits a false report or erroneous months after the service of the order, with the Tokyo District Court materials; or (c) the applicant has forced other cartel participants to to quash such JFTC order. The Tokyo District Court decisions over engage in the given cartel or has prevented cartel participants from complaints to quash JFTC orders can then be appealed to the Tokyo leaving the cartel. High Court and finally to the Supreme Court. There is no time period for ceasing the obligation. Prior to the amendment to the Antimonopoly Law, which became effective as of April 1, 2015, complaints to quash JFTC orders 4.6 Is there a ‘leniency plus’ or ‘penalty plus’ policy? were examined through administrative proceedings presided by the administrative judges appointed and authorised by the chairperson and commissioners of the JFTC. JFTC orders, the relevant advance No. Although an applicant may file a leniency application for any notice of which was rendered prior to April 1, 2015, shall still be conduct in violation of the Antimonopoly Law as a cartel, it is not subject to the administrative proceedings of the JFTC, pursuant to considered as a “leniency plus” policy and it has no effects on any the Antimonopoly Law before the amendment. cartels other than that for which such leniency application is filed. Complaints to quash JFTC orders are examined by a panel of three or five court judges.

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Since the abolishment of the substantial evidence rule in which the 2. The statutory limitation of a damage suit under the general Tokyo High Court is bound by the JFTC’s findings of fact as long as tort law (i.e., civil code) is three years after a person becomes they are supported by substantial evidence, the Tokyo District Court aware of the damages and the person who caused such shall not be bound by the JFTC’s findings of fact and a defendant damages, and 20 years after the cessation of conduct. company may submit evidence to the judicial court proceedings. An appeal against a judgment rendered by the Tokyo High Court to 8.4 Does the law recognise a “passing on” defence in the Supreme Court can be accepted if certain requirements set forth civil damages claims? in the Civil Procedure Law are fulfilled. To our knowledge, we do not have a “passing on” defence

Japan concerning civil damage claims with regard to the cartels under the 7.2 Does an appeal suspend a company’s requirement to Antimonopoly Law. pay the fine?

No. Unless the company obtains the decision to suspend the payment 8.5 What are the cost rules for civil damages follow-on by the judicial courts or the JFTC through separate procedures, the claims in cartel cases? company must pay the ordered administrative surcharge. The cost rule is the same as those applicable to other types of civil actions. Namely, either a plaintiff or defendant who loses the case is 7.3 Does the appeal process allow for the cross- usually ordered to bear the cost for the given litigation. examination of witnesses?

Yes. The cross-examination of witnesses is made in the same way 8.6 Have there been any successful follow-on or stand as in other types of administration proceedings and litigations. alone civil damages claims for cartel conduct? If there have not been many cases decided in court, have there been any substantial out of court settlements? 8 Damages Actions To our knowledge, there have been some successful civil damage claims filed by plaintiffs (e.g., the representatives of residents who 8.1 What are the procedures for civil damages actions live in the local government entity that incurred the damages) with for loss suffered as a result of cartel conduct? Is the regard to bid-rigging cases involving public bids. The number of position different (e.g. easier) for ‘follow-on’ actions as opposed to ‘stand alone’ actions? civil litigations with regard to the violation of the Antimonopoly Law seems to be small. Although “private enforcement” of the Antimonopoly Law through civil damage suits by private plaintiffs is not as common in Japan 9 Miscellaneous as it is in the United States, a party (e.g., a customer) who suffers damage from a cartel is entitled to undertake civil action for recovery of damages based on provisions of strict liability under 9.1 Please provide brief details of significant, recent or Article 25 of the Antimonopoly Law or on the more general tort imminent statutory or other developments in the field law provisions of the Japanese Civil Code. The Antimonopoly of cartels, leniency and/or cartel damages claims. Law enables a plaintiff to claim compensation more easily. That is, if a suit for indemnification of damages or counter-claim under See question 7.1 with regard to the major amendment to the appeals the provisions of Article 25 (i.e., strict liability) has been filed, the for the JFTC’s administrative orders. The JFTC is working for the court may, without delay, request the opinion of the JFTC regarding amendment to the Antimonopoly Law to introduce administrative the amount of damages caused by such violations. Note that no surcharge which the JFTC may impose on the defendant companies compensation for punitive damages/triple damages is allowed. at its sole discretion. (See question 3.1.)

8.2 Do your procedural rules allow for class-action or 9.2 Please mention any other issues of particular interest representative claims? in your jurisdiction not covered by the above.

There are no procedural rules that allow for class-action or The JFTC has conducted investigations cooperating with foreign representative claims with regard to the cartels under the competition authorities in international cartel cases. Antimonopoly Law. The JFTC has signed agreements concerning cooperation on antitrust enforcement with the US Government (1999), the European Commission (2003) and Canada (2005), respectively. 8.3 What are the applicable limitation periods? Moreover, Japan signed an economic partnership agreement (EPA) with Singapore in 2002 and with Mexico in 2004, respectively. 1. The statutory limitation period for a damages action to be filed in accordance with Article 25 of the Antimonopoly Law Since then Japan has executed EPAs with 11 countries, including is three years after the date on which the cease-and-desist Singapore and Mexico, and ASEAN as of today. Furthermore, the order or administrative surcharge order becomes irrevocable JFTC executed memoranda concerning cooperation with Korea (i.e., an appeal therefore has not been filed, in principle, (2014) and Brazil and the Philippines (2013), respectively. within 60 days after the service thereof).

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Eriko Watanabe Nagashima Ohno & Tsunematsu JP Tower, 2-7-2, Marunouchi Chiyoda-ku, Tokyo 100-7036 Japan

Tel: +81 3 6889 7531 Email: [email protected] URL: www.noandt.com Japan

Admitted to Bar: 1988, Japan. Education: Tohoku University (LL.B., 1983). University of Washington School of Law (LL.M., 1994). Professional Experience: Kirkland & Ellis, Chicago, 1994–1995. The Fair Trade Commission of Japan, 1995–1998. Keio University, Law School Professor (Antitrust), April 2004–2007. Board of Governors/Audit & Supervisory Committee Nippon Hoso Kyokai (NHK), March 2012–February 2015. Languages: Japanese and English. Practice Areas: Antitrust/Competition Law. Panelist (outside of Japan): ABA International Cartel Workshop (2004, 2006, 2008 and 2016), ABA International Competition Conference (2008), IBC Legal Presents Competition Law Challenges in Asia (July 2015), and others. Publications (published outside of Japan): “Regulation on Setting Technology Standards Under The Antimonopoly Law of Japan”, Washington University Global Studies Law Review (2002). “Merger Control Worldwide” (Japan), Cambridge University Press (2008). “Anti-Cartel Enforcement Worldwide” (Japan), Cambridge University Press (2008). “Merger Control Worldwide” (Japan), Cambridge University Press (2010). “Doing Business in Japan – Competition Law”, Matthew Bender (2010 and 2011), and others.

Nagashima Ohno & Tsunematsu is the first integrated full-service law firm in Japan and one of the foremost providers of international and commercial legal services based in Tokyo. The firm’s overseas network includes offices in New York, Singapore, Bangkok, Ho Chi Minh City, Hanoi and Shanghai, associated local law firms in Jakarta, Beijing and Yangon where our lawyers are on-site, and collaborative relationships with prominent local law firms throughout Asia and other regions. In representing our leading domestic and international clients, we have successfully structured and negotiated many of the largest and most significant corporate, finance and real estate transactions related to Japan. The firm has extensive corporate and litigation capabilities spanning key commercial areas such as antitrust, intellectual property, labour and taxation, and is known for path-breaking domestic and cross-border risk management/corporate governance cases and large-scale corporate reorganisations. The firm’s approximately 370 lawyers work together in customised teams to provide clients with the expertise and experience specifically required for each client matter.

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Macedonia Dragan Dameski

Debarliev, Dameski & Kelesoska, Attorneys at Law Jasmina Ilieva Jovanovik

agreement or participates in the conclusion of an agreement, decision 1 The Legislative Framework of the Cartel or concerted practice prohibited by law, and aims to prevent, limit Prohibition or distort competition, and thus the legal entity obtains property benefits in greater extent or causes damage in greater extent, shall be sentenced to imprisonment with a duration of one to 10 years. 1.1 What is the legal basis and general nature of the cartel prohibition, e.g. is it civil and/or criminal? 1.3 Who enforces the cartel prohibition? The legal basis of the cartel prohibition in Macedonia is the Law on the Protection of Competition (“the Law”) and the Criminal Law. The national competition authority for enforcing the cartel The Law on the Protection of Competition regulates prohibited prohibition and other provisions of the Law on the Protection of forms of prevention, restriction or distortion of competition, and sets Competition in Macedonia is the Commission for the Protection of measures and procedures regarding the restriction of competition. Competition (“the Commission”). The Commission is independent The Law on the Protection of Competition contains only in the proceeding and decision-making activities related to the administrative fines for entities that break the cartel prohibitions. sanctioning of offences related to the disturbance of competition. The Criminal Law provides a provision that anticipates criminal However, when it comes to criminal liability of the responsible responsibility for the authorised person of a company who concludes person of the legal entity that has participated in a cartel, enforcement a cartel agreement or participates in such agreement or practice, and of the substantive provisions of the Criminal Law falls under the as a result of these activities, the company achieves large profits or competence of the Basic Public Prosecution Office and the Criminal causes great damages. The criminal penalty may vary from one to Court. 10 years’ imprisonment.

1.4 What are the basic procedural steps between the 1.2 What are the specific substantive provisions for the opening of an investigation and the imposition of cartel prohibition? sanctions?

The specific substantive regulation of cartel prohibition is given in The procedure before the Commission for misdemeanour matters the Law on the Protection of Competition. Article 7 paragraph 1 of shall be initiated ex officio, at the request of the Secretary General the Law on the Protection of Competition prohibits all agreements of the Commission or at the request of a natural or legal person concluded between undertakings, decisions by associations of having a legitimate interest in determining the existence of a undertakings and concerted practices which have as their object or misdemeanour. The Commission for misdemeanour matters shall effect the distortion of competition, such as: initiate the misdemeanour procedure with a procedural order against 1. directly or indirectly fixing purchase or selling prices or any which no appeal or legal action instituting an administrative dispute other trading conditions; shall be allowed. 2. limiting or controlling production, markets, technical Parties who take part in the misdemeanour procedure are: development or investments; ■ the person against whom the misdemeanour procedure has 3. sharing markets or sources of supply; been initiated; and 4. applying dissimilar conditions to equivalent or similar ■ the submitter of the request for the initiation of a transactions with other trading parties, thereby placing them misdemeanour procedure referred to in article 34 of thе Law at a competitive disadvantage; and (a natural or legal person who has a legitimate interest in 5. making the conclusion of contracts with other parties determining the existence of a misdemeanour). conditioned by the acceptance by the other parties of For the purposes of exercising the authorisations determined in the supplementary obligations, which, by their nature or Law, the Commission for misdemeanour matters may, by means of according to commercial usage, have no connection with the a procedural order, request from the undertakings the submission subject of such agreements. of data regarding their economic-financial condition, their business When it comes to criminal liability, in accordance with the Criminal relations, data regarding their statutes and decisions, and the number Law, the responsible person in the legal entity who concludes an and identity of the persons affected by such decisions, as well as

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other data necessary for conducting the procedure. But, if there is a justified suspicion that a certain undertaking owns documents 1.5 Are there any sector-specific offences or exemptions? or other objects or information that could be relevant to prove the existence of a misdemeanour, the Commission for misdemeanour The Law on the Protection of Competition provides for the matters may, by means of a procedural order, order the said possibility for certain agreements to be exempt from prohibition undertaking to provide the authorised persons of the Commission under certain terms and conditions. with evidence on the spot. Under article 7 paragraph 3, the provisions for prohibited agreements With regard to providing the participants in the procedure with between undertakings shall not apply to agreements, decisions of the possibility of stating their opinion regarding the facts and associations of undertakings and concerted practices that contribute circumstances relevant to establishing the actual state of affairs, the to promoting the production or distribution of goods and services

Commission for misdemeanour matters, prior to scheduling an oral or to promoting technical or economic development, provided that Macedonia hearing, shall submit to the participants a preliminary statement of the consumers have a proportionate share of the resulting benefit, objections. After the initiation of the procedure and by the delivery and which: of the final statement of objections at the latest, the person (the 1. do not impose restrictions on the concerned undertakings undertaking) against whom a procedure has been initiated may offer which are not indispensable to the attainment of these commitments before the Commission for misdemeanour matters, by contributions; and which the distortion of the competition, caused by actions or failure 2. do not impose on such undertakings the possibility of to take action by the person against whom the procedure has been eliminating competition in respect of a substantial part of the initiated, shall be overcome. The Commission for misdemeanour products or services in question. matters shall decide to hold an oral hearing if it is necessary for the These exemptions shall apply especially to the following types of establishment of the actual state of affairs. contract: After the Commission for misdemeanour matters fully establishes ■ vertical contracts for exclusive right of distribution, selective the actual state of affairs relevant for correct decision-making, it right of distribution, exclusive right of purchase and shall adopt: franchising; 1. a decision whereby it shall establish that the person against ■ horizontal contracts for research and development or whom the procedure has been initiated has committed a specialisation; misdemeanour stipulated by the provisions of the Law, and ■ contracts for technology transfer, licence or know-how; shall impose an appropriate misdemeanour sanction; or ■ contracts for distribution or servicing vehicles; 2. a decision whereby it shall establish that the person against ■ insurance contracts; and whom the procedure has been initiated has not committed an offence stipulated by the provisions of the Law. ■ contracts in the transportation sector. On the other hand, in case a criminal procedure has been initiated As an exception, and when necessary for protecting the public against the responsible person of a legal entity that has participated interest relating to the application of the provisions for competition in a cartel, the procedure contains the following phases: protection, the Commission may, acting on its own initiative, establish by means of a decision that the provisions for competition 1. Pre-investigation procedure – initiation of the criminal procedure. protection are not applicable to a certain agreement, a decision of an association of undertakings or a concerted practice. 2. Investigation procedure. Also the provisions for prohibited agreements between undertakings 3. Indictment. shall not apply to an “agreement of minor importance”, i.e. any 4. Court procedure. agreement in which the joint market share of the parties to the 5. Verdict. agreement and undertakings under their control on the market does The criminal procedure is initiated by submission of a criminal not exceed the threshold of 10% where the agreement is horizontal, charge by the police ex officio or at the request of any person. or the threshold of 15% where the agreement is vertical. In cases The procedure is public in all phases, except the pre-investigation where it is not possible to classify the agreement as either horizontal phase, whereby the police or the public prosecutor informally or vertical, the 10% threshold shall apply. This exemption shall also collect evidence. As soon as there is reasonable doubt as to a apply if the market share of the undertakings has not increased by committed crime, the public prosecutor adopts an order and initiates more than 2% in the last two consecutive business years. an investigation procedure. The criminal procedure is no longer Specific conditions for exemptions from the cartel prohibition are secret and the prosecutor and the police have broad investigation prescribed with by-laws for each sector. authorisations for the purpose of determination of the facts, including: search (of premises and persons); temporary provision and seizure of objects or property; examination of the suspect; 1.6 Is cartel conduct outside your jurisdiction covered by examination of witnesses; determination of expertise by expert the prohibition? witnesses; insight and reconstruction; and other special investigative measures. In the case that there is enough evidence for a committed The Law on the Protection of Competition shall apply to all forms crime, the public prosecutor adopts an indictment, by which a court of prevention, restriction or distortion of competition that have an procedure is initiated and a judge is authorised to decide whether the effect on the territory of the Republic of Macedonia, even if they indictment and the evidence proposed by the public prosecutor are result from acts and actions carried out or undertaken outside of the sufficient to reach a conviction. territory of the Republic of Macedonia.

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In the case that the crime is committed or has been committed by 2 Investigative Powers an organised group, the Public Prosecution Service can request the court to grant surveillance measures over the suspects, including: 2.1 Summary of general investigatory powers. ■ monitoring and recording of telephone and other electronic communications in a procedure determined by a special law; Table of General Investigatory Powers ■ monitoring and recording in a home, office or enclosed space that belongs to that home or office space which is designated Investigatory Power Civil/Administrative Criminal as private, or in a vehicle, and entry into those premises Order the production for the purpose of creating conditions for monitoring of specific documents Yes Yes* communications; or information ■ secret surveillance and recording of persons and objects Macedonia Carry out compulsory with technical means outside of the home or office space interviews with Yes Yes individuals designated as private; Carry out an ■ gaining secret insight and carrying out a search within a unannounced search No Yes* computer system; of business premises ■ automatically or otherwise, carrying out a search and Carry out an comparison of personal data; unannounced No Yes* search of residential ■ inspection of realised telephone and other electronic premises communications; ■ Right to ‘image’ ■ simulated purchase of objects; computer hard drives Yes Yes* ■ simulated giving and receiving of bribes; using forensic IT tools ■ controlled delivery and transport of persons and objects; ■ Right to retain ■ using persons with a hidden identity to monitor and collect Yes Yes original documents information or data; ■ Right to require ■ opening a simulated bank account; and an explanation Yes Yes* of documents or ■ simulated registration of legal entities or use of existing legal information supplied entities for data collection. ■ Right to secure premises overnight Yes Yes* 2.4 Are there any other significant powers of (e.g. by seal) investigation? Please Note: * indicates that the investigatory measure requires the authorisation by a court or another body independent of the In the case of an emergency, when there is a risk of the occurrence competition authority. of serious and irreparable damage for competition, the Commission can, with a decision, bring temporary measures against the person and/or undertaking. As a temporary measure, the Commission 2.2 Please list specific or unusual features of the may order the cessation of certain actions, fulfilment of certain investigatory powers referred to in the summary table. conditions or other measures necessary for preventing the distortion of competition, and shall determine the duration of the measures. The Law on the Protection of Competition provides that if some of The duration of the measures shall be proportionate and suitable the data or documentation which are taken or kept by the authorised to the goal that has to be attained by the ordered interim measure. persons of the Commission are a business or professional secret, The conditions for implementing the measures (e.g. the types of the undertaking which is under investigation may, within eight days measures and duration of such) shall be determined in the decision as of the day of performing the actions, inspect the taken or kept of the Commission. data and documentation, clearly mark the data and documentation which are a business secret and indicate the legal basis for their classification as such. If the undertaking fails to act, it shallbe 2.5 Who will carry out searches of business and/or considered that the collected data and documentation do not contain residential premises and will they wait for legal advisors to arrive? data which are a business secret. If, during the course of investigating, there is a probability of hiding, Investigative actions are carried out by authorised personnel from changing or destroying certain data, documents and/or objects which the Commission. The authorised persons from the Commission might be crucial for ascertaining an offence, the Commission may shall perform the necessary actions even against the will with the require assistance from the relevant authorities for keeping public assistance of the relevant authorities for keeping public order. The order (e.g. the police). Law on the Protection of Competition does not provide for any This assistance can also be required in cases where the investigated obligation of authorised persons to wait for legal advisors to arrive. undertaking/subject does not allow the authorised personnel from When it comes to criminal procedures, the search is conducted on the Commission to conduct investigation activities. the basis of a court order and is performed by authorised persons appointed by the order – usually the public prosecutor with the 2.3 Are there general surveillance powers (e.g. bugging)? assistance of police officers. The suspect can request his attorney- at-law to be present during the search, in which case the attorney-at- Competition authorities do not have any surveillance powers. The law must be awaited, but for no longer than two hours. use of bugging is restricted to the most serious criminal offences only, and the cartel prohibition generally does not fall inside this category.

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the amount of up to 1% of the value of the total annual turnover 2.6 Is in-house legal advice protected by the rules of calculated in the absolute and nominal amount earned in the privilege? last business year for which the undertaking or association of undertakings has compiled an annual account if there is any No, there are no provisions in this respect in the applicable law. obstruction of an investigation. However, documentation that contains business secrets can In criminal procedures, obstruction of the investigation procedure be marked as such and the Commission is obliged to keep the is considered as a crime and is severely sanctioned. In case there information confidential and not disclose it to the public. is a reasonable doubt that the suspect will obstruct the investigation According to the Law on Advocacy, the legal advice that an outside procedure, the public prosecutor can request alternative measures lawyer provides to a company must be given in good conscience and for identification and security to be imposed. with expertise, in accordance with the laws and the lawyers’ codex, Macedonia and they must keep secret and privileged the information at their disposal given by the company. 3 Sanctions on Companies and Individuals On the other hand, criminal procedure prescribes certain cases where rules of privilege are applied. Communication between the 3.1 What are the sanctions for companies? suspect and his attorney-at-law cannot be used as evidence in the criminal procedure. In cases where the evidence given in front of According to the Law on the Protection of Competition, if the the court may present a possibility that an important business secret Commission concludes a prohibited agreement or otherwise is going to be disclosed to the public during a court hearing, the participates in an agreement, decision or concerted practice leading public can be exempted from the hearing. to the distortion of competition within the meaning of article 7 of the Law on the Protection of Competition, if a person (an undertaking) 2.7 Please list other material limitations of the fails to act pursuant to the decision of the Commission for temporary investigatory powers to safeguard the rights of measures, or if an undertaking fails to act pursuant to the decision of defence of companies and/or individuals under the Commission for offence matters, the Commission shall impose investigation. a fine in the amount of up to 10% of the value of the total annual turnover earned in the last business year, calculated in the absolute There are no explicit material limitations on the investigatory and nominal amount for which the undertaking or association of powers of the Commission provided in the Law on the Protection undertakings has compiled an annual account. of Competition. During the investigation, the company and the Regarding the offence sanction described above, the Commission individuals concerned are protected by their fundamental rights of for offence matters may impose on the legal person, in addition to defence. the fine, a temporary ban on the performance of a specific activity On the other hand, the investigatory powers of the police and the for the duration of three to 30 days. public prosecutor in criminal procedures include, in particular, the following limitations: 3.2 What are the sanctions for individuals (e.g. criminal ■ the suspect has to be aware of his rights and has to be sanctions, director disqualification)? informed of his rights before every questioning, including the following information: the charge against him and the grounds for suspicion that stand against him; that he is not The monetary sanctions for individuals are the same as monetary obliged to present his defence, nor to answer the questions sanctions for legal entities under the Law on the Protection of asked, but if he makes a statement it can be used in the Competition. As an exception to the rule, regarding offences, the procedure against him; that he can take a counsel of his own Commission for offence matters may impose on the natural person, choice with whom he can be independently advised and who in addition to the fine, a ban on the performance of an occupation, can attend the questioning; that he can plead for the crime activity or duty for a duration of three to 15 days. that he is charged for and present all the facts and evidence in his favour; that he has the right to inspect the records and On the other hand, according to the Criminal Law, criminal to examine the objects that have been seized; that he has the liability is intended only for natural persons who are responsible right to the free assistance of an interpreter, if he does not in a legal entity which has participated in a cartel. The sanction is understand or speak the language used in the questioning; imprisonment of one to 10 years in duration. and that he has the right to be examined by a doctor if he is in need of medical treatment or for the purpose of determining any possible police overdrafts; 3.3 Can fines be reduced on the basis of ‘financial hardship’ or ‘inability to pay’ grounds? If so, by how ■ a witness cannot be a person who by his statement may much? disclose information he is aware of as a result of his professional interaction with the suspect (e.g. attorney-at- law, priest or doctor); and The Commission for offence matters may, at the request of the perpetrator of the offence and when determining the fine, take ■ other limitations of investigative powers. into account its payment incapability against a specific social and economic background. The fine may not be reduced due to this 2.8 Are there sanctions for the obstruction of reason should it concern financial losses of the perpetrator of the investigations? If so, have these ever been used? offence committed for the purpose of avoiding the payment of a Has the authorities’ approach to this changed, e.g. fine. The fine may be reduced solely if the perpetrator presents become stricter, recently? evidence that the fine, determined in line with the provisions of the Law, would jeopardise the economic capability of the perpetrator The Commission for offence matters shall, by means of a decision, and would cause their assets to lose their value. impose a fine on the undertaking or association of undertakings, in

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Full leniency is available to the first cartel member who produces 3.4 What are the applicable limitation periods? evidence to the Commission of the existence of a cartel, which will enable the Agency to commence the proceeding in connection Generally, the offence procedure may not be initiated or conducted with the alleged anticompetitive practice or, if the Commission after the expiry of three years regarding offences referred to as has already initiated the proceeding, that will enable it to end procedural offences, and five years regarding offences referred the proceeding. In the case that an applicant is not eligible for to as serious offences under provisions such as those on cartel full leniency, his fines may be reduced if he furnishes additional prohibition. The deadlines for limitation shall begin to run as of evidence to the Commission, which will substantially contribute to the day of committing the offence. Should it concern an extended the closure of the proceeding concerned. The following conditions or repeated offence, the deadlines for limitation shall begin to run as must also be fulfilled in the case of both full leniency and reduction of the day when the offence was terminated. The imposed offence of a fine: Macedonia sanction may not be enforced if two years have elapsed as of the day 1. the applicant must cease his involvement immediately; of the effectiveness of the decision establishing the existence of an 2. he must cooperate with the Commission throughout the offence. The limitation of the offence prosecution and the limitation proceeding; of the enforcement of the offence sanction shall occur in any case 3. he must keep his application a secret from other cartel when twice the time legally required for the limitation of the offence members; prosecution or for the execution of the offence sanction has elapsed. 4. he must keep his application a secret from all others except In criminal procedures, initiation of the procedure cannot be the competition authorities outside of Macedonia; and initiated after the lapse of 10 years since the performance of the 5. he must not destroy, conceal or forge evidence relevant to the criminal offence. Sanctions imposed in a criminal procedure cannot Commission’s decision in the instant case. be enforced: after the passing of three years, in cases where the The Commission for offence matters will not grant full immunity imposed sanction is imprisonment of a duration of more than one to an undertaking that, during the existence of the alleged cartel, year; after the passing of five years, in the case of imprisonment for has taken steps to coerce other undertakings to join the cartel or to more than three years; and after 10 years, in the case of imprisonment remain in it, but it can grant a reduction of fines if the undertaking for over five years. fulfils the relevant requirements and meets all the conditions mentioned above. 3.5 Can a company pay the legal costs and/or financial penalties imposed on a former or current employee? 4.2 Is there a ‘marker’ system and, if so, what is required to obtain a marker? There is no explicit legal provision and the applicable legislation does not contain an express prohibition in this respect. Thus, the A marker system for the leniency programme is available, in company is free to compensate the former or current employee accordance with the Decree for leniency. In order to obtain a for the legal costs and/or penalties imposed on a former or current marker, it is a necessity to notify the Commission of the intention employee. of filing an application for leniency. By the notification, the person notifying must provide the following information: 3.6 Can an implicated employee be held liable by his/her ■ the name and head office of the person submitting the notice; employer for the legal costs and/or financial penalties imposed on the employer? ■ the name and seat of the participants in the cartel; ■ a description of the affected goods and/or services and the An offence committed by a legal person does not exclude the area in which the cartel would have an effect; responsibility of the perpetrator. ■ an estimation of the duration of the cartel; The responsible person in a legal entity or its sole proprietor will be ■ a description of the actions that constitute a cartel; fined for an offence when the offence resulted from his actions or ■ an explanation of the reasons for submitting the notification; from his failure to supervise. Also, if a company/employer suffers and damages as a direct result of the employee’s actions (in this case, the ■ information about other previous or possible future release imposed penalties), the company can request compensation of such requests, or reductions in fines on other authorities that are damages from the employee in a civil procedure. responsible for sanctioning the cartel outside the Republic of Macedonia. The Commission determines a deadline for provision of necessary 4 Leniency for Companies information and/or evidence in order to accept the application for leniency. In the case that the person notifying fulfils the conditions of the marker and provides enough information and evidence for 4.1 Is there a leniency programme for companies? If so, please provide brief details. the cartel, it is considered that the application for leniency has been submitted on the day of the notification for the intention of application for leniency of the Commission. According to the Law on Protection of Competition, there is a leniency programme for companies. With a view to discovering cartels which constitute misdemeanours, the Commission for 4.3 Can applications be made orally (to minimise any misdemeanour matters, acting upon the request from an undertaking subsequent disclosure risks in the context of civil that has admitted to its participation in a cartel, will grant full damages follow-on litigation)? immunity from the fine which should be, as per the decision, imposed on the said undertaking. The Law on the Protection of Competition permits an application for leniency to be submitted orally and recorded in minutes.

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4.4 To what extent will a leniency application be treated 6 Plea Bargaining Arrangements confidentially and for how long? To what extent will documents provided by leniency applicants be disclosed to private litigants? 6.1 Are there any early resolution, settlement or plea bargaining procedures (other than leniency)? Has the competition authorities’ approach to settlements There is no explicit legal provision in this respect. changed in recent years? However, the Commission can only allow the statement to be viewed by legal entities that are a subject to the misdemeanour procedure Yes, there is a settlement procedure outside of the leniency at hand and under the condition that they will not copy any of the process. The purpose of the procedure is to attain the consent of information which it contains. This is considered special protection the perpetrators of offences and the competent authorities for the Macedonia of the statement. elimination of harmful consequences of the committed offence, and The statement is not under such special protection from the moment to prevent the perpetration of offences and therefore avoid offence when the applicant for leniency has disclosed its content to third proceedings being brought before the competent court or offence parties. authority. There have not been any changes recently to the rules regarding the 4.5 At what point does the ‘continuous cooperation’ authorities’ approach to settlements. requirement cease to apply? 7 Appeal Process The applicant must cooperate with the Commission throughout the entire duration of the procedure within the Commission; therefore the finishing of the proceedings with a Decision by the Commission 7.1 What is the appeal process? shall mean a cessation of the obligation for the cooperation in the particular matter. The decisions of the Commission for misdemeanour matters as well as the decisions in an administrative procedure (for administrative 4.6 Is there a ‘leniency plus’ or ‘penalty plus’ policy? matters) are final and the undertaking concerned has no right to appeal. Yet, the concerned entity may challenge the decision in an administrative dispute in front of the Administrative Court. The There is no “leniency plus” or “penalty plus” policy provided in legal action instituting an administrative dispute against a decision the Law. brought in a misdemeanour procedure shall be brought within eight days as of the day of receiving such decision, while for decisions 5 Whistle-blowing Procedures for brought in an administrative procedure the administrative dispute Individuals shall be brought within 30 days as of the day of receiving the decision.

5.1 Are there procedures for individuals to report cartel conduct independently of their employer? If so, 7.2 Does an appeal suspend a company’s requirement to please specify. pay the fine?

There is a prescribed procedure for reporting in cases where a Challenging the Commission’s decision (in the manner described in person has a reasonable suspicion or knowledge that an unlawful question 7.1 above) suspends the execution of the fine. action or performance that violates or threatens the public interest has been performed, is being performed/executed, or is likely 7.3 Does the appeal process allow for the cross- to be performed, all in accordance with the Law on Protection of examination of witnesses? Whistleblowers, adopted in 2015. A whistleblower is considered a person who: Cross-examination of witnesses shall be done in the procedure ■ has been an employee for a definite or indefinite period in the that precedes the decision, while in the process of challenging the institution or legal person on which it is reporting; decision (in the manner described in question 7.1 above). It is usually not allowed in front of an administrative court. ■ is a candidate for employment, voluntary work or an internship in the institution or the legal entity on which it is reporting; 8 Damages Actions ■ is either a volunteer or an intern in the institution, legal entity or legal person on which it is reporting; ■ is or was engaged to perform the work of the institution, i.e. 8.1 What are the procedures for civil damages actions the legal entity on which it is reporting, on any ground; for loss suffered as a result of cartel conduct? Is the position different (e.g. easier) for ‘follow-on’ actions ■ is or has been in a business relationship or another relationship as opposed to ‘stand alone’ actions? of cooperation with the institution, that is, the legal entity on which it is reporting, for whatever reason; and/or If damage is caused by any action prohibited by the provisions of ■ uses or has used services in the institution or legal entity in the public or private sector on which it is reporting. the Law on the Protection of Competition, the person who suffered the damage may request compensation from the sanctioned person Whistleblowers are subject to special protection for reporting through a lawsuit in a civil procedure according to the positive unlawful actions of their employers, in accordance with this law. legislation of the Republic of Macedonia. The lawsuit submitted can be either a follow-on or stand alone action; however, when

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initiating a damage compensation follow-on lawsuit with a prior decision for a conducted offence ascertained by the Commission, 8.6 Have there been any successful follow-on or stand the plaintiff has a greater chance of success in the dispute, since alone civil damages claims for cartel conduct? If there have not been many cases decided in court, have the offensive action by the defendant has already been ascertained. there been any substantial out of court settlements?

8.2 Do your procedural rules allow for class-action or The publicly available court practice archive does not have any representative claims? records of follow-on or stand alone civil damages claims for cartel conduct. Also, out-of-court settlements, which we believe are rare Yes, according to Macedonian laws, class actions are allowed. in Macedonia, are not publicly available. Damage claims may be consolidated in a single lawsuit by persons

Macedonia claiming to have suffered injury as a result of the same infringement, or proceedings may be joined after the submitting of different 9 Miscellaneous lawsuits.

On the other hand, representative actions are not recognised and 9.1 Please provide brief details of significant, recent or regulated in Macedonian law. imminent statutory or other developments in the field of cartels, leniency and/or cartel damages claims.

8.3 What are the applicable limitation periods? The latest statutory developments in this regard occurred in 2015. The limitation period for submitting damage actions is three years The most significant case to have made “waves” in the anti-cartel after the damaged party learned of the damage and of the person that field in Macedonia was the case of the Commission for Protection caused it; there is a general damage limitation period of five years of Competition against several companies active in energy sector in from the occurrence of damage. Macedonia which had fines of about 3 million EUR imposed due to their “cartel” behaviour and acts on the energy market in Macedonia. This sent a serious warning that the Competition Commission in 8.4 Does the law recognise a “passing on” defence in Macedonia is active and very carefully protecting competition on civil damages claims? the Macedonian markets.

Macedonian law does not recognise literally a “passing on” defence in civil damages claims, but it is possible for a customer 9.2 Please mention any other issues of particular interest to be involved in a process started between the retailer claiming in your jurisdiction not covered by the above. damages and the manufacturer who has participated in a price- fixing agreement. The customer may also request damages from Anti-cartel advising campaigns are being run increasingly often in the manufacturer (as a direct victim of the price-fixing agreement) every market area, and entities are becoming more informed of their and thereby affect/decrease the damage claim of the retailer against rights and the consequences in relation to, and arising out of, cartels the manufacturer. and other activities constituting disturbance of competition. The Commission is issuing guidelines on the interpretation of articles of the Law on the Protection of Competition related to prohibited 8.5 What are the cost rules for civil damages follow-on claims in cartel cases? contracts and cartel identification. Recently, the Commission issued a guideline on discovering illegal contracts in public procurement procedures, which are an important segment of the economic system There are no particular cost rules for civil damages follow-on claims and competition in that segment is an essential principle. in cartel cases, and thus the general cost rules for a civil damage compensation procedure shall be applicable.

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Dragan Dameski Jasmina Ilieva Jovanovik Debarliev, Dameski & Kelesoska, Debarliev, Dameski & Kelesoska, Attorneys at Law Attorneys at Law Mirche Acev Street, no. 2, 3rd floor Mirche Acev Street, no. 2, 3rd floor 1000 Skopje 1000 Skopje Macedonia Macedonia

Tel: +389 2 3215 471 Tel: +389 2 3215 471 Email: [email protected] Email: [email protected] URL: www.ddklaw.com.mk URL: www.ddklaw.com.mk

Dragan Dameski is one of the founders of Debarliev Dameski Jasmina I. Jovanovik joined Debarliev, Dameski & Kelesoska, Macedonia & Kelesoska, Attorneys at Law. He is the head of the corporate Attorneys at Law in 2005. She passed the Bar exam and became a department of the company. Corporate law, M&A, competition, public member of the Macedonian Bar Association in 2007. procurement and direct foreign investments are his most valued areas Recently Jasmina was promoted to partner at DDK. Having gained of expertise. extensive experience in the spheres of competition and corporate law Dragan Dameski graduated from Iustinianus Primus Faculty of Law by participating in various projects including M&A and concentrations in Skopje, the Republic of Macedonia in 1999. He continued his affecting the Macedonian market over the past 10 years, Jasmina is postgraduate studies in business law at the Law Faculty in Skopje, the leading lawyer in DDK for the assessment of competition matters and in economics and business administration at Sheffield University in commercial contracts, and for merger-filing procedures in front of in Thessaloniki, Greece. the competition authorities in Macedonia. In 2003, Dragan Dameski was admitted to the Macedonian Bar Association, and since 2005 he has been a member of the Management Board of the Association of Mediators of Macedonia. He is also a member of the International Association of Lawyers (UIA) and the International Bar Association (IBA). He represents and advises clients on various competition matters in different markets in Macedonia, and also has extensive experience of representing domestic and foreign clients in administrative, infringement and court procedures in the area of competition.

Accepting the premise that no-one can be equally versed in all fields of law, Debarliev, Dameski & Kelesoska, Attorneys at Law (DDK) was created as a company committed to being the leading business law firm in Macedonia. Debarliev, Dameski & Kelesoska, Attorneys at Law was also the first law company established in the territory of the Republic of Macedonia, distinguishing itself on the market with a clear business and corporate law orientation, complemented by an excellent network of legal experts covering the complete territory of the Republic of Macedonia. The quality of Debarliev, Dameski & Kelesoska, Attorneys at Law rests mainly upon the quality of its attorneys, their accessibility and efficiency. DDK’s attorneys share outstanding academic backgrounds, as well as a strong commitment to legal perfection. The partners of DDK have more than 20 years’ legal practice experience and exceed clients’ expectations by providing sophisticated and efficiently managed legal services. DDK offers excellent legal services to clients and has been engaged as counsel in numerous successful PPP projects, privatisations, M&A, capital markets transactions, banking, joint ventures, debt collection, tax disputes with authorities, disputes with the Commission for Competition, etc.

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Malaysia Raymond Yong Chin Shiung

Rahmat Lim & Partners Penny Wong Sook Kuan

(a) it has reason to suspect that a particular enterprise has infringed 1 The Legislative Framework of the Cartel or is infringing any prohibition under the Competition Act; or Prohibition (b) it receives a complaint by a person. In the course of conducting an investigation, the MyCC has been 1.1 What is the legal basis and general nature of the conferred wide powers under the Competition Act, akin to those of cartel prohibition, e.g. is it civil and/or criminal? a police officer in relation to a police investigation in seizable cases, including, but not limited to, requiring the enterprise to provide the Cartel conduct in Malaysia is governed under the Competition Act MyCC with any information or document which is deemed relevant 2010 (“Competition Act”). to the investigation and to enter any premises with or without a Cartels are considered “hard-core restrictions” and are deemed to warrant. have the object of significantly preventing, restricting or distorting Upon completion of the investigation, a proposed decision will be competition. There are currently no criminal sanctions for an issued to the enterprise setting out, amongst others, the grounds for individual who is involved in cartel conduct. Offences breaching the MyCC’s decision and the sanctions imposed. The enterprise cartel prohibition are civil in nature. will then have an opportunity to provide a written and/or oral representation before the MyCC. After receiving the enterprise’s 1.2 What are the specific substantive provisions for the written and/or oral representation, the MyCC will then make a cartel prohibition? finding of an infringement or non-infringement. If an infringement finding is made, the MyCC can: Section 4(2) of the Competition Act prohibits horizontal agreements (a) require the infringement to be ceased immediately; which have the object of: (b) specify steps to be taken by the enterprise; (a) fixing, directly or indirectly, a purchase or selling price or any (c) impose a financial penalty not exceeding 10% of the other trading conditions; worldwide turnover of the enterprise during the infringement (b) sharing market or sources of supply; period; or (c) limiting or controlling: (d) issue any other direction it deems appropriate. (i) production; (ii) market outlets or market access; 1.5 Are there any sector-specific offences or exemptions? (iii) technical or technological development; or (iv) investment; or Any commercial activity regulated under the following legislation is exempted from the Competition Act: (d) bid-rigging. (a) the Communications and Multimedia Act 1998; The abovementioned conduct is deemed to have the object of significantly preventing, restricting or distorting competition in any (b) the Energy Commission Act 2001; market for goods or services. (c) the Petroleum Development Act 1974 (although this is limited to upstream activities only); and (d) the Malaysian Aviation Commission Act 2015. 1.3 Who enforces the cartel prohibition? Liner shipping agreements in Malaysia in respect of vessel-sharing agreements and voluntary discussion agreements have been granted The statutory body which oversees all competition issues (save for those that are expressly exempted under the Competition Act) is the a block exemption by the MyCC. The exemption was recently Malaysia Competition Commission (“MyCC”). extended for a further two years, effective 7 July 2017.

1.4 What are the basic procedural steps between the 1.6 Is cartel conduct outside your jurisdiction covered by opening of an investigation and the imposition of the prohibition? sanctions? Yes, cartel activities which take place outside of Malaysia will be Under the Competition Act, the MyCC may commence an subject to the Competition Act if there is an impact on the market investigation if: in Malaysia.

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officers to halt the search pending the arrival of the enterprise’s legal 2 Investigative Powers advisors, it is unlikely that such request will be refused if it is made by the enterprise in good faith. 2.1 Summary of general investigatory powers. 2.6 Is in-house legal advice protected by the rules of Table of General Investigatory Powers privilege?

Investigatory Power Civil/Administrative Criminal No, in-house legal advice is not protected under legal professional Order the production of specific documents Yes N/A privilege and will have to be disclosed to the MyCC upon request. or information Malaysia Carry out compulsory 2.7 Please list other material limitations of the interviews with Yes N/A investigatory powers to safeguard the rights of individuals defence of companies and/or individuals under Carry out an investigation. unannounced search Yes N/A of business premises Carry out an There do not appear to be any material limitations on MyCC’s unannounced investigatory powers, as it has similar powers to a police officer in a Yes N/A search of residential seizable case. However, any communication between the company premises and its external legal advisor is protected by legal professional ■ Right to ‘image’ privilege and will not have to be disclosed to the MyCC during its computer hard drives Yes N/A investigation. using forensic IT tools ■ Right to retain Yes N/A 2.8 Are there sanctions for the obstruction of original documents investigations? If so, have these ever been used? ■ Right to require Has the authorities’ approach to this changed, e.g. an explanation Yes N/A become stricter, recently? of documents or information supplied Under the Competition Act, it is a criminal offence to obstruct an ■ Right to secure premises overnight Yes N/A investigation by the MyCC. This includes: (e.g. by seal) (a) refusing the MyCC’s officer access to any premises or records; Please Note: * indicates that the investigatory measure requires (b) assaulting, obstructing, hindering or delaying the MyCC the authorisation by a court or another body independent of the officer from effecting entry into the premises; competition authority. (c) giving false or misleading information, evidence or documents; (d) destructing, concealing, mutilating or altering any records or 2.2 Please list specific or unusual features of the documents relevant to the MyCC’s investigation; or investigatory powers referred to in the summary table. (e) tipping off any other person subject to the MyCC’s investigation. The MyCC has the power to search and seize, amongst others, If found liable, the following penalties can be imposed: any document or item without a warrant if it is satisfied, upon the (a) If such person is a body corporate, a fine not exceeding RM5 information received, that it has reasonable cause to believe that million; and for a second or subsequent offence, a fine not the investigation will be adversely affected or the evidence will be exceeding RM10 million. tampered with or removed, should there be a delay in obtaining the (b) If such person is not a body corporate, a fine not exceeding search warrant from the courts. RM1 million or imprisonment for a term not exceeding five years or both; and for a second or subsequent offence, a fine 2.3 Are there general surveillance powers (e.g. bugging)? not exceeding RM2 million or imprisonment for a term not exceeding five years or both. No, the MyCC does not have surveillance powers under the To date, no criminal offence has been found to have been committed Competition Act. by any body corporate or individual.

2.4 Are there any other significant powers of 3 Sanctions on Companies and Individuals investigation?

No, there are no other significant powers of investigation. 3.1 What are the sanctions for companies?

Companies that are involved in cartel conduct will be liable to a 2.5 Who will carry out searches of business and/or financial penalty not exceeding 10% of the worldwide turnover of residential premises and will they wait for legal advisors to arrive? the company during the period of infringement. Apart from financial penalties, the MyCC may also: An officer from the MyCC will be responsible for carrying out the (a) require the infringement to be ceased immediately; searches at the business and/or residential premises with or without (b) specify steps to be taken by the enterprise; or a warrant. Although there is no statutory obligation for the MyCC (c) issue any other direction it deems appropriate.

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The percentage of reduction granted to the enterprise depends on 3.2 What are the sanctions for individuals (e.g. criminal several factors, including: sanctions, director disqualification)? (a) whether the enterprise was the first person to alert the MyCC of the infringement; or There are currently no criminal sanctions under the Competition Act (b) the stage of the investigation at which the enterprise admitted for individuals who have been involved in cartel conduct, save for its involvement or at which the information was provided to the offences mentioned in question 2.8 above. the MyCC.

3.3 Can fines be reduced on the basis of ‘financial 4.2 Is there a ‘marker’ system and, if so, what is required hardship’ or ‘inability to pay’ grounds? If so, by how to obtain a marker? Malaysia much? Yes. A company can make an application to the MyCC to request There are currently no precedents on whether “financial hardship” for a “marker” to preserve its priority in receiving leniency. In or “inability to pay” are grounds for a reduction in the fines imposed. applying for a “marker”, the applicant shall provide the name of the In computing the financial penalties, the MyCC will take into enterprise that will be covered by the leniency, and sufficient details consideration whether there are any mitigating and/or aggravating for the MyCC to identify the infringement. factors, including but not limited to the following: (a) seriousness of the infringement; 4.3 Can applications be made orally (to minimise any (b) turnover of the market involved; subsequent disclosure risks in the context of civil (c) duration of the infringement; damages follow-on litigation)? (d) impact of the infringement; (e) degree of fault; The leniency application has to be submitted in writing and signed by an authorised senior officer of the applicant, unless otherwise (f) role of the enterprise in the infringement; directed by the MyCC. The Leniency Application Form is available (g) recidivism; on the MyCC’s website and can be submitted via email or post. (h) existence of a compliance programme; and (i) level of financial penalties imposed in similar cases. 4.4 To what extent will a leniency application be treated confidentially and for how long? To what extent 3.4 What are the applicable limitation periods? will documents provided by leniency applicants be disclosed to private litigants?

There is no limitation period as to the MyCC’s enforcement and/or A leniency application will be treated confidentially in accordance investigation powers under the Competition Act. with Section 21 of the Competition Act. “Confidential information” means trade, business or industrial information that belongs to any 3.5 Can a company pay the legal costs and/or financial person, has economic value and is not generally available or known penalties imposed on a former or current employee? by others. However, the documents may be disclosed to private litigants As there are currently no criminal sanctions imposed on individuals provided that the disclosure is: save for those set out in question 2.8, this is not applicable. (a) made with the consent of the person from whom the information was obtained; 3.6 Can an implicated employee be held liable by his/her (b) necessary for the performance of the functions or powers of employer for the legal costs and/or financial penalties the MyCC; imposed on the employer? (c) reasonably made during any proceedings under the Competition Act provided that it is not against any direction As there are currently no criminal sanctions imposed on individuals of the MyCC or the Competition Appeal Tribunal; save for those set out in question 2.8, this is not applicable. (d) made in connection with an investigation of an infringement or an offence under the Competition Act; or 4 Leniency for Companies (e) made with the authorisation of the MyCC to any competition authority of another country.

4.1 Is there a leniency programme for companies? If so, 4.5 At what point does the ‘continuous cooperation’ please provide brief details. requirement cease to apply?

Yes, there is a leniency regime under Section 41 of the Competition The Guidelines on Leniency Regime do not specify the period Act, whereby a reduction by up to a maximum of 100% in the in which the “continuous cooperation” provided by the applicant penalties imposed can be granted to an enterprise which has: should cease to apply. (a) admitted its involvement in an infringement constituting any type of cartel conduct, i.e. any prohibition under Section 4(2) of the Competition Act; and 4.6 Is there a ‘leniency plus’ or ‘penalty plus’ policy? (b) provided information or other forms of co-operation to the MyCC which significantly assisted in the identification or A leniency applicant can receive a reduction in the financial investigation of an infringement finding of other enterprises. penalties by providing information on other cartel conduct and/ or prohibition, although it is unclear whether the reduction will be

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greater compared to a situation in which the information provided is only in relation to the cartel in which the applicant is involved. 8 Damages Actions

8.1 What are the procedures for civil damages actions 5 Whistle-blowing Procedures for for loss suffered as a result of cartel conduct? Is the Individuals position different (e.g. easier) for ‘follow-on’ actions as opposed to ‘stand alone’ actions?

5.1 Are there procedures for individuals to report cartel The Competition Act does provide for a right of private action conduct independently of their employer? If so, please specify. (follow-on action) to be commenced by anyone who has suffered

loss or damages directly as a result of cartel conduct. The procedure Malaysia to commence such action is similar to the procedure involved in No, there are currently no statutory procedures for individuals to carrying out a civil proceeding in the Malaysian courts. report cartel conduct to their employers.

8.2 Do your procedural rules allow for class-action or 6 Plea Bargaining Arrangements representative claims?

6.1 Are there any early resolution, settlement or plea Class action claims are allowed under Order 15 rule 4 of the Rules bargaining procedures (other than leniency)? Has of Court 2012. the competition authorities’ approach to settlements changed in recent years? 8.3 What are the applicable limitation periods?

No, there are currently no plea bargaining or early settlement No limitation period has been prescribed under the Competition Act procedures under the Competition Act. However, the MyCC has for a right of private action to be commenced. However, under the the power to accept an undertaking from the company to do or to Limitation Act 1953, the statutory limitation period for an action to refrain from doing something, and if such undertaking is accepted, be brought in tort is six years from the date on which the cause of the MyCC will close its investigation without making a finding of action accrued. an infringement.

8.4 Does the law recognise a “passing on” defence in 7 Appeal Process civil damages claims?

There is currently no guidance on whether such defence will be 7.1 What is the appeal process? recognised in Malaysia.

An appeal against the decision of the MyCC can be made to the Competition Appeal Tribunal by submitting a notice of appeal 8.5 What are the cost rules for civil damages follow-on in writing within 30 days from the date of the MyCC’s decision, claims in cartel cases? followed by a statement in reply which sets out, amongst others, a succinct argument of fact or law to support the appellant’s case. There are currently no such rules under the Competition Act. Parties will also be directed to submit their supporting documents, including the agreed bundle of documents and their written 8.6 Have there been any successful follow-on or stand submissions. A public hearing will then be conducted before the alone civil damages claims for cartel conduct? If there Competition Appeal Tribunal. have not been many cases decided in court, have there been any substantial out of court settlements?

7.2 Does an appeal suspend a company’s requirement to pay the fine? There have not been any follow-on civil damages claims for cartel conduct to date. There is also no publicly available information on No, an appeal does not suspend a company’s requirement to pay the out-of-court settlements with the MyCC. financial penalty imposed. However, the company can apply for a stay of the MyCC’s decision (which may include payment of the 9 Miscellaneous financial penalties) pending the appeal hearing. Such application shall be made in writing to the Competition Appeal Tribunal. 9.1 Please provide brief details of significant, recent or imminent statutory or other developments in the field 7.3 Does the appeal process allow for the cross- of cartels, leniency and/or cartel damages claims. examination of witnesses? There have not been any changes to Section 4 of the Competition Yes, the Competition (Appeal Tribunal) Regulations 2017 allow the Act in relation to cartel claims or Section 41 of the Competition Act Competition Appeal Tribunal to issue a direction for the examination on the leniency regime. of witnesses.

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by the Competition Appeal Tribunal and both parties were 9.2 Please mention any other issues of particular interest found not to have infringed Section 4(2) of the Competition in your jurisdiction not covered by the above. Act; (c) a price-fixing arrangement between 24 ice manufacturers of Since the Competition Act came into force in 2012, the MyCC has Kuala Lumpur, Selangor and Putrajaya; and issued decisions of infringement of Section 4 of the Competition Act (d) a price-fixing arrangement between four container depot in the following instances: operators and one information technology service provider to (a) a price-fixing arrangement by the Cameron Highlands the shipping and logistics industry in Penang. Floriculturist Association; In February 2017, the MyCC issued a proposed decision against (b) a market-sharing agreement entered into between Malaysia the General Insurance Association of Malaysia and its 22 member Malaysia Airlines Berhad (“MAS”), AirAsia Berhad and AirAsia X insurance companies for being parties to a price-fixing agreement Sdn. Bhd. (“AirAsia”) where a financial penalty of RM10 to fix the trade discount of vehicle parts and the hourly labour rates. million was imposed on MAS and AirAsia, respectively. The proposed financial penalty to be imposed is RM213.45 million. However, the MyCC’s decision was unanimously overturned

Raymond Yong Chin Shiung Penny Wong Sook Kuan Rahmat Lim & Partners Rahmat Lim & Partners Suite 33.01, Level 33 Suite 33.01, Level 33 The Gardens North Tower The Gardens North Tower Mid Valley City, Lingkaran Syed Putra Mid Valley City, Lingkaran Syed Putra 59200 Kuala Lumpur 59200 Kuala Lumpur Malaysia Malaysia

Tel: +603 2299 3810 Tel: +603 2299 3915 Email: [email protected] Email: [email protected] URL: www.rahmatlim.com URL: www.rahmatlim.com

Raymond heads the Regulatory & Compliance Department at Rahmat Penny’s main practice areas are competition law and data protection Lim & Partners. He regularly advises corporate clients and financial law. Her experience includes advising on various competition law institutions in relation to regulatory issues and investigations. issues, carrying out competition compliance programmes, assisting in providing competition law training, reviewing of business practices and He is recognised as a Leading Individual in Competition and Antitrust assisting in the drafting of competition compliance manuals. She has by Chambers Asia Pacific (2017), which noted his “very sound been actively involved in investigations by the Malaysia Competition knowledge”. He is also recommended by Global Competition Review Commission, lodgement of complaints and leniency applications. (2017) for competition work. She has also represented her clients in appeal hearings before the Raymond regularly deals with the Malaysia Competition Commission Competition Appeal Tribunal. (“MyCC”) including representing clients in investigations, lodgement Penny regularly advises clients on competition law matters from a wide of complaints and seeking leniency. He appeared before the range of industries including the pharmaceutical, financial services, Competition Appeal Tribunal in an appeal against a finding by the fast-moving consumer goods, automotive, government procurement MyCC of an abuse of a dominant position, and also represented a and oil & gas industries. trade association on its exemption application to the MyCC. Raymond advises financial institutions – in particular, banks, payment system operators and payment instrument issuers – on the licensing and regulatory aspects of their businesses.

Rahmat Lim & Partners is an award-winning, full-service law firm in Malaysia which is dedicated to the provision of high-quality legal services. With its extensive experience and premier client base, the firm’s partners and practices have been consistently recognised and ranked as leaders in the market and have won various awards since the firm was established in 2010. The firm is, first and foremost, a Malaysian law firm, but takes pride in having a distinctive global approach and perspective, and aims to provide effective domestic and cross-border solutions for its local and international clients. The firm’s lawyers have advised on many of the nation’s largest and most high-profile transactions, and offer quality services to clients requiring representation across a wide range of contentious and non-contentious matters. Its banking and finance, capital markets, dispute resolution, intellectual property and technology, mergers and acquisitions, and corporate real estate practices are all ranked in international and regional legal publications. While its lawyers are drawn from diverse backgrounds, Rahmat Lim & Partners stands firmly on the principles of integrity, excellence and professionalism. These core values form the foundation of its culture, and enable it to act as a trusted legal advisor to its clients.

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Malta Ron Galea Cavallazzi

Camilleri Preziosi Advocates Lisa Abela

1 The Legislative Framework of the Cartel 1.3 Who enforces the cartel prohibition? Prohibition The MCCAA Act provides for the institutional set-up for the enforcement of competition law in Malta. It established the 1.1 What is the legal basis and general nature of the Authority which amalgamates within it four entities including the cartel prohibition, e.g. is it civil and/or criminal? OC and the Office for Consumer Affairs. Although the Authority is managed by a Board of Governors which is responsible for drawing The legal basis for the cartel prohibition in Malta is Article 5(1) up the policy of the Authority, the Director General (the “Director of the Competition Act 1994 (the “Competition Act”), which is the General”) of the OC is exclusively responsible for the application national equivalent of Article 101 of the Treaty on the Functioning and enforcement of the Competition Act. According to Article of the European Union (the “TFEU”). The Competition Act adopts 14(1)(c) of the MCCAA Act, the OC must act as the designated an administrative fining regime. national competition authority in Malta in terms of Article 35(1) of In addition, in accordance with Article 5(5) of the Competition Regulation 1/2003 and Article 29A of the Competition Act requires Act, the Director General of the Office for Competition (the “OC”) the Director General to cooperate with the Commission and the must apply Article 101 TFEU where it applies Article 5(1) to NCAs in terms of Regulation 1/2003. The Director General has conduct which may affect trade between Malta and EU Member the power to carry out a cartel investigation whether on its own States. Further, Article 5(6) of the Competition Act specifies that initiative, or as the result of a reasonable allegation in writing the Director General must not prohibit any conduct under Article of a breach of the Competition Act. The OC comprises three 5(1) which may affect trade between EU Member States which is Directorates including the Inspectorate and Cartel Investigations compatible with Article 101(1) or which falls within the exemption Directorate. criteria of Article 101(3). Decisions issued by the OC may be appealed before the Competition and Consumer Affairs Tribunal (the “Appeals Tribunal”) on points 1.2 What are the specific substantive provisions for the of law and fact. The Appeals Tribunal is presided by a judge cartel prohibition? and has a panel of six members consisting of two economists, a certified public accountant and three other persons with recognised Article 5(1) of the Competition Act contains an Article 101 TFEU- competence and knowledge in competition law matters, consumer like prohibition of agreements and concerted practices between protection, industry and commerce. undertakings, and decisions by an association of undertakings, In terms of Article 27 of the Competition Act, where before a having the object or effect of preventing, restricting or distorting Civil Court an agreement or conduct is alleged to be in breach of competition within Malta or any part of Malta. Article 5(1) lists the Competition Act on the basis, inter alia, of Article 5 and/or non-exhaustive examples of such prohibited conduct, which are: Article 101 TFEU, the Court is obliged to stay proceedings and ask ■ directly or indirectly fixing purchase or selling prices or any the Director General to submit a report on the competition issues other trading conditions; concerned. The report of the Director General is not binding on the Court. However, where the competition issue has already ■ limiting or controlling production, markets, technical development or investments; been decided upon under the Competition Act and the decision has become res judicata, the Court must abide by that prior decision. ■ sharing markets or sources of supply; This procedure may also be applied upon the initiative of the ■ imposing the application of dissimilar conditions to Director General where he becomes aware of civil cases involving equivalent transactions with other trading parties thereby the application of the competition rules. placing them at a competitive disadvantage; and ■ making the conclusion of contracts subject to acceptance by other parties of supplementary obligations which, by their 1.4 What are the basic procedural steps between the nature or according to commercial usage, have no connection opening of an investigation and the imposition of with the subject of such contracts. sanctions? Any such agreements or decisions are ipso jure null and Written complaints remain the most important source for the OC in unenforceable. uncovering anti-competitive conduct. However, according to law, the OC may initiate an investigation: (i) ex officio; (ii) following

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a complaint; (iii) at the request of the Minister responsible for Investigatory Power Civil/Administrative Criminal competition matters; or (iv) at the request of any NCA of a Member Carry out compulsory State or of the European Commission. interviews with Yes N/A In 2013 the OC published draft leniency regulations modelled on individuals the European Competition Network Model Leniency Programme; Carry out an unannounced search Yes N/A however, these have not yet been enacted. of business premises It is usual for the OC to exercise its formal powers of investigation Carry out an unannounced by issuing requests for information and conducting formal meetings Yes* N/A where it may receive verbal or written statements from any person search of residential

Malta premises as well as make copies of any document produced to it. The request ■ Right to ‘image’ for information must clearly state the legal basis for the request, the computer hard drives N/a N/A reasoning of the request, the information required, a reasonable time using forensic IT limit within which to provide such information and the penalties tools for failing to comply. The MCCAA Act provides legal safeguards ■ Right to retain No N/A for information protected by professional secrecy and information original documents containing business secrets or other confidential information. ■ Right to require an explanation Yes** N/A The OC also has the power to conduct unannounced inspections at of documents or business and residential premises where the Director General “has information supplied reason to believe” that information relevant to the investigation may ■ Right to secure be found. To date, this power has not yet been applied. premises overnight Yes** N/A (e.g. by seal) Where the Director General considers that a prima facie infringement has occurred, a statement of objections (“SO”) must Please Note: * indicates that the investigatory measure requires be issued to the undertakings investigated, setting out the facts, its the authorisation by a court or another body independent of the provisional findings and the imposition of fines. The addressees of competition authority. the SO have a right to access the OC’s investigation file, to make ** indicates that this right is only available with respect to the written submissions and to attend an oral hearing to respond to the business premises of the undertaking being investigated. allegations made in the SO. If, after having had regard to the parties’ written and oral submissions, the OC still considers that there has been a breach of the Competition Act, it will issue an infringement 2.2 Please list specific or unusual features of the decision imposing fines, including the possibility of a cease and investigatory powers referred to in the summary table. desist and/or compliance order. The OC to date does not have any enforcement practice in the area of ‘dawn raids’. It continues to rely on ‘Request for Information’ 1.5 Are there any sector-specific offences or exemptions? and investigative interviews as its main investigatory powers.

There are no sector-specific offences or exemptions for cartels under the Competition Act. 2.3 Are there general surveillance powers (e.g. bugging)?

No, there are not. 1.6 Is cartel conduct outside your jurisdiction covered by the prohibition? 2.4 Are there any other significant powers of In the application of Articles 101 and 102 TFEU, the OC must have investigation? recourse to EU law, Court of Justice case law and decisions and statements of the European Commission, including interpretative No, there are not. notices on the application of Articles 101 and 102 TFEU. The European Courts have ruled that what is relevant in determining 2.5 Who will carry out searches of business and/or whether EU competition rules apply is whether the agreement or residential premises and will they wait for legal practice was ‘implemented’ in the EU. Therefore, in practice, advisors to arrive? the Competition Act applies to any anticompetitive agreement or practices which may have an effect in Malta, regardless of the place The OC does not have any experience in this respect. It is expected, where the agreement was entered into. however, that the OC would use its own officials and a forensic IT expert for the purposes of these inspections. Furthermore, the Competition Act provides for the assistance of the Police, if so 2 Investigative Powers required by the Director General, in carrying out any inspections at residential or business premises. 2.1 Summary of general investigatory powers. The Competition Act allows for the assistance of legal advisors during the course of an inspection; however, it specifically states Table of General Investigatory Powers that the right to such assistance is not to have the effect of delaying or suspending the inspection. Investigatory Power Civil/Administrative Criminal Order the production of specific documents Yes N/A or information

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the fine, the OC must have regard both to the ‘gravity’ andthe 2.6 Is in-house legal advice protected by the rules of ‘duration’ of the infringement and to any aggravating or attenuating privilege? circumstances. Since the introduction of administrative fines is a relatively new The OC has the power to demand from any person any information procedure, there is no enforcement practice that can be relied on. or document which is relevant to the matter being investigated. It The OC may issue guidelines on the calculation of fines; however, is not, however, entitled to order the production of any document to date, no such administrative fine has actually been issued by the or the disclosure of any information that is covered by the duty of OC with respect to a cartel infringement. professional secrecy. In dealing with legal professional privilege, the national law does not distinguish between independent lawyers The Competition Act also gives the OC the power to require a Malta and lawyers in employment. company to bring an infringement to an end. For this purpose, it may impose on the company a behavioural or structural remedy, In interpreting the Competition Act, both the OC and the Appeals which is proportionate to the infringement committed and necessary Tribunal must refer to the judgments of the Court of Justice of the to bring the infringement effectively to an end. The OC has, to date, EU and to relevant decisions of the European Commission, including issued one cease and desist order together with its infringement statements and secondary legislation. In a recent decision, the decision in regard to a cartel case. Appeals Tribunal referred to the European Commission procedural rules as being applicable to national proceedings. Therefore, in The OC has also considered that parents of wholly-owned the case of legal advice by in-house counsel, EU rules on legal subsidiaries may be held liable for their subsidiary’s antitrust professional privilege may apply. infringements, even where they were unaware of their subsidiary’s conduct in line with the European Commission’s thinking. It is up to the parent company to then disprove the OC’s presumption. 2.7 Please list other material limitations of the investigatory powers to safeguard the rights of defence of companies and/or individuals under 3.2 What are the sanctions for individuals (e.g. criminal investigation. sanctions, director disqualification)?

The Maltese Constitutional Court has declared that the decision- The Competition Act does not contemplate any sanctions for making process provided in the Competition Act is in breach of individuals engaged in cartel conduct. the right to a fair hearing found in the Constitution of the Republic However, an undertaking’s failure to pay an administrative fine or of Malta. Article 39(1) of the Constitution requires that a person daily penalty payment is a criminal offence, and any key officers of charged with a criminal offence must be heard by an independent the undertaking concerned could be personally liable to a fine of up and impartial court. The Court considered that the notion of ‘court’ to €20,000. could only refer to the superior and inferior courts in Malta and that neither the Director General nor the Appeals Tribunal could be considered to be a court. 3.3 Can fines be reduced on the basis of ‘financial hardship’ or ‘inability to pay’ grounds? If so, by how This has led the OC to consider legislative changes to the Competition much? Act in order to align itself with the Court’s judgment. To date no such legislative changes have been made which may render the There is no enforcement practice that can be relied on in this sense. procedures undertaken by the OC vis-à-vis an undertaking being However, in keeping with the Director General’s obligation to investigated illegal. follow EU law, the OC would refer to the European Commission’s antitrust best practices in this regard. 2.8 Are there sanctions for the obstruction of investigations? If so, have these ever been used? 3.4 What are the applicable limitation periods? Has the authorities’ approach to this changed, e.g. become stricter, recently? Criminal action for offences under the Competition Act is prescribed The Competition Act allows the Director General to issue an by the lapse of five years. administrative fine of up to €10,000 in respect of any person who, The prescription period for the imposition of administrative fines during a competition investigation, gives false or incomplete is three years in the case of infringements of the Competition Act information or obstructs the investigation. concerning requests for information or the conduct of inspections, An administrative fine of up to €2,400 for each day in default may and five years in the case of all other infringements. also be imposed if a director, manager, company secretary or similar The prescription period begins to run from the day on which the officer of a company fails, without reasonable cause, to comply with infringement is committed. However, in the case of continuing or a request for information within the stipulated time. repeated infringements, this period begins to run from the day on To date, the OC has not issued any such fines. which the infringement ceases.

3.5 Can a company pay the legal costs and/or financial 3 Sanctions on Companies and Individuals penalties imposed on a former or current employee?

3.1 What are the sanctions for companies? According to the Competition Act, the company in the economic interests of which the person found guilty of a criminal offence The OC may fine any undertaking up to 10 per cent of the total under the Competition Act was acting is liable in solidum with the turnover in the preceding business year. In fixing the amount of person found guilty for the payment of the said fine. Please see questions 2.8 and 3.2.

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3.6 Can an implicated employee be held liable by his/her 4.5 At what point does the ‘continuous cooperation’ employer for the legal costs and/or financial penalties requirement cease to apply? imposed on the employer? According to the draft Regulations, the applicant must cooperate The Competition Act does not deal with this specifically. As a genuinely and fully on a continuous basis from the moment it general rule, under Maltese law, there could be an action in tort, submits its application up to the conclusion of the investigation. based on the concept of fault, if the required elements subsist.

4.6 Is there a ‘leniency plus’ or ‘penalty plus’ policy?

Malta 4 Leniency for Companies The draft Regulations do not provide for any leniency plus or penalty policies. Applicants that do not qualify for immunity from 4.1 Is there a leniency programme for companies? If so, fines may nonetheless benefit from a reduction of a fine. please provide brief details.

No, there is not. 5 Whistle-blowing Procedures for Article 33(2) of the Competition Act provides that the Minister, Individuals after consultation with the Board of Governors of the MCCAA, may make regulations providing for the power to waive or reduce the applicable fine in cartel investigations. The Competition 5.1 Are there procedures for individuals to report cartel Act, therefore, provides for the introduction of leniency through conduct independently of their employer? If so, regulations. please specify. Draft Regulations entitled ‘Immunity from Fines and Reduction of There are no procedures for individuals to report cartel conduct Fines in Cartel Investigations Regulations’ were published on 14 independently of their employer. June 2013 for public consultation by the OC in terms of Article 33(2). To date, however, these remain mere legislative proposals and there has been no enforcement practice in this area. 6 Plea Bargaining Arrangements

4.2 Is there a ‘marker’ system and, if so, what is required to obtain a marker? 6.1 Are there any early resolution, settlement or plea bargaining procedures (other than leniency)? Has the competition authorities’ approach to settlements According to the draft Regulations, an undertaking which plans changed in recent years? to apply for immunity and is not in possession of evidence and information that would enable it to submit a complete application In the course of an investigation concerning a cartel, the Director may initially apply for a ‘marker’ by completing an application in General may, prior to issuing a statement of objections, invite accordance with the provisions of the regulations and providing the the undertakings concerned to engage in settlement discussions Director General with information concerning its name and address, with a view to possibly introducing settlement submissions and the parties to the alleged cartel, the affected product and territory, the acknowledging their participation in an infringement of the estimated duration of the alleged cartel and the nature of the alleged Competition Act as well as their liability. The Director General may cartel conduct. reward the undertakings concerned for the settlement by reducing If no other applicant has applied for immunity, the applicant applying the amount of the fine to be imposed by 10%. Furthermore, he for the marker will have secured a marker for immunity, provided may also decide at any time during the procedure to discontinue also that the applicant perfects the marker within the time-limit set settlement discussions altogether in a specific case or with respect to by the Director General by gathering the necessary information one or more of the parties involved, if he considers that procedural and evidence to submit a formal full application that is required to efficiencies are not likely to be achieved. perfect the marker. There have been no settlement decisions to date.

4.3 Can applications be made orally (to minimise any subsequent disclosure risks in the context of civil 7 Appeal Process damages follow-on litigation)?

According to the draft Regulations, the Director General may allow 7.1 What is the appeal process? oral statements where the applicant justifies the submission of an oral statement instead of an application in writing and where the According to the Competition Act, the appeal process in respect of a applicant presents all evidence and information to the OC. decision issued by the OC is to file an application before the Appeals Tribunal within 20 days of notification of the decision issued by the OC. The Director General is then notified and must file his reply 4.4 To what extent will a leniency application be treated thereto within 20 days from the date of notification of the appeal. confidentially and for how long? To what extent will documents provided by leniency applicants be The Appeals Tribunal then may either confirm in whole or in part disclosed to private litigants? or quash the decision, taking into account the gravity and duration of the infringements as well as any aggravating or attenuating According to the draft Regulations, the Director General must keep circumstances. the identity of the applicant confidential for the duration of the The Director General or any party to an appeal before the Appeals proceedings until the SO is notified to the parties concerned. Tribunal who feels aggrieved by the decision of the Appeals Tribunal

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may appeal on question of law to the Court of Appeal by means of an application filed in the registry of the court within 20 days from 8.3 What are the applicable limitation periods? the date of the decision of the Appeals Tribunal. The relevant limitation period for an action for damages is five years from the date when the infringement of competition law has ceased 7.2 Does an appeal suspend a company’s requirement to and the claimant became aware, or can reasonably be expected pay the fine? to have become aware, of the damage, the infringement and the identity of the undertaking responsible for the infringement. An appeal shall not have the effect of automatically suspending the requirement to pay a fine. However, the Appeals Tribunal, upon a reasoned request by a party to the appeal and after considering the 8.4 Does the law recognise a “passing on” defence in Malta submissions of the Director General, may suspend the administrative civil damages claims? fine pending the final determination of the appeal. In terms of Article 27A (8) of the Competition Act, the ‘passing on defence’ is available to the defendant in an action for damages for 7.3 Does the appeal process allow for the cross- breach of the competition rules. To date, however, such a defence examination of witnesses? has never been used before Maltese courts. According to the MCCAA Act, the Appeals Tribunal has, exercisable through its president, the powers vested in the Malta 8.5 What are the cost rules for civil damages follow-on Civil Court First Hall which includes the power to summon and claims in cartel cases? examine witnesses. Costs are awarded by the Court as part of the final judgment. 8 Damages Actions 8.6 Have there been any successful follow-on or stand alone civil damages claims for cartel conduct? If there 8.1 What are the procedures for civil damages actions have not been many cases decided in court, have for loss suffered as a result of cartel conduct? Is the there been any substantial out of court settlements? position different (e.g. easier) for ‘follow-on’ actions as opposed to ‘stand alone’ actions? We are not aware of any damages actions instituted on the basis of the ad hoc action for damages introduced in the Competition In 2017, the Competition Law Infringements (Actions for Damages) Act in 2011. However, we are aware of one case before the civil Regulations were issued and aim to implement the provisions of courts which concerned a demand for compensation for loss of Directive2014/104/EU of the European Parliament and of the income following an infringement decision issued by the OC based Council of 26 November 2014 on certain rules governing actions on Article 5 of the Competition Act for limiting the market and for damages under national law for infringements of the competition applying discriminatory conditions. law provisions of the Member States and of the European Union. The provisions of these regulations are to be deemed to have come into force on the 27 December 2014. 9 Miscellaneous Private damages actions before the Civil Courts may also be instituted as follow-on cases or stand alone cases. 9.1 Please provide brief details of significant recent or imminent statutory or other developments in the field of cartels, leniency and/or cartel damages claims. 8.2 Do your procedural rules allow for class-action or representative claims? There are none. By virtue of the Collective Proceedings Act 2012, representative or group actions are now possible. This Act is only applicable to 9.2 Please mention any other issues of particular interest claims arising under competition and consumer law. in your jurisdiction not covered by the above. It is possible to claim monetary compensation (damages consisting in actual damages, loss of profits and interest) for a number of class There are none. members and also request injunctions.

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Ron Galea Cavallazzi Lisa Abela Camilleri Preziosi Advocates Camilleri Preziosi Advocates Valletta Buildings, Level 3, South Street Valletta Buildings, Level 3, South Street Valletta VLT 1103 Valletta VLT 1103 Malta Malta

Tel: +356 2123 8989 Tel: +356 2123 8989 Email: ron.galeacavallazzi@ Email: [email protected] camilleripreziosi.com URL: www.camilleripreziosi.com URL: www.camilleripreziosi.com Malta

Ron is actively involved in Competition Law, State Aid, Public Lisa commenced her legal practice in civil litigation and then Procurement, Energy, Aviation, Employment and Industrial Relations, proceeded to join the Corporate Department of Deloitte (Malta) where Information Technology and General Commercial Law. she assisted in the restructuring of companies. She then moved on to join the Office for Competition, which today forms part of the Malta Ron’s experience in these fields includes advice to local government Competition and Consumer Affairs Authority where she headed the entities, local regulatory bodies, international companies, as well as regulated sector Directorate and was involved in both antitrust and to a number of local medium-sized and large companies, including M&A investigations. In 2014, Lisa was recruited as Senior Associate, Malta’s only international airport and Enemalta plc (Malta’s sole forming part of the Regulatory, EU and Litigation practice group. She Distribution System Operator). is also a visiting lecturer at the University of Malta for the Master of Ron advises private enterprises as well as state-owned entities and Laws programme in European and Comparative Law. corporations on European and Maltese competition law, including State Aid and the economic regulation of utilities. As part of his competition law practice, Ron has gained ample experience in the State Aid field, having advised the Government of Malta and other state-owned entities on European Law and State Aid issues on a number of projects and proposed initiatives. Ron joined the firm in 2004 as a Trainee and became an Associate in 2005, Senior Associate in 2010, and in 2013, he was admitted to Partnership.

The firm’s hallmark is a combination of innovation in thought and technical excellence in the law, and to deliver solution-driven advice to clients. The firm is organised into two practice groups: Corporate and Finance and Regulatory; and EU and Litigation. The Corporate and Finance practice group focuses principally on domestic and international transactions including M&A and capital markets; it advises the financial services and insurance sector and provides tax advice and compliance services. The Regulatory, EU and Litigation practice group handles competition law matters, commercial dispute resolution as well as regulatory advice and support. The level of specialisation within the firm, and its lawyers’ constant exposure to commercial consideration, enable it to advise on the most complex commercial transactions and disputes.

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New Zealand Jennifer Hambleton

MinterEllisonRuddWatts Alisaundre van Ammers

or as a result of a complaint or an application for immunity. The 1 The Legislative Framework of the Cartel NZCC’s Competition and Consumer Investigation Guidelines set Prohibition out the NZCC’s investigation process. An investigation is complete once the NZCC has decided it can be 1.1 What is the legal basis and general nature of the closed without an enforcement response or reached a decision as to cartel prohibition, e.g. is it civil and/or criminal? the type and level of enforcement action it will take. If the NZCC considers that there has been a breach of the cartel New Zealand’s principle competition legislation is the Commerce prohibition and that it has sufficient evidence to prove it to the civil Act 1986 (Act), which contains the cartel prohibition and related standard (on the balance of probabilities), it will initiate proceedings provisions. The cartel prohibition is civil in nature. in the High Court. It is for the High Court to determine if a defendant has breached the cartel prohibition and, if so, impose penalties.

1.2 What are the specific substantive provisions for the cartel prohibition? 1.5 Are there any sector-specific offences or exemptions?

A new cartel prohibition was recently introduced with the enactment There are no sector-specific offences or exemptions. However, there of the Commerce (Cartels and Other Matters) Amendment Act 2017 are numerous general exceptions and exemptions, including for: (Cartels Act), which came into force on 15 August 2017. The ■ conduct which is authorised by any enactment; new prohibition replaces the previous price fixing prohibition and ■ cartel provisions in contracts, arrangements or understandings prohibits a person from entering into a contract or arrangement, entered into between parties involved in a “collaborative or arriving at an understanding, that contains a cartel provision, or activity”; giving effect to a cartel provision. ■ certain cartel provisions in vertical supply contracts; A cartel provision is a provision that has the purpose, effect, or ■ certain cartel provisions in joint buying and promotion likely effect of one or more of the following in relation to the supply agreements; or acquisition of goods in New Zealand: ■ covenants in connection with the sale of a business that protect ■ price fixing; the purchaser in respect of the goodwill of the business; ■ restricting output; and/or ■ provisions that relate exclusively to the export of goods from ■ market allocating. New Zealand or exclusively to the supply of services outside New Zealand, if full and accurate particulars of the provision Cartel provisions are generally unenforceable unless one of the including any method of fixing, controlling, or maintaining exceptions to the cartel prohibition applies, or the parties to the such prices were provided to the NZCC before the expiration relevant contract, arrangement or understanding have obtained of 15 working days after the date the contract or arrangement clearance from the New Zealand Commerce Commission (NZCC) was made; to use the provision in the context of a collaborative activity. ■ any act done, other than in trade, in concert by users of good or services against the suppliers of those goods or services; ■ provisions that provide for exclusivity for the carriage of 1.3 Who enforces the cartel prohibition? goods by sea from a place in New Zealand to a place outside New Zealand or from a place outside New Zealand to a place The Act is administered and enforced by the NZCC. The NZCC has in New Zealand; and the power to investigate potential breaches of the cartel prohibition ■ provisions that provide for the acquisition or disposition of and can initiate civil proceedings in the High Court where it believes assets of a business or shares. parties have engaged in cartel conduct.

1.6 Is cartel conduct outside your jurisdiction covered by 1.4 What are the basic procedural steps between the the prohibition? opening of an investigation and the imposition of sanctions? Yes, the Act applies to conduct engaged in outside of New Zealand by any person resident or carrying on business in New Zealand to The NZCC can initiate an investigation either on its own information the extent that such conduct affects a market in New Zealand.

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A person (person A) engages in conduct in New Zealand if: Investigatory Power Civil/Administrative Criminal ■ any act or omission forming part of the conduct occurs in ■ Right to require New Zealand; or an explanation Yes* N/A ■ another person (person B) engages in conduct in New of documents or information supplied Zealand, and the conduct of person B is deemed to be the conduct of person A. ■ Right to secure premises overnight Yes* N/A The conduct of person B is deemed to also be the conduct of person (e.g. by seal) A if: ■ person B is a director, employee or agent of person A, acting Please Note: * indicates that the investigatory measure requires within the scope of his or her actual or apparent power; or the authorisation by a court or another body independent of the competition authority. ■ person B was acting on the direction, or with the consent or New Zealand agreement, of a director, employee, or agent of person A who was acting within the scope of the director’s, employee’s, or 2.2 Please list specific or unusual features of the agent’s actual or apparent authority. investigatory powers referred to in the summary table. The extraterritorial application of the Act was considered in Commerce Commission v Visy Board Pty Ltd [2012] NZCA 383. Absent a search warrant, the NZCC’s search and entry powers are In that case, Visy Board Pty Ltd (Visy), an Australian company, limited to the following: admitted to having participated in cartel conduct with Amcor ■ NZCC can rely on an implied licence to enter a business Australia and was fined $36 million in Australia. The New Zealand premise during business hours or approach the front door of High Court found that whether or not a person is “carrying on a residential premised to speak to the occupants like anyone business in New Zealand” is not confined to whether or not the else, but must leave if asked to do so. company maintained a systematic and continuous physical presence ■ NZCC staff can carry out a search with the consent of the in New Zealand and the analysis requires recognition of the practical person in control of a place, vehicle or thing. modes of transacting business, including the fact that modern day commerce necessitates dealing with consumers through a variety of 2.3 Are there general surveillance powers (e.g. bugging)? methods of communication including the internet.

Some of the reasons that Visy was found to carry on business in No. The NZCC does not have any general surveillance powers New Zealand included: and cannot obtain a warrant authorising the use of surveillance and ■ Visy operated Visy Board NZ as an integrated division of interception devices as these are only available in relation to serious Visy and presented itself to trans-Tasman customers as one criminal offences. business including the New Zealand division; ■ Visy was directly involved in Visy Board NZ’s New Zealand operations; and 2.4 Are there any other significant powers of investigation? ■ Visy dealt directly with New Zealand customers on various occasions, particularly with major customers. The Act allows the Government or the NZCC to enter into co- operation arrangements with overseas governments and competition 2 Investigative Powers regulators. New Zealand currently has formal cooperation arrangements with Australia, Canada, Singapore, Taiwan and the UK, to allow the sharing 2.1 Summary of general investigatory powers. of information and/or the provision of other investigative assistance. Table of General Investigatory Powers 2.5 Who will carry out searches of business and/or Investigatory Power Civil/Administrative Criminal residential premises and will they wait for legal Order the production advisors to arrive? of specific documents Yes N/A or information The NZCC will carry out searches of business and/or residential Carry out compulsory interviews with Yes N/A premises and is entitled to enlist other suitable persons to assist with individuals the execution of a search warrant. Carry out an The NZCC is not required to give advance notice of its intention to unannounced search Yes* N/A conduct a search or to wait for legal advisors to arrive. However, if of business premises requested, the NZCC will generally provide an opportunity for the Carry out an unannounced occupier of premises under search to contact their legal advisors. Yes* N/A search of residential premises 2.6 Is in-house legal advice protected by the rules of ■ Right to ‘image’ privilege? computer hard drives Yes* N/A using forensic IT tools Yes. Privilege will apply to a communication with an in-house legal ■ Right to retain Yes* N/A advisor that is confidential and made in the course of and for the original documents purpose of obtaining or providing legal advice. Communications with an in-house lawyer acting in a capacity other than in his or her legal capacity (for example, as a commercial manager or business advisor) will not attract legal advice privilege.

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It is notable that the NZCC has not filed charges for the above 2.7 Please list other material limitations of the offences in almost a decade. However, it is difficult to say whether investigatory powers to safeguard the rights of the NZCC’s approach to the enforcement of these offences has defence of companies and/or individuals under changed or whether it is simply a matter of no cause for enforcement investigation. arising.

If, in the course of executing a search warrant, NZCC staff identify any material they have reasonable grounds to believe may be 3 Sanctions on Companies and Individuals privileged, they must provide an opportunity for that privilege to be claimed. If the NZCC is unable to locate anyone who can claim privilege within a reasonable time, it can apply to a court for 3.1 What are the sanctions for companies? determination as to the status of the material. The maximum pecuniary penalty for a company is (per breach) the New Zealand In the event of a dispute as to privilege, the NZCC will secure the greater of $10 million, and either: material (without looking at it) and provide the party claiming ■ three times the value of any commercial gain resulting from privilege with the opportunity to explain its grounds in the hope of the breach; or resolving the matter by agreement. If agreement cannot be reached, ■ if the commercial gain cannot be readily ascertained, 10 the merits of the privilege claim will be determined by a court. per cent of the turnover of the company, including all of its If it is not possible to identify and separate privileged material interconnected bodies corporate. onsite, the NZCC will secure or seize all material and make appropriate arrangements to ensure that privilege is protected during 3.2 What are the sanctions for individuals (e.g. criminal the identification and separation process. sanctions, director disqualification)? A person cannot refuse to comply with any requirement to furnish information, produce documents, or give evidence, or if appearing For individuals, the maximum pecuniary penalty for cartel conduct before the NZCC, to answer any question or produce any document, is $500,000. The Court must order an individual who has engaged on the ground that to do so might tend to incriminate him or her. in cartel conduct to pay a pecuniary penalty unless it considers that However, statements made to the Commission cannot be used there is good reason not to. against the person who made them in criminal proceedings or The Court can also order that an individual be banned from directing, proceedings for pecuniary penalties under the Act, except in the case promoting or otherwise being involved in the management of a of perjury and offences relating to the obstruction of the NZCC’s company for up to five years. exercise of its investigatory powers.

3.3 Can fines be reduced on the basis of ‘financial hardship’ 2.8 Are there sanctions for the obstruction of or ‘inability to pay’ grounds? If so, by how much? investigations? If so, have these ever been used? Has the authorities’ approach to this changed, e.g. Yes. In setting penalties, the Court must have regard to “all relevant become stricter, recently? factors”, including the size and resources of the defendant.

It is a criminal offence to: 3.4 What are the applicable limitation periods? ■ without reasonable excuse, refuse or fail to comply with a notice requiring the provision of documents or information or to appear before the Commission; The NZCC must commence proceedings for alleged breaches of the ■ knowingly provide the NZCC with false or misleading cartel prohibition within three years after the matter giving rise to documents, information or evidence; the contravention was discovered or ought reasonably to have been discovered, with a “long-stop” limitation of 10 years. ■ in the context of a compulsory interview with the NZCC, refuse to take an oath or affirmation, answer any question or produce any document; or 3.5 Can a company pay the legal costs and/or financial ■ resist, obstruct or delay a NZCC employee acting pursuant to penalties imposed on a former or current employee? a search warrant. A person who commits any of the above offences is liable on A company may, if authorised by its constitution, indemnify or conviction to, in the case of an individual, a fine of up to $100,000 have insurance for its officers and employees for costs incurred in defending or settling proceedings commenced by the NZCC, and in the case of a body corporate, a fine of up to $300,000. provided the officer or employee is successful in defending the These sanctions have been used on at least three occasions: proceedings or the proceedings are discontinued. ■ in 2005, Koppers Arch Wood Protection and its former general However, a company must not indemnify its officers, employees or manager (GM) were fined $25,000 and $8,000, respectively, agents, in respect of a pecuniary penalty imposed for a contravention for failing to produce company documents when required to of the cartel prohibition or any associated defence costs. Any such do so; indemnity given is void and the company would be liable for a ■ in 2006, Osmose, a participant in the same wood preservatives pecuniary penalty of up to two times the value of the contravening cartel as Koppers, was fined $13,000 after it pleaded guilty indemnity. to a charge of failing to provide documents, including a particularly pertinent non-public price list that Osmose had obtained from Koppers; and 3.6 Can an implicated employee be held liable by his/her ■ in 2008, Aerolineas Argentinas pleaded guilty to a charge employer for the legal costs and/or financial penalties of failing to comply with a statutory notice by providing the imposed on the employer? required documents five months after the due date and was fined $11,000. The Act does not provide any means by which an employer can hold

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an employee liable for legal costs and/or financial penalties imposed on the employer. 4.3 Can applications be made orally (to minimise any subsequent disclosure risks in the context of civil However, in some circumstances, an employer may have an action damages follow-on litigation)? against an employee or officer under general law (for example, for negligence or breach of contract or a directors’ duty). Yes. The proffer may be made orally at the applicant’s request, provided the NZCC considers this is justified. The NZCC will, 4 Leniency for Companies however, create records of discussions and contact.

4.4 To what extent will a leniency application be treated 4.1 Is there a leniency programme for companies? If so, confidentially and for how long? To what extent please provide brief details.

New Zealand will documents provided by leniency applicants be disclosed to private litigants? Yes, the NZCC operates a Cartel Leniency Policy (Policy) which outlines the NZCC’s approach to applications for immunity and Both the NZCC and applicants for immunity are subject to leniency for cooperation by companies and individuals. confidentiality obligations. Under the Policy, the NZCC may grant conditional immunity to The NZCC has stated that it will endeavour to protect to the fullest the first cartel member to approach the NZCC. The immunity is extent confidential information provided by holders of a marker or from prosecution by the NZCC only, and does not extend to private conditional immunity. The NZCC will not waive privilege over enforcement actions by third parties. any information provided to it, except where to do so is necessary The applicant must meet (and continue to meet) the following for the NZCC to conduct the investigation or issue proceedings. conditions for immunity to be available: Information is also received by the NZCC on the basis that it will ■ the applicant is the first applicant to meet the criteria for not be used as evidence in proceedings against the applicant for that conditional immunity; cartel unless immunity is revoked or a marker is not perfected. ■ the applicant is or was a participant in the cartel; However, the NZCC may share confidential information with other ■ the party admits that its participation in the cartel may breach competition authorities overseas where the NZCC has sought a the relevant sections of the Act; waiver from the applicant. ■ the applicant is no longer involved in the cartel, or has Information an applicant discloses to the NZCC in relation to a informed the NZCC that it will cease its involvement (except leniency application may become discoverable in third-party private in particular circumstances); enforcement actions. However, the applicant may be able to assert ■ the applicant has not coerced others to participate in the privilege over proffers and related information provided to the cartel; NZCC. Public interest immunity grounds may also be of assistance ■ the applicant makes admissions in relation to actions that are to an applicant in resisting production; however, this has not yet genuinely corporate acts as opposed to those undertaken by been tested in New Zealand. individuals (in the case of companies); and ■ the applicant agrees to provide full and continuing 4.5 At what point does the ‘continuous cooperation’ cooperation to the NZCC in its investigation, and in any requirement cease to apply? subsequent proceedings.

The NZCC may also exercise its discretion to take a lower level Full and continuous cooperation is required for the duration of any of enforcement action against subsequent immunity applicants in investigation and/or court proceedings. exchange for information and continuing cooperation.

4.6 Is there a ‘leniency plus’ or ‘penalty plus’ policy? 4.2 Is there a ‘marker’ system and, if so, what is required to obtain a marker? Yes, the NZCC has an Amnesty Plus policy. Under the policy, applicants who do not qualify for conditional immunity or a marker Yes. To obtain a marker, an applicant needs to be the first person may be entitled to conditional immunity for their participation in a (company or individual) to approach the NZCC requesting immunity second cartel and a recommended penalty concession in respect of for a particular cartel. The prospective applicant must provide the the first cartel. NZCC with sufficient information on the nature of the cartel, such as the product(s) and/or service(s) involved, the main participants, To obtain “Amnesty Plus”, an applicant must inform the NZCC of and the impact of the cartel on a market in New Zealand before a their participation in a second cartel of which the NZCC was not aware marker will be given. or for which it does not have sufficient evidence to take legal action. The second cartel must be completely separate from the first cartel. Once a marker has been obtained, the applicant must then provide the NZCC with a written or oral statement called a “proffer” to perfect the marker. The standard time allowed to perfect the marker 5 Whistle-blowing Procedures for is 28 calendar days, but a longer or shorter time may be agreed with Individuals the NZCC. Subsequent applicants will be informed of their place in the queue for conditional immunity. If the first applicant fails to perfect the 5.1 Are there procedures for individuals to report cartel marker, or if conditional immunity is not granted, the NZCC may conduct independently of their employer? If so, please specify. offer a marker or conditional immunity to the next applicant in the queue, subject to their meeting the conditions. Yes. An application for conditional immunity may be made by

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individuals or companies. Where an applicant is an individual, they loss or damage caused by the conduct. In addition, the High Court must be, or have been, a director, officer or employee of a company that can order exemplary damages, notwithstanding that the person may was a party to the cartel. A company will not qualify for conditional have paid, or at a later date be required to pay, pecuniary penalties immunity if it has already been granted to an individual employee. in relation to the same conduct. Civil proceedings seeking damages can be commenced in the High 6 Plea Bargaining Arrangements Court by filing and serving a notice of proceeding and statement of claim. Legally, the positon is not different for follow on actions as opposed 6.1 Are there any early resolution, settlement or plea to stand alone actions. In both cases, the plaintiff must establish that bargaining procedures (other than leniency)? Has the defendant has breached the Act and that the plaintiff has suffered the competition authorities’ approach to settlements a loss as a result. A plaintiff cannot simply rely on a judgment in a changed in recent years? New Zealand pecuniary penalty case as prima facie evidence of a breach or that loss or damage occurred. The NZCC is open to early resolution, including settlement, of actual or potential court proceedings in appropriate cases. The NZCC may not consider it appropriate to settle where the conduct is 8.2 Do your procedural rules allow for class-action or particularly serious or a legal precedent is required. representative claims? Settlements with the NZCC can be: There is no codified “class actions” regime in New Zealand. ■ Out-of-court, where proceedings have not been issued and the terms of the settlement do not require the Court’s approval. The High Court Rules do allow for collective claims via Generally, an admission of breach will be required. representative actions brought by a named representative plaintiff or ■ In-court, where settlements have been commenced or the plaintiffs on behalf of, and for the benefit of, others with the “same Court’s involvement is required to implement the settlement interest” in the subject matter of the proceeding. However, to date, terms. For example, the Court may need to set a penalty or no representative actions alleging breaches of the Act have been make other orders. brought. The NZCC has reached in-court settlements in at least five cartel cases since 2011. 8.3 What are the applicable limitation periods?

7 Appeal Process Three years after the matter giving rise to the contravention was discovered or ought reasonably to have been discovered, with a “long-stop” limitation of 10 years. 7.1 What is the appeal process? 8.4 Does the law recognise a “passing on” defence in Decisions of the High Court can be appealed to the Court of Appeal civil damages claims? within 20 working days of the decision. A decision of the Court of Appeal can only be appealed to the The New Zealand courts are yet to consider and determine whether Supreme Court with leave. An application for leave must be filed a “passing-on defence” is available in this context. and served within 20 working days of the decision. 8.5 What are the cost rules for civil damages follow-on 7.2 Does an appeal suspend a company’s requirement to claims in cartel cases? pay the fine? Subject to the courts’ discretion, the general principle is that an Not automatically. However, an appellant can apply to either the unsuccessful party will be required to contribute to the successful High Court or the Court of Appeal for an order suspending the party’s costs. requirement to pay a penalty pending resolution of an appeal. Typically, the costs awarded are calculated on a scale basis and are significantly less (around one third) than actual legal costs. In 7.3 Does the appeal process allow for the cross- some circumstances, increased and/or indemnity costs may also be examination of witnesses? awarded.

In general, no. However, a party can apply for leave to adduce 8.6 Have there been any successful follow-on or stand further evidence on questions of fact by oral examination in Court. alone civil damages claims for cartel conduct? If there If leave is granted, cross-examination will be allowed. have not been many cases decided in court, have there been any substantial out of court settlements?

8 Damages Actions We are not aware of any successful follow on or stand alone civil damages claims for cartel conduct in New Zealand. It is possible that some claims have been settled out of court but the fact and 8.1 What are the procedures for civil damages actions for loss suffered as a result of cartel conduct? Is the terms of settlement would be confidential as between the parties. position different (e.g. easier) for ‘follow-on’ actions as opposed to ‘stand alone’ actions?

Any person that contravenes the cartel prohibition is liable for any

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9 Miscellaneous 9.2 Please mention any other issues of particular interest in your jurisdiction not covered by the above.

9.1 Please provide brief details of significant, recent or imminent statutory or other developments in the field The New Zealand Government has recently announced proposed of cartels, leniency and/or cartel damages claims. amendments to the Act which will allow the Minister for Commerce and Consumer Affairs to direct the NZCC to conduct formal market The Act was recently amended by the Cartels Act. The key changes studies. The recommendation was made following a targeted are: review of the Act, which identified New Zealand as an outlier, with approximately 40 other competition agencies having the ability ■ Introduction of the new cartel prohibition, which replaces the previous prohibition on price fixing. to conduct market studies. At present, the Ministry of Business,

New Zealand Innovation and Employment expects to release an exposure draft of ■ New exceptions to the cartel prohibition for collaborative the Bill to introduce the market studies power for public consultation activities (replacing the old “joint venture” exemption), vertical supply contracts, and joint buying and promotion towards the end of 2017. agreements. See https://minterellison.co.nz/our-view?services=competition-and- ■ A new clearance regime for collaborative activities. regulation for regular updates on competition law practice in New Zealand. The new cartel prohibition applies immediately to all contracts entered into after 15 August 2017. However, transitional provisions provide for a nine-month grace period during which the Commission cannot enforce the cartels prohibition in relation to pre-15 August contracts.

Jennifer Hambleton Alisaundre van Ammers MinterEllisonRuddWatts MinterEllisonRuddWatts Level 20 Level 18 88 Shortland Street 125 The Terrace Auckland Wellington New Zealand New Zealand

Tel: +64 9 353 9794 Tel: +64 4 498 5143 Email: [email protected] Email: Alisaundre.Vanammers@ URL: www.minterellison.co.nz minterellison.co.nz URL: www.minterellison.co.nz

Jennifer is a Senior Associate with experience on contentious and Alisaundre (Ali) is a Senior Solicitor with substantial experience in non-contentious competition and consumer law matters and general commercial litigation and disputes resolution. She advises clients on commercial litigation. contentious and non-contentious aspects of competition, consumer law and public law. Jennifer has extensive experience as a commercial litigator. She has represented commercial and government clients in Australia and Having worked in the public sector and in private practice, Ali has New Zealand on a number of large complex competition enforcement represented a broad range of clients, from national government actions, consumer law actions, actions for breaches of director’s departments and ministries to international corporate clients, with a duties, contractual disputes and negligence actions. particular focus on the energy sector. Jennifer has advised clients in the technology and telecommunications, insurance, gambling, airline, accommodation, FMCG, pharmaceuticals and energy industries on a range of commercial issues. This includes advising clients on the competition law implications of mergers and joint ventures, exclusive agreements, pricing practices, dealings with competitors and market behaviour, consumer law issues arising from contractual terms and advertising and promotions, contractual issues including termination rights, restraints of trade and confidentiality, and compliance with industry-specific codes.

Named New Zealand Law Firm of the Year by Chambers and Partners in 2017, MinterEllisonRuddWatts is a top-tier New Zealand law firm known for providing clients with technically excellent legal solutions and innovative advice. We are trusted advisors and work alongside our clients to ensure success. We are proud to be a New Zealand law firm offering a global outlook. Our offices in Auckland and Wellington are able to access an international network through the MinterEllison Legal Group, a leading firm in the Asia-Pacific. The firm supports numerous charitable endeavours and organisations through its pro bono and fundraising initiatives.

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Portugal Inês Gouveia

Morais Leitão, Galvão Teles, Soares da Silva & Associados, Sociedade de Advogados, R.L. Luís do Nascimento Ferreira

1 The Legislative Framework of the Cartel 1.3 Who enforces the cartel prohibition? Prohibition The cartel prohibition (and competition law enforcement in general) is enforced by the Portuguese Competition Authority (Autoridade 1.1 What is the legal basis and general nature of the cartel prohibition, e.g. is it civil and/or criminal? da Concorrência), created in 2003 by Decree-Law nr. 10/2003, of 18 January. The latter was revoked and replaced by Decree- Law nr. 125/2014, of 18 August, which approved the current The legal basis for the cartel prohibition is Article 9 of the Portuguese Statute of the Portuguese Competition Authority (hereinafter “the Competition Act (Law nr. 19/2012, of 8 May – hereinafter “the Act” Authority”). The current Statute reinforces – in relation to the – which repealed and replaced, with effect as of 7 July 2012, the previous one – the Authority’s independence and autonomy while previous Portuguese Competition Act, Law nr. 18/2003, of 11 June). also ruling on aspects such as transparency, cooperation, control Article 9 prohibits and sanctions anti-competitive agreements, and responsibility on the performance of its functions, in line with practices and decisions by associations of undertakings in terms the existing legal framework on independent regulatory authorities similar to Article 101 (1) of the Treaty on the Functioning of the (see also question 9.1). The Authority is a public entity with the European Union (hereinafter the “TFEU”). nature of an independent administrative body. It benefits from Similarly to all other infringements of competition law, cartels (i) statutory independence for the performance of its attributions, are considered administrative offences (misdemeanours) and not (ii) administrative, financial and management autonomy, and (iii) criminal offences. As a result thereof, they are penalised with fines independence from an organic, functional and technical perspective. and other ancillary sanctions (see section 3 below). The Authority has sanctioning, supervisory and regulatory powers which are established in Decree-Law nr. 125/2014 and further 1.2 What are the specific substantive provisions for the developed in the Act. cartel prohibition? Within the Authority, the investigation of cartels is committed to a dedicated unit called the “Anti-cartel Unit”, which was created The specific substantive provision is Article 9 of the Act, which in order to address the need for reinforcement of the Authority’s prohibits agreements between undertakings, concerted practices and effectiveness of intervention in terms of cartel detection and decisions by associations of undertakings which have as their object investigation. or effect the prevention, distortion or restriction of competition, to a The Authority is responsible for enforcing competition law in any considerable extent, in whole or in part of the domestic market. The sector of the economy. However, for activities subject to sector- above shall include, in particular, agreements, practices or decisions specific regulation, the Act establishes (in Articles 5 (4), 34(4) by associations of undertakings, which: and 35) a general principle of cooperation between the Authority a) directly or indirectly fix purchase or selling prices or any and sector-specific regulators in the application of competition other trading conditions; legislation, which translates into the following: b) limit or control production, markets, technological ■ whenever the Authority becomes aware of facts occurring development or investment; within the scope of sector-specific regulations and likely to be c) share markets or sources of supply; classified as prohibited practices, it shall immediately inform d) apply dissimilar conditions to equivalent transactions with the sector-specific regulator, so as to allow the latter to issue other trading parties, thereby placing them at a competitive an opinion within a time limit stipulated by the Authority; disadvantage; or ■ whenever the Authority intends to apply interim measures e) conclude contracts subject to acceptance by the other parties within the course of an investigation in a market subject to of supplementary obligations which, by their nature or sector-specific regulation, it shall request the opinion of the according to commercial usage, have no connection with the sector-specific regulator (to be issued in five working days); subject of such contracts. ■ before adopting a final decision, and unless the case is closed The list above (which is in line with Article 101 (1) of the TFEU) without conditions, the Authority shall consult the sector- specific regulator (which shall issue its opinion within the is non-exhaustive, and therefore other conducts that have the object time limit stipulated by the Authority); or effect of restricting competition to an appreciable extent may be caught by the above-referred prohibition. ■ whenever a sector-specific regulator deals, within the scope of its own responsibilities, on its own initiative or at

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the request of an entity within its jurisdiction, with issues (ii) settle the case by issuing a sanctioning decision within the concerning a possible breach of the provisions of the Act, it context of a settlement procedure; shall immediately inform the Authority of the procedure and (iii) close the investigation by adopting a decision imposing of its essential facts; conditions (to guarantee compliance with commitments ■ before taking a final decision, the sector-specific regulator submitted by the party concerned in order to eliminate the shall inform the Authority of the draft decision, so that the effects on competition stemming from the practice); or Authority issues its opinion within a time limit set for that (iv) continue with the case by initiating the second stage of purpose; and the investigation (“instrução”), with a notification to the ■ in any of the above situations and where applicable, the defendant of a “Statement of Objections” (“SO”). Authority may decide not to initiate an investigation or to If an investigation was initiated following a complaint by an

Portugal stay an ongoing investigation, for as long as necessary. interested third party, it cannot be closed pursuant to (i) above, Cooperation with sector-specific regulators is therefore based on without the complainant being given the opportunity to submit any consultation mechanisms, according to which, the Authority, in the observations in writing within not less than 10 working days from course of investigations it conducts, obtains an opinion from other being informed of the Authority’s decisions to close the investigation. regulators. Unless the complainant’s observations reveal, directly or indirectly, In order to facilitate cooperation in the enforcement of competition a reasonable likelihood of a sanctioning decision being issued, the law, the Authority and the sector-specific regulators can enter into Authority shall close the case and this decision is subject to appeal bilateral or multilateral protocols. to the Competition, Regulation and Supervision Court. During the second stage of the investigation, the defendant is 1.4 What are the basic procedural steps between the assured the exercise of its defence rights: it is given a “reasonable opening of an investigation and the imposition of period” (not less than 20 working days) to reply to the SO and it may sanctions? request the Authority to undertake additional evidentiary measures (e.g., witness depositions) and to have its written submissions Investigations can be initiated ex officio or following a complaint. complemented by an oral hearing. The Authority can refuse Ever since June 2017, an online complaints portal (and a dedicated additional evidentiary measures found irrelevant to the case or telephone line) is available in the Authority’s internet website considered to have mainly a delaying purpose. making it easier to report any type of anti-competitive behaviour The Authority may promote additional measures to gather evidence, and allowing for anonymity of the complainant (see http:// at its own initiative, even after a reply to the SO has been submitted www.concorrencia.pt/vEN/News_Events/Comunicados/Pages/ by the defendant. Any additional evidence included in the case as PressRelease_201708.aspx?lst=1&Cat=2017). a result thereof shall be notified to the defendant, who shall have a The sanctioning powers of the Authority are exercised under a period of not less than 10 working days to state its views in relation principle of opportunity, which means that the Authority is granted thereto. the ability to choose which cases to pursue on the basis of criteria The Act expressly recognises the possibility of the Authority issuing of public interest. Pursuant to Article 7 (2) of the Act, in assessing a new SO whenever the evidence collected as a result of additional whether or not to initiate proceedings, the Authority shall take into evidentiary measures materially changes the facts initially attributed account aspects such as its previously set priorities in competition to the defendant. policy, the elements of fact and of law brought to the file, the The second stage should be concluded within an indicative period of seriousness of the alleged infringement, the likelihood of proof of 12 months from the notification of the SO. Whenever compliance the infringement and the extent of investigation measures required with such time limit is not possible, the defendant shall be informed to adequately fulfil its mission. of such fact and of the additional time necessary to conclude the If the Authority considers that there are insufficient grounds to act proceedings. on a complaint, it shall inform the complainant and set a time limit This second stage ends with a decision of the Authority to either: of no less than 10 working days for the complainant to present its (i) order the closing of the case without any conditions being observations in writing. If the observations presented within the imposed; established deadline do not lead to a different assessment of the complaint, the Authority shall expressly declare, in writing, that the (ii) order the closing of the case with the imposition of conditions (to guarantee compliance with commitments submitted complaint is unfounded or not subject to priority treatment and close by the party concerned in order to eliminate the effects on it. The complainant may appeal such a decision to the Competition, competition stemming from the practice); Regulation and Supervision Court. (iii) impose a sanction in the context of a settlement decision; or If, on the contrary, an investigation is indeed initiated (ex officio (iv) declare that a prohibited practice has occurred and, where or otherwise), such investigation shall be divided in two stages. such practice cannot be justified pursuant to the exemption During the first stage (“inquérito”) the Authority undertakes all criteria (see question 1.5), the decision may be accompanied necessary inquiries (within the scope of its investigation powers) by an admonition or the imposition of the relevant sanctions to identify the relevant anti-competitive conduct, its agents and to (fines and other – see section 3) and, if applicable, bythe collect evidence to this end. The Act has introduced an indicative imposition of behavioural or structural measures that are period of 18 months following the opening of the case for conclusion indispensable for halting the prohibited practice or its effects. of the first stage. Whenever compliance with such time limit is not Structural measures can only be imposed by the Authority when possible, the defendant shall be informed of that as well as of the there is no equally effective behavioural measure or when, though additional time necessary to conclude the investigation. existing, such behavioural measure would be more onerous for the The first stage ends with a decision of the Authority to either: defendant than the structural measure. (i) close the investigation, if there is not sufficient evidence to Whenever the market in question is subject to sector-specific conclude for a reasonable likelihood of a decision imposing a regulation, there are specificities concerning the procedure and the sanction; intervention of the sector-specific regulator (see question 1.4).

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In March 2013, the Authority published its guidelines on the handling of antitrust proceedings (available on the Authority’s 2 Investigative Powers website in Portuguese only). The guidelines’ main aim is to clarify how the Authority acts when handling and investigating antitrust 2.1 Summary of general investigatory powers. proceedings under the Act. The guidelines include information on the most important steps of the procedure described above. Table of General Investigatory Powers

Investigatory Power Civil/Administrative Criminal 1.5 Are there any sector-specific offences or exemptions? Order the production of specific documents Yes N/A or information

The Act applies equally across all sectors of the economy and to Portugal all economic activities in the private, public or cooperative sectors. Carry out compulsory interviews with Yes N/A Companies that are legally charged with the management of individuals services of general economic interest or which have the nature of Carry out an legal monopolies are subject to the provisions of the Act but only unannounced search Yes* N/A to the extent that those provisions do not constitute an impediment of business premises in law or in fact to the fulfilment of the mission they have been Carry out an unannounced entrusted with. Yes* N/A search of residential An exemption from the general rule of Article 9 prohibiting anti- premises competitive agreements is established in Article 10 in terms ■ Right to ‘image’ equivalent to Article 101 (3) TFEU. Agreements, practices or computer hard drives Yes* N/A decisions by associations of undertakings can be considered using forensic IT as justified if they contribute to improving the production or tools ■ Right to retain distribution of goods and services or to promoting technical or Yes* N/A original documents economic progress, and, cumulatively thereto, they: ■ Right to require a) allow the users of such goods or services an equitable part of an explanation Yes N/A the resulting benefit; of documents or b) do not impose on the undertakings concerned any restrictions information supplied that are not indispensable to attaining such objectives; and ■ Right to secure premises overnight Yes* N/A c) do not afford such undertakings the possibility of eliminating (e.g. by seal) competition in a substantial part of the goods or services market in question. Please Note: * indicates that the investigatory measure requires It is not possible to request from the Authority a prior assessment authorisation by a court or another body independent of the of agreements, practices or decisions covered by the prohibition competition authority. of Article 9. The Act fully embraces the self-assessment principle provided at EU level and specifically states that it is the responsibility 2.2 Please list specific or unusual features of the of the undertakings or associations of undertakings concerned which investigatory powers referred to in the summary table. invoke the justification under Article 10 to provide evidence that the conditions are fulfilled. In accordance with Article 42 of the general regime on Practices prohibited by Article 9 are also considered as justified misdemeanours (as approved by Decree-Law nr. 433/82, of when, although not affecting trade between Member States, they 27 October, and subsequently amended), correspondence and fulfil all other requirements for application of a regulation adopted telecommunications are explicitly protected and, therefore, may under Article 101 (3) of the TFEU. The Authority may, nonetheless, not be used as evidence in competition infringement procedures. withdraw this benefit if, in a particular case, it ascertains that the The existing case-law in respect of search and seizure powers practice at stake has effects incompatible with the conditions for by the Authority has, so far, distinguished between opened and justification laid down here above. unopened correspondence: correspondence (including emails) that has already been opened is considered normal documentation and 1.6 Is cartel conduct outside your jurisdiction covered by is thus subject to be used as evidence by the Authority; and only the prohibition? correspondence which remains unopened (including unread emails) will be considered correspondence stricto sensu and thus benefit Cartel conduct outside Portugal will, in principle, be covered by the from protection. This understanding – expressly endorsed by the prohibition to the extent that the practice has, or is liable to have, Authority in its guidelines on the handling of antitrust proceedings effects in the Portuguese territory. This follows from the general – was developed under the previous Competition Act (repealed in rule laid down in Article 2 (2) of the Act according to which, subject 2012) and before the enactment of the Law on Cybercrime. The to the exception of the international obligations of the Portuguese latter rules specifically on the seizure of electronic mail messages State, the Act is applicable to restrictive competition practices and in terms similar to any other correspondence (subject to the prior concentrations between undertakings which take place or have or validation of an examining judge), which makes the understanding may have effects in the territory of Portugal. of the Authority (for whom opened emails should be treated as mere documents) a highly disputed one.

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2.3 Are there general surveillance powers (e.g. bugging)? 2.6 Is in-house legal advice protected by the rules of privilege? There are no general surveillance powers for conducts sanctioned as misdemeanours (as are competition law infringements). Under Portuguese law, the protection given by the rules on legal professional privilege (which is protected by the Constitution, the Penal Code and the Statute of the Portuguese Bar) covers both 2.4 Are there any other significant powers of independent lawyers and in-house lawyers who are members of the investigation? Portuguese Bar since they are subject to the same professional and ethical duties. The Act establishes the Authority’s right to search private premises, Portugal which include not only the homes of company shareholders, This view – expressly acknowledged by the General Council of the directors and employees but also “other locations” (including Portuguese Bar in a legal Opinion issued in 2007 – was confirmed vehicles). These searches must be previously authorised by an by the judiciary in 2008, when the Lisbon Commerce Court stated examining judge. that (as national procedural rules do not differentiate between in- house and external lawyers) an in-house lawyer who has been The Act expressly provides for the possibility of searches being employed to exercise his activity as a lawyer and is registered with carried out at lawyers’ or doctors’ offices, provided that the the Portuguese Bar shall be subject to the same duties and rules – following safeguards are respected: an examining judge must be and therefore shall benefit from the same guarantees and privileges present at the search and the president of the respective professional – as external lawyers, in particular in what regards legal professional Bar must be notified in advance in order to guarantee his presence privilege. or representation, if he so wishes. In its March 2013 Guidelines on the handling of antitrust The Authority is also empowered to seize documents located proceedings, the Authority expressly states that, in addition to at lawyers’ or doctors’ offices, provided that the above-referred lawyers registered in the Portuguese Bar, those registered in safeguards are respected and that the documents are not covered analogous entities in other countries will also benefit from a similar by professional secrecy with one exception: documents covered protection. Thus, the Authority indicates that, when carrying out by professional secrecy that constitute, in themselves, the object or its investigations, it will extend the scope for protection under legal elements via which the infraction is perpetrated can be seized. The privilege beyond what was acknowledged by the Court (which only exact scope of this provision is, however, not without ambiguity, referred to lawyers registered with the Portuguese Bar). because the Statute of the Portuguese Bar (Law nr. 145/2015, of 9 September) only allows for seizure in cases of criminal offence. The protection given by national rules of legal professional privilege is therefore broader than the one resulting from the application of The Act further empowers the Authority to seize documents the case-law of EU courts and, as a result, the regime applicable to covered by banking secrecy (whether or not belonging to the in-house legal advice may differ depending on whether Portuguese defendant), provided that the seizure is carried out by an examining national rules or EU rules apply. judge and that there are well-substantiated reasons to believe that the documents are related to an infringement and are of major For the (new) provisions of the Act regarding seizure of documents importance for finding out the truth or in terms of evidence. covered by professional secrecy, see question 2.4 above.

2.5 Who will carry out searches of business and/or 2.7 Please list other material limitations of the residential premises and will they wait for legal investigatory powers to safeguard the rights of advisors to arrive? defence of companies and/or individuals under investigation.

Searches of business premises are carried out by the Authority’s The rights of companies/individuals being investigated comprise duly appointed employees who shall, for that purpose, bear the essentially the following: right to access the file; right to exercise credentials issued by the Authority stating the purpose of the the defence according to the adversarial principle; right to a hearing; investigation and the warrant from the competent judicial authority. and the right to appeal against interlocutory and final decisions The Act establishes that, whenever necessary, the Authority may adopted by the Authority. request the action of the police authorities and, in practice, the Authority is usually accompanied by the police authorities. A significant number of the Authority’s decisions condemning companies for anticompetitive practices have been appealed to court The law does not impose any obligation for the Authority’s and, amongst those, a significant number (especially the earliest investigators to wait for legal advisors to arrive, but companies cases) have been quashed for violation of the right of defence. under inspection have the right to have legal advisors present at the diligence. Searches at private premises have additional (stricter) requirements: 2.8 Are there sanctions for the obstruction of the warrant must be issued by an examining judge and shall investigations? If so, have these ever been used? Has the authorities’ approach to this changed, e.g. establish, inter alia, the date for the commencement of the search become stricter, recently? and the possibility of judicial review; if the search is conducted at an inhabited home or in a closed dependence thereof it must be carried Failure to cooperate with the Authority or obstruction of the exercise out between 7am and 9pm; and where the search is conducted in the of the Authority’s investigatory powers (either by wilful misconduct offices of a lawyer or a doctor, the examining judge must be present or negligence) is sanctioned with a fine, the amount of which may and the president of the respective professional Bar must be notified not exceed 1% of the turnover of the year immediately preceding in advance in order to guarantee his presence or representation, if the final decision for each of the undertakings concerned or, in the he so wishes. case of associations of undertakings, the aggregate turnover of the associated undertakings.

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Failure to supply information or the supply of false, inaccurate or undertakings, of the aggregate turnover of its members (which are incomplete information in response to a request by the Authority jointly and severally liable for the fine under certain conditions). in the exercise of its powers of sanction or supervision (either The relevant turnover refers to that of the year preceding the by wilful misconduct or negligence) shall be subject to a similar issuance of the Authority’s final decision, although a 2015 decision sanction. Until 2015, the only publicly known decision of the by the Court of Appeal shed some doubt on the constitutionality Authority in respect of “non-compliance” with information of such provision, considering that it makes the maximum fine requests dating back to 2005 concerned a fine of €1,000 imposed vary according to market trends and the timings of the proceedings on a professional association for supplying incomplete information (judgment of the Appellate Court of Lisbon of 11.03.2015, in Case during an infringement procedure – Proc. nr. 769/05.6TYLSB. The nr. 204/13.6YUSTR.L1-3). other three fining decisions issued for refusal to provide information In addition to these penalties, if the seriousness of the infringement to the Authority in the exercise of its powers of supervision were and the liability of the offender so justify, the Authority may impose Portugal annulled on appeal due to irregularities in requests for information ancillary sanctions of two kinds: – Proc. nr. 205/06.0TYLSB. (i) publication in the official gazette and in a national newspaper, In 2015, however, the Authority issued three fining decisions for at the offender’s expense, of the relevant parts of a decision “non-compliance” with its information requests, which can be seen finding an infringement; or as an indication of the Authority’s stricter enforcement of the legal (ii) a ban to participate in procurement proceedings if the provisions referring to cooperation duties with the Authority. In infringement found has occurred during, or as a consequence brief: of, such proceedings. This sanction may only last for a ■ CP Carga was fined €100,000 for having failed to provide the maximum period of two years. Authority with information on costs requested in the context Moreover and whenever deemed necessary, the Authority may of an investigation for an alleged abuse of dominance (which impose a periodic penalty payment in cases of non-compliance with was closed in the meanwhile with no finding of abuse against a decision imposing a fine or ordering the application of certain the company). This fining decision was annulled on appeal measures. This may result in a payment of up to 5% of the average (Case nr. 276/15.9YUSTR at the Competition, Regulation daily turnover of the infringing undertaking in the year preceding and Supervision Court). The Court considered that CP Carga the decision for each day of delay. did not breach its cooperation duties when it replied to the Authority that a specific type of cost information did not exist Civil law sanctions may also arise; notably, all prohibited within the company, even though in subsequent investigation agreements and concerted practices are null and void; also, parties measures the Authority found that there was cost information that have suffered losses as a result of a cartel infringement may data available within the company that turned out to be seek compensation in court (see section 8). relevant to the case. This finding by the Court was largely due to the fact that the initial request was very generic and allowed its addressee different interpretations as to the 3.2 What are the sanctions for individuals (e.g. criminal specific type of cost information sought for/requested by the sanctions, director disqualification)? Authority. The Court’s decision was confirmed upon appeal by the Appellate Court of Lisbon. Penalties can be imposed not solely on members of the board of ■ Peugeot Portugal was fined €150,000 for having failed to the undertaking concerned, but also on persons responsible for provide the Authority with a copy of its general conditions the management or supervision of the areas of activity where the for extended warranty (which contained a potentially infringement occurred. restrictive clause) in reply to a request by the Authority for all documentation available in respect of each of the In cartels, penalties may go up to 10% of the individual’s total company’s warranty, in the context of an investigation into annual income in the last complete year of the breach. the company’s extended warranty policy for motor vehicles Liability of natural persons arises when they knew or should have (closed in March 2015 with the imposition, by the Authority, known of the infringement but failed to take appropriate measures to of mandatory conditions based on commitments offered bring it to an end. However, if a more serious penalty is applicable by Peugeot Portugal) – the fining decision was confirmed pursuant to other legal provision, the latter will apply. on appeal by the Competition, Regulation and Supervision Court (Case nr. 273/15.4Y1FDR). In Portugal antitrust infringements are not considered criminal ■ Ford Lusitana was fined €150,000 for having failed to infractions and the authority does not have the power to remove or provide the Authority with a version of the extended warranty suspend an individual from its functions. contract available on its website, which was different (and included a potentially restrictive clause) to the version sent 3.3 Can fines be reduced on the basis of ‘financial to the Authority in reply to a request for information in the hardship’ or ‘inability to pay’ grounds? If so, by how context of an ongoing supervision process in the automobile much? sector (closed in September 2015 with the imposition, by the Authority, of mandatory conditions based on commitments offered by Ford Lusitana in respect of its extended warranty The (current) Act refers to the ‘economic situation of the offender’ policy) – the fining decision was confirmed on appeal by the as one of the aspects to be weighted by the Authority when setting a Competition, Regulation and Supervision Court. fine. Thus, financial hardship and inability to pay claims should be factored in, regarding the amount of the penalty. Even prior to the enactment of the Act, the Authority had already 3 Sanctions on Companies and Individuals signalled that it would be willing to take this criterion into account. In a 2011 decision regarding an alleged price fixing between driving 3.1 What are the sanctions for companies? schools established in Madeira Island, the Authority imposed a total fine of €9,865.40 on seven undertakings. To reach this figure, the The maximum fine in a cartel case is up to 10% of the turnover Authority took into consideration, inter alia, the small economic of each participating undertaking, or, in the case of associations of scale of the companies concerned (in terms of turnover and number

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of employees) and the fact they operated in a market characterised by insularity. 4 Leniency for Companies In 2012, the Authority published guidelines regarding the method for establishing fines in antitrust proceedings. These guidelines 4.1 Is there a leniency programme for companies? If so, cover all major types of antitrust infringements, including cartels. please provide brief details. In the paper, which in this point closely follows the Commission’s view on the issue, the Authority states that it may take account of The current leniency programme is provided for in the Act (which an undertaking’s inability to pay in a specific social and economic replaced the previous leniency programme in force from 2006 to context. However, the Authority shall not grant any reduction in 2012) and further ruled by a Leniency Regulation dealing with the fine on the mere finding of an adverse or loss-making financial the correspondent administrative procedure and complemented Portugal situation; a reduction may only be awarded on the basis of objective by the Authority’s own accompanying Explanatory Guidelines on evidence that the imposition of the proposed fine would irretrievably Leniency (covering both substantive and procedural rules). From jeopardise the economic viability of the undertaking concerned and an objective viewpoint, the scope of the leniency regime in force cause its assets to lose all their value. covers only cartel-type behaviour: the Act refers specifically to agreements or concerted practices between competitors that are aimed at coordinating their competitive behaviour on the market or 3.4 What are the applicable limitation periods? influencing relevant parameters, specifically through the fixing of purchase or selling price or other trading conditions, the allocation As a general rule, sanctioning proceedings for cartel offences of production or sales quotas, the sharing of markets, including (similarly to other prohibited practices) are subject to a five-year collusion in auctions and bid-rigging in public procurement, limitation period. The issue of when this limitation period starts restrictions on imports or exports or anti-competitive actions against to run will ultimately depend on the type of infringement at stake; other competitors. for instance, in the case of continuing infringements, the five-year period only starts to run from the date on which the infringement From a subjective viewpoint, leniency may be granted either to ceases. companies or to individuals subject to liability for infringements to the Act. The latter includes members of the board of directors or of Five years (counting from the date when the decision has become res the supervisory board of legal persons and equivalent entities as well judicata) is also the time limit for the enforcement of the sanctions as individuals who are responsible for the direction or supervision of imposed. areas of activity where a misdemeanour has occurred. Individuals However, these limitation periods are suspended, inter alia, for as may apply for leniency on behalf of the company or individually long as a judicial review is pending, and total suspensions may last (in the last case, immunity or special reduction will only benefit the for a three-year period. The period is also interrupted whenever the applicant). Authority takes any action for the purpose of the investigation, and There are two types of lenient categories: (full) immunity from the each interruption shall start the time running afresh. fine; or fine reduction. In any event, expiry of these limitation periods occurs on the day on Common requirements for immunity and reduction which 7.5 years, plus the eventual suspensions, have elapsed, i.e., a maximum of 10.5 years. A company or individual wishing to benefit from immunity or reduction must comply with three conditions: (i) to cooperate fully and continuously with the Authority from 3.5 Can a company pay the legal costs and/or financial the moment the application is filed, which requires providing penalties imposed on a former or current employee? all the information and evidence in its possession or under its control at the moment or in the future, promptly replying There is no specific provision preventing a company from paying to any information requests, refraining from acts that may the penalties and/or legal costs imposed on its (former or current) hinder the progress of the investigation and refraining from employees. disclosing the existence or content of its application or the intention to submit an application (except if the Authority so authorises in writing); 3.6 Can an implicated employee be held liable by his/her (ii) to terminate its participation in the infringement except to employer for the legal costs and/or financial penalties the extent deemed reasonably necessary by the Authority to imposed on the employer? maintain the effectiveness of the investigation; and (iii) not having coerced any of the other companies to participate Companies are held liable for infringements committed: (i) on their in the infringement. behalf or account by persons occupying a leading position therein (i.e., Specific requirements for immunity corporate bodies, representatives and persons holding control over the company’s activity); or (ii) by anyone acting under the authority of the Immunity from fines is reserved to ‘first in’ situations, but itis persons mentioned in (i) when the latter have breached the supervision no longer required (as in the previous leniency regime) that the or control duties that are incumbent upon them. information be presented to the Authority at a stage where no investigation has been initiated. It is also worth mentioning that the liability of an undertaking under the Act does not preclude the individual liability of natural persons, Hence, immunity is granted to companies or individuals that are the nor does it depend on the liability of the latter, in the case where first to supply information and evidence that allow the Authority there has been a breach of the duty to cooperate. to either (i) substantiate a request for search and seizure where such information was not available to the Authority, or (ii) detect Under the general principles of labour and civil law, an employer an infringement (eligible for leniency) where the Authority did not may claim and seek damages (including legal costs and financial have enough evidence on such infringement. penalties) from an employee if he/she acted wilfully or negligently and his/her action caused the employer’s engagement and punishment in the cartel.

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Specific requirements for the reduction of a fine and relevant thresholds 4.2 Is there a ‘marker’ system and, if so, what is required to obtain a marker? Reductions of fines are granted to companies or individuals that (though not fulfilling the requirements for immunity) provide the The Leniency Regulation (issued in January 2013) expressly Authority with evidence and information on an infringement with establishes a marker system for immunity applicants. A marker significant added value with respect to the information already in may be granted either at the Authority’s own initiative or in reply possession of the Authority. to the immunity applicant’s request, provided that, in any event, The level of reduction of the fine can be set at: 30%–50% (for the the immunity applicant supplies the Authority with the following first company/individual to provide evidence or information with minimum information (in line with the ECN Model), in its initial significant added value); 20%–30% (for the second company/ request: name and address of the leniency applicant; information Portugal individual to provide evidence or information with significant added with regard to the participants in the alleged cartel; the products and/ value); and <20% (for any subsequent companies/individuals to or services and territory covered; an estimate of the duration of the provide evidence or information with significant added value). cartel; the nature of the alleged cartel conduct; information on any For leniency requests presented after the SO, the above-referred past or possible future leniency applications to any other competition thresholds shall be reduced by half. authorities in relation to the alleged cartel; and a justification for the The Act does not qualify the notion of “significant added value”, request for a marker. but it provides that the criteria should be assessed taking into The immunity applicant shall be given a period of no less than account the information and evidence already in the possession of 15 days to complete the initially submitted immunity application; the Authority. Also, the evidentiary value of the information and a different deadline may be set by the Authority if so justified for the fact that further corroboration might be (un)necessary will also reasons of cooperation with other competition authorities within the play a relevant role, as stressed in the Explanatory Guidelines on EU, pursuant to Regulation (EC) no. 1/2003. Failure to complete Leniency. the initial request within the established deadline shall lead to In addition, individuals who cooperate fully and continuously with refusal of the leniency application and any documents that have the Authority will benefit from immunity or reduction of the fine been delivered shall be returned to the applicant or, upon express which would otherwise be applicable even if they do not request request by the latter, retained by the Authority and assessed under such benefits personally. the cooperation criteria, to be taken into account by the latter when setting the amount of the fine. Up to the present, there are four known fining decisions by the Authority which have been triggered by leniency applications: ■ the “Catering Cartel”, the investigation of which was triggered 4.3 Can applications be made orally (to minimise any by an individual leniency application presented in 2007 by a subsequent disclosure risks in the context of civil former director of one of the cartelists, who benefited from damages follow-on litigation)? full immunity while his employer and remaining cartel members and respective directors were all fined. After a court The possibility to present oral applications was introduced with the annulment of the initial fining decision (2009) on procedural Leniency Programme adopted in 2012. grounds and its replacement in 2012 by a second (new) fining The Leniency Regulation establishes that oral applications are decision (only partially upheld on appeal), the Appellate Court of Lisbon declared, in March 2015, the dismissal of the initially presented at a meeting with the Authority together with all whole administrative procedure due to time limitations; relevant evidence of the cartel in the possession or under the control of the applicant. Oral applications are recorded at the Authority’s ■ the “Commercial Forms Cartel” (2012), which resulted in a total fine of €1,797,978.51 imposed upon three of the four premises and, after verification of content by the applicant, are companies involved and their respective directors, amounts subject to transcription and signed by the applicant. which were significantly reduced on appeal (to a total of approximately €459,300) as the court decided to apply to the 4.4 To what extent will a leniency application be treated case the more favourable regime of the current Act in terms confidentially and for how long? To what extent of fine calculation (see question 7.1); will documents provided by leniency applicants be ■ the “Polyurethane Foam Cartel” (2013), which resulted disclosed to private litigants? in a total fine of €993,000 imposed upon two of the three companies involved and their respective directors. The two The Act rules in detail on the issue of confidentiality and access to companies sanctioned benefited from a further fine reduction the leniency application and related documents. It imposes upon as they agreed to a settlement during the second stage of the the Authority an obligation to classify as confidential the leniency investigation (see question 6.1); application as well as all the documents and information submitted ■ the “Pre-fabricated modules cartel” (2015) which resulted for the purposes of immunity or reduction. in a total fine of €831,810, imposed upon four of the five companies involved. The fine reductions granted resulted not The defendant shall be granted access to the leniency application only in leniency reductions but also in reductions resulting and related documents and information for the purposes of preparing from the settlement procedure; and its reply to the SO; however, copies of those documents will only be ■ the “Office consumables” cartel (2016) which resulted in possible if so authorised by the leniency applicant. Access by third a fine of €440,000 imposed upon one cartel participant parties is dependent upon authorisation by the leniency applicant. who applied for leniency and settled and an initial fine of In relation to oral statements, the defendant which has orally applied €160,000 imposed upon another company who did not settle for leniency shall not be given access to copies of its statements and and reduced on appeal to €50,000 (this Court decision was third parties shall be prevented from accessing such information/ appealed by the company and the case is still pending). documentation. There are other currently pending investigations based on leniency In the context of the implementation of Directive 2014/104/EU applications. (“the EU Private Enforcement Directive”) and according to the

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Authority’s draft proposal for an implementing legislation, leniency applicants will be further protected as the proposal states that courts 6 Plea Bargaining Arrangements may not determine the submission of evidence which includes leniency applications as well as settlement proposals. The current 6.1 Are there any early resolution, settlement or plea wording of the proposal may create a discrepancy between those bargaining procedures (other than leniency)? Has documents and supporting documents and information provided the competition authorities’ approach to settlements together with the leniency application as the latter are not expressly changed in recent years? excluded from disclosure by court order. Apart from the leniency programme, the Act empowers the Authority to enter into two types of settlement arrangements in respect of 4.5 At what point does the ‘continuous cooperation’ Portugal antitrust infringements in general. On the one hand, the Authority requirement cease to apply? may accept binding commitments from the parties in exchange for dropping the proceedings without concluding for the existence of The definite decision to grant or refuse immunity from fineor an infringement (case closure with conditions – see question 1.4). fine reduction is taken by the Authority only at the end ofthe On the other hand, it may enter into a settlement procedure that will proceedings. Since one of the requirements to benefit from leniency allow for a swift decision and a reduction of the fine. is to cooperate fully and continuously with the Authority from the moment the application is filed (see question 4.1), this means the According to publicly available information, the Authority has ‘continuous cooperation’ should last until the final decision on the used the settlement procedure in three antitrust cases, decided in proceedings is adopted. 2013 (the “Polyurethane Foam Cartel”), 2015 (the “Pre-Fabricated Modules Cartel”) and 2016 (the “Office Consumables Cartel”) If, during the course of the investigation, the Authority considers – see question 4.1 above. Conversely, commitment decisions are that the applicant is no longer cooperating, the leniency status will becoming increasingly frequent in the decision-making practice. be withdrawn. However, according to the March 2013 guidelines regarding the However, the cooperation initially given will still be relevant for conduct of antitrust proceedings, the Authority shall typically not other purposes, in particular, considering that the level of cooperation accept commitments in cartel cases. with the Authority during an investigation is one of the criteria used Settlement proceedings may pose an advantage where parties are to establish the amount of a fine under the Act (see question 3.3). ready to acknowledge their participation in a cartel and accept their liability for it, but wish to shorten the procedure and obtain a 4.6 Is there a ‘leniency plus’ or ‘penalty plus’ policy? reduction of the fine. Neither the Act nor the guidelines mentioned above clarify the There is no “leniency plus” or “penalty plus” policy under the amount of reduction expected to be received in settled cases, and leniency regime currently in force. this aspect has been highly criticised by practitioners. Nevertheless, reductions of fine under settlement proceedings and under the leniency programme are cumulative. 5 Whistle-blowing Procedures for Individuals In the “Polyurethane Foam Cartel” (the first antitrust settlement decision), the Authority granted to the undertakings and individuals involved significant reductions, ranging from 38%–40%, in addition 5.1 Are there procedures for individuals to report cartel to the discount from leniency. Those percentages were significantly conduct independently of their employer? If so, reduced to 10% in the subsequent “Pre-Fabricated Modules Cartel” please specify. of 2015. In the 2016 “Office Consumables Cartel”, regrettably the Authority has not disclosed the reduction awarded to the sole Individual leniency is possible for members of the board of directors company that settled the case, thus contributing to an undesirable or the supervisory board of legal persons and equivalent entities opacity in this field. as well as for individuals who are responsible for the direction or This is all the more incomprehensible, as the Authority has publicly supervision of areas of activity within a company or equivalent legal announced it wishes to reinforce the transparency of its practices, entity where a misdemeanour has occurred. with settlement procedures being one of the key instruments on Individual leniency abides by similar criteria and follows the which the Authority wants to rely to accomplish its announced same procedure as corporate leniency. In the event of individual priorities in the fight against antitrust infringements (see question application, the leniency will only benefit the applicant, not the 9.1). company (contrary to corporate leniency, which may benefit The facts to which a party in a settlement procedure has confessed individuals – see question 4.1). cannot be judicially appealed. As a rule, third parties are not allowed Outside the scope of the leniency programme, any individual (either to access settlement submissions contained in the file and other a director, an employee or any third party) may submit a complaint undertakings concerned in the case are only allowed to see those to the Authority implicating other individuals or companies in a documents for the purposes of preparing their defence, but no copy suspected cartel. The Authority’s approved form (available on of these can be made without due authorisation by the author of the its website) should be used for that purpose. The practice of the settlement proposal. In the 2016 “Office Consumables Cartel”, only Authority has also been to accept anonymous complaints. one of the undertakings concerned accepted the settlement whereas Once the Authority has decided to initiate an investigation pursuant the remaining companies were subject to a separate decision finding to a complaint, it cannot close the case without granting the an infringement. complainant the opportunity to submit observations on the proposed decision beforehand (see question 1.4).

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The exemption is available for appellants in the case of decisions 7 Appeal Process imposing fines or other sanctions: the appellant may ask the court to suspend the effects of the decision when the execution of such 7.1 What is the appeal process? decision would cause considerable harm and the appellant offers to provide a guarantee in lieu, in which case the suspension of effects Decisions handed down by the Authority in cartel cases are subject will depend on the guarantee actually being provided within the time limit prescribed by the court. to appeal to a specialised court dealing with competition, regulatory and supervisory matters. In 2016, the Constitutional Court ruled that the absence of suspensive effect attached to the appeal did not breach the Appeals against final decisions are lodged within 30 working days. fundamental law (Judgment nr. 376/2016 of 8 June 2016, in Case

The Authority will then have an additional 30-working-day-period Portugal nr. 1094/2015). However, later that year the same Constitutional to forward the records to the public prosecution office and to enclose Court issued a second ruling on the matter and this time it decided its own allegations or other information deemed relevant. The that the provision of the Act that does not suspend the obligation to public prosecutor can only withdraw the accusation if the Authority pay the fine in case of appeal or requires a company to provide a gives its consent. guarantee instead is indeed unconstitutional (Judgment nr. 674/2016 The court holds full jurisdiction to review decisions whereby the of 13 December 2016, in Case nr 206/16). If, as a result of future Authority has imposed a fine or periodic penalty payment, and thus appeals, the Constitutional Court finds such provision to violate may reduce or increase the amount of such sanctions. the fundamental law in three judicial reviews, the court is entitled Up to the present date, the court has never increased the amounts to open an ex officio procedure that may result in a declaration of of fines prescribed by the Authority. The Competition, Regulation unconstitutionality with statutory general force, which would bar and Supervision Court actually ruled (in the appeal concerning national courts from applying the provision at stake. the “Commercial Printed Forms Cartel”) that the levels of fines provided in the current Act may be generally more favourable 7.3 Does the appeal process allow for the cross- for companies and individuals than those resulting from the 2003 examination of witnesses? competition legislation, essentially because under the current Act: (i) the relevant year on which to base the amount of a fine is that Testimonial evidence is permitted and the witnesses can be subject before the adoption of the Authority’s final decision, whereas to cross-examination by the counterparty. under the 2003 law the relevant year was the last full year of the infringement (this may be relevant if the economic situation of the defendants subsequently deteriorated, although, as mentioned 8 Damages Actions in question 3.1, the Court of Appeal deemed that the setting of the fine based on the turnover preceding the decision may raise constitutional issues); (ii) the limits of the fines applicable to 8.1 What are the procedures for civil damages actions individuals are now set at 10% of their annual remuneration, whilst for loss suffered as a result of cartel conduct? Is the position different (e.g. easier) for ‘follow-on’ actions under the 2003 legislation individuals were liable for fines of up as opposed to ‘stand alone’ actions? to half of those imposed on their companies; and (iii) there is an express requirement for the economic situation of the defendant to Damages actions for loss suffered as a result of any breach of the be taken into account in the calculation of the fine (although the Act (including, therefore, for cartel conduct) follow general civil general regime for misdemeanours, applicable to both the 2003 and law and civil law procedures. Hence, private antitrust liability 2012 acts on a subsidiary basis, already provided for consideration depends on the fulfilment of the five cumulative requirements of this criterion). established in the Portuguese Civil Code for tort liability, which are: The court may reach a final decision in appeal with or without a (1) a conduct (act or omission) controllable by human resolution; previous court hearing, in the latter case only if the Authority, the (2) the conduct’s unlawfulness; (3) the imputation of the conduct public prosecutor and the defendant do not object thereto. If there to a wrongdoer; (4) the existence of damages; and (5) a causal link is a court hearing, the court shall rule on the basis of the evidence between the conduct and the damages. presented in the hearing, as well as on the proof gathered during the Under the general civil law and civil law procedure rules currently administrative proceedings. in force, there is no material difference in terms of substantive The court decision is subject to one further appeal and the Appellate and procedural law between follow-on and stand alone actions, Court will finally rule on the case. even though, in respect of follow-on actions, the Authority’s final The Authority has an autonomous right to appeal. decision can serve as prima facie evidence that an infringement of competition law (requirements 1 to 3 above) has occurred and, The Authority is bound to publish on its website court rulings issued therefore, the position of the claimants is likely to be stronger from on appeals lodged in antitrust cases. the outset (though such decision has a mere persuasive evidentiary value for the judge). 7.2 Does an appeal suspend a company’s requirement to In the context of the implementation of the EU Private Enforcement pay the fine? Directive and according to the Authority’s draft proposal for the respective implementing legislation, this will change as the proposal According to the Act, not as a general rule. However, there is one confers a binding evidentiary value (in the form of a non-rebuttable exception and one exemption to this rule, without prejudice to the presumption) on final decisions adopted by the Authority, or on constitutional doubts that it raises. final judicial rulings on appeal, regarding the existence, nature, The exception concerns decisions that impose structural measures, duration and material, personal and territorial scope of an antitrust in which case the effects of these decisions will be automatically infringement. In addition, final decisions or rulings by competition suspended once the appeal is lodged. authorities or courts of other Member States are given a qualified evidentiary value on the basis of a rebuttable presumption.

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Finally, one should not exclude the possibility of a damages claim being brought under contractual liability in cases where a contract 8.3 What are the applicable limitation periods? exists between the wrongdoer and the entity suffering the damage and there is a breach of a contractual obligation or of any ancillary The right to compensation under the tort liability regime is subject duty. to a time limitation of three years from the moment when the injured party becomes aware of his right to make a claim for damages.

8.2 Do your procedural rules allow for class-action or If contractual liability were at stake, the time limitation would be representative claims? 20 years. In the context of the implementation of the EU Private Enforcement Law nr. 83/95 of 31 August as amended by Decree-Law nr. Directive and according to the Authority’s draft proposal for the Portugal 214-G/2015 establishes the legal framework applicable to the respective implementing legislation, the three-year limitation period representative action (“acção popular”), which can be used in the referred to above shall increase to five years from the moment the context of a private antitrust class action. The aim of these actions injured party becomes aware or can reasonably be assumed to is to defend collective or diffuse interests either for prevention have become aware: (i) of the behaviour in question and the fact (injunction) or for redress (claims for damages). Under this that it constitutes an infringement of competition law; (ii) of the framework, any natural person, association or foundation (the identity of the infringer; and (iii) of the fact that the infringement of latter two in cases which are directly connected with their scope) competition law caused harm to it, even if it was not aware of the should be capable of bringing a private antitrust class action before full extent thereof. a Portuguese court based on the breach of competition law rules. A different limitation period is proposed for SMES and leniency Companies, on the contrary, may not use the representative action applicants that benefited from immunity from fine, in relation procedure. to injured parties which are not their purchasers or suppliers. Our national procedure can be qualified as an opt-out system, as Such limitation period shall be of three years from (i) the date of the claimant automatically represents by default all the holders of the bankruptcy finding by the court, (ii) of the termination ofan similar rights or interests at stake who did not opt out, following, executive action for lack of attachable assets, or (iii) of any other inter alia, the public notice regarding the submission of the final court decision finding the inability of the remaining co- representative action before the court. infringers to pay. New rules are also proposed for the counting of and suspension of the limitation period, which are broadly in line The liable party must compensate all the persons who have been with the solutions of the EU Private Enforcement Directive. victims of a given practice and may have to refund the unlawful profit derived from the conduct in question. In the representative action, the court is not bound by the evidence 8.4 Does the law recognise a “passing on” defence in civil damages claims? gathered or requested by the parties and, as a general rule, has the power to collect the evidence that it deems appropriate and necessary. The Portuguese Civil Code determines that the injured party has the right to claim for loss suffered and lost profits resulting from The claimant may seek redress for damages suffered; the law the illegal conduct and that reparation of damages shall only take determines that the compensation of rights’ holders that cannot the form of pecuniary compensation either if natural reconstitution be individually identified shall be determined globally. The right is impossible or does not fully repair the damage suffered or is to compensation shall be time-barred within three years from the excessively costly for the debtor. delivery of the court decision that has acknowledged the existence of such right. The indemnity shall be the difference between the pecuniary situation of the claimant on the most recent date that can be taken In the context of the implementation of the EU Private Enforcement into account by the court and the pecuniary situation in which the Directive and according to the Authority’s draft proposal for the claimant would be in the absence of those damages. Thus, the respective implementing legislation a set of specific rules shall be measure of loss which shall be compensated in an antitrust damage introduced in respect of representative actions for damages claims for case will be the difference between the claimant’s actual position antitrust breaches. The draft proposal (i) extends the legal standing and the situation the claimant would have been were it not for the to bring forward such representative actions to associations and illegal conduct. foundations for the defence of consumers rights and to associations In light of the above, the defendant may use a passing-on defence of undertakings whose associates are affected by the infringement to sustain that the claimant did not suffer all or part of the damages of competition law in question, and (ii) rules on aspects such as the claimed because of overcharges passed on to its customers. identification of injured parties, the quantification of damages and the receipt, management and payment of damage compensations Such a defence, although permissible, may entail non-negligible with the purpose of facilitating the feasibility of representative difficulties in practice as the defendant may find it difficult to prove actions for antitrust infringements in the context of an “opt-out that the passing-on has actually occurred. system”. To the best of our knowledge, Portugal’s first-ever class action for 8.5 What are the cost rules for civil damages follow-on private competition law damages was lodged earlier in 2015, but it claims in cartel cases? refers to a redress claim for damages caused by an abuse of dominant position and not by a cartel. Indeed, the collective damages claim The general provisions of the Regulation of procedural fees apply. was presented by the “Portuguese Competition Observatory” on Procedural fees include (broadly) court fees (“taxa de justiça”) and behalf of all pay-TV consumers allegedly damaged by the conduct court expenses. Court fees are due and charged for the procedural of pay-TV operator Sport TV, previously fined for having abused initiative of the party and depend on the amount of the claim or its dominant position in the market for conditional access premium claims at stake in the proceedings as well as on the complexity of sports channels by applying a discriminatory remuneration system the case. Court expenses relate to the costs of certain procedural in the distribution agreements for Sport TV television channels. acts or services.

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In light of the particulars of a given case (in particular, the amount watch on cartel practices, acting either through ex officio initiatives of the claims at stake) it is possible to estimate approximately the (projected by the Authority to represent around 15–20% of the procedural fees to be charged in the proceedings. antitrust investigations in 2017) or reactive means (e.g., the leniency Procedural fees and expenses are charged in different moments programme and simple complaints). throughout the procedure to both parties. To this end, the Authority is also taking relevant measures to The final court decision (or a decision that finally decides any strengthen its investigation tools, such as the settlement procedure procedural incidents or appeals) will rule on the liability for costs; and the use of forensic ITs in the course of premise searches. the general rule being that the losing party will be liable for payment Another important gear is the anti-cartel internal unit devoted to of the procedural costs in the proportion of its loss. probing and tackling such types of infringements. In 2017, the Authority has also launched a new Electronic If the court decision convicts the defendants to the fulfilment of joint Portugal and several obligations, the liability as to procedural fees shall also Complaints Portal, as well as a dedicated phone line, aiming to be joint and several. streamline the submission of complaints in the antitrust field by companies and individuals. Plaintiffs in representative actions will benefit from an exemption of court fees in accordance with Article 4 (1), b) of the Portuguese A special area of concern for the Authority since at least 2016 in the Court Fees Regulation. fight against cartels is bid rigging. The Authority has intensified its advocacy role in this respect, promoting sessions and dedicated material (e.g., guidance, brochures and checklists) meant to alert 8.6 Have there been any successful follow-on or stand stakeholders to the signs and risks of collusion in public procurement alone civil damages claims for cartel conduct? If there proceedings. have not been many cases decided in court, have there been any substantial out of court settlements? Attention is also being given to private enforcement. In 2016, the Authority delivered to the Government a proposal for a law To the best of our knowledge there have been no successful private transposing the EU Private Enforcement Directive, following a antitrust damages actions so far for cartel conduct. widely participated public consultation. Together with the public consultation, the Authority has hosted a workshop on the matter in order to “market test” some of the proposed solutions vis-à-vis a 9 Miscellaneous number of stakeholders. The new act is expected to be approved by the Government in the course of 2017.

9.1 Please provide brief details of significant recent or imminent statutory or other developments in the field 9.2 Please mention any other issues of particular interest of cartels, leniency and/or cartel damages claims. in your jurisdiction not covered by the above.

The competition policy priorities for 2017, set out by the Authority Please refer to the preceding question. at the end of 2016 (available at http://www.concorrencia.pt/vEN/ Documents/Competition%20Policy%20Priorities%202017EN. pdf), confirm the intention of the Authority to keep a vigorous

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Inês Gouveia Luís do Nascimento Ferreira Morais Leitão, Galvão Teles, Soares da Silva Morais Leitão, Galvão Teles, Soares da Silva & Associados, Sociedade de Advogados, R.L. & Associados, Sociedade de Advogados, R.L. Avenida da Boavista, 3265 5.2 Rua Castilho, 165 4100-137 Porto 1070-050 Lisbon Portugal Portugal

Tel: +351 226 166 950 Tel: +351 210 091 730 Email: [email protected] Email: [email protected] URL: www.mlgts.pt URL: www.mlgts.pt Portugal Inês Gouveia joined the firm in 2006 and is a Managing Associate Luís do Nascimento Ferreira joined the firm in 2003 and is a Partner working in the EU and Competition Law Practice Group. She holds with the EU and Competition Law team. He holds a law degree and a law degree from the Portuguese Catholic University Law School, postgraduate studies in European Law both from the University of postgraduate degrees in European Law (2001) and in Public Lisbon Law School, an LL.M. on International Business Law and a Regulation from the Coimbra University Law School (2003) and Master’s degree in Law from the Portuguese Catholic University a Master’s Degree in Economics in Competition Law from King’s Law School. Luís has vast experience in EU and Competition Law, College London (2008). namely on advising and representing national and international clients, including the Portuguese State, in the areas of merger control, Inês has vast experience in EU and Competition Law and advises a restrictive practices, market dominance, State aid and SGEIs, both wide range of Portuguese and international clients on their dealings with before the Portuguese Competition Authority and the European competition authorities in the context of merger, restrictive practices and Commission. He also advises and represents clients on EU law market dominance in a variety of industries, both at national and EU matters, especially on internal market rules, public procurement and level. She has worked extensively in cases in the food and non-food structural funds, and has experience in cases before EU Courts retailing sectors, motor vehicle distribution and several manufacturing and the ECHR. He is particularly active in the energy and financial industries. She has also assisted clients in the design and sectors. Luís has several articles and works in the area of competition implementation of internal competition law compliance programmes. law in national and international publications. He has also been Inês has published several articles in the area of competition law in invited to speak on EU and competition law matters in the context of national and international publications and co-lectures a seminar on postgraduate studies, Masters of Law and conferences. Portuguese Competition Law in the Master’s degree programme of the Portuguese Catholic University Law School (Porto).

Morais Leitão, Galvão Teles, Soares da Silva & Associados is an independent full-service law firm and a leading law firm in Portugal, with more than 200 lawyers and offices in Lisbon, Porto and Funchal (Madeira). We have a significant international practice in all major areas of law and represent multinational corporations, international financial institutions, and sovereign governments and their agencies, as well as domestic corporations and financial institutions. To address the growing needs of our clients throughout the world, particularly in Portuguese-speaking countries, we established MLGTS Legal Circle, an association of leading law firms in Brazil, Angola, Mozambique and Macau. We also maintain close contact with major law firms in Europe, the United States and South America, being the sole Portuguese member of Lex Mundi, the world’s leading association of independent law firms. Our EU and Competition Law team, based in Lisbon and Porto, is widely recognised for its in-depth knowledge and experience in all aspects of EU Law and European and Portuguese Competition Law. We advise and represent international and domestic clients on merger control, dominance, horizontal and vertical restraints, State aid and services of general economic interest, ensuring expert assistance before the European Commission and the Portuguese Competition Authority, as well as before Portuguese and the European Courts. We have extensive experience representing clients in a wide range of industries, such as energy, financial services, communications, pharmaceuticals, broadcasting, advertising, land, sea and air transportation, retail distribution, logistics, mining, food and beverages, tourism and agriculture.

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Romania

Pachiu & Associates Remus Ene

1 The Legislative Framework of the Cartel 1.3 Who enforces the cartel prohibition? Prohibition The competent authority to enforce competition legislation and, implicitly, cartel prohibition, is the Romanian Competition Council. 1.1 What is the legal basis and general nature of the cartel prohibition, e.g. is it civil and/or criminal? 1.4 What are the basic procedural steps between the The cartel prohibition is provided by Article 101 of the Treaty on opening of an investigation and the imposition of the Functioning of the European Union (hereinafter the “TFEU”) sanctions? and Article 5 of Law No. 21 of April 10, 1996, on competition, as subsequently amended (hereinafter the “Competition Law”). The Competition Council may decide to open an investigation either As a general rule, in Romania setting up and/or operating a cartel ex officio or following a complaint filed by a party directly affected represents a misdemeanour for all parties involved. by the cartel. However, the wilful set-up or organisation of a cartel by any Investigations will be initiated by the competition authority, by director, legal representative or member of the management of means of a written order of the President of the Competition Council, an undertaking is considered a criminal offence punishable with only when there are sufficient grounds, in fact and in law, justifying imprisonment of six months to five years or with a fine and the this measure. In order to conduct the investigation, the President of interdiction of certain rights. the Competition Council, at the suggestion of the General Director of the authority, will appoint one of the competition inspectors to act as the rapporteur of the investigation. The rapporteur will be 1.2 What are the specific substantive provisions for the in charge of preparing and reviewing all documents with respect cartel prohibition? to the investigation procedure, as well as for the creation of the procedural framework related to such investigation. At the same Considering that Romania is a member of the European Union, the time, the rapporteur will prepare the report of the investigation, national legislation related to competition matters, including cartel including the sanctions/remedies proposed by the investigation prohibition, follows the substantive EU legal provisions in this field. team with respect to the case, and present it to the plenum or to a Article 5(1) of the Competition Law generally transposes in the commission of the Competition Council. domestic legislation the provisions of Article 101 of the TFEU. The investigation team led by the rapporteur benefits from Therefore, any express or tacit agreements between undertakings extensive powers during the investigation. In this regard, or associations of undertakings, any decisions by associations of competition inspectors are entitled to (i) request any information undertakings and any concerted practices, which have as their object and/or documents from undertakings, associations of undertakings or may have as their effect the restriction, prevention or distortion or public authorities, (ii) enter the premises, real estate or means of competition on the Romanian market or on a part of it, shall be of transport of the investigated undertakings or associations of prohibited, especially those aimed at: undertakings, (iii) review and obtain copies of any documents, a) fixing, directly or indirectly, the selling or the purchase registers, financial and/or accounting documents or any other such prices, as well as any other trading conditions; data with respect to the investigated undertakings, irrespective of b) limiting or controlling production, selling, technological where such documents are stored or the format in which they are development or investments; discovered (i.e. electronic or hard copy), (iv) request clarifications from the representatives or the employees of the investigated c) sharing markets or sources of supply; undertakings with respect to facts related to the object of the d) applying dissimilar conditions to equivalent transactions with investigation, and (v) seal any premises used by the investigated other trading parties, thereby placing them at a competitive undertakings for the performance of their activity, as well as any disadvantage; or documents, registers, financial and accounting books and any other e) making the conclusion of contracts subject to acceptance by such information which may be of relevance for the investigation. the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection Any dawn raids have to be approved by means of an order issued by with the subject of such contracts. the President of the Competition Council and must be authorised, in advance, by the Bucharest Court of Appeal. Copies of the order and

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of the judicial authorisation issued by the court have to be handed Please Note: * indicates that the investigatory measure requires over to the undertaking having its premises inspected. the authorisation by a court or another body independent of the Based on the data collected, the investigation team, through the competition authority. rapporteur, will draft the investigation report and submit it to the Competition Council’s plenum or to one of its commissions for 2.2 Please list specific or unusual features of the approval. investigatory powers referred to in the summary table. The report will be communicated to the envisaged undertakings, therefore, allowing them to exercise their defence right. In this Any unannounced search of business premises and/or inspections regard, the undertakings have a minimum 30-day period to review of any other premises (including the residence, real estate or means the investigation file and submit their observations/motions of of transportation) of the directors, administrators or any employee Romania defence. If the investigated undertakings consider it useful, they of the investigated undertaking or association of undertakings may may request the Competition Council to organise a hearing on the be performed only subject to obtaining a prior authorisation in this report. regard, issued by the Bucharest Court of Appeal. If, following the analysis of the motions of defence/clarifications The request for the issuance of such authorisation shall be decided submitted by the investigated parties and of the discussions during in chambers, without subpoenaing the targeted party, within 48 the hearing, the Competition Council’s plenum considers that an hours of the request being made by the competition authority. infringement has occurred, it will issue a decision in this regard and will impose the appropriate sanctions on the infringing undertakings. 2.3 Are there general surveillance powers (e.g. bugging)?

1.5 Are there any sector-specific offences or exemptions? The Competition Law does not provide for any general surveillance powers, including bugging, to the benefit of the competition Under Romanian legislation, there are no sector-specific offences or authority. exemptions. However, the Block Exemption Regulations adopted at EU level apply accordingly in Romania. 2.4 Are there any other significant powers of investigation?

1.6 Is cartel conduct outside your jurisdiction covered by the prohibition? In principle, the investigation powers of the Competition Council are in line with the current powers of investigation of the European Commission. Therefore, there are no other significant powers of Cartel conduct outside Romania may be subject to the provisions investigation, except as detailed above. of the Competition Law to the extent that it produces effects on the Romanian market. 2.5 Who will carry out searches of business and/or residential premises and will they wait for legal 2 Investigative Powers advisors to arrive?

As mentioned above, the competition inspectors have the right to 2.1 Summary of general investigatory powers. search business premises and/or residential premises only with the prior approval of the Bucharest Court of Appeal. Table of General Investigatory Powers The party may be assisted by a lawyer during searches. However, the Investigatory Power Civil/Administrative Criminal absence of a lawyer does not preclude the right of the investigation Order the production team to perform the search. In general, as a courtesy gesture, the of specific documents Yes N/A inspectors will wait a short period of time in order to allow an or information external legal adviser to arrive at the investigated premises. Carry out compulsory Whenever required by the Competition Council, the police have interviews with Yes N/A individuals the obligation to assist the competition inspectors during the dawn Carry out an raids, should any opposition be reasonably expected. unannounced search Yes* N/A of business premises 2.6 Is in-house legal advice protected by the rules of Carry out an privilege? unannounced Yes* N/A search of residential premises As in the EU, there have been discussions with respect to the ■ Right to ‘image’ privileged character of legal advice offered by in-house counsel computer hard drives Yes N/A under Romanian legislation. using forensic IT tools The Competition Law recognises and protects the privileged ■ Right to retain character only with respect to communications with an external Yes N/A original documents lawyer. Therefore, it may be concluded that information exchanged ■ Right to require with in-house legal counsel is not covered by such privilege. an explanation Yes N/A However, if the investigated undertaking proves that the documents of documents or prepared by in-house legal counsel have been drafted and/or information supplied circulated for the sole purpose of exercising the right of defence, ■ Right to secure premises overnight Yes N/A such documents may be considered as privileged. Until this moment, (e.g. by seal) to our knowledge, there has been no case law in this regard.

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However, the level of the fine reduction will be decided by the 2.7 Please list other material limitations of the Competition Council. investigatory powers to safeguard the rights of defence of companies and/or individuals under investigation. 3.4 What are the applicable limitation periods?

As provided above, the attorney-client correspondence is privileged For cartel offences, the right of the Competition Council to apply and cannot be used by the Competition Council for the purpose sanctions is time-barred to five years, calculated as of the latest of establishing an infringement of competition legislation if such enforcement of the cartel by its members. communication has been made in connection with and for the For certain acts, such as providing incomplete information or exclusive purpose of exercising the undertaking’s right of defence. refusing to submit to a raid, the right of the Competition Council to Romania Another limitation of the investigation powers of the competition apply sanctions is time-barred to three years from the date the act inspectors refers to the period when dawn raids may be performed. has occurred. According to the Competition Law, dawn raids of both business and residential premises will be performed between 08:00 and 18:00. A 3.5 Can a company pay the legal costs and/or financial dawn raid may continue after 18:00 only with the express approval penalties imposed on a former or current employee? of the representatives of the investigated undertaking. This situation is not expressly regulated under national legislation. 2.8 Are there sanctions for the obstruction of However, under general principles of law, although unlikely, there investigations? If so, have these ever been used? may be scenarios where an employer could be held liable for paying Has the authorities’ approach to this changed, e.g. the legal costs imposed on one of its current employees. become stricter, recently?

The Competition Law provides that obstructing a dawn raid 3.6 Can an implicated employee be held liable by his/her performed by competition inspectors is considered a misdemeanour employer for the legal costs and/or financial penalties imposed on the employer? and may be sanctioned with a fine between 0.1% and 1% of the turnover of the undertaking for the preceding fiscal year. Although not expressly provided, in consideration of the general There have been cases where the Competition Council has fined principles of law the employer may, at least in theory, hold liable the undertakings for opposing to or obstructing the investigation. One implicated employee for the legal costs and the financial penalties of the highest fines amounted to RON 19 million (approximately imposed on the first. Nevertheless, in practice, there is a slim chance EUR 5 million at that time) and was received by a bank that refused that a court of law will decide in favour of the employer. access to the competition inspectors during a dawn raid.

4 Leniency for Companies 3 Sanctions on Companies and Individuals

4.1 Is there a leniency programme for companies? If so, 3.1 What are the sanctions for companies? please provide brief details.

Cartels are considered to be serious infringements of competition The Competition Council has implemented a leniency programme legislation. The fines that may be applied for such infringements by means of the 2009 “Instructions regarding the conditions could be as high as 10% of the turnover of the undertaking for the and application criteria of the leniency policy” (hereinafter the preceding year. Generally, cartel fines tend to be in the higher part “Leniency Instructions”). of the fine range, due to the serious disruption of the market that According to the aforementioned document, the Competition such conduct usually creates. Council rewards the undertakings that cooperate with the authority for the purpose of facilitating the discovery and the de-structuring 3.2 What are the sanctions for individuals (e.g. criminal of a cartel. sanctions, director disqualification)? More specifically, the undertaking which is first to inform the Competition Council on the existence of the cartel to which it is a As provided under question 1.1, the wilful set-up or organisation party, and provides sufficient evidence to the competition authority of a cartel by any director, legal representative or member of the in this regard, may be totally exempted from sanctions under the management of an undertaking is considered a criminal offence Competition Law. The conditions for obtaining total immunity punishable with imprisonment of six months to five years or with a from fines are stringent and require full and complete cooperation of fine and the interdiction of certain rights. the undertaking applying for immunity. Notwithstanding the above, an undertaking that has put pressure on 3.3 Can fines be reduced on the basis of ‘financial undertakings to join the cartel or to remain a party to it, shall not hardship’ or ‘inability to pay’ grounds? If so, by how benefit from the immunity from fines. However, such undertakings much? may benefit from a reduction of the applicable fine in accordance with the Leniency Instructions. In certain circumstances, the Competition Council may consider If the undertaking provides details of the existence of a cartel but reducing the fine imposed to an undertaking in the case the latter does not qualify for total immunity for fines under the leniency proves, beyond any doubt, that paying the fine will jeopardise programme, it may still obtain a reduction of the fine, if the the existence of such undertaking, namely that it will force the information provided to the authority significantly supplements the undertaking to exit the relevant market. data already obtained by the Competition Council.

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4.2 Is there a ‘marker’ system and, if so, what is required 5 Whistle-blowing Procedures for to obtain a marker? Individuals

In line with EU legislation, Romania has implemented a ‘marker’ 5.1 Are there procedures for individuals to report cartel system. conduct independently of their employer? If so, In order to obtain a ‘marker’, the interested undertaking must please specify. submit an application with the Competition Council containing the name and the address of the undertaking, the parties involved in The Competition Council has implemented an online whistle-blower the cartel, the affected product and market, the type of agreement platform aimed at facilitating the discovery of cartels. Individuals who Romania generating the prohibited conduct, and the estimated duration of the have information on cartels set up by their employers may use this infringement, as well as a short description of the mechanism of the online platform for sending anonymous messages to the Competition illegal conduct. Council concerning the illegal agreement/practice. The platform is The ‘marker’ system has been implemented in order to protect an designed to ensure the total anonymity of the individual accessing it. applicant for a limited period of time, while gathering information Notwithstanding the above, according to the Competition Law, and evidence regarding the prohibited practice. any director, legal representative or member of the management of an undertaking, involved in the setting-up of a cartel who, before the start of a criminal investigation, discloses to the criminal 4.3 Can applications be made orally (to minimise any investigation body his participation to a cartel shall not be punished, subsequent disclosure risks in the context of civil damages follow-on litigation)? if the disclosure leads to the identification of other participants to such cartel. Usually, the leniency applications are made in writing. However, in exceptional cases, they may be made orally, but will be recorded by 6 Plea Bargaining Arrangements the competition authority in audio format.

6.1 Are there any early resolution, settlement or plea 4.4 To what extent will a leniency application be treated bargaining procedures (other than leniency)? Has confidentially and for how long? To what extent the competition authorities’ approach to settlements will documents provided by leniency applicants be changed in recent years? disclosed to private litigants?

At present, cartel offences are eliminated from the applicability of The leniency application and all documents submitted in this regard the commitments procedure. Therefore, cartel participants cannot will be included in the investigation file. Consequently, they cannot offer commitments in order to address any competition concerns be disclosed or used for other purposes than the enforcement of of the authority. According to the applicable legislation, the Article 5(1) of the Competition Law or Article 101(1) of the TFEU. commitments procedure is suitable only for minor infringements of However, the undertakings involved in the investigation will be competition law, such as vertical agreements, when fair competition allowed access to the file as part of their right of defence. The on the market may be swiftly restored by accepting the commitments leniency application may be reviewed by the other cartel members, made by investigated parties. provided, however, that they do not have the right to copy it or use the information contained therein for purposes other than the exercise of their right of defence. 7 Appeal Process The Leniency Instructions expressly provide that no other parties, including the party that has filed a complaint, will have access to 7.1 What is the appeal process? the statements and documents submitted by the leniency applicant. Nevertheless, under the claim for civil damages, the court may The Competition Law provides that any decisions of the require the Competition Council to provide information and/or Competition Council imposing sanctions for cartel conduct may be documents included in its file. In such situation, the court will appealed with the Bucharest Court of Appeal, within 30 days of the ensure the protection of confidential information. communication of the challenged decision.

4.5 At what point does the ‘continuous cooperation’ 7.2 Does an appeal suspend a company’s requirement to requirement cease to apply? pay the fine?

An undertaking that applies for the leniency programme must An appeal does not automatically suspend the obligation to pay the cooperate with the Competition Council until the finalisation of fine. Such suspension may be obtained only in court, for justified the investigation. Only at that time will the undertaking be granted reasons, and only with the payment of a bail. However, in practice, immunity from fines, provided that all conditions prescribed in the this happens infrequently. Leniency Instructions have been met in full. 7.3 Does the appeal process allow for the cross- 4.6 Is there a ‘leniency plus’ or ‘penalty plus’ policy? examination of witnesses?

At this moment, in Romania none of the aforementioned policies Considering the provisions of the Civil Procedure Code, the have been implemented. cross-examination of witnesses is allowed only to prove facts in connection with the investigated conduct.

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8 Damages Actions 8.5 What are the cost rules for civil damages follow-on claims in cartel cases?

8.1 What are the procedures for civil damages actions for loss suffered as a result of cartel conduct? Is the As a general rule, the judge will order the unsuccessful party to position different (e.g. easier) for ‘follow-on’ actions totally or partially pay the other party’s legal costs. When the judge as opposed to ‘stand alone’ actions? does not rule entirely in favour of one party, he will decide on how the legal costs will be allocated between the parties. The procedure for civil damages actions for loss suffered as a result of cartel conduct is regulated by the newly enacted Government 8.6 Have there been any successful follow-on or stand Emergency Ordinance No. 39/2017 on the civil damages actions alone civil damages claims for cartel conduct? If there Romania based on infringements of competition legislation. These new rules have not been many cases decided in court, have must be read together with the provisions of the Civil Procedure there been any substantial out of court settlements? Code on general actions for damages. Therefore, any person affected by cartel conduct will have to prove in court the (i) existence of the Given that the procedural framework created by GEO No. 39/2017 cartel, (ii) the damage it has incurred as a result of the cartel, and (iii) has just been put in place, to our knowledge, there have been no the link between the damage and the cartel. follow-on or stand alone civil damages claims or settlements outside The action for civil damages must be filed with the Bucharest the court in this regard. Tribunal, whose decision may be further appealed. In ‘follow on’ cases, the existence of the cartel has already been 9 Miscellaneous proved by the Competition Council. Therefore, the burden of proof is significantly lower on the claimant. The difficulty in gathering the required information by the claimant for proving the existence of 9.1 Please provide brief details of significant, recent or the cartel usually deters this type of action in ‘stand alone’ actions. imminent statutory or other developments in the field of cartels, leniency and/or cartel damages claims. Unfortunately, at the time of writing we have no information on successful ‘follow on’ or ‘stand alone’ actions brought in court The adoption of GEO No. 39/2017 created the specific and most against the participants of a cartel. welcomed framework for civil damages claims linked to competition legislation infringements. There is still a long way until the action 8.2 Do your procedural rules allow for class-action or for damages will become frequent, acting as an effective deterrent representative claims? for prospective infringers of competition legislation, but the newly enacted legal provisions represent a good start in this direction. The Competition Law provides that legally registered associations It is now on the entities affected by infringements of competition for the protection of consumers may file actions for damages on legislation to use the remedies at their disposal and on the courts to behalf of consumers. The same right is provided for professional or justly apply the new legislative framework. owner associations on behalf of their members.

9.2 Please mention any other issues of particular interest 8.3 What are the applicable limitation periods? in your jurisdiction not covered by the above.

Civil damages actions may be filed within five years, calculated as of The Competition Council, in collaboration with the National the moment when the competition legislation infringement ceased, Authority for Consumers Protection, has initiated an online platform but not before the moment when the claimant knew or should have which allows consumers to compare prices of certain consumer known the following: (i) the existence of a conduct which infringes goods between various retailers. This mechanism is seen by the competition legislation; (ii) that such conduct caused a damage to competition authority as a mean of increasing transparency on the the claimant; and (iii) the infringer’s identity. GEO No. 39/2017 retail market, thus enhancing competition between the relevant also provides for specific causes and events which suspend or players. interrupt the statute of limitation.

8.4 Does the law recognise a “passing on” defence in civil damages claims?

The defendant in a civil damages claim may use, as a defence, the fact that the claimant transferred to third parties (in full or in part) any price increase which may have occurred as a result of the infringement.

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Remus Ene Pachiu & Associates 13 Barbu Delavrancea Street Bucharest 1 011351 Romania

Tel: +40 21 312 10 08 Fax: +40 21 312 10 09 Email: [email protected] URL: www.pachiu.com

Romania Remus is a Partner of the firm and in charge of the competition and IP practice areas of the Corporate Practice Group. He has extensive experience in commercial law, assisting various clients in complex transactions, as well as with respect to their day- to-day business. Regarding the competition field, Remus has expertise in providing assistance with regards to mergers control, the structuring and implementation of distribution channels in accordance with competition legislation and review of the commercial behaviour and contracts of clients in order to prevent the infringement of Romanian and European competition legislation. In the intellectual property field, Remus was responsible for multiple core legal issues surrounding the rights of ownership of copyrights, trademarks, patents, industrial designs, computer software and databases. Remus holds a Postgraduate diploma in Competition Law from King’s College and attended the summer courses of the Academy of European Law on European Competition Law. Remus is fluent in Romanian and English and conversant in French.

Pachiu & Associates is a leading business law firm based in Bucharest. The firm has a strong focus on the energy sector. Pachiu & Associates has full transactional capabilities in energy projects being noted for the commitment and ability to assist clients with their most complex and demanding legal and business challenges worldwide. We are the exclusive Romanian member of the Europe-wide network for leading energy law and consultancy firms, Associated European Energy Consultants (AEEC) and its lawyers are active members of the Association of International Petroleum Negotiators, the Working Group on Energy Security, the US-Romania Strategic Partnership, Consulegis International Network of Law Firms and the Energy Policy Group which is a Bucharest- based, non-profit, independent think-tank specialising in energy policy, markets and strategy analysis. We also share privileged relationships with some of the leading global law firms like Herbert Smith Freehills, Mayer Brown, Norton Rose, Taylor Wessing or Freshfields, which enables us to provide integrated solutions worldwide. We are always keeping an eye open to any cross–selling and new business opportunity which arises in our well established network of clients and partners. It gives us great satisfaction whenever our efforts turn into value for our clients. www.pachiu.com

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Russia Artur Rokhlin

INFRALEX Victor Fadeev

According to part 4 of article 11 of the Antitrust Law, other 1 The Legislative Framework of the Cartel agreements between business enterprises are prohibited, if it is Prohibition established that such agreements lead or can lead to competition restriction. To that extent, such agreements are not considered to be cartels. 1.1 What is the legal basis and general nature of the cartel prohibition, e.g. is it civil and/or criminal? 1.3 Who enforces the cartel prohibition? The meaning of cartel, as well as prohibition of cartel agreements, is given in article 11 of the Federal law of July 26, 2006 No. 135- The regulatory authority − Federal Antimonopoly Service (FAS FZ “On competition protection” (the Antitrust Law), which also Russia) and its territorial agencies. establishes antitrust violation proceedings, including cartel case In certain cases, evidence relating to a cartel (please see question proceedings. 3.2 for more details) is reported to law enforcement agencies if it is Entering into cartel agreements is subject to administrative liability subject to criminal liability. and, in certain circumstances, criminal liability, in accordance with the Code of Administrative Offences of the Russian Federation (the CoAO RF) and the Criminal Code of the Russian Federation (the 1.4 What are the basic procedural steps between the opening of an investigation and the imposition of CC RF), respectively. Alongside that, persons whose rights and sanctions? interests are violated as a result of the antitrust law breach have the right to appeal to the court and to the Commercial Court with There is no such official expression as “antimonopoly authority claims, including claims for damages and loss of profit recovery, in investigation” (investigation) in the existing regulatory documents. accordance with the established procedures. However, according to part 2 of article 39 of the Antitrust Law, the Thus, criminal, administrative and civil liabilities are provided for following are grounds for the initiation and consideration (hearing) when entering into cartel agreements in the Russian Federation. of a case for violation of the Antitrust Law by the antimonopoly authority: 1.2 What are the specific substantive provisions for the 1) evidence delivered from public authorities and local cartel prohibition? authorities indicating signs of violation of the Antitrust Law; 2) a statement from a legal entity (company) or an individual According to part 1 of article 11 of the Antitrust Law, cartels indicating signs of violation of the Antitrust Law; are prohibited. The interdiction on cartels has a character of 3) detection by the antimonopoly authority of signs of violation “per se” prohibitions, which means that a cartel is forbidden no of the Antitrust Law; matter whether the negative consequences occurred or the parties 4) media reports indicating signs of violation of the Antitrust commenced its realisation. Cartels are any agreements between Law; and competitive business enterprises, i.e. between enterprises carrying 5) results of control indicating signs of violation of the Antitrust out the sale of goods on the same commodity market, or acquisition Law. of goods on the same commodity market, if such agreements lead or can lead to: According to part 3 of article 39 of the Antitrust Law, cases of violation of the Antitrust Law can be considered by the antimonopoly 1) establishment or maintenance of the prices (tariffs), discounts, extra charges (surcharges) and/or margins; authority in the place of violation, or in the location or residence of the person whom the application or submitted materials concern. 2) increase, decrease or maintenance of the tender prices; The Federal antimonopoly authority is entitled to consider specified 3) division in the commodity market by the territorial principle, cases irrespective of the place of violation or the location or residence the volume of sale or purchase of goods, the range of of the person whom the application or submitted materials concern. the marketable goods or the group of sellers or buyers (customers); If eligible, the antimonopoly authority initiates proceedings upon 4) reduction or cessation of the production of goods; and violation of the Antitrust Law. For consideration of each case of violation under article 11 of the Antitrust Law, a commission on the 5) refusal from conclusion of contracts with certain sellers or consideration of the violation of the Antitrust Law (acting on behalf buyers (customers).

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of the antimonopoly authority) is created. The commission consists Investigatory Power Civil/Administrative Criminal of employees of the antimonopoly authority. The members of the Carry out an commission and its Chairman are approved by the antimonopoly unannounced No Yes authority. The case is considered by the commission within a term search of residential not exceeding three months. The specified term can be extended premises by the commission for the period not longer than six months. The ■ Right to ‘image’ computer hard drives Yes Yes commission considers cartel agreement cases at its meetings. The using forensic IT persons participating in a case are notified about the time and place tools of its consideration. Upon the results of consideration of each case, ■ Right to retain Yes Yes* the decision is delivered and the instruction to rectify violations can original documents Russia be issued. Before delivering the decision, the commission should ■ Right to require an explanation send the so-called “report on circumstances”. In its essence, the Yes Yes report on circumstances is a predecision which should disclose all of documents or information supplied the circumstances established by the commission during hearing the ■ Right to secure case, and basic conclusion on the presence or absence of an antitrust premises overnight No Yes violation. After receipt of the report on circumstances, the parties to (e.g. by seal) the case are entitled to present their objections. Upon consideration of all the objections of the parties, the commission may: Please Note: * indicates that the investigatory measure requires ■ continue the hearing of the case if, on the basis of the the authorisation by a court or another body independent of the objections, it finds signs of another breach of antimonopoly competition authority. legislation; ■ terminate the case if, on the basis of the objections, it finds the 2.2 Please list specific or unusual features of the absence of signs of antitrust legislation violations; or investigatory powers referred to in the summary table. ■ deliver the decision on the case. After the decision is delivered, FAS initiates administrative FAS carries out actions listed in the table above following the orders offence proceedings to bring the guilty persons to administrative of the Head of the antimonopoly authority. Separate actions, such responsibility. as the right to retain original documents and/or search residual If eligible (for more details please see question 3.2), case materials premises, may be conducted exclusively by law enforcement are transferred to law-enforcement authorities for further initiation authorities upon authorisation of the court; for such purposes, FAS of criminal proceedings and prosecution. is entitled to involve police officers. The act of inspection is drawn up on the basis of results of the carried-out check.

1.5 Are there any sector-specific offences or exemptions? 2.3 Are there general surveillance powers (e.g. bugging)? The current legislation does not provide for any sector-specific offences or exemptions. FAS has no such powers. Nevertheless, according to point 11, part 1 of article 23 of the Antitrust Law, the antimonopoly authority, in accordance with the established procedure, can request that law 1.6 Is cartel conduct outside your jurisdiction covered by enforcement authorities carry out special investigative actions. the prohibition? The results of such actions (including the results of listening to telephone negotiations) are used by the antimonopoly authority for According to part 2 of article 3 of the Antitrust Law, the provisions consideration of cartel cases along with other sources of evidence. of the Law are applied to agreements between Russian and (or) foreign individuals or organisations, concluded outside the territory of the Russian Federation, as well as to actions between them, if 2.4 Are there any other significant powers of such agreements or actions have an impact on competition in the investigation? territory of the Russian Federation. FAS is entitled to request any information and documents (including commercially confidential information). 2 Investigative Powers FAS is entitled to involve and appoint experts and expertise.

2.1 Summary of general investigatory powers. 2.5 Who will carry out searches of business and/or residential premises and will they wait for legal Table of General Investigatory Powers advisors to arrive?

Investigatory Power Civil/Administrative Criminal Survey and examination of office territories and premises are Order the production carried out by FAS employees. In accordance with administrative of specific documents Yes Yes or information regulation, FAS is not entitled to conduct house-checks, and for this Carry out compulsory purpose police officers can be involved. interviews with Yes Yes There are no special law provisions that provide for the conduct of individuals FAS examinations in the presence of legal advisors. Carry out an unannounced search Yes Yes* of business premises

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perpetrator’s expenses on the purchase of goods exceeds 75% from 2.6 Is in-house legal advice protected by the rules of the total sum of such sale proceeds from realisation of all goods, privilege? or the administrative offence is made on a commodity market, and realisation of such goods is regulated by tariffs as in accordance The current legislation does not provide for in-house legal privilege with legislation of the Russian Federation, there is a penalty which in this situation. amounts to 3/1,000 to 3/100 of the sum of sales proceeds of the perpetrator, or the sum of the perpetrator’s expenses on purchase of 2.7 Please list other material limitations of the goods, but not less than 100,000 rubles. investigatory powers to safeguard the rights of defence of companies and/or individuals under 3.2 What are the sanctions for individuals (e.g. criminal Russia investigation. sanctions, director disqualification)?

The survey of the territory and premises must be made in the For office-holders, article 14.32 of the Administrative Code provides presence of not less than two witnesses. administrative sanctions in the form of a penalty of 20,000 to 50,000 For public servants, the following duties are required: rubles, or disqualification for up to three years. ■ not to impede the presence of executive managers, managers In certain cases, cartel agreements can entail criminal liability. and official representatives of the company during the search, According to article 178 of the Criminal Code of the Russian and to answer questions related to the subject of the search; Federation, cartels that cause major damage to citizens (exceeding ■ to provide information and documents related to the 10 million rubles), organisations or the state, or generation of income search to the executive manager, managers and the official of a large size (exceeding 50 million rubles) shall be punished by: representatives of the company who are present during the a penalty from 300,000 to 500,000 rubles or at a rate of a salary search; or other income condemned for the period from one to two years; ■ to brief the executive manager, managers and official forced labour for a period of up to three years, with deprivation of the representatives of the company with the results of the search; right to hold certain positions or to be engaged in certain activities ■ before carrying-out of the field search, by the request of the for a period of up to one year or without such; or imprisonment for executive manager, managers and official representatives a period of up to three years with deprivation of the right to hold of the company, to instruct them on the provisions of certain positions or to be engaged in a certain activity up to one year administrative regulations according to which the search is carried out; and or without such. ■ not to disclose information containing state, commercial and A cartel that causes especially large damage (exceeding 30 million business secrets or other secrets protected by the law and rubles), or entails commercialisation on an especially large scale received by the antimonopoly authority, except as otherwise (exceeding 250 million rubles), is punished by: forced labour for stipulated by the legislation of the Russian Federation. a period of up to five years, with deprivation of the right to hold certain positions or to be engaged in a certain activity for a period of up to three years or without such; imprisonment for a period of up 2.8 Are there sanctions for the obstruction of investigations? If so, have these ever been used? to six years with a penalty of up to one million rubles, or at a rate of Has the authorities’ approach to this changed, e.g. a salary or other income of the convicted for a period of up to five become stricter, recently? years or without such; or deprivation to hold certain positions or to be engaged in certain activities for a period of between one and three There is a penalty under article 19.8 of the CoAO RF for failure to years or without such. provide information required by FAS: from 1,500 to 2,500 rubles Cartels which were concluded with violence or with the threat of for individuals; from 10,000 to 15,000 rubles for managers; and violence are punished by forced labour for a period of up to five from 50,000 to 500,000 rubles for legal entities. In practice, such years, with deprivation of the right to hold certain positions or to violations and penalties are common. be engaged in certain activities for a period of between one and There is also a penalty for persons who obstruct access to the three years, or imprisonment for a period of up to seven years with territory or premises for employees of the antimonopoly authority deprivation of the right to hold certain positions or to be engaged in when they are carrying out a check. However, such measure is certain activities for a period of between one and three years. uncommon in practice. These sanctions have remained the same as in past years. 3.3 Can fines be reduced on the basis of ‘financial hardship’ or ‘inability to pay’ grounds? If so, by how much? 3 Sanctions on Companies and Individuals FAS imposes an administrative penalty within frames established 3.1 What are the sanctions for companies? by the CoAO RF. FAS can defer penalty payment for a period of up to three months According to article 14.32 of the CoAO RF, there is a penalty for if, when taking into account the financial position of the person legal entities which can amount to 1/100 to 15/100 of the sum of brought to administrative responsibility, there are circumstances the sales proceeds of the perpetrator in the market where the cartel where payment of a penalty is impossible within the established was revealed, or the sum of the perpetrator’s expenses on purchase time limits. of goods in such market, or from 1/10 to ½ of the initial price of The sum of penalty can be reduced by the court based on the the subject of the tender, but not less than 100,000 rubles. In the constitutional principle of proportionality. case the sum of sale proceeds of the perpetrator or the sum of the

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■ if the person who committed an administrative offence 3.4 What are the applicable limitation periods? prevents harmful consequences of that administrative offence; According to article 41.1 of the Antitrust Law, the limitation period ■ if voluntary compensation is offered by the person who to commence proceedings is three years from the date of completion committed an administrative offence for the damage caused of the violation. or voluntary elimination of such damage; According to article 4.5 of the CoAO RF, the limitation period to ■ voluntary execution of the instruction given by FAS bring to administrative responsibility is one year from the moment concerning remedy of a violation by the person who committed an administrative offence, before FAS has FAS adopted the decision by which the cartel was revealed. announced its resolution on administrative proceedings; Russia ■ if the person who committed an administrative offence is 3.5 Can a company pay the legal costs and/or financial not a facilitator of the limiting competition agreement or of penalties imposed on a former or current employee? coordinated actions and/or has received orders to execute his/her instructions to participate in such agreements and/or The current antitrust legislation does not provide for such actions; and opportunity. ■ if the person who committed an administrative offence has not begun the execution of a limiting competition agreement.

3.6 Can an implicated employee be held liable by his/her Article 14.32 of the CoAO RF also provides for minimal rates of employer for the legal costs and/or financial penalties fines, stipulated by the article, for legal entities which are second imposed on the employer? and third to voluntarily declare a cartel agreement to the Federal antimonopoly service or its territorial authorities and which fulfil In accordance with article 277 of the Labour Code of the Russian the following conditions: Federation, the head of organisation, in cases stipulated by federal ■ the entity admitted the commission of the offence; law, can be held liable to indemnify damages caused by his culpable ■ the entity refused to participate or refused further participation activity. in the cartel agreement; and ■ the submitted information and documents are sufficient to establish the facts of the commission of the administrative 4 Leniency for Companies offence. According to part 3 of article 178 of the CC RF (establishing criminal 4.1 Is there a leniency programme for companies? If so, liability for cartels), the person who has committed an offence shall please provide brief details. be exempt from criminal liability if he/she was the first to expose the committed offence, assisted the clearance of the crime or the According to article 14.32 of the CoAO RF (establishing investigation, reimbursed damages or provided another remedy for administrative responsibility for cartels), an entity which voluntarily harm caused by the cartel, and his/her actions do not contain other declares a cartel agreement to the Federal antimonopoly service components of the crime. or its territorial authorities can be exempted from administrative liability for cartels when satisfying all of the following conditions: 4.2 Is there a ‘marker’ system and, if so, what is required ■ at the moment of the person’s application, the antimonopoly to obtain a marker? authority did not have the relevant information and documents about the committed administrative offence; Neither the legislation nor practice of antimonopoly authorities ■ the entity refused to participate, or refused further has an accurate system of indicators, except for those specified in participation in the cartel agreement, or implementation or question 4.1. further implementation of coordinated actions; and ■ the submitted information and documents are sufficient to establish the facts of the commission of the administrative 4.3 Can applications be made orally (to minimise any offence. subsequent disclosure risks in the context of civil damages follow-on litigation)? The first person, who satisfies all the above-specified conditions, shall be released from administrative responsibility. However, an The current legislation does not provide for the possibility of an oral application submitted simultaneously on behalf of several persons statement regarding a cartel for the purpose of a leniency programme. who entered into a cartel agreement is not subject to consideration. The following circumstances should be considered for mitigating administrative responsibility when making the decision on imposing 4.4 To what extent will a leniency application be treated administrative penalty: confidentially and for how long? To what extent will documents provided by leniency applicants be ■ if there is a voluntary termination of illegal behaviour by the disclosed to private litigants? person who committed an administrative offence; ■ if a voluntary report is submitted by the person who The current legislation does not provide for a confidential mode committed an administrative offence to the authority carrying for applications. At the same time, if such applications contain out the proceedings for the administrative offences; information related to a trade secret, the applicant can specify it, and ■ if the person who committed an administrative offence access to information will be closed for the third parties. assisted the authority carrying out the proceeding of administrative offences by substantiating the facts that have to be established in the case of an administrative offence;

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4.5 At what point does the ‘continuous cooperation’ 7.2 Does an appeal suspend a company’s requirement to requirement cease to apply? pay the fine?

Please see question 4.1. The fine is to be paid from the moment when an administrative decision comes into force. An administrative decision on a cartel case comes into force upon expiration of a 10-day term for its 4.6 Is there a ‘leniency plus’ or ‘penalty plus’ policy? contestation. CoAO RF stipulates that if an administrative decision is contested before the expiration of the 10-day term, its execution No, there is not. is suspended until the decision of the Commercial Court comes into Russia force. 5 Whistle-blowing Procedures for Individuals 7.3 Does the appeal process allow for the cross- examination of witnesses?

5.1 Are there procedures for individuals to report cartel The procedure of hearing in the court of the Russian Federation conduct independently of their employer? If so, provides the right for the parties to put questions to witnesses. please specify.

According to part 2 of article 39 of the Antitrust Law, one of the 8 Damages Actions grounds for initiation and consideration of a case on violation of the antimonopoly legislation by the antimonopoly authority can be, including but not limited to, the statement of the legal entity or an 8.1 What are the procedures for civil damages actions individual indicating signs of violation of the Antitrust Law. Thus, for loss suffered as a result of cartel conduct? Is the any individual can report a cartel. position different (e.g. easier) for ‘follow-on’ actions as opposed to ‘stand alone’ actions?

6 Plea Bargaining Arrangements Currently, there are no special norms relating to compensation of damages caused by a cartel. The Antitrust Law stipulates that persons, whose rights and interests have been infringed as a result 6.1 Are there any early resolution, settlement or plea of a breach of antimonopoly legislation, may claim to the court in bargaining procedures (other than leniency)? Has accordance with the established procedure for damages. the competition authorities’ approach to settlements changed in recent years? Damages compensation caused by cartels can be exercised in the general order of civil legal proceedings. According to article 1064 No, there are not. of the Civil Code of the Russian Federation, the harm caused to the person or property of a citizen, as well as damage caused to the property of a legal entity, shall be reimbursed in full by the tortfeasor. 7 Appeal Process 8.2 Do your procedural rules allow for class-action or 7.1 What is the appeal process? representative claims?

According to article 23 of the Antitrust Law, the decisions and/ There are no special norms regulating private claims for cases of or instructions of territorial antimonopoly authorities can be violation of the Antitrust Law. appealed to the Federal antimonopoly service if such decision and/ Both the Code of Civil Procedure of the Russian Federation and or instruction violates the uniformity of practice of antimonopoly the Arbitration Procedure Code of the Russian Federation stipulate legislation application. Such cases are considered by the collegiate that the claim can be presented to the court collectively by several authority of FAS. claimants (procedural partnership). The procedural partnership is According to article 52 of the Antitrust Law, the decision and/ allowed if: or instruction of antimonopoly authorities can be appealed in the 1) the subject of the dispute consists of collective rights or Commercial Court within three months of the date of the decision or duties of several claimants or respondents; issuance of the instruction. 2) the rights and duties of several claimants or respondents have one ground; or The procedure for challenge of the FAS Commission’s decision does not cease administrative proceedings, which are initiated after 3) the subject of the dispute consists of joint rights and duties. the FAS decision is announced. Each of the claimants or respondents, in relation to the other party, The application for challenging the resolution of administrative appears in the process independently. The joint parties can assign to proceedings must be submitted to the Commercial Court within plead the case to one or several joint parties. three months from the date of obtaining such resolution. In case the A lawsuit can also be brought for the protection of rights and decision and/or instruction was appealed to the collegiate authority legitimate interests of a group of entities. A legal case on such court of FAS, the acts delivered under the antimonopoly case may be claim will be initiated, if: appealed to the Commercial Court within one month from the date 1) the plaintiff and all other entities for the protection of whom when the collegiate commission act came into force. the class action lawsuit was filed are participants of the same legal relationship; and

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2) not less than five entities have joined the demand of the plaintiff. 9 Miscellaneous Please note that this mechanism is not used very often in practice. The antimonopoly authority can apply to court with claims, for 9.1 Please provide brief details of significant, recent or instance: imminent statutory or other developments in the field of cartels, leniency and/or cartel damages claims. ■ on contestation of the act of a state agency; ■ on declaration of the auction to be invalid; At present, the new draft of amendments to the Antitrust Law ■ on enforcement of decisions of the antimonopoly authority; and the CoAO RF has been worked out. The draft law suggests and

Russia considering the antimonopoly compliance system, if such has ■ on collection of monetary damages gained as a result of been adopted, and is applied by the violating entity as a mitigating violation of competition law. liability circumstance. Such court proceedings can be understood as public interest litigation. 9.2 Please mention any other issues of particular interest Furthermore, a prosecutor has the right to apply to the arbitration in your jurisdiction not covered by the above. court: ■ with claims on the contestation of regulatory acts, non- Part 4 of article 11 of the Antitrust Law forbids any agreements regulatory acts of state and local authorities affecting rights between economic entities if it is specified that such agreements and legitimate interests of organisations and citizens in the lead or can lead to competition restriction, except for contracts field of business and other economic activity; and of commercial concession and “vertical” agreements between ■ with a lawsuit for the invalidation of transactions made by economic entities, where each with a share in any commodity state and local authorities, state and municipal enterprises, market less than 20% (the two mentioned exclusions are not applied state institutions and legal entities in charter capital of to “vertical” agreements between financial organisations). Such which the Russian Federation, constituent entity of the agreements can lead, in particular, to the following consequences: Russian Federation or municipal entity, has a share (and on enforcement of the consequences of invalidity of such 1) the imposition on the contract partner of terms that are transactions). disadvantageous for him or not related to the subject of the contract (unreasonable requirements to transfer financial resources, other property, including property rights, and also 8.3 What are the applicable limitation periods? a consent to sign the contract on condition of including the provisions concerning the goods in which the contractor isn’t There are no special norms regulating time limits for making a claim interested, and other requirements); for compensation of harm caused by a cartel. The general period of 2) unreasonable establishment (economically, technologically limitation of civil actions in the Russian Federation is three years. or otherwise) by an economic entity of various prices (tariffs) for the same goods; 3) the creation of barriers preventing other economic entities 8.4 Does the law recognise a “passing on” defence in entering into the commodity market or exiting the commodity civil damages claims? market; and 4) the establishment of conditions of membership (participation) According to article 15 of the Civil Code of the Russian Federation, in professional and other associations. a person whose right is violated is entitled to demand full recovery of According to article 13 of the Antitrust Law, the specified actions damages caused to him/her. “Damages” are understood as expenses can be recognised as admissible if such agreements do not create which the person whose right is violated has incurred or will incur the opportunity for individuals to eliminate the competition in for restoration of the violated right, harm or loss of their property the relevant commodity market; do not impose on parties or third (real loss), and also the lost income which such person would have parties restrictions that do not meet the objectives of such actions gained under the ordinary course of business if his/her right had not (inaction); and agreements and concerted practices, transactions and have been violated (lost profit). other actions if their result is or may be: Thus, the claimant has to prove the existence of damages and the 1) an improvement of production, realisation of goods or size of expenses when applying to court for compensation. stimulation of technical, economic progress or increase of the competitiveness of goods of a Russian manufacturer in the 8.5 What are the cost rules for civil damages follow-on world commodity market; and claims in cartel cases? 2) obtaining advantages (benefits) for buyers proportional to the advantages (benefits) gained by economic entities asa There are no special norms regulating court costs for cartel cases. result of action (inaction), agreements, coordinated actions and transactions. According to the current legislation, the court awards all incurred legal costs to the party in favour of which the judgment took place. Joint venture agreements between business enterprises, which can lead: ■ to establishment or maintenance of prices (tariffs), discounts, 8.6 Have there been any successful follow-on or stand extra charges (surcharges) and/or margins; alone civil damages claims for cartel conduct? If there have not been many cases decided in court, have ■ to the territorial principle governing a section of the there been any substantial out of court settlements? commodity market, by volume of sale or purchase of goods, the range of the realised goods or structure of sellers or buyers (customers); At present, there is no positive practice of compensation of harm caused by cartels. ■ to a reduction or cessation in the production of goods; or

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■ to the refusal to conclude contracts with certain sellers or implementation by its participants of direct investments buyers (customers); this can be recognised as admissible in the territory of the Russian Federation (including the if such agreements do not create for specific entities an introduction of new capacities, modernisation of operating opportunity to eliminate the competition in the relevant capacities); and commodity market, do not impose restrictions on third 2. obtaining advantages (benefits) for buyers, proportional parties, and the result of such agreements is, or can be, in to the advantages (benefits) received by business total: enterprises as a result of actions (inaction), agreements 1. an improvement in manufacturing, realisation of goods and coordinated actions, and transactions. or stimulation of technical, economic progress or Russia

Artur Rokhlin Victor Fadeev INFRALEX INFRALEX Capital City Tower, b.8, str.1 Capital City Tower, b.8, str.1 Presnenskaya nab. Presnenskaya nab. Moscow, 123317 Moscow, 123317 Russia Russia

Tel: +7 495 653 82 99 Tel: +7 495 653 82 99 Email: [email protected] Email: [email protected] URL: www.infralex.ru URL: www.infralex.ru

Artur Rokhlin graduated from the law department of Lomonosov Viсtor Fadeev graduated with Honours from the Faculty of Moscow State University in 1996, and the Russian School of International Law at the Moscow State Institute of International Private Law in 1998. From 1997–2000, Artur worked for OJSC Relations (MGIMO University) of the Ministry of Foreign Affairs of the Boguchangesstroi (a subsidiary of RAO UES of Russia). From 2000 Russian Federation with a specialisation in international merchant to 2013, he worked for YUST Law Firm, becoming a partner in 2006. law in 2008. In 2010, he obtained a Master’s degree in international In 2001, he received his credentials as an attorney, and in 2007 he private and civil law. In 2010, Mr. Fadeev started working on his became one of the founders of the non-profit partnership “Advancing doctoral dissertation, “[t]he correlation of bank guarantees and Competition” (at present Association of antimonopoly experts). Artur standby letters of credit in the legislation of the Russian Federation participated in the activities of the NP, “Advancing Corporate Law”, and the USA”, in the Department of International Private and Civil from 2011–2013, and has been a partner at INFRALEX Law Firm since Law of MGIMO. From February 2012, Victor Fadeev worked in the 2014. competition regulation practice of a Russian law firm and in July, 2015, he joined the antimonopoly practice team of INFRALEX. Artur is the author of numerous articles on competition and civil law. Since 2009, he has been recommended by Best Lawyers for Competition Law and Litigation (Lawyer of the Year 2014). He was recommended in the European Legal Experts journal as an expert on Corporate Law and Mergers and Acquisitions.

INFRALEX is a national law firm created by partners with over 20 years of work experience and well recognised by leading professionals in their fields. The firm offers legal counselling services for government and private business projects. The partners of INFRALEX have represented clients in a series of precedent-setting cases related to the application of tax law, competition law and insolvency law (bankruptcy). The lawyers of INFRALEX actively participate in working groups and expert organisations, and collaborate with the Federal Antimonopoly Service of Russia on issues related to the improvement of Russian antitrust legislation. Partner Artur Rokhlin is one of the founders of the non-profit partnership “Advancing Competition” (at present Association of antimonopoly experts). He has been repeatedly recognised by the Federal Antimonopoly Service of Russia for his active participation in formulating antitrust practices. The lawyers of INFRALEX provide advice to clients on all matters of antitrust regulation of companies and governmental authorities’ activities.

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Singapore Lim Chong Kin

Drew & Napier LLC Corinne Chew

The illustrative list in section 34(2) of the Act is not intended to 1 The Legislative Framework of the Cartel be exhaustive, and the CCS has specified in the CCS Guidelines Prohibition on the Section 34 Prohibition 2016 (the “Section 34 Guidelines 2016”) that other types of arrangements may have the effect of preventing, restricting or distorting competition (e.g. information 1.1 What is the legal basis and general nature of the cartel prohibition, e.g. is it civil and/or criminal? sharing agreements). Arrangements involving price-fixing, bid-rigging, market sharing Competition law in Singapore is governed by the Singapore or output limitation are considered by the CCS to always have an Competition Act (Cap. 50B) (the “Act”), and is enforced by the appreciable effect on competition such that it is not necessary for Competition Commission of Singapore (“CCS”). the actual effects of such arrangements to be analysed before an Currently, there is no criminal liability in respect of competition law infringement is found. violations, and penalties are monetary in nature. The CCS can also One important qualification on the application of the Section 34 issue directions to bring the violation to an end and, where necessary, Prohibition is that it does not apply to arrangements that give rise to require action to be taken to remedy, mitigate or eliminate any net economic benefit (an exclusion that is provided for in paragraph adverse effects of the violation and to prevent the recurrence of the 9 of the Third Schedule to the Act). In order to qualify for the same. However, criminal liability can arise in circumstances where exclusion, it must be shown that the arrangement: undertakings or individuals obstruct the CCS in the performance of ■ contributes to improving production or distribution, or its duties, or refuse to provide information requested pursuant to the promoting technical or economic progress; CCS’s statutory powers, etc. ■ does not impose on the undertakings concerned restrictions that are not indispensable to the attainment of those 1.2 What are the specific substantive provisions for the objectives; and cartel prohibition? ■ does not afford the undertakings concerned the possibility of eliminating competition in respect of a substantial part of the Cartel activities are prohibited by section 34 of the Act (the “Section goods or services in question. 34 Prohibition”), which provides: Additionally, the Section 34 Prohibition does not apply to vertical “…agreements between undertakings, decisions by associations of agreements unless the Minister otherwise specifies by order undertakings or concerted practices which have as their object or (paragraph 8 of the Third Schedule to the Act). To date, the Minister effect the prevention, restriction or distortion of competition within has not specified any vertical agreement to which the Section 34 Singapore are prohibited…” Prohibition will apply. Section 34(2) of the Act provides examples of the types of arrangements that may fall within the ambit of this prohibition. 1.3 Who enforces the cartel prohibition? Specifically, section 34(2) of the Act states that agreements, decisions or concerted practices may have the object or effect of Competition law in Singapore is enforced by the CCS, a statutory preventing, restricting or distorting competition within Singapore body established under Part II of the Act. The CCS has the ability to if they: investigate suspected violations of competition law, and to impose ■ directly or indirectly fix purchase or selling prices or any sanctions in respect of such violations. other trading conditions; ■ limit or control production, markets, technical development or investment; 1.4 What are the basic procedural steps between the opening of an investigation and the imposition of ■ share markets or sources of supply; sanctions? ■ apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive The CCS has the power to conduct an investigation under section disadvantage; or 62(1)(a) of the Act, if “it has reasonable grounds for suspecting that ■ make the conclusion of contracts subject to acceptance by the section 34 prohibition has been infringed by any agreement”. the other parties of supplementary obligations which, by their Any investigation will be carried out by either the CCS or a duly nature or according to commercial usage, have no connection appointed inspector (section 62(2) of the Act). with the subject of the contracts.

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After investigations, if the CCS proposes to make a decision that Investigatory Power Civil/Administrative Criminal the Section 34 Prohibition has been infringed, the Competition ■ Right to require Regulations 2007 requires the CCS to first give the parties involved an explanation Yes N/A notice via a proposed infringement decision (“PID”), which will set of documents or out the reasons for the CCS’s proposed decision and the facts that it information supplied has relied on. The parties will have the opportunity to make written ■ Right to secure premises overnight Yes N/A and oral representations, and to inspect the CCS’s file. The PID (e.g. by seal) is confidential and only issued to the parties that are subject to the proposed enforcement action. Please Note: * indicates that the investigatory measure requires Thereafter, and upon consideration of the representations, the the authorisation by a court or another body independent of the

CCS will issue its infringement decision, imposing sanctions as competition authority. Singapore determined by the CCS. 2.2 Please list specific or unusual features of the 1.5 Are there any sector-specific offences or exemptions? investigatory powers referred to in the summary table.

Certain liner shipping agreements are exempt from the application The power to search premises is generally limited to business of the Section 34 Prohibition, by way of a Block Exemption Order premises and vehicles. However, the CCS does have limited power (“BEO”). The BEO initially took effect on 1 July 2006 for a to search residential premises where they are used in connection period of five years, and its extension until 2015 was granted by with the affairs of an undertaking, or when documents relating to the the Minister for Trade and Industry on 16 December 2010. The affairs of an undertaking are kept there. BEO was then subsequently extended by the CCS, and will now apply until 31 December 2020. The liner shipping BEO is the only 2.3 Are there general surveillance powers (e.g. bugging)? BEO that has been granted in Singapore since the introduction of competition law. No such power is expressly afforded to the CCS under the Act. Other specific activities and industries excluded from the application of the Section 34 Prohibition are specified in paragraphs 5, 6 and 7 2.4 Are there any other significant powers of of the Third Schedule to the Act, and include postal services, the investigation? supply of bus and rail services and the supply of piped potable water, amongst others. There is nothing of particular note.

1.6 Is cartel conduct outside your jurisdiction covered by the prohibition? 2.5 Who will carry out searches of business and/or residential premises and will they wait for legal advisors to arrive? Yes, section 33 of the Act specifically states that conduct that takes place outside of Singapore will also be prohibited by the Section 34 Searches are carried out by officers of the CCS, and such other Prohibition if it has the object or effect of preventing, restricting or officers or persons as the CCS has authorised in writing, to distorting competition within Singapore. accompany the investigating officer. Inspectors and other such persons as the inspector requires may also be involved. 2 Investigative Powers If the CCS intends to conduct an unannounced search of a premise, but there is no one currently in the premises, the CCS is required under section 65(10) of the Act to take reasonable steps to inform 2.1 Summary of general investigatory powers. the occupier of the intended entry, and if the occupier is informed, afford him or his legal representative a reasonable opportunity to be Table of General Investigatory Powers present when the warrant is executed. Investigatory Power Civil/Administrative Criminal Regulation 20 of the Competition Regulations 2007 also provides Order the production that an officer shall grant an occupier’s request to allow fora of specific documents Yes N/A reasonable time for the occupier’s professional legal adviser to or information arrive at the premises before continuing investigations, but only Carry out compulsory if the officer considers it reasonable in the circumstance to do so, interviews with Yes N/A and is satisfied that any conditions that he considers appropriate to individuals impose in granting the occupier’s request will be complied with. Carry out an unannounced search Yes* N/A Finally, the CCS Guidelines on the Power of Investigation 2016 of business premises specifies that the right to consult a legal advisor must not unduly Carry out an delay or impede the inspection. Moreover, where an undertaking unannounced Yes* (but limited) N/A has in-house legal advisors on the premises at the time of inspection, search of residential premises the search will not be postponed to allow for external legal advisors ■ Right to ‘image’ to arrive. Also, a search will not be delayed for legal advice where computer hard drives the undertaking has been given prior notice of inspection. Yes N/A using forensic IT tools ■ Right to retain Yes (in certain N/A original documents circumstances)

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remedy, mitigate or eliminate any adverse effect of the infringement. 2.6 Is in-house legal advice protected by the rules of While section 69 provides a general discretion to the CCS in making privilege? directions, the provision provides specific examples of the directions that the CCS may make, including a direction: Section 66(3) of the Act provides that a professional legal adviser ■ requiring parties to the agreement to modify or terminate the is not required to disclose or produce privileged communications agreement; made by them in that capacity. In-house legal advice is protected ■ to pay to the CCS such financial penalty in respect of the by legal professional privilege under the Evidence Act (Cap. 97). infringement as the CCS may determine (where it determines The CCS Guidelines on the Power of Investigation 2016 also states that the infringement has been committed intentionally or that “communications with in-house lawyers, in addition to lawyers negligently), but not exceeding 10 per cent of such turnover in private practice including foreign lawyers, can benefit from the of the business of the undertaking in Singapore for each year Singapore privilege”. of infringement for such period, up to a maximum of three years; ■ to enter such legally enforceable agreements as may be 2.7 Please list other material limitations of the investigatory powers to safeguard the rights of specified by the CCS and designed to prevent or lessen the defence of companies and/or individuals under anti-competitive effects which have arisen; investigation. ■ to dispose of such operations, assets or shares of such undertaking in such manner as may be specified by the CCS; Under section 66(2) of the Act, there is a saving provision in respect and of statements that might tend to incriminate individuals. Where ■ to provide a performance bond, guarantee or other form the individual claims, in advance of making any statement states of security on such terms and conditions as the CCS may that the information disclosed may tend to incriminate him, that determine. statement is then not admissible in evidence against him in criminal proceedings, other than in respect of the obstruction offences as set 3.2 What are the sanctions for individuals (e.g. criminal out in question 2.8 below. However, these statements still have to sanctions, director disqualification)? be disclosed and can be used by the CCS in its investigations. They are also admissible as evidence in civil proceedings, for instance, in There are no sanctions imposed on individuals in respect of cartel appeals before the Competition Appeal Board (“CAB”). conduct or competition law violations. Similarly, parties cannot refuse to provide information or documents In relation to obstruction offences, please refer to question 2.8 on the basis that they are confidential. However, parties are allowed above. to claim confidentiality over any information that they furnish to the CCS and section 89 of the Act protects such confidential information 3.3 Can fines be reduced on the basis of ‘financial by requiring the CCS’s officers and other specified parties handling hardship’ or ‘inability to pay’ grounds? If so, by how such information to preserve and aid in the preserving of secrecy much? including all matters relating to the business, commercial or official affairs of any person. The CCS Guidelines on the Appropriate Amount of Penalty 2016 (the “Penalties Guidelines 2016”) state that, in setting the level of a 2.8 Are there sanctions for the obstruction of financial penalty, the “size and financial position of the undertaking investigations? If so, have these ever been used? in question” may be a relevant consideration. Has the authorities’ approach to this changed, e.g. become stricter, recently? 3.4 What are the applicable limitation periods? Criminal liability can arise in the context of cartel investigations where a person: In relation to a breach of a substantive provision of the Act, there is ■ refuses to provide information pursuant to a requirement on no limitation period within which enforcement proceedings must be him or her to do so; brought by the CCS. ■ destroys or falsifies documents; ■ provides false or misleading information; or 3.5 Can a company pay the legal costs and/or financial penalties imposed on a former or current employee? ■ obstructs an officer of the CCS in the discharge of his or her duties. This is not applicable. There are no sanctions imposed on individuals Offences are punishable by a prison sentence not exceeding 12 in respect of cartel conduct or competition law violations. months, a fine not exceeding $10,000, or both. To date, there have been no such criminal sanctions imposed in Singapore. 3.6 Can an implicated employee be held liable by his/her employer for the legal costs and/or financial penalties 3 Sanctions on Companies and Individuals imposed on the employer?

As far as we are aware, and based on publicly available information, 3.1 What are the sanctions for companies? the position is currently untested in Singapore.

The CCS, under section 69 of the Act, can make such directions as it considers appropriate to bring an infringement to an end, or to

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4 Leniency for Companies 4.3 Can applications be made orally (to minimise any subsequent disclosure risks in the context of civil damages follow-on litigation)? 4.1 Is there a leniency programme for companies? If so, please provide brief details. Yes, leniency applications may be made orally or in writing, according to the Leniency Guidelines 2016. Yes. The CCS’s leniency programme is described in detail in the CCS Guidelines on Lenient Treatment for Undertakings Coming Forward with Information on Cartel Activity 2016 (the “Leniency 4.4 To what extent will a leniency application be treated Guidelines 2016”). confidentially and for how long? To what extent will documents provided by leniency applicants be Singapore Where a party provides sufficient information to the CCS to disclosed to private litigants? establish the existence of cartel activity before the CCS has opened an investigation, that party may benefit from full immunity from The Leniency Guidelines 2016 state that the CCS will “endeavour, financial penalties (“full immunity leniency applications”). To earn to the extent consistent with its obligations to disclose or exchange full immunity, the applicant must also ensure that it: information, to keep the identity of such undertakings confidential ■ provides the CCS with all the information, documents and throughout the course of the investigation, until the CCS issues a evidence available to it regarding the cartel activity; written notice under section 68(1) of the Act of its intention to make ■ grants an appropriate waiver of confidentiality to the CCS in a decision that the section 34 prohibition has been infringed”. respect of other jurisdictions and regulatory authorities which In accordance with section 89(3) of the Act, applicants can request have been notified of the conduct and/or from whom leniency has been sought; confidential treatment to be granted over documents and information provided to the CCS in the course of making a leniency application. ■ unconditionally admits liability to the conduct for which leniency is sought; However, confidentiality claims under section 89 of the Act are still subject to disclosure if lawfully required by any court, and this ■ maintains continuous and complete cooperation throughout may include court-issued discovery orders in the context of private the investigation and until the conclusion of any action by the CCS arising as a result of the investigation; litigation. ■ refrains from further participation in the cartel activity from the time of disclosure of the cartel activity to the CCS (except 4.5 At what point does the ‘continuous cooperation’ as may be directed by the CCS); requirement cease to apply? ■ must not have been the one to initiate the cartel; and ■ must not have taken any steps to coerce another undertaking The Leniency Guidelines 2016 state that continuous cooperation to take part in the cartel activity. must be maintained until “the conclusion of any action by CCS arising as a result of the investigation”. Accordingly, this would After the CCS has opened an investigation, the first party that likely extend to the issuance of an infringement decision by the provides information to the CCS about the cartel that is sufficient CCS, in respect of the conduct in question. for it to issue an infringement decision can benefit from lenient treatment by way of a reduction of up to 100 per cent in the level of the financial penalties (“100 per cent reduction leniency 4.6 Is there a ‘leniency plus’ or ‘penalty plus’ policy? applications”). Subsequent applicants may benefit from a reduction in financial penalties of up to 50 per cent. Yes. Under the CCS’s “Leniency Plus system”, where a party is The leniency programme is also supplemented by the existence of being investigated in respect of its involvement in Cartel A, subject the marker system and the Leniency Plus system. to the fulfilment of the party of the criteria set out in question 4.1, if that party was to provide information in respect of Cartel B it may not only stand to benefit from lenient treatment in respect of Cartel 4.2 Is there a ‘marker’ system and, if so, what is required B, but may benefit from further reductions in penalties in respect of to obtain a marker? Cartel A. Yes. The CCS provides a marker system for full immunity leniency applications and 100 per cent reduction leniency applications (see 5 Whistle-blowing Procedures for question 4.1 for details about the types of applications). If the Individuals applicant is unable to immediately submit sufficient evidence to allow the CCS to establish the existence of the cartel activity, the applicant will be given a limited time to gather sufficient information 5.1 Are there procedures for individuals to report cartel and evidence in order to perfect the marker. If the applicant fails conduct independently of their employer? If so, to perfect the marker within the given time, the next applicant in please specify. the marker queue will be allowed to perfect its marker to obtain immunity or a 100 per cent reduction in financial penalties. Once The CCS currently has a whistle-blower programme, under which it the marker has been perfected, the other applicants in the marker offers financial rewards of up to $120,000 for information relating to queue will be informed that they no longer qualify for full immunity competition infringements (subject to certain criteria and conditions or a 100 per cent reduction in financial penalties. and subject to the discretion of the CCS). The CCS has indicated that whistle-blowers should have direct, or at the very least, indirect, access to inside information surrounding the competition infringements. The CCS has indicated that hearsay information is unlikely to be useful to the CCS.

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6 Plea Bargaining Arrangements 7.2 Does an appeal suspend a company’s requirement to pay the fine?

6.1 Are there any early resolution, settlement or plea bargaining procedures (other than leniency)? Has Yes. Under section 71(2) of the Act, an appeal suspends any the competition authorities’ approach to settlements direction with respect to the payment, or amount, of the financial changed in recent years? penalty imposed. However, an appeal does not suspend any other directions made by the CCS (e.g. relating to the suspension of the The CCS introduced the CCS Practice Statement on the Fast Track activity in question, etc.). Accordingly, to suspend compliance Procedure for Section 34 and Section 47 cases (the “Practice with a direction of the CCS (unrelated to the payment of a financial penalty pending a hearing before the CAB) it would be necessary

Singapore Statement”) on 1 November 2016. The Practice Statement, which came into effect on 1 December 2016, sets out a framework to for the party to apply to the CAB for interim relief. incentivise parties under investigation to co-operate with the CCS to fast track proceedings. The fast track procedure essentially provides 7.3 Does the appeal process allow for the cross- an avenue for parties to admit liability for infringements of the Act examination of witnesses? (and comply with various other conditions) in return for a reduction in the amount of financial penalty to be imposed. Yes. Under Regulation 19(2)(h) of the Appeals Regulations, the The CCS has confirmed that the fast track procedure exists in CAB may give directions in relation to the cross-examination of parallel to the leniency system and is distinct from the voluntary witnesses. Regulation 26(4) of the Appeals Regulations also states commitments process which does not involve any admission that the CAB may “limit the cross-examination of witnesses to any of liability by the parties under investigation and any finding of extent or in any manner it considers appropriate”. infringement under the Act. That said, the CCS has also clarified that admissions and documents provided by a party under the fast track procedure will be deemed to be withdrawn if the fast track 8 Damages Actions procedure no longer applies. The CCS has further stated that it will provide parties with an 8.1 What are the procedures for civil damages actions indicative timetable at the start of the fast track procedure and may for loss suffered as a result of cartel conduct? Is the also request for parties to provide their financial information to position different (e.g. easier) for ‘follow-on’ actions assist in the determination of financial penalties. This is potentially as opposed to ‘stand alone’ actions? helpful to parties as it would enhance the efficiency of proceedings and assist businesses in making the necessary arrangements to Section 86 of the Act provides that any person who suffers loss or cooperate with the CCS. The Penalties Guidelines 2016 state that damage directly as a result of an infringement (including, inter alia, the CCS will also adjust the penalty to take into account the discount of the Section 34 Prohibition) shall have a right of action for relief applicable for an undertaking that agrees to the CCS’s fast-track in civil proceedings. procedure. The discount for fast-track procedure will be in addition Such rights are predicated on an infringement finding by the CCS to any applicable leniency reductions. (i.e. only follow-on claims are allowed), 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 7 Appeal Process other circumstances, or to lodge an appeal with the CAB.

7.1 What is the appeal process? 8.2 Do your procedural rules allow for class-action or representative claims? The appeals process is set out under the Competition (Appeals) Regulations (the “Appeals Regulations”). A party subject to an The only form of group litigation recognised in Singapore is infringement decision by the CCS may appeal the decision by representative actions, governed by Order 15, Rule 12 of the Rules lodging a Notice of Appeal with the CAB, within two months of the of Court. However, notwithstanding that representative actions infringement decision (Regulation 7 of the Appeals Regulations). may be brought, it would still be necessary for parties to establish The CAB may hear appeals on infringement findings by the CCS in that they have suffered loss directly. respect of, inter alia, the Section 34 Prohibition. The CAB’s powers and procedures are set out primarily in section 73 of the Act, and the 8.3 What are the applicable limitation periods? Appeals Regulations. Following the lodgement of a Notice of Appeal, the CCS then has Private actions must be brought within two years from the date that six weeks in which to file its Defence (Regulation 14 of the Appeals the CCS makes a decision or upon the determination of any appeal Regulations). In the usual course, the rest of the process will (if an appeal is brought), as provided under section 86 of the Act. proceed at the direction of the CAB, and may include the filing of written submissions, agreed core bundles of documents and skeletal submissions. 8.4 Does the law recognise a “passing on” defence in civil damages claims? Thereafter, an oral hearing is held to hear the substantive arguments of the parties (Regulation 21 of the Appeals Regulations). The position is currently untested.

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■ the leniency applicant must unconditionally admit liability in 8.5 What are the cost rules for civil damages follow-on respect of the conduct for which leniency is sought. claims in cartel cases? The Penalties Guidelines 2016 reflect changes to the CCS’s earlier approach towards calculating penalties and provide more clarity on In general, “costs follow the event” for most civil actions in the same. Singapore. This means that the costs of an action are usually awarded to the successful litigant. However, any award of costs is The revised CCS guidelines apply to all cases for which the CCS has at the discretion of the court. not issued a PID before 1 December 2016. The Practice Statement (discussed in question 6.1 above) came into effect on 1 December 2016. 8.6 Have there been any successful follow-on or stand

alone civil damages claims for cartel conduct? If there Singapore have not been many cases decided in court, have 9.2 Please mention any other issues of particular interest there been any substantial out of court settlements? in your jurisdiction not covered by the above.

To date, there have not been any follow-on claims brought to court Since the Section 34 Prohibition became effective on 1 January in respect of a violation of the Section 34 Prohibition, nor have 2006, the CCS has issued 10 infringement decisions: there been any publicly available details relating to any private out ■ bid-rigging in the provision of termite control services in of court settlements in Singapore in respect of a violation of the Singapore, 9 January 2008; Section 34 Prohibition. ■ price-fixing in the provision of coach tickets for travelling between Singapore and destinations in Malaysia, 3 November 2009; 9 Miscellaneous ■ bid-rigging in electrical and building works, 4 June 2010; ■ price-fixing of monthly salaries of new Indonesian foreign 9.1 Please provide brief details of significant, recent or domestic workers in Singapore, 30 September 2011; imminent statutory or other developments in the field ■ price-fixing of modelling services in Singapore, 23 November of cartels, leniency and/or cartel damages claims. 2011; ■ information sharing in the provision of ferry services between The CCS completed its review to various guidelines in 2016. Batam and Singapore, 18 July 2012; The Section 34 Guidelines 2016, Leniency Guidelines 2016 and ■ bid-rigging by motor vehicle traders at public auctions, 28 Penalties Guidelines 2016, published on 1 November 2016, are March 2013; revised versions of the CCS’s earlier guidelines. ■ price-fixing of ball and roller bearings sold to aftermarket The Section 34 Guidelines 2016 contain clarifications on the CCS’s customers, 27 May 2014; analytical framework and considerations in relation to the Section ■ infringement of the Section 34 Prohibition in relation to the 34 Prohibition. provision of air freight forwarding services for shipments The Leniency Guidelines 2016 provide greater clarity on the from Japan to Singapore, 11 December 2014; and leniency programme, including the requirements for leniency, ■ infringement of the Section 34 Prohibition in relation to the how a leniency marker or conditional immunity/leniency is distribution of life insurance products in Singapore, 17 March secured, perfected and/or withdrawn, and the disclosure and use of 2016. information obtained from the leniency applicant by the CCS. It also introduced new express requirements (set out in question 4.1 above) for leniency applications: ■ the leniency applicant must grant an appropriate waiver of confidentiality to the CCS in respect of other jurisdictions and regulatory authorities which have been notified of the conduct and/or from whom leniency has been sought; and

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Lim Chong Kin Corinne Chew Drew & Napier LLC Drew & Napier LLC 10 Collyer Quay #10-01 10 Collyer Quay #10-01 Ocean Financial Centre Ocean Financial Centre Singapore 049315 Singapore 049315

Tel: +65 6531 4110 Tel: +65 6531 2326 Email: [email protected] Email: [email protected] URL: www.drewnapier.com URL: www.drewnapier.com

Singapore Chong Kin is a Director with Drew & Napier LLC. He heads both the Corinne is a Director at Drew & Napier LLC. Corinne’s experience Competition and Regulatory (Contentious and Non-Contentious), and extends to all areas of competition law practice, including assisting the Telecommunications, Media and Technology practices. clients in the filing of merger notifications to the CCS, leniency applications and assisting clients with CCS investigations. Corinne Chong Kin has experience in advising the sectoral competition has also assisted multi-national and local companies in setting up regulators on liberalisation matters since 1999, including drafting, competition law compliance and audit structures, dawn raid and whistle- implementing and enforcing the competition law framework for the blowing programmes and conducting audit checks for companies in telecom, media and postal sectors, before moving onto the general a wide range of industries in Singapore and other jurisdictions such Competition Act. as China, Thailand, Malaysia, Indonesia, South Korea and Vietnam. He continues to advise both regulators and industry on competition Corinne’s corporate experience includes providing contractual matters under various sectoral competition codes and is widely and regulatory advice for listed and unlisted companies in a broad acknowledged by peers, clients and rivals as a leading competition spectrum of industries. She has assisted in the reviewing and drafting lawyer in Singapore. of joint venture, shareholder, distribution, as well as sale and purchase agreements. Corinne is listed as a leading individual in Competition Asialaw 2017 lists him as a market-leading lawyer, noting, “[Chong and Antitrust in Singapore by . Kin] is a very technically proficient and commercially savvy lawyer. He Asia Pacific Legal 500 2017 is also very entrenched in the competition space, giving him unique insights into policy direction and interpretation.”; while Chambers Asia describes Chong Kin as “clever, able, bright and estimable man; he is terrific”.

Drew & Napier’s Competition and Regulatory Practice Group, established in 1999, is the oldest and largest dedicated competition law practice in Singapore. Established six years before the enactment of the Competition Act (Cap. 50B) in 2005, our experience has grown in tandem with the development of both national and sectoral competition laws in Singapore. We are the preferred competition law counsel of many regional companies, multinational corporations, associations and government bodies, and regularly assist them on competition matters in Singapore and ASEAN member countries. The Competition and Regulatory Practice Group comprises lawyers that are cross-trained in competition law and economics, who are highly experienced and qualified in handling competition law matters both generally under the Competition Act as well as in the carved-out telecommunications, media, energy and postal sectors.

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Spain

King & Wood Mallesons Ramón García-Gallardo

the method of calculation of fines followed by the Spanish 1 The Legislative Framework of the Cartel Competition Authority provided in that communication, Prohibition the Spanish Competition Authority no longer relies on this communication (see the answer to questions 3.1 and 9.1). ■ Guidelines on Termination by Commitments of Infringement 1.1 What is the legal basis and general nature of the Proceedings (terminación convencional), which were adopted cartel prohibition, e.g. is it civil and/or criminal? on 28 September 2011. According to these guidelines, cartels fall outside the scope of the terminación convencional The Spanish Competition Act (hereinafter, the “Competition Act” request. or SCA) entered into force on 1 September 2007 (Law 15/2007 on ■ In June 2013, the former CNC also published guidelines Defence of Competition) and replaced the former Law 16/1989. on the leniency programme, which replaced the former The Competition Act aims to reinforce the existing mechanisms and provisional guidelines relating to the handling of applications to provide the tools and optimal institutional structure to protect for exemptions and reduction of fines published in February competition in the market. At the same time, it takes into account 2008, which contains non-binding indications aimed at explaining the practical aspects of making leniency the changes introduced at EU level, notably Regulation 1/2003, and applications. the powers of regional governments in this field. It is also worth mentioning that in December 2009, the Spanish In this regard, the enforcement system is also supplemented by Competition Authority published a Guidance Notice on the Law 1/2002 on the coordination of competencies between central activities of trade associations and compliance with competition and regional bodies (see question 9.2). Regional Competition law (Guía para Asociaciones Empresariales). Authorities are empowered to enforce the Spanish Competition Act in cases of antitrust behaviour, the effects of which are limited to Finally, on 5 June 2013, the Spanish Government enacted a new Law the territory of one single autonomous region. In this regard, the 3/2013 of 4 June, establishing the new Markets and Competition procedural and substantive provisions of the Competition Act also National Commission (the Comisión Nacional de los Mercados apply to the Regional Competition Authorities’ actions. Therefore, y la Competencia or “CNMC”). The new Authority merged the leniency applicants are also allowed to submit their application to Spanish Competition Authority with the six Spanish supervisory Regional Competition Authorities. sector regulators (with the exception of the Comisión Nacional del Mercado de Valores, “CNMV” or National Securities Market Currently, eight regions have their own Regional Competition Commission). (See the answer to question 1.3.) Authority with full investigating and enforcement powers (Basque Country, Andalusia, Aragón, Castilla, Catalonia, Galicia, León, and However, the substantive provisions of the Competition Act were Valencia), four regions have an Authority with only investigative not affected by such new law, and only the institutional organisation functions, the final decisions being taken by the Council ofthe was modified. central Spanish Competition Authority (Canary Islands, Madrid, It is worth noting that Spain has just implemented into Spanish law Murcia and Navarra), and five regions still do not have any Authority the EU Directive on Antitrust Damages Actions to remove the main in place (Asturias, Balearic Islands, Cantabria, Castilla-La Mancha obstacles to effective compensation by Royal Decree-Law 9/2017, and Rioja). of 26 May (the “Royal Decree-Law”), with six months of delay, as In addition, the Spanish Government adopted Royal Decree the directive entered into force on 25 December 2014 and had to 261/2008, for the implementation of the Competition Act (the be transposed into national law by 27 December 2016. The Title “Royal Decree”), which came into force on 28 February 2008 and II of the Royal Decree-Law consists of two articles amending the deals with the implementation of some essential aspects of Law Competition Act (Article 3) and the Civil Procedure Act (Article 15/2007, such as “de minimis conduct”, leniency, promotion of 4). Article 3 of the Royal Decree-Law introduces a Title VI in the competition, proceedings, etc. Spanish Competition Act, “Compensation for Damages Caused by Restrictive Practices”, including new Articles 71 to 81. The Spanish Competition Authority has also adopted some guidelines (soft law) in order to more effectively enforce the Spanish competition law has two different aspects: public; and Competition Act and the Royal Decree: private. ■ A communication on the calculation of fines, which was On the one hand, from a public point of view, Spanish competition published in February 2009. However, as a result of the law aims to regulate free trade and therefore it has an administrative Supreme Court’s judgment on 29 January 2015 reviewing nature. Further, the regional and national authorities that apply

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antitrust provisions belong to the State and Regional Administration, 284 refers to price distortion which prevents free competition, respectively. providing imprisonment penalties from six months up to two years On the other hand, Spanish competition law is traditionally together with fines from one to two years; (ii) Article 262, which commercial by nature, as it seeks to regulate undertakings involved refers to bid-rigging in auctions and public tenders, and provides in economic activities. Similarly, the Commercial Courts are in imprisonment penalties from one to three years together with daily charge of the private enforcement of Spanish competition law. fines from one to two years and loss of licence for public bidding; and (iii) Article 281, which may be applied to unlawful competition Cartel infringements are punishable by an administrative sanction conduct consisting of withdrawing raw materials or essential goods consisting of a fine if the penalty is imposed by the National or from the market in order to limit supplies or distort prices, with an Regional Competition Authorities, or by an order for compensation

Spain imprisonment penalty of one to five years and fines of one to two for damages if the penalty is imposed by the Commercial years. Courts. Nevertheless, the Spanish Criminal Code provides a few exceptions rarely applied whereby cartel conduct is punishable by imprisonment (see question 2.1). It can be noted that at the time this 1.3 Who enforces the cartel prohibition? chapter was written, we were aware of criminal proceedings open by a court against aerial firefighting companies suspected of a bid- The Competition Act is enforced, since 7 October 2013, by the rigging cartel on public tenders for firefighting aircraft and related newly created Markets and Competition National Commission (the equipment, which also included bribery, tax fraud, forgery, money Comisión Nacional de los Mercados y la Competencia or “CNMC”) laundering and embezzlement charges. following the enactment on 5 June 2013 of Law 3/2013. The Finally, the Spanish Courts apply certain principles and case law CNMC replaced the former Comisión Nacional de la Competencia related to criminal law when reviewing the administrative decisions (“CNC”), which was active for eight years. of the Spanish Competition Authority. The new Authority, informally known as the “super-regulator”, merges the Spanish Competition Authority with the six Spanish supervisory sector regulators: the Energy National Commission; the 1.2 What are the specific substantive provisions for the cartel prohibition? Telecommunication Market Commission; the Postal Sector National Commission; the Airport Economic Regulatory Commission; the Audio-visual Media Council; and the Railway Regulatory The prohibition of anti-competitive agreements is enshrined in Committee, into one single independent authority. The CNMC Article 1 of the Competition Act, which prohibits any agreement, became operational on 7 October 2013. The status of the new decision or collective recommendation or any concerted or CNMC was set out by Royal Decree 657/2013 of 30 August 2013. consciously parallel practice which has as its object or effect the prevention, restriction or distortion of competition in all or part of The CNMC is an autonomous authority organically and functionally the Spanish market, and in particular those that: independent from the Government but ascribed within the Ministry ■ directly or indirectly fix prices or any other commercial or of Economy. service terms; The CNMC consists of a chairman, a Council and four different ■ limit or control production, distribution, technical investigation directorates, namely a specific Directorate for development or investments; Competition, and three further Directorates for Telecommunications ■ share markets or sources of supply; and the Audio-visual sector, for Energy, and for Transport and the ■ apply dissimilar conditions to equivalent transactions in Postal sector. commercial or service relations, thereby placing some The Council is composed of two chambers: a chamber dealing with competitors at a competitive disadvantage; and competition-related matters; and a chamber dealing with regulatory ■ make the conclusion of contracts subject to the acceptance matters. The chamber for competition matters is chaired by the of supplementary obligations which, by their nature or chairman and composed of four additional members. according to commercial usage, have no connection with the The Chairman holds managerial and representation duties. subject of such contracts. The Directorate for Competition is in charge of conducting It also defines a cartel as “a secret agreement between two or more investigations into cases and preparing files as well as studies and competitors which has as its object fixing prices, production or sales reports. quotas, sharing markets including bid-rigging or restricting imports or exports”. The Council has the final decision-making power. Furthermore, apart from the fines which can be imposed by the The CNMC is controlled by Parliament. The CNMC usually (central or regional) antitrust authorities (see the section below on publishes an annual report and its Chairman appears regularly fines), agreements or any other conduct prohibited by Article 1 of before Parliament. In addition, Law 3/2013 includes provisions on the Competition Act shall be deemed void. transparency and orders the publication of all provisions, decisions, agreements and reports, once notified to the parties and free of In addition, Article 101 of the Treaty on the functioning of the confidential aspects. European Union (“TFEU”) is directly applicable before the Spanish Competition Authorities and takes precedence over Spanish One of the most important changes introduced by the Competition law. Under the system of parallel competences established by Act is the possibility that certain provisions may be directly applied EU Regulation 1/2003, the Spanish Competition Authorities can by the Commercial Courts (i.e., the prohibition of anti-competitive simultaneously apply Article 101 TFEU and Article 1 Law 15/2007 agreements and the abuse of a dominant position). Furthermore, to any competition infringement. the Commercial Courts will be able to award damages based on the Competition Act without requiring a prior administrative decision Finally, although Spanish criminal cartel prosecutions are rather rare, finding an infringement. In view of the increased importance of the Spanish Criminal Code contains a limited number of provisions the Commercial Courts, the Competition Act introduces an amicus regarding unlawful competitive behaviour. For instance: (i) Article curiae system inspired by Regulation 1/2003, under which the

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CNMC and the antitrust regional bodies may submit observations commitment of an infringement, the companies under investigation regarding the application of the Competition Act (see section 8 are heard, and have the option to submit observations on the below). statement of objections (Pliego de Concreción de Hechos). The In fact, this amicus curiae mechanism was used for the first time in Directorate’s fact-finding powers have been reinforced in line with Spain in a €458 million follow-on damage claim (further described in Regulation 1/2003 (for example, it has the power to inspect the question 8.2) initiated by the consumer advocacy group AUSBANC homes of directors, managers and other members of staff and the against Telefónica España in relation to the European Commission power to seal any business premises and books or records for the Decision of 4 July 2007 fining Telefónica over €151 million for period and to the extent necessary for the inspection – see section 2 five years of margin-squeezing practices in the Spanish broadband below). The Council can adopt interim measures at any time during market. Within the framework of this proceeding, the former CNC the course of the proceedings and for an undetermined length of Spain was asked to act as an amicus curiae before the Mercantile Court Nº time. Once the Directorate has finished its investigation, it will 4 of Madrid. As further described in question 8.6, the amicus curiae adopt a proposal for resolution (Propuesta de Resolución), granting provided by the SCA is used more and more by the Spanish Courts. the parties the opportunity to submit their observations again. Thereafter, the Directorate will refer its motion together with the As mentioned above, since the enactment of Law 1/2002, the observations submitted by the undertakings (Informe de Propuesta enforcement of Spanish competition rules (except for merger de Resolución) to the Council, which will assess the case and adopt control) is shared with the regional governments. This law also a final decision on the infringement and imposition of fines. sets out some rules on coordination. Spanish competition rules can be applied by regional authorities provided the conduct in question The Competition Act provides that the maximum length of the has regional scope. For this purpose, regional governments have to procedure is 18 months (although under certain circumstances, this assume these competencies. To date, most of the Spanish regions deadline can be extended). The Royal Decree also determines the have enacted rules but not all of them have established ad hoc maximum length of the investigation phase, i.e., 12 months (the authorities. The Competition Act establishes that the CNMC will resolution may be taken in the remaining time, up to the total of 18 have a duty to request a Regional Authority’s non-binding report on months). The expiration of the 12-month term of the investigation a particular case regarding the application of the Competition Act phase does not have any relevant legal consequence for the provisions or even of Articles 101 and 102 TFEU, provided that the investigated parties, as established by the National High Court’s infringement has a significant impact on the regional territory. judgments of 25 February 2013 and 9 July 2013. In turn, the lapse of the 18-month maximum period provokes the caducity of the on- The merger of the competition regulators (except the CNMV) into the going proceedings but not necessarily the expiration of the CNMC’s CNMC aims at increasing coordination and avoiding discrepancies time-limit for action. in the enforcement of competition rules. If an investigation affects a regulated sector, the respective chamber of the Council dealing with It is important to note that the Supreme Court in a judgment issued that regulatory matter must issue a non-binding report. After the on 26 July 2016 ruled out the National High Court’s case law by non-binding report is issued, in the event of a discrepancy between stating that any suspension of the proceedings, even if the order the Council’s chambers for competition and for regulatory matters, comes after the initial 18-month period, shall be taken into account the matter will be discussed and decided during a plenary session of in order to calculate the maximum duration of the proceedings. the Council. It is in this framework that the CNMC issued a Notice Furthermore, in line with article 9 of the EC 1/2003 Regulation, allowing the use of short-form notifications in specific cases in Article 52 of the Competition Act provides that it is possible which a report from other regulators was required, as opposed to to terminate the proceedings when commitments are offered the situation before. (terminación convencional), as long as these commitments remedy However, it is important to note that the Spanish Parliament is the anticompetitive effects generated by the investigated conducts currently discussing the possibility of splitting the CNMC into two and the public interest is sufficiently guaranteed. The parties independent regulatory bodies. This means that the merger control may offer commitments at any time before the Informe Propuesta regime, as well as other anti-trust proceedings, will be handled by a de Resolución is referred to the Council by the Directorate for new independent administrative body which will only devote itself Competition. to competition issues. On 28 September 2011, the former CNC adopted Guidelines on the termination of infringement proceedings by way of commitments (terminación convencional), which establish the criteria to be 1.4 What are the basic procedural steps between the opening of an investigation and the imposition of applied for granting or rejecting requests for commitments in sanctions? on-going procedures. The Guidelines set out the criteria that the CNMC takes into account when deciding to allow infringement The Competition Act sets up a two-phase procedure: an investigation proceedings to be terminated, subject to the submission of certain is opened and carried out by the Directorate for investigation; and commitments. According to these Guidelines, cartel conducts and the decision is taken by the Council’s Competition Chamber. hard-core restrictions fall outside the scope of the terminación convencional request. Proceedings are initiated by the Directorate for investigation either by its own motion, at the request of the Council or as a result of a non-binding third party complaint. Before opening 1.5 Are there any sector-specific offences or exemptions? formal infringement proceedings, the Directorate for investigation proceeds with a preliminary and initial investigation (información One of the main features of the Competition Act in this field is reservada). During this preliminary phase, the Directorate may the abolition of the system of individual exemptions, in line with carry out inspections and submit formal requests for information. Regulation 1/2003. Therefore, the prohibition described above will Once proceedings have been formally initiated (incoación) because not automatically apply, provided the criteria set out in Article 101.3 the Directorate of Investigation has prima facie evidence of the of the TFEU are met. Furthermore, the EU Block Exemptions will also apply to those agreements even in the absence of any cross-

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border impact. In addition, the Government can adopt block Table of General Investigatory Powers exemptions. For example, under the former Act, the Government Investigatory Power Civil/Administrative Criminal adopted Royal Decree 602/2006, implementing the block exemption on information exchange agreements relating to late payments. Order the production of specific documents Yes No The Competition Act also includes a provision similar to Article 10 or information of Regulation 1/2003 whereby findings of inapplicability may be Carry out compulsory made. interviews with Yes No individuals Nevertheless, pursuant to Article 4 of the Spanish Competition Carry out an Act, the prohibition set out in Article 1 does not apply to conducts unannounced search Yes* No Spain deriving from the application of a law. However, this exception on of business premises the application of the Spanish competition rules is without prejudice Carry out an unannounced to the enforcement of EU competition law provisions when both are Yes* No simultaneously applicable. search of residential premises Similarly, the prohibition will not apply to conducts of minor ■ Right to ‘image’ importance that qualify as “de minimis”, according to the criteria computer hard drives Yes No set out in Article 3.1 of Royal Decree 261/2008. The former CNC using forensic IT used this provision for the first time in theCorral de Las Flamencas tools ■ Right to retain case on 3 December 2009. By a judgment on 24 June 2013, the Yes No original documents Audiencia Nacional (National High Court) also used de minimis ■ Right to require exemption to annul the fine imposed by the former CNC upon a an explanation Yes No small farmers’ association from the south of Spain. of documents or information supplied ■ Right to secure 1.6 Is cartel conduct outside your jurisdiction covered by premises overnight Yes* No the prohibition? (e.g. by seal)

The Competition Act does not include any particular provision Please Note: * in the event that the affected party does not give setting out the extraterritorial enforcement of the Spanish provisions its consent to a dawn raid into its premises or its premises to be to a cartel conduct taking place outside Spain. However, as Article 1 secured by CNMC or regional competition authorities’ officials, the already provides that any conduct “which has as its object or effect investigatory order is required to be supported with the authorisation the prevention, restriction or distortion of competition in all or part by the competent Court for Contentious Administrative Proceedings of the Spanish market” is prohibited, therefore any cartel conduct where the defending party has its registered office or domicile. taking place outside Spain which affects or may affect all or part In practice, the Spanish Competition Authority usually requests of the Spanish market has the potential to be covered by the cartel judicial authorisation before taking action in order to avoid delays prohibition. and/or denials. In this regard, it is worth noting that according to the Competition Act, any conduct restricting imports or exports is considered to be 2.2 Please list specific or unusual features of the cartel conduct (see question 1.2). As an example, in the Sherry investigatory powers referred to in the summary table. cartel case (S/0091/08), the restrictive practices concerned products which were intended for the export market (primarily to Germany, The powers of inspection granted to the CNMC allow the authorised the Netherlands and the United Kingdom) or even outside the personnel to enter not only any premises of the concerned European Economic Area. The 2009 CNMC’s guidelines on the undertakings, but also all land and means of transport owned by calculation of fines establish that when an infringement has effects them. beyond the borders of the Spanish territory, only the turnover made They can enter not only the private homes of the entrepreneurs, in the European Economic Area will be taken into account for the but also those of managers and other members of staff of the fine calculation. Despite this, it must be noted that in the maritime undertakings concerned. So far, we are only aware of an inspection transport cartel case between Morocco and Spain (S/0331/11), being carried out at a private home in the wooden pallets cartel, the effects of the conduct took place not only in Spain but also but only because the inspected trade association’s domicile was in Morocco, but the Spanish Authority ignored this fact when it the same as the private domicile of an individual working for that included the affected sales in Morocco for its fine calculation (at association. the time of writing of this chapter, this judgment was under appeal before the Audiencia Nacional). The CNMC’s officials may verify, copy, retain (for a maximum period of 10 days) and seal the books and other records relating to the business activity under investigation irrespective of the medium 2 Investigative Powers on which such records are stored. Furthermore, the seal of the CNMC is not restricted to the business 2.1 Summary of general investigatory powers. premises, as it is also possible to seal other business assets. As regards compulsory interviews with individuals, any representative The Directorate for Competition, which is in charge of enquiries, is or member of staff of the undertaking in question may be interviewed the authority invested with the powers referred to below. However, by the CNMC (see question 2.7). the Council’s Chamber of Competition alone has the final decision- making power.

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Finally, it is worth noting that even though Article 40.2 provides a list Investigations into business and residential premises will be carried of the investigative powers of the CNMC, this is not an exhaustive out by the CNMC (or Regional Competition Authorities) officials, list. Therefore, the Directorate for Competition is entitled to use who will have been duly authorised by the Director of Competition other means of investigation to undertake its searches, provided that acting as an agent of the authority with the corresponding judicial the Spanish constitutional and jurisdictional rules are respected. authorisation, should the affected party fail to provide its consent As an example of the above, we are aware that in some of its (in conformity with the European Court of Justice case law, namely inspections, the CNMC’s officials have requested and searched the Dow Chemical, judgment of 17 October 1989). Inspections of smartphones of key individuals and looked for information in SMS private domiciles will only take place in cases where there are well- and messaging applications such as WhatsApp. founded indications that books or other documents may be found

which can be used to prove a serious or very serious infringement. Spain As previously mentioned, we are only aware of one inspection 2.3 Are there general surveillance powers (e.g. bugging)? carried out at residential premises in the wooden pallets cartel case but only because the residential premises coincided with the The Competition Act enables the CNMC to monitor the fulfilment premises of a trade association. In principle, CNMC personnel do of obligations, resolutions and decisions adopted by it. Monitoring not have to wait for the arrival of legal advisors before starting to shall be carried out under the terms established by the relevant search but they usually inform the investigated companies that they regulations and by decisions of the CNMC itself. may be accompanied by external or in-house legal representatives The Competition Act does not include any provision regarding if they wish and usually wait a reasonable period of time for their bugging. It is worth mentioning that all powers of investigation arrival before starting the searches. (e.g. bugging) are subject to compliance with constitutional and In line with Regulation 1/2003, the Royal Decree provides that the jurisdictional rules. CNMC will be the competent authority to collaborate on inspections Finally, it must be noted that the CNMC may exceptionally require a and share powers of investigation with the European Commission leniency applicant to continue participating to a cartel agreement in and other Competition Authorities of other Member States. order to preserve the effectiveness of its inspections. Similarly, the officials of Regional Competition Authorities may collaborate on inspections undertaken by the CNMC’s officials 2.4 Are there any other significant powers of taking place under their jurisdiction. investigation? 2.6 Is in-house legal advice protected by the rules of The Royal Decree provides that CNMC personnel may, while privilege? carrying out an investigation, be accompanied by experts or specialists (e.g. experts in information technologies) duly authorised Spanish legislation and case law do not explicitly explain whether by the Director for Competition. In that regard, the Directorate in-house legal advice is protected by the principle of legal privilege. works with a Sub-directorate of Communication and Information Nevertheless, even though there are no Spanish cases recognising Systems, whose members usually participate actively in the legal privilege for in-house counsel, pursuant to a decision of 22 July framework of the investigations commenced by the Directorate. 2002 of the former Spanish Competition Court and the judgments This Sub-directorate has advanced IT forensic kits at its disposal to of the National Audience and Supreme Court related to inspections be used during the inspections, and in addition to this its members carried out by the Directorate of Investigation in the Stanpa, Salvat receive special IT training. Logistica, Unesa and Consenur cases, it appears that the Spanish Further, during the inspections, the appointed CNMC officials may practice only covers external legal advice by legal privilege, and call the police in the case of obstruction. As an example, on 15 sensu contrario, it would not cover in-house legal advice, in line October 2009, during the inspection of the construction company, with the EU practice (Akzo Nobel, judgment of the European Court Extraco, in the context of a suspected bid-rigging cartel for road of Justice of 14 September 2010). construction (S/0226/10), the officials of the former CNC called for the police in order to have access to a safe box because Extraco refused to open it. 2.7 Please list other material limitations of the investigatory powers to safeguard the rights of Finally, the CNMC may send a request for information to the defence of companies and/or individuals under suspected companies or to other third parties. Should these parties investigation. fail to collaborate with the CNMC by not responding to such requests or by providing incomplete or misleading information, the The exercise of the power of interviewing individuals and entering CNMC may impose fines of up to 1% of the total turnover of the premises, private homes, land and means of transport shall require infringing company. As an example, the former CNC imposed a the prior express consent of the affected party or, failing this, €200,000 fine upon Mediapro on 31 July 2012 and a €1,285,649 fine judicial authorisation. As previously mentioned, in practice, the upon Cementos Portland on 31 May 2012. CNMC usually requests a judicial authorisation before taking action in order to avoid delays and/or denials. 2.5 Who will carry out searches of business and/or The investigations carried out by CNMC personnel are restricted residential premises and will they wait for legal to the matter at hand and the information found cannot be used for advisors to arrive? other purposes different than those included in the scope of the investigation. Furthermore, documents drafted by external lawyers In July 2016, the CNMC issue a communication on inspections are protected by legal privilege, and personal documents will be where it summarises the legal framework, its investigative powers, excluded from the inspection at the prior justified request of the the way the investigations are conducted and finally recalls conducts company representative or person concerned and only after a brief that may be considered as an obstruction to dawn raids and which examination and approval of the CNMC official. may lead to the imposition of a fine of up to 1% of the global turnover of the company in the previous year.

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In a judgment of the Supreme Court on 4 December 2012, in the Finally, on 20 July 2012, the former CNC imposed a €9,737 fine upon so-called Stanpa case (cartel of perfumery and cosmetics), the Florencio Barrera e Hijos, S.L. for obstructing an inspection, and in Spanish Court ruled that the former CNC was entitled on the basis particular, for concealing information and supplying misleading and of a key-words search to copy certain electronic documents, which inaccurate information on the use of certain company emails. included personal communications and other documents not related The above shows the particular intolerance of the Spanish to the investigation, but was obliged to return those documents once Competition Authority of this kind of behaviour. identified. The National Audience also, in judgments such as the judgments of 21 July 2014 (Renault case), 12 June 2014 (BP case), and the 3 Sanctions on Companies and Individuals

Spain Supreme Court on 9 June 2012, May 2011 (Unesa case) and April 2010 (Salvat Logistica case), have confirmed the investigative 3.1 What are the sanctions for companies? powers and the practice of the former CNC. Nevertheless, the Supreme Court has showed having a very For the first time, the Competition Act includes a classification strict approach on the scrutiny of search warrants and the of infringements based upon their gravity (minor, serious and compliance of the CNMC’s inspections with the scope and aim very serious). By way of example, cartels between competing of the search warrants (CNMC’s orders of investigation and undertakings are classified as very serious, anticompetitive vertical judicial authorisations). In this regard, by recent judgments of agreements as serious and obstructing the CNMC’s inspections as 10 December 2014 (UNESA), 10 December 2014 (Campezo) minor. and 27 February 2015 (Transmediterránea), the Supreme Court The amount of the fine will depend upon the gravity of the annulled the CNMC’s respective orders of investigations for not infringement, up to 1% (for minor infringements), 5% (for serious being sufficiently precise and not clearly indicating the scope and infringements) and 10% (for very serious infringements) of the aim of the investigation; for not being consistent with the judicial total turnover of the infringing undertaking in the business year authorisation; and lastly, for being too vague and imprecise. As a immediately preceding that of the imposition of the fine. When consequence of these annulments, the further appeals brought on the turnover cannot be calculated, the Council can impose a fine of up merits have derived on judgments overturning the respective fines to €10 million. imposed by the CNMC. The Competition Act sets out the criteria that are taken into account when calculating the exact amount of the fine (scope and 2.8 Are there sanctions for the obstruction of characteristics of the affected market; market shares of responsible investigations? If so, have these ever been used? Has undertakings; scope of the infringement; duration; effects of the the authorities’ approach to this changed, e.g. become stricter, recently? breach on consumers or any other undertaking; and unlawful profit). The Competition Act also lists a series of mitigating and aggravating factors. The Competition Act provides that the following conducts, amongst others, will constitute an obstruction of an investigation: (i) the On 6 February 2009, the former CNC published guidelines on the lack of submission and the incorrect, misleading or incomplete method for calculating fines in cartels and abuses of a dominant submission of documents requested by the CNMC; (ii) the refusal position. However, as further explained below, the Spanish Courts to answer or the providing of incomplete, inexact or misleading have reviewed the method used by the former CNC to impose and answers to the questions formulated by the CNMC; and (iii) the calculate fines and particularly the method included in the above breaking of seals affixed by CNMC personnel. guidelines. These infringements will be treated as minor infringements and In that regard, the Supreme Court declared on 29 January 2015 in a sanctioned with a fine of up to 1% of the total turnover of the landmark judgment that the CNMC’s method for calculation of fines undertaking concerned. In the event that it is not possible to make (a method similar to that of the European Commission) was in breach such a calculation, the undertakings in question will be fined of the Spanish Competition Act and concluded that the criteria set between €100,000 and €500,000. out in the Spanish Competition Act for calculating the fines, 0–1% for minor offences, 0–5% for serious offences and 0–10% for very In a decision dated 24 July 2008, Caser-2 case (SNC/02/08), the serious offences, should be counted out as a scale while calculating former CNC condemned an insurance company for the obstruction the fine and not as anex post maximum cap once the fine has already of the inspection which caused a delay, and ordered the company to been calculated. In addition, the Supreme Court decided with pay a fine of €133,500. respect to the turnover to take into account when calculating fines In the above-mentioned case in question 2.4, on 6 May 2010, that it should be based on global turnover rather than turnover in the Extraco was fined €300,000 after having obstructed the inspections affected market in the year preceding the decision. carried out by the former CNC by hiding documents, providing The Competition Act states that the CNMC will also be able to misleading information and impeding the inspections. However, punish the participants of any group or association of enterprises. the Supreme Court reduced this fine to €100,000 by judgment of In the event that an association does not have sufficient funds to pay February 2015, considering that the fine should be adapted to the the fine, the members of the association will be held liable. Payment circumstances of the case. of the fine can be demanded from any of the members ofthe On 21 September 2011 the former CNC imposed a fine of €2,093,000 companies whose representatives are members of the government upon Trasmediterranea and its subsidiary Europa Ferries for bodies of the association in question or, alternatively, any member hindering the initiation and development of the inspection, making of the association operating in the market in which the infringement access to information difficult, providing incomplete information took place. and preventing contact with the head and directors of the company. Subsidiaries may also be forced to pay for conduct carried out by The National Audience reduced the fine to €418,000 applying the their parent company. principle of proportionality. The Audiencia Nacional’s judgment was further confirmed by the Supreme Court on 29 January 2015.

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The Competition Act establishes a general threshold of 10% of total 2.8 above), the Council decided to allow the Directorate to initiate a turnover for companies belonging to associations which committed sanctioning proceeding against two individuals, the Regional Director infringements, regardless of whether the infringement was minor, of Transmediterránea and the Director of its subsidiary, Europa Ferries, serious or very serious. due to their alleged refusal to be present during the inspections. We are On 12 November 2009, in the so-called decennial insurance cartel not aware of any further developments in this case. (S/0037/08), the former CNC imposed the highest fine in its history, The CNMC’s Chairman announced during its appearance before amounting to €120,728,000 to several insurance companies, such the Spanish Senate in April 2015 the CNMC’s intention to use as Caser, Swiss Re, Münchener, Mapfre and Scor. Although the fines against directors and managers of companies participating to Audiencia Nacional’s judgments overturned the €120 million anticompetitive conducts and repeatedly infringing the competition fines for all companies, not without certain controversy, the final rules. Spain judgments of the Supreme Court in May and June 2015 confirmed Finally, one year later, on 12 May 2016, the Council of the CNMC the existence of an anticompetitive conduct for four out of the six issued a resolution fining managers and directors of companies companies but referred those four cases to the CNMC in order to involved in a cartel in the sanitary towels market for the first time recalculate the fines to be adapted to the new method for calculation (case S/0455/12). of fines. It is worth noting that the European Commission intervened ex officio as amicus curiae for the first time in Spain, 3.3 Can fines be reduced on the basis of ‘financial bringing submissions before the Spanish Supreme Court related to hardship’ or ‘inability to pay’ grounds? If so, by how the concept of an infringement by object and the interpretation of much? the EU insurance block exemption regulation. In this context, the European Commission seems to have brought Financial hardship or inability to pay is not included in the list of a second time amicus curiae observations on 21 April 2015 before mitigating circumstances in the Competition Act. However, in the Spanish Supreme Court, this time on the calculation on fines light of the fact that this list is not exhaustive, nothing prevents related to 10% maximum threshold for fines, the turnover used for the CNMC from reducing fines at its own discretion, taking into that calculation of fines and the EU principle of effectiveness. account the financial situation of the fined companies. On 23 July 2015, the CNMC broke the former CNC’s highest fine It is worth noting that, despite the financial turmoil, the former CNC record and imposed a total of €171 million in fines to the Spanish did not seem particularly keen to reduce fines following requests subsidiaries of 21 car manufacturers and two consulting companies for a reduction of fines on the basis of financial hardship. In this for an alleged exchange of sensitive and strategic information in the regard, it has been common practice over the past few years for market of car distribution and after-sales services. companies to ask for reductions based on the “crisis cartel” nature of the conduct, e.g., cartel of the sherry wine (S/0091/08), cartel of It is worth noting that, according to the former CNC’s case law, the Cantabrian concrete (648/08), etc. However, we are not aware public entities’ activities may also fall under the remit of Article of any reductions granted by the former CNC or the Audiencia 1 of the Competition Act when the public entities act as economic Nacional on appeal based upon that reasoning. operators. As stated on 6 October 2011 in the Jerez grape and grape juice case, public entities may be liable under the Spanish Competition Act, even in the event that they do not act as an 3.4 What are the applicable limitation periods? economic operator, when they act as “facilitator” of the alleged infringing conduct. In the aforementioned case, despite considering As of the day when the infringement was committed or ceased (in that the Andalusia department of Fish and Agriculture was liable as the case of continuous infringements), the limitation periods are facilitator, the former CNC did not impose a fine due to the lack of four years for very serious infringements, two years for serious established case law in this area. infringements and one year for minor infringements. On 3 March 2009, the former CNC also jointly and severally fined Similarly, the Competition Act lays down two cases in which the the Palma de Mallorca city council for the abuse of a dominant above limitation periods may restart to count fresh again, namely by any act of the Administration, with formal communication of position of its wholly controlled local funerary undertaker. The fine the interested parties’ intentions to comply with the Act; and by was confirmed by the Audiencia Nacional and the Supreme Court the acts carried out by the interested parties complying with the on 14 June 2013. corresponding resolutions.

3.2 What are the sanctions for individuals (e.g. criminal 3.5 Can a company pay the legal costs and/or financial sanctions, director disqualification)? penalties imposed on a former or current employee?

Individuals (i.e. legal representatives or members of the management Spanish law does not expressly include any provisions in this body) may be subject to a personal fine of up to €60,000. To date, respect; therefore, companies are not prevented from doing so. we are only aware of one fine imposed by the former CNC upon one individual. In that respect, on 26 September 2012, for the first time since the enactment of Law 15/2007, the former CNC imposed 3.6 Can an implicated employee be held liable by his/her a fine of €50,000 upon Joan Gaspart. The fine had a particular employer for the legal costs and/or financial penalties imposed on the employer? deterrent character as Mr. Gaspart was the former vice president of the CEOE, a Confederation of Spanish Entrepreneurs. However, this fine was later annulled on 15 October 2013 by the Audiencia The Competition Act and the Spanish Royal Decree do not provide anything in this regard. However, according to Spanish law, the Nacional as it considered that the statements of Mr. Gaspart during shareholders of the company may ask for compensation derived the international fair of tourism referring to a potential future price from the mismanagement conduct carried out by certain employees increase in the sector did not amount to a collective recommendation. holding a relevant function within the company, such as the members On 21 September 2011, after fining Transmediterránea (Case of the Board of Directors. SNC/0014/11) for obstruction of an investigation (see question

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According to the last available annual report published in 2016, 4 Leniency for Companies the new leniency system has been very successful as it has allowed the former CNC to discover and punish 25 cartels since its 4.1 Is there a leniency programme for companies? If so, implementation on 28 February 2008. Among those cartels, 19 of please provide brief details. them were exclusively initiated following a leniency application, and in the remaining six the subsequent submission of applications for One of the major changes introduced by the Competition Act is reduction after the proceedings had already been opened contributed to improve the level of evidence at the disposal of the former CNC. the introduction of a leniency system both for complete immunity and reduction of the amount of fines in cartel cases. This system On 27 January 2010, the CNC published its first Resolution

Spain has been implemented by the Royal Decree, which regulates those originating from a leniency application, which had unveiled procedures. As previously mentioned, on 21 June 2013, the Spanish a cartel in the bath and shower gel manufacturing sector Competition Authority published guidelines on the leniency (S/0084/08). The proceedings had been initiated on the same programme. date the leniency programme first came into effect. On that day, two of the cartel participants – Henkel and Sara Lee – submitted Immunity is reserved for the first undertaking which provides respective statements to the CNC disclosing the existence of the evidence that, in the view of the CNMC, will enable it to carry out an cartel and their participation, as well as the involvement of Puig, inspection or to find an infringement of Article 1. Those companies Colgate and Colomer. The CNC levied fines totalling €8 million, which have adopted measures obliging other undertakings to with Henkel receiving a complete waiver thanks to the leniency participate in the infringement are excluded from claiming programme, and Sara Lee receiving a 40% waiver. On 29 July immunity. In addition, the applicant is required to: cooperate 2010, the CNC published its second Resolution originating from a fully, on a continuous basis and expeditiously throughout the leniency application in relation to a cartel case in the sherry wine investigation; end its involvement in the alleged cartel immediately market (S/0091/08) related to the export of BOB products (buyers- following its application, except for what would, in the CNMC’s own-brand). In this case, also initiated on the same date that the view, be reasonably necessary to preserve the effectiveness of Spanish leniency programme entered into force (28 February the inspections; not destroy relevant evidence relating to its 2008), the CNC imposed a total of €6,723,000 worth of fines. The application; and not disclose to third parties other than the European CNC granted full immunity to the first applicant. Commission or any other national authorities its intention to submit To date, the first leniency applicant has always benefited from 100% an application or its content. immunity from fines in most cases, the second leniency applicant Companies or individuals who subsequently provide additional was awarded in most of the cases a 40% reduction, and there were evidence may have their fines reduced by up to 50% (see question only two cases in which a third successive leniency applicant 4.6). Reductions can be granted when the undertaking provides the benefited from a 30% reduction. CNMC with evidence of the alleged infringement which represents Finally, no provisions of the Competition Act grant immunity before significant added value with respect to the evidence already in the the Civil Courts for either successful or unsuccessful candidates who CNMC’s possession. Furthermore, the applicant must meet the may still be challenged before the Court and held liable for damages cumulative conditions set out above. when these can be proved. So far, we are not aware of any follow- If the applicant for a reduction of a fine submits evidence which on damages claims before the Spanish Courts deriving from a prior allows for the establishment of additional facts with a direct bearing decision of the CNMC originating from a leniency application. on the amount of the fine, the CNMC will take such additional facts into account when setting the fine to be imposed on the undertaking 4.2 Is there a ‘marker’ system and, if so, what is required that provided such evidence. to obtain a marker? Leniency applications may also be submitted before the Regional Competition Authorities in those regions where Competition The Royal Decree provides a “marker” granted by the Directorate for Authority is in place. The Regional Competition Authorities shall Competition. A reasoned request from the applicant for exemption communicate all leniency applications submitted to it to the CNMC. provides that the filing date for the application will be considered as Legal representatives or members of management bodies who the initial date of the marker application. have participated in the alleged infringement will also benefit from Nevertheless, in order to obtain the marker, it is necessary to provide immunity and a reduction of fines granted to a company, provided the Directorate with the necessary information required for the they cooperate with the CNMC. normal exemption application (applicant and cartel participants’ When more than one Member State is affected by the infringement names and addresses, description of the cartel, applications to other and subsequently more than one Competition Authority is well Competition Authorities), except the evidence relating to the cartel, placed to act against the infringement, the Commission encourages which might be presented subsequently in order to give the applicant all Competition Authorities affected to apply for leniency. The time to gather more information. European Competition Network Model Leniency Programme was Leniency applications may also be submitted online. launched in order to avoid the lack of application to all NCAs As explained above, the submission of the leniency application affected as a result of discrepancies between the existing leniency before other potential applicants may make a big difference in the programmes within the European Competition Network. Its aim is quantum of the fine reduction. to harmonise leniency programmes throughout the European Union. In those cases where the Commission is particularly well placed 4.3 Can applications be made orally (to minimise any to deal with a case (those cases affecting three Member States or subsequent disclosure risks in the context of civil more), the applicant filing for immunity with the Commission may damages follow-on litigation)? submit summary applications with any NCAs which might also be well placed to act. In order to ensure the effectiveness of the leniency system, the Competition Act provides that the CNMC cannot provide the

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Commercial Courts with the information obtained via the immunity of significant added value; a 20% to 30% reduction for the second or reduction of fines applications. This provision affords some undertaking; and a maximum reduction of up to 20% for subsequent protection to applicants in the event of damages actions. In that undertakings. regard, unlike the EU case law practice (e.g., Pfleiderer case), Spanish legislation is unambiguous in relation to the fact that all documentation and declarations made together with a leniency 5 Whistle-blowing Procedures for application, as well as the application itself, are confidential, as Individuals provided by Article 15 bis of the Spanish Civil Procedure Act, Article 50 of the SCA and Article 51 of Royal Decree 261/2008 of 5.1 Are there procedures for individuals to report cartel

22 February 2008, which approves the Regulation for the Defence Spain conduct independently of their employer? If so, of Competition. please specify. At the applicant’s request, both the exemption and reduction of fines may be submitted orally, accompanied by the relevant information The Competition Act expressly states that the exemption granted and evidence, recorded at the CNMC premises with a transcript to an undertaking shall also benefit its legal representatives or the entered on the register. persons comprising the management bodies, provided that they have The CNMC agrees that only the interested parties may have access cooperated with the CNMC. However, neither the Competition Act to the transcript. Neither mechanical nor electronic copies of nor the Royal Decree expressly provide for the opposite scenario, the oral submission may be made when requesting access to the i.e., being the “whistle-blower”. This means that in cases where an CNMC’s file. employee reports cartel conduct independently of his employer, he alone will benefit from the exemption and not the undertaking. To date, we are not aware that any whistle-blowing actions have been 4.4 To what extent will a leniency application be treated independently brought by employees before the CNMC. confidentially and for how long? To what extent will documents provided by leniency applicants be It is worth noting that in 2014, the CNMC opened an online and disclosed to private litigants? confidential “mail-box” in which any company or citizen may submit relevant information to the CNMC concerning anti-competitive The filing of the application is confidential. A special separate record practices. This mail-box is anonymous, which means, that there is of all documents and data deemed to be confidential (including the no need for the whistle-blower to provide its name to the authority. applicant’s identity) will be organised. However, the interested parties have access to all non-confidential information necessary in order to respond to the statement of objections (with the exception 6 Plea Bargaining Arrangements of obtaining copies of any of the applicant’s oral statements). The Competition Act does not specify for how long the leniency 6.1 Are there any early resolution, settlement or plea application will be treated as confidential. bargaining procedures (other than leniency)? Has the Competition Authorities’ approach to settlements In order to protect the effectiveness of the leniency system, the changed in recent years? Competition Act establishes that the CNMC cannot provide the Courts with any information obtained through the applications for In line with Article 9 EC 1/2003 Regulation, Article 52 of the immunity or the reduction of fines. Spanish Competition Act allows for the possibility of terminating proceedings when commitments are offered (terminación 4.5 At what point does the ‘continuous cooperation’ convencional), provided that these commitments remedy the requirement cease to apply? anticompetitive effects generated by the investigated conduct and public interest is sufficiently guaranteed. Following the The Competition Act requires the full, continuous and expeditious Directorate’s proposal, the Council may terminate sanctions cooperation of the leniency applicant throughout the administrative proceedings when the offenders propose commitments which put investigation procedure, together with other conditions, in order the anticompetitive effects of their conduct to an end. The period to be able to benefit from exemption or reduction of fines. These during which commitments may be submitted has been extended conditions include bringing the alleged conduct to an end, not and the procedure is more flexible now. In any event, the parties destroying any evidence, not disclosing any information to third may offer commitments at any time before the Directorate’s referral parties and not forcing other parties to take part in the infringement. of its proposal of the decision to the Council, whose adoption is not However, although the Competition Act does not expressly contain conditional upon the agreement of the rest of the parties interested any provisions regarding the termination of the obligation of in the proceedings. These commitments shall be binding on the “continuous cooperation”, the Royal Decree states in a general offenders. way that the leniency applicant should cooperate with the CNMC On 28 September 2011, the former CNC approved Guidelines on throughout the entirety of the proceedings. termination by commitments (terminación convencional), which establish the criteria used by the Authority when terminating The Guidelines on the leniency programme confirm that cooperation infringement proceedings by means of commitments. According to must be “full, continuous and diligent” until the conclusion of the these Guidelines, cartel conduct will fall outside the scope of the proceedings. terminación convencional request. During its eight years in existence, the former CNC issued 25 4.6 Is there a ‘leniency plus’ or ‘penalty plus’ policy? decisions awarding termination with commitments and five decisions between 2012 and October 2013. The reduction of fines is based on a percentage-based system, which Lastly, under the Spanish competition rules, there is no cartel depends on the timing of the provision of information: a 30% to settlement instrument similar to that provided at the EU level by 50% reduction for the first undertaking to provide any information Commission Regulation 622/2008.

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societies Agedi and AIE, which had even offered to submit bank 7 Appeal Process guarantees covering the fine amounts, as the Spanish Court considered that the periculum in mora had not been sufficiently proven. The 7.1 What is the appeal process? Supreme Court confirmed this judgment on 31 March 2014. Spanish Courts very rarely grant the suspension of a fine without the First, it must be noted that during the CNMC’s formal proceedings, prior deposit of a bank guarantee covering the fine amount, even for the resolutions and acts of the Directorate leading to non-defendable companies that have serious financial problems (e.g., the National or irreparable damage can be appealed before the Council within 10 Audience rejected the Moroccan Comarit’s request for suspension days (administrative appeal) and subsequently before the National of a fine without a prior bank guarantee in the appeal against the €27 Spain Audience and Supreme Court in last instance. In the period million fine imposed by the former CNC in the Strait of Gibraltar 2012/2013, the Council resolved 39 appeals against the acts of the cartel). Directorate and only partially admitted one of them. It is worth noting that, following the entry into force of the 7.3 Does the appeal process allow for the cross- Competition Act and the development of the former CNC’s examination of witnesses? inspection tasks, a high number of inspections ordered by the Directorate, mostly derived from leniency applications, were As the Competition Act does not establish any specific rules appealed before the Council of the former CNC, and subsequently regarding the cross-examination of witnesses, the rules governing the were appealed before the Spanish Courts. However, most of them Common Administrative Process (Law 39/2015) and, subsequently, were rejected either by the Supreme Court, e.g. the aforementioned the regulation for the Contentious Administrative Jurisdiction (Law Stanpa case in the cartel of gel products, May 2011 (Unesa case) 29/1998), need to be applied, in particular those rules referring to and April 2010 (Salvat Logistica case) (see questions 2.7 and 4.1) the abduction of proof during a procedure (Articles 60 and 61). In or by the Audiencia Nacional, as the judgments of 21 July 2014 practice, cross-examination of witnesses is rather rare before the (Renault case) and 12 June 2014 (BP case). Administrative Courts. Secondly, the resolutions – including fining decisions – and acts issued by the Chairman and the Competition Chamber of the Council may only be appealed before the Administrative Chamber 8 Damages Actions of the National Audience within two months (judicial appeal) and in a second review, appeal is possible in certain cases (e.g., 8.1 What are the procedures for civil damages actions appeals regarding the amount of the fines, which must be lower for loss suffered as a result of cartel conduct? Is the than €600,000) before the Chamber for Contentious Administrative position different (e.g. easier) for ‘follow-on’ actions Proceedings of the Supreme Court. as opposed to ‘stand alone’ actions? It is worth noting that, according to the CNC’s 2012/2013 annual report, since the enactment of the SCA in 2007, 76.9% of the At the time this chapter was being prepared, the Spanish Parliament appealed sanctioning decisions issued by the former CNC were enacted the Royal Decree-Law 9/2017, of 26 May, transposing confirmed by the National Audience. directives of the European Union in the financial, mercantile and sanitary areas, and on the displacement of workers, in particular However, according to our own calculations, around 50% of the Directive 2014/104/EU of 26 November 2014 on certain rules CNMC and the former CNC’s fining decisions were either reduced governing actions for damages under national law for infringements or annulled. of the competition law provisions of the Member States and of the European Union into the Spanish legal system to remove the main 7.2 Does an appeal suspend a company’s requirement to obstacles to effective compensation. pay the fine? The Title II of the Royal Decree-Law consists of two articles amending the Competition Act (Article 3) and the Civil Procedure No, unless that company requests the competent court for a Act (Article 4). Article 3 of the Royal Decree-Law introduces a Title suspension of the fine payment as an interim measure. VI in the SCA, “Compensation for Damages Caused by Restrictive According to the Spanish law, those measures are only granted Practices”, including new Articles 71 to 81. if the competent court is satisfied that the requesting party has Both follow-on and stand alone actions are possible in Spain. complied with certain requirements. These are the following: (i) a Follow-on claims with a precedent administrative decision contain good arguable case shall be presented (fumus boni iuris); (ii) there relevant data about the unlawful conducts that may come to reduce is evidence that a real risk of dissipation of assets exists, to the the burden of proof or even to exempt the claimant to prove the point that the judgment may not be effective unless the defendant is unlawful practices; and in the absence of an administrative decision, himself restrained by an injunction or by a similar court order over a stand alone claim is available where the tribunal will need to his assets (periculum in mora); and (iii) a bond must be deposited make a deeper assessment to confirm if the alleged anticompetitive by the requesting party in order to indemnify the defendant in the practices violate the provisions of competition law. event that the final decision does not grant the relief sought by the However, in view of the relative lack of experience of the Mercantile claimant and the temporary injunction or interim measure is thus Courts in dealing with stand alone actions, follow-on actions may revoked. consider to be more easily arguable before the Spanish Courts, and In practice, the Audiencia Nacional usually grants a suspension of in particular, since there is already an administrative fining decision payment of the fine upon the deposit of a financial guarantee, if the serving as support of the claim. periculum in mora is sufficiently supported. It is worth noting that, when the administrative investigation is still However, a recent order of the Audiencia Nacional in February 2013 ongoing or when the administrative decision is not final (pending rejected a request for the suspension of €1.94 million and €1.35 appeals), Civil Courts are not bound by the findings of fact made by million fine payments, brought by the Spanish copyright collecting the competition authority.

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Pursuant to Judiciary Act 6/1985, following the amendments products, services or activities from both public and private introduced by the Competition Act, for the first time the Mercantile providers, provided that they do not act as professionals in Courts (already competent for the enforcement of Articles 101 and the case. In order to guarantee that individual consumers are 102 TFEU, according to the Regulation 1/2003) have jurisdiction in aware of these proceedings, the competent court will stay the civil actions concerning the private enforcement of Articles 1 (cartel proceedings for two months and invite publicly – e.g. through newspapers – potential affected consumers to join the claim prohibition) and 2 (abuse of dominant position) of the Competition during that period. Act for both stand alone and follow-on actions. Spanish collective actions do not follow either the opt-in or the The general rule to claim damages is found in article 1.902 of the opt-out model, but have an intermediary own regime. Consumers Civil Code: “any persons who by action or omission causes harm have free choice to opt in and join a class action but cannot opt-out to another by fault or negligence is obliged to repair the damage Spain once the proceedings have been initiated. The final decision will be caused”. binding irrespective of their choice, and even if they do not join the By judgments of 10 May 2012 and 7 November 2013, the Spanish proceedings they will be bound by the judgment. Supreme Court awarded for the first time damages derived from a We are only aware of a €458 million ‘follow-on’ damages action price-fixing cartel for two follow-on damages actions in relation to lodged by the consumer advocacy group AUSBANC against the well-known sugar cartel case. Both damages actions followed Telefónica in relation to the European Commission Decision of the decision of the Spanish Competition Authority on 15 April 1999 4 July 2007, fining Telefónica over €151 million for five years to fine several Spanish sugar manufacturers for participating in a of margin-squeezing practices in the Spanish broadband market. horizontal price cartel. This procedure is still pending, and in this regard, on 22 June Those rulings granted the entirety of the respective claims for 2010, an order of the Mercantile Court Nº 4 of Madrid declared damages lodged by Nestlé and several biscuit manufacturers against the admission of the AUSBANC claim, ordered its publication and the sugar manufacturers Acor in Valladolid and Azucarera Ebro in set a two-month deadline for affected persons to join the claim and Madrid (i.e., a €1.1 million damage claim against Acor and €4.1 become co-claimants. However, it is worth bearing in mind that this million against Azucarera Ebro). One of the more controversial damages claim derives from an abusive conduct and not from a cartel aspects of these landmark judgments was the court’s reasoning agreement. However, the Mercantile Court stayed its proceedings and decision as to the quantification of damages. It adopted a in accordance with Article 16 EU Regulation 1/2003 in order to victim-friendly approach and included a number of guidelines for guarantee the uniform application of EU competition law in light companies and consumers who have been affected by collusive of the fact that the Commission’s decision fining Telefónica was behaviour, and who seek compensation as a result of such conduct. first subject to appeal before the EU General Tribunal (confirmed These judgments provided established case law and added legal by judgment of 23 June 2012) and further, to the appeal brought by certainty in relation to key points, such as the burden of proof, Telefónica before the EU Court of Justice. We are not aware of any the passing-on defence, the submission of expert report for the further developments in this case. quantification of damage, etc. On 30 July 2015, the Spanish consumer association OCU announced its potential intentions to bring a collective damage 8.2 Do your procedural rules allow for class-action or claims representing affected consumers against the different car representative claims? dealers of different car brands having being fined by different CNMC’s decisions in 2015. In principle, mechanisms for collective actions similar to those Finally, also under Spanish law, it is possible for affected groups in the US regime are not available under Spanish law. In Spain, to bring a joint action (for instance an association of companies collective actions can only be exerted by groups and legal entities claiming damages after the abuse of dominant position by a on behalf of consumers and end-users. competitor) or for third parties, having a direct and legitimate The law of civil procedure recognises: interest, to join proceedings that have already been initiated, as co- ■ On the one hand, the right of consumers, individuals of a claimants. Only the parties represented during the proceedings will user group (at least 50% of the group) who have suffered loss have the benefit of the judgment. deriving from cartel conduct, and consumer associations to As the application of competition law by national Courts in Spain bring a claim for compensation before the Mercantile Courts intensified in the years after the 2007 Act, and particularly after the in circumstances where the individuals are already determined enactment of the leniency programme, the recently enactment of or easily determinable. The difference lies in the fact that the final award is granted to each individual claimant and not the transposition of the EU Directive on Antitrust Damages Actions to the whole injured collective. Where collective interests could contribute to a proliferation of cases with multiple claimants are defended before a Court, it will be essential – prior to over the coming years. filing the action – to demonstrate that all the necessary steps have been taken in order to identify all the interested parties 8.3 What are the applicable limitation periods? represented in order for them to intervene in the process. Once the class action is lodged, affected consumers will be able to opt in to the proceedings at any time. There are no clear rules with regard to the limitation period for bringing a civil claim for breach of competition law, since different ■ On the other hand, when the consumers or users are undetermined or not easily determinable, only the statutory provisions may apply, depending on the circumstances of each users and relevant consumer associations are able to bring particular case: a claim for damages. In order to avoid abusive claims on (i) On the one hand, the general limitation period for actions behalf of user groups, only those affected by the infringement arising from an infringement of competition law based on in question will be allowed to file a claim (e.g., a consumer non-contractual obligations is one year from the date that the group for food products would not be allowed to file a claim injured party discovers the harm (Articles 1.968 and 1.902 of against a prohibited practice in the car sector). In these cases, the Spanish Civil Code). This limitation period of one year the interests at stake are intended to be those of the consumers. seems insufficient in comparison with the recently enacted This is a broad concept under Spanish law, which includes EU Directive‎ on Antitrust Damages that states a limitation both individuals and legal entities who may purchase goods, period of “at least five years”.

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(ii) On the other hand, the limitation period for claims based on practices, thus making it particularly difficult to claim damages contractual relations, such as restitution or damages arising and to prove a causal link between the damage and anticompetitive from breach of contract, are subject to a 15-year limitation conduct. period (Article 1.964 of the Spanish Civil Code) starting from the date at which the judicial decision declaring the nullity However, defendants are allowed to disagree, and have done so of the agreement became final (Article 1.971 of the Spanish in the past. For instance, this was the case in the damages claims Civil Code), or in the absence of a previous judicial decision, lodged in relation to the sugar cartel case. As previously explained from the date in which the action could be lodged (Article (see question 8.1), several chocolate and biscuit manufacturers 1.969 of the Spanish Civil Code). In both cases (i.e. non- lodged damages claims against ACOR and Azucarera Ebro, and contractual and contractual obligations) the limitation period the defendants tried to put forward a passing on defence, but the

Spain can be interrupted by lodging an extrajudicial claim or by the Spanish Supreme Court deemed that this was not sufficiently extrajudicial admission of the infringer (Article 1.973 of the proved. In the Azucarera Ebro case, the Supreme Court considered Spanish Civil Code). that for the passing-on defence to be accepted, the defendant must Determining whether the case relates to contract or tort law, and show that the claimant passed on to consumers not only the price consequently whether the limitation period applies, can sometimes increase, but also the totality of the damages. This includes any be a tricky issue. This is reflected in the judgment adopted by other indirect damages as a result of the price increase, such as, the Court of First Instance Nº 50 of Madrid (Autos 735/07) in the for example, the erosion of competitiveness, damage to the brand civil damages claim lodged against Azucarera Ebro, in relation identity and reputation, the reduction of demand, market share and to the sugar cartel case whereby the type of liability at stake was sales. The judgment concluded that the defendant did not prove that not clearly established. However, the Supreme Court has finally the damage was completely passed on to consumers. Therefore, the confirmed the nature of tort liability of the damages (responsabilidad Court ruled that the passing-on defence was not established. extracontractual) resulting from a cartel (sugar cartel case) and also on other antitrust infringement such as abuses of a dominant 8.5 What are the cost rules for civil damages follow-on position (Centrica case). claims in cartel cases? Also, because there are neither legal provisions nor settled case law, a controversial question arises when determining the exact The judge will generally order the unsuccessful party to pay the date at which the limitation period starts to run in an infringement successful party’s legal costs. This does not apply when the judge case that the Competition Authority is dealing with. The starting deems and explains in his judgment that there were serious doubts date of the limitation period turned out to be, in fact, a key point in in fact or at law. When the judge does not rule entirely in favour the damages claim lodged by Centrica against Iberdrola before the of either party, the judge might not expressly determine who is to Juzgado de lo Mercantil Nº 1 of Bilbao. Iberdrola was accused of pay the legal costs, in which case each party will pay its own costs. having denied access to its customer data information, which, as When the unsuccessful party is ordered to pay legal costs, it will only the monopolist local distributor, was legally obliged to render to have to pay the lawyers’ fees and those of other professionals whose third power supplying companies. In a judgment of 21 July, 2010, fees are not fixed by official fee scales, which, in any event, cannot this court did not grant Centrica the damages requested on the basis exceed one third of the amount of the proceedings in question. If that its action was time-barred, following the application of the the amount of the proceedings cannot be determined, an overall one-year limitation period for tort liability. In particular, the court maximum of €18,000 will apply. This cost regime is established in did not uphold Centrica’s allegation concerning the existence of the rules contained in both the Civil Procedural Act (Articles 241 to “continuous damage” in order to avoid the time limitation problem. 246) and the Spanish Civil Code. On the contrary, the court stated that there had been “constant damage”, which was interrupted at the time Iberdrola granted free access to its customer data information. However, in the Spanish 8.6 Have there been any successful follow-on or stand Court’s view, Centrica sent its bureaufax to Iberdrola in an untimely alone civil damages claims for cartel conduct? If there way, asking for damages on 28 May 2009 after it had been granted have not been many cases decided in court, have free access on 22 May 2008. It is worth noting that Centrica only there been any substantial out of court settlements? exceeded the one-year limitation period by six days. Because the follow-on rule applied under the former Competition Under the current case law of the Spanish courts, the one-year Act required firms to receive a prior decision (not subject to appeal) period starts counting once a decision of the Spanish Competition of the Competition Authority, it was difficult for private parties to Authority became firm after the potential administrative appeals. bring actions based on antitrust infringement proceedings as a final In any case, it is important to underline that the time limitation decision might only be available after several years. periods can be interrupted by sending a formal notice to the Most of the damages claims actions brought before the Spanish defendant by means of an extrajudicial claim (bureaufax, registered Courts have been brought on the basis of abusive conducts, such letter, etc.). as the 3C v Telefónica case in 2007 (follow-on action), the Conduit v Telefónica case in 2006 (stand alone action), the Cableuropa v 8.4 Does the law recognise a “passing on” defence in AVS and Sogecable case in 2010 or the Centrica v Endesa case in civil damages claims? January 2011. The two above-mentioned judgments of the Supreme Court in the Spanish law does not regulate the status of indirect purchasers in sugar cartel case (see question 8.1) were the first two damages competition cases and no legal presumption as to a passing-on of actions derived from cartel conducts in Spain (both follow-on excessive costs is foreseen. In theory, indirect purchasers may actions). claim damages but they would be obliged to prove that the excessive In addition, following the CNMC’s decision on the decennial costs were passed on to them. Normally, indirect purchasers are insurance decision (see question 3.1), by judgment of 9 May 2014, consumers and users who do not have enough information to the Mercantile Court of Madrid granted €3.5 million damages to a determine whether an increase of price is due to anticompetitive competitor (i.e. not a victim of the price-fixing cartel) who brought

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a claim against three of its competitors, insurers and reinsurers infringements, 5% for serious infringements and 1% for minor which participated to the decennial insurance cartel. The Mercantile infringements must be applied as a sliding scale but not as an ex Court considered proved that those insurers and reinsurers took post cap and exclusively apply to the total turnover of the infringing retaliation measures against its competitor, namely by boycotting company in the year preceding that of the fining decision. The new this competitor and putting pressure on third companies not to case law promulgated by the Supreme Court – as confirmed by the provide an essential input for the latter. This judgment is relevant recent CNMC’s fining decisions – does not involve any drastic as it represented a mixture of stand alone and follow-on action changes in relation to the amount of the fine the CNMC imposes, as whereby the Madrid Commercial Court considered that alone the the new method of calculation is based on the total global turnover of retaliation and boycott measures constituted a conduct in breach of the firm and not on its turnover in the affected market (as established

Article 101 TFEU and the Unfair Competition Act without being by the Audiencia Nacional’s interpretation). Spain necessary to previously prove the existence of a cartel as for which As a result of the new case law, the Audiencia Nacional and the the monitoring and disciplinary mechanism was established. Supreme Court must also shortly resolve an important number With regard to vertical contracts, a significant number of private of pending appeals in which the CNMC used the past method of actions related to the fuel distribution market in which petrol stations calculation of fines. So far, when resolving those appeals, the claimed damages and the breach of their distribution contracts with Audiencia Nacional and Supreme Court are opting to refer the petrol suppliers due to vertical restraints. Damages were awarded calculation of these fines back to the CNMC, which in turn must for instance by the Mercantile Court of Mallorca in March 2010 in apply the new Supreme Court’s interpretation and is obliged under relation to a contract between Repsol (an oil company) and a petrol Spanish law not to apply higher fines than those being reviewed. station. This judgment was confirmed on appeal by the Supreme Nevertheless, we will have to wait to see whether the Audiencia Court’s judgment of 8 May 2013. Nacional and Supreme Court agree with the way the CNMC is Under the current Competition Act, individuals may bring an action applying the new interpretation of the calculation of fines established for antitrust infringements before the Mercantile Courts. Therefore, by the Supreme Court. the number of successful civil damages claims is expected to Lastly, the European Commission intervened in the above increase significantly in the near future, particularly in relation to discussion and it has brought amicus curiae observations on 21 follow-on claims after the numerous decisions rendered by the CNC April 2015 before the Spanish Supreme Court on an appeal dealing and CNMC in the last years sanctioning cartel cases. with the calculation on fines related to 10% maximum threshold for No public access is possible to out-of-court settlements since those fines and the turnover used for that calculation under the SCA and are usually subject to confidential rules and private agreements. the principle of effectiveness of EU law (probably related to the However, we believe that there have certainly been private deterrent effect of competition rules). settlements between parties. As previously mentioned, we expect an increase in the number of follow-on cartel damages claims brought before the Spanish Mercantile Courts. This is due to the high number of sanctioning 9 Miscellaneous decisions of the former CNC as regards cartel infringements and the adoption on 26 November 2014 of the EU Directive on Antitrust Damages Actions. This directive is designed to promote private 9.1 Provide brief details of significant, recent or imminent statutory or other developments in the field of cartels, enforcement by facilitating and harmonising the process for bringing leniency and/or cartel damages claims. actions for competition damages in the EU. In a judgment of March 2010 held by the Mercantile Court of As stated above, the Competition Act introduced for the first time a Mallorca, mentioned in question 8.6 above, the Spanish Court leniency system in Spain for both total immunity and reduction of formally requested for the first time the former CNC’s opinion fines in cartel cases. However, the operation of the new leniency about the damage quantification making use of the cooperation system was conditional upon the entry into force of the Royal mechanism provided in the SCA. Decree, which took place on 22 February 2008. Even though the initial steps undertaken by the CNMC since its On the first day of the operation of the new leniency system in Spain, establishment in October 2013 did not seem very promising – in six leniency applications were submitted. To date, the former CNC fact, throughout 2014 the Authority only imposed fines amounting and the CNMC have dealt with over 25 cases in which leniency to a total of €52.6 million and carried out a limited number of applications were submitted. Amongst those 25 cases, 19 were inspections – during the nine-month period between 1 January and only initiated after the submission of a leniency application and in 10 September 2015 the CNMC speeded up its activity and imposed five of them the applications were submitted only after the Spanish fines amounting to a total of over €536 million. Authority had already initiated investigations.

In June 2013, the CNC also published guidelines on the leniency 9.2 Please mention any other issues of particular interest programme, which replaced the former provisional guidelines in your jurisdiction not covered by the above. relating to the handling of applications for exemptions and reduction of fines published in February 2008, which contain non- The Spanish enforcement system is supplemented by Law 1/2002 binding indications aimed at explaining the practical aspects of the on the coordination of competencies between central and regional presentation of leniency applications. bodies, adopted in response to a Constitutional Court judgment, The former CNC adopted, in January 2009, a communication which held that regional governments are also competent in the field on the calculation of fines, with the purpose of developing and of legal enforcement. publicising the rules of the new disciplinary regime. However, Pursuant to Law 1/2002, the regional governments in Spain the method followed by the CNMC for the calculation of fines has are entitled to enforce the antitrust provisions of the Spanish been reviewed by the Supreme Court’s landmark judgment of 29 Competition Act when the effects of the prohibited conduct are January 2015, setting aside that communication on calculation of restricted to the region concerned. In the event that the cartel’s or fine, and considering that the fine limits of 10% for very serious abusive behaviour’s effects extend beyond the territory of a single

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region, the CNMC will be competent. Besides, the CNMC will be competent to enforce the antitrust provisions in regions which have Ramón García-Gallardo not set up their own Regional Competition Authorities. King & Wood Mallesons Goya, 6 1ª Planta Article 3 of the Competition Act deals with cases of distortion of 28001 Madrid free competition by unfair acts which affect the public interest. Spain In this regard, not only the Competition Act but also the Unfair Tel: +34 91 426 0050 Competition Act 3/1991 apply to such conduct. Fax: +34 91 426 0066 Email: [email protected] URL: www.kwm.com Spain

Ramón García-Gallardo has been practising law since 1989, specialising in competition, corporate law and litigation. Ramón joined the firm as a partner in 1999. He manages the Brussels office, leads the European Competition practice and is also head of the Spanish competition law practice group in the Madrid office. He specialises in European Union and Spanish competition law in a wide range of industry sectors, including air and maritime transport, energy and agri-food. As a competition lawyer, his main activities involve a broad range of issues, including a variety of competition issues, such as dominance, cartels, dawn raids, pricing, refusal to supply, etc. Ramón regularly represents clients before the Spanish Antitrust Authority and the European Commission, and also has particular expertise in litigation cases before the Spanish Civil and Mercantile Courts, the General Court of the European Union and the Court of Justice of the European Union in Luxembourg. He has provided competition law compliance support to a large number of international clients and has particular expertise in cartel defence work and leniency issues, both at the Spanish and EU level. Ramón regularly advises on mergers under Spanish and EU law, acting for either one of the merging parties or third parties such as complainants or investors. Educated at the University of Valladolid, Spain, Ramón later studied for his Masters in EU law at the Instituto de Estudios Europeos at the University of Salamanca, at King’s College, London and at the Free University of Brussels, and is fluent in Spanish, English and French. He participates regularly in working sessions, seminars and conferences on EU & Spanish competition matters.

We have created a network of more than 2,700 lawyers in 30 locations across the world, including China, Hong Kong, Australia, Europe, the Middle East, Japan and the US. With one of the largest competition teams in Europe and Asia Pacific, we offer our clients a full competition law service. Our department has extensive experience of advising on and defending alleged cartels before the Competition Authorities. This includes advising on compliance programmes, fines, leniency applications, applying for markers, settlement, and strategy, handling on-site inspections (“dawn raids”) and subsequent investigations by the authorities. It also has extensive experience in competition-related litigation, including judicial review, as well as applications for injunctions and damages and defending such applications.

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Sweden Peter Forsberg

Hannes Snellman Attorneys Ltd Haris Catovic

by the prohibition in Section 2, paragraph 1, and corresponds in its 1 The Legislative Framework of the Cartel entirety to Article 101(1) TFEU. Prohibition An exemption from the prohibition against anticompetitive agreements is provided in Section 2, paragraph 2, of the Competition 1.1 What is the legal basis and general nature of the Act and correlates with the structure of Article 101(3) TFEU. cartel prohibition, e.g. is it civil and/or criminal?

1.3 Who enforces the cartel prohibition? The Swedish Competition Act (2008:579) (Competition Act) came into force on 1 November 2008 and governs all aspects of The prohibition against anticompetitive agreements is administered Swedish competition law. The legal basis for the prohibition and enforced by the SCA and trailed by the courts. As of 1 September of anticompetitive agreements is provided in Section 2 of the 2016, a new court system for competition law infringement Competition Act and it is under this provision that cartels are proceedings was established. The Patent and Market Court (PMC) regulated. The Competition Act does not provide a legal definition was established as a division within the Stockholm District Court of what a cartel is, but it is generally understood to be an agreement (SDC) as the first instance in competition law violation and merger entered into between competitors to distort competition. control proceedings. The PMC is also the first instance in damages The Swedish Competition Authority (SCA) is the central actions, including “stand alone” actions, which are handled as civil administrative authority for the enforcement of the competition law matters. Decisions and judgments by the PMC can be appealed rules in Sweden and is entrusted with investigative powers as well to the Patent and Market Court of Appeal (PMCA), which replaced as rights of intervention; however, the SCA does not have the power the Market Court (MC) as, in principle, the highest instance. A to impose fines in individual cases. precondition for the PMCA to hear and conduct an examination of Swedish competition law is of a public and administrative nature an appealed case or matter is that the court grants leave to appeal. and does not prescribe criminal sanctions. The prohibition against The reorganisation of the court system was deemed necessary due anticompetitive agreements in the Competition Act primarily affects to the complex and comprehensive nature of competition law and undertakings and not individuals. The public sanctions comprise merger control cases. The intention is to obtain a more uniform orders to bring an infringement to an end, interim measures and examination and handling of competition law matters. imposition of administrative fines. The civil sanctions constitute actions for damages by private litigants. However, a trading 1.4 What are the basic procedural steps between the prohibition can be imposed on an individual in cases of particularly opening of an investigation and the imposition of severe cartel infringements. The SCA will impose a trading sanctions? prohibition only in situations where it is considered to be in the public interest and the individual in question has seriously failed to The SCA conducts cartel investigations either on its own initiative, fulfil its obligations. on the basis of a complaint from a third party or following a leniency application. The powers of the SCA stem from the provisions in 1.2 What are the specific substantive provisions for the Section 5 of the Competition Act and provide the authority with cartel prohibition? tools to gather sufficient evidence to establish the existence of an infringement. The SCA’s investigative powers include, for instance, The legal basis for the prohibition of anticompetitive agreements conducting unannounced on-site inspections (dawn raids) upon is set out in Section 2, paragraph 1, of the Competition Act approval by the PMC. If the court approves the SCA’s application and is modelled in accordance with the prohibition provided in to conduct an inspection, the authority is empowered to examine Article 101(1) TFEU. The prohibition consists of four elements business records, take copies of documents as well as having and becomes applicable if: (i) there is an agreement or concerted access to any of the inspected undertaking’s premises, land, means practice; (ii) between two or more undertakings and the agreement of transport and other areas. Independently of a court approval, or concerted practice; (iii) has as its object or effect, the prevention, the SCA may order undertakings to submit information, order restriction or distortion of competition; and/or (iv) in the Swedish employees and representatives of the inspected undertaking and market to an appreciable extent thereof. The Competition Act other individuals likely to be in possession of relevant information contains a non-exhaustive list of corporate conduct that is prohibited to appear for interrogation. Once the SCA has gathered sufficient evidence, a draft summons application (which is equivalent to

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a statement of objections (SO)) will be issued for review by the Investigatory Power Civil/Administrative Criminal concerned undertakings. Before the SCA can bring an action for ■ Right to secure prohibition of the alleged anticompetitive agreement, the implicated premises overnight Yes* N/A undertakings must be given an opportunity to comment upon the (e.g. by seal) SCA’s draft summons application. Subsequently, the SCA may file the summons application to the PMC, which is the first instance Please Note: * indicates that the investigatory measure requires in competition law and merger control proceedings. The PMC’s the authorisation by a court or another body independent of the judgment can be appealed to the PMCA, which is (in principle) the competition authority. final instance in competition law matters. 2.2 Please list specific or unusual features of the Sweden investigatory powers referred to in the summary table. 1.5 Are there any sector-specific offences or exemptions?

During an unannounced on-site inspection, the SCA does not have The Competition Act includes legal exemptions from the prohibition the legal right to review documents or storage devices containing against anticompetitive agreements, such as certain arrangements information covered by legal privilege. In the event of a dispute relating to the agriculture, forestry and horticulture sectors (Section whether a particular document is legally privileged, the document in 2, paragraph 4) and taxi services (Section 2, paragraphs 3 and 5). question is immediately to be sealed and sent by the SCA to the PMC The taxi services exemption provides a safe harbour for certain for the matter to be determined without delay by the court. In practice, written agreements between taxi undertakings and a central booking the threshold to establish that a particular document is protected by service. legal privilege is set rather low. In matter Ä 6673-11, Posten AB et. In addition, the Swedish competition law regime includes block al., the SCA discovered a memorandum written by the undertaking’s exemptions which are equivalent in substance to those that apply in-house legal counsel during an unannounced on-site inspection. The at EU level. undertaking claimed that the document was written for the purpose of obtaining external legal advice and, as such, it should be covered by 1.6 Is cartel conduct outside your jurisdiction covered by legal privilege. The court agreed with the claimant and consequently the prohibition? considered that every written document which has been entrusted to a counsel within its profession is protected by legal privilege. The scope of the prohibition against anticompetitive agreements In order for the SCA to examine and take copies of electronically is not necessarily limited to anticompetitive conduct within the stored data to be reviewed at its own premises, the undertaking Swedish territory. The Competition Act becomes applicable to any or individual subject to the inspection must give its consent. infringement with an effect on the Swedish market, irrespective of Representatives or legal counsels of the inspected undertaking are whether the agreement itself or the undertakings concerned have entitled to be present and supervise while the SCA investigates any connection to Sweden and regardless of whether the infringing digital data. In practice and due to practical reasons, an undertaking practice was conducted in Sweden or abroad. subject to an inspection commonly gives its consent to the SCA to review the electronical data at the authority’s own premises. 2 Investigative Powers In MD 2015:15, the MC held that the SCA did not have the authority to use previously mirrored material collected at an unannounced on- site inspection relating to another alleged violation to investigate 2.1 Summary of general investigatory powers. a potentially new infringement of the Competition Act, hence clarifying that “fishing expeditions” are unlawful. Table of General Investigatory Powers

Investigatory Power Civil/Administrative Criminal 2.3 Are there general surveillance powers (e.g. bugging)? Order the production of specific documents Yes N/A The SCA is not empowered to use general surveillance powers in or information cartel investigations. Carry out compulsory interviews with Yes N/A individuals 2.4 Are there any other significant powers of Carry out an investigation? unannounced search Yes N/A of business premises The SCA can order an undertaking subject to an unannounced Carry out an on-site inspection to provide the SCA with the information and unannounced Yes N/A search of residential documents needed for the investigation. The SCA may also order premises oral clarifications and explanations directly on the site. ■ Right to ‘image’ computer hard drives Yes N/A using forensic IT 2.5 Who will carry out searches of business and/or tools residential premises and will they wait for legal advisors to arrive? ■ Right to retain No N/A original documents ■ Right to require Searches of business and residential premises are carried out by an explanation Yes N/A SCA officials. The SCA is often accompanied by the Swedish of documents or Enforcement Authority, which can assist in gaining access to the information supplied premises and may seal these premises during an unannounced on- site inspection.

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The undertaking has the right to have a legal representative present The SCA uses a two-step methodology when determining the amount during an investigation; however, generally, the presence of legal of the fines. As an initial step, the sanction value of the infringement counsel is not a precondition for the commencement and execution is set for each undertaking. The sanction value is determined by of the inspection. The undertaking’s legal representative shall reference to the turnover in the relevant market, the gravity of the always be given the opportunity to review all the documents that infringement and its duration. Infringements such as horizontal the SCA intends to make a copy of before the unannounced on-site price-fixing, market sharing and output-limitation agreements are in inspection finishes. principle deemed to be severe in nature and will place the sanction value high on the scale. The second step adjusts the sanction value upwards or downwards, depending on aggravating and mitigating 2.6 Is in-house legal advice protected by the rules of privilege? circumstances attributable to the violation. Examples of aggravating circumstances are, inter alia, if an undertaking has coerced another Sweden undertaking to participate in the infringement, or if it had a leading Solely legal advice by an external legal counsel which is a member role. Conversely, mitigating circumstances are, for example, if an of the Swedish Bar Association or his/her associate is legally undertaking’s participation in the infringement was of a limited privileged (Section 5, paragraph 11, of the Competition Act). extent, or if it participated in the infringement through negligence. However, case law has confirmed that memorandums written by an in-house counsel for the purpose of obtaining external legal advice In practice, the courts tend to set the amount of the administrative are also covered by legal privilege (see question 2.2 for a detailed fines at a lower level than what was originally claimed bythe account). SCA. For instance, in the Passenger Cars Cartel (MD 2008:12), the SCA claimed that the members of the cartel were liable to pay administrative fines in a total of SEK 71.3 million. The concerned 2.7 Please list other material limitations of the undertakings were ultimately imposed administrative fines of investigatory powers to safeguard the rights of approximately SEK 21 million. defence of companies and/or individuals under investigation. The SCA has the power to issue an injunction against an undertaking to terminate an infringement of the prohibition According to Section 5, paragraph 13, of the Competition Act, against anticompetitive agreements. The injunction is made individuals or undertakings that are subject to an obligation to effective immediately and may be imposed in combination with an supply information pursuant to the Competition Act must not be administrative penalty in the event of non-compliance. unduly burdened. The provision reflects a general principle of Furthermore, the SCA is authorised to impose an interim order to proportionality that the SCA must comply with when it exercises stop the infringing practice until a final court decision is taken on its investigative powers. The SDC has on two occasions (matters Ä the matter. 5791-11 and Ä 7672-11) dismissed the SCA’s application to conduct an unannounced on-site inspection. Both applications were, 3.2 What are the sanctions for individuals (e.g. criminal however, approved on appeal to the MC, where the SCA provided sanctions, director disqualification)? clarifications to its application for carrying out the inspections.

A trading prohibition can be imposed on an individual in cases 2.8 Are there sanctions for the obstruction of of particularly severe cartel infringements, such as price-fixing investigations? If so, have these ever been used? arrangements, limiting or controlling production or market-sharing. Has the authorities’ approach to this changed, e.g. The SCA will only bring a claim for the imposition of a trading become stricter, recently? prohibition where it is considered to be in the public interest to do so and if the individual has seriously failed to fulfil its obligations. Undertakings and individuals subject to an unannounced on- Furthermore, an individual can obtain immunity from a trading site inspection of business or residential premises have a general prohibition if the person: (i) has a position at an undertaking that has obligation to cooperate with the SCA. There are no direct sanctions been granted immunity from or reduction of an administrative fine; in case of non-compliance with this obligation, although a decision or (ii) personally has cooperated to a significant extent in facilitating to conduct an inspection can be combined with an administrative the SCA’s investigation of the infringement. penalty in the event of non-compliance. However, it is a criminal offence to either obstruct an official function or damage or remove an official seal. 3.3 Can fines be reduced on the basis of ‘financial hardship’ or ‘inability to pay’ grounds? If so, by how much? 3 Sanctions on Companies and Individuals Section 3, paragraph 8, of the Competition Act specifies that the administrative fine shall be set according to the sanction value of the 3.1 What are the sanctions for companies? infringement. When assessing the sanction value, account is taken of the gravity and nature of the infringement and its duration. As a At the request of the SCA, the PMC may order the investigated mitigating circumstance, Section 3, paragraph 10, of the Competition undertaking to pay an administrative fine. The administrative fine Act states that special account is taken of whether a cartel member may not exceed 10 per cent of the annual turnover of the concerned has participated in the alleged infringement to a limited extent. undertaking in the preceding financial year and is calculated based While the Competition Act does not explicitly mention “financial on the relevant economic entity’s aggregated annual turnover, e.g. a hardship” or “inability to pay” as a basis to reduce the administrative fine to be imposed on a subsidiary of a corporate group is calculated fine, the provision appears to leave discretion to the courts in this on the basis of the turnover of the whole corporate group. If the regard. action relating to the administrative fine is brought against several undertakings, the fine is determined individually for each undertaking.

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the existence of an infringement or facilitates the investigation of 3.4 What are the applicable limitation periods? the infringement in some other way to a very significant extent (category 2 leniency). The SCA may only impose an administrative fine if the allegedly In both situations described above, an undertaking applying for infringing parties are served with a summons application within five leniency must also fulfil the following cumulative conditions: (i) years from when the infringement ceased. provide the SCA with all the information and evidence about the However, if the undertaking concerned has been subject to an infringement which the undertaking has at its disposal or gets access unannounced on-site inspection or has been given the opportunity to to; (ii) actively cooperate with the SCA during the whole investigation respond to a draft summons application within the five-year period, of the infringement; (iii) not destroy evidence or in another way the limitation period instead starts from that later point in time. In hinder the present or future investigation of the infringement; and Sweden all circumstances, an administrative fine may only be imposed if the (iv) terminate its participation in the infringement as soon as possible summons application has been served within 10 years from the date after a leniency application or after it has provided the information. when the infringement ceased. Pursuant to Section 3, paragraph 13, of the Competition Act, an undertaking which is not the first to apply for leniency can still receive a reduction of the administrative fines. A reduction 3.5 Can a company pay the legal costs and/or financial penalties imposed on a former or current employee? will be available to undertakings which provide the SCA with information that facilitates the investigation to a significant extent. The cumulative conditions (i) to (iv) explained above in relation to Since an administrative fine based on an infringement of competition leniency applicants apply equally to those seeking a reduction of the law cannot be imposed on an individual employee, this issue is not administrative fines. The SCA states in the Leniency Guidelines of relevance in Swedish cartel proceedings. that it applies a restrictive interpretation of the provision and that the possibilities to obtain a fine reduction are very limited. 3.6 Can an implicated employee be held liable by his/her The first undertaking to fulfil the relevant conditions will be eligible employer for the legal costs and/or financial penalties to a 30–50 per cent reduction; the second undertaking can receive a imposed on the employer? discount of up to 20–30 per cent; and additional undertakings stand to benefit from a reduction of up to 20 per cent. In determining According to Section 4, paragraph 1, of the Swedish Tort Liability the adequate reduction, the SCA will take into account the timing Act (1972:207), an employee may only be held liable for damages of providing the information, the extent to which the information caused within the employment in exceptional circumstances, with has added value and the continuity of the applicant’s cooperation regard to the nature of the damaging act, the status of the employee, throughout the investigation. the interests of the injured party and other relevant circumstances. Leniency from administrative fines will not be granted to an Exceptional circumstances can be at hand if the employee has undertaking that has coerced another undertaking to participate in committed a severe criminal offence or in situations of serious or the infringement. If an undertaking, following threats or pressure, repeated negligent acts. However, no damages can be claimed if the has coerced another undertaking to participate in the infringement, employee caused the harm with only minor negligence. this undertaking does not fulfil the conditions for leniency in the form of immunity from fines. An undertaking that has initiated, 4 Leniency for Companies maintained or played a leading part in the infringement is, however, not excluded from immunity. An undertaking that has coerced another undertaking to participate in the cartel may instead be 4.1 Is there a leniency programme for companies? If so, granted a reduction of the administrative fine. please provide brief details.

4.2 Is there a ‘marker’ system and, if so, what is required The Competition Act regulates the leniency programme in Section to obtain a marker? 3, paragraphs 12 to 15. These rules were amended in 2014 to introduce greater predictability and to further mirror the EU The marker system within the leniency regime allows an undertaking leniency system, particularly through the addition of a marker to apply for a marker and thus be granted an extension period for system. The SCA has issued guidelines regarding its interpretation submitting the extensive information. The minimum requirement of the provisions regulating the leniency programme, the in order to obtain a marker is that the initial notification contains requirements for immunity or reduction from the administrative information about which product the infringement relates to, which fines and the procedure that the SCA applies in these matters other undertakings are participating in the infringement and the (Leniency Guidelines). subject matter of the infringement. The SCA gives the undertaking The Swedish leniency regime entitles the SCA to grant an an extension period to provide the extensive information required undertaking either immunity or a reduction of an administrative fine. for granting immunity from an administrative fine. The extension In situations where the SCA has not yet obtained sufficient evidence period is set to two weeks, as a general rule. Another undertaking to conduct an unannounced on-site inspection, immunity may cannot jump the queue for leniency, unless the undertaking applying be granted to the first undertaking to notify the authority of an for a marker fails to submit the extensive information within the infringement. This is on condition that it is as a result of information prescribed period. provided by the leniency applicant, and that the SCA has collected sufficient information to take action against the infringement 4.3 Can applications be made orally (to minimise any (category 1 leniency). subsequent disclosure risks in the context of civil damages follow-on litigation)? Alternatively, if the SCA has already obtained sufficient evidence to conduct an unannounced on-site inspection without the information provided by the leniency applicant, immunity may still be granted Leniency applications are not required to follow a certain form and if the undertaking is first to provide information which establishes can be made both by written submissions and orally.

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4.4 To what extent will a leniency application be treated 6 Plea Bargaining Arrangements confidentially and for how long? To what extent will documents provided by leniency applicants be disclosed to private litigants? 6.1 Are there any early resolution, settlement or plea bargaining procedures (other than leniency)? Has the competition authorities’ approach to settlements In Sweden, there is a strong legal tradition of transparency. As a changed in recent years? starting point, all public documents created by, or submitted to, a public authority can in principle be requested. However, access The SCA cannot agree to a plea bargain to resolve an investigation, to certain information and data in the SCA’s investigations can be but there is a form of settlement procedure. In cases where the restricted due to that material falling within the scope of the Public Sweden facts are uncontested between the parties, the SCA may issue a fine Access to Information and Secrecy Act 2009:400 (Secrecy Act) and order to settle the cartel investigation. The settlement proceeding is as such, being protected by confidentiality. The decision to grant based on voluntariness and the undertaking concerned may choose access to a public document is made by the authority in possession to either accept or disregard the SCA’s terms for settlement. A of the document and each document is individually assessed. From fine order is a binding settlement and the SCA issues a simplified the submission to the SCA to at least when the authority files a decision on competition law liability. However, the settlement can summons application, leniency applications are confidential under be appealed to the PMC within a year from the written confirmation. Section 30, paragraph 3, of the Secrecy Act. Nevertheless, in order to guarantee a party’s right to properly prepare its defence and to safeguard its interests, a party to the matter has the right to access 7 Appeal Process files even if they are confidential, unless there are exceptional reasons not to disclose the information in question. 7.1 What is the appeal process? Further, confidentiality is available for business secrets, information which may be injurious to an individual concerned and to protect the integrity and objectives of the SCA’s investigative process. In Sweden, it is not the SCA that takes an infringement decision. Upon hearing the arguments of the SCA and the defendants and After the conclusion of a cartel investigation, private litigants may reviewing the written and oral evidence of the case, it is the PMC demand access to the public documents regarding the investigation. which decides the imposition and the amount of the administrative However, information covered by confidentiality during the fines. The PMC’s judgment and decisions can be appealed to the SCA’s investigation continues to be confidential once the cartel PMCA, which in principle is the second and ultimate instance in investigation has ended, if it can be assumed that disclosure of competition law infringement proceedings. An appeal to the PMCA the information would cause significant damage or detriment to a will involve a full examination of facts and substance, affecting both private party. The files are confidential for a maximum period of 20 the legal assessment and sanctions. The PMCA must grant leave to years. Consequently, private litigants have limited possibilities to appeal before the court will hear and conduct an examination of an gain access to, for instance, a leniency application once the SCA’s appealed case or matter. The PMCA will, for instance, grant leave to investigation has concluded. appeal if there is an alleged error of law in the PMC’s judgment or if the judgment by the PMCA is necessary because of the importance 4.5 At what point does the ‘continuous cooperation’ of the case for the future application of the law. requirement cease to apply?

7.2 Does an appeal suspend a company’s requirement to The leniency applicant shall actively and continuously cooperate pay the fine? with the SCA throughout the whole infringement investigation. The Leniency Guidelines state that the applicant is also expected If the PMC’s judgment is appealed, the imposed administrative to cooperate with the SCA during potential court proceedings. The fine will not be legally enforceable until the matter has finally been leniency applicant has an obligation to uphold the information it determined by the PMCA. submitted to the SCA throughout the court proceedings.

7.3 Does the appeal process allow for the cross- 4.6 Is there a ‘leniency plus’ or ‘penalty plus’ policy? examination of witnesses?

There is no “leniency plus” or “penalty plus” available within the Oral hearings are part of the court proceedings in cartel cases and current Swedish leniency regulatory framework. witnesses can be cross-examined by the SCA and the defendant.

5 Whistle-blowing Procedures for 8 Damages Actions Individuals

8.1 What are the procedures for civil damages actions 5.1 Are there procedures for individuals to report cartel for loss suffered as a result of cartel conduct? Is the conduct independently of their employer? If so, position different (e.g. easier) for ‘follow-on’ actions please specify. as opposed to ‘stand alone’ actions?

Any third party can make an anonymous complaint or provide the On 27 December 2016, a new act on antitrust damages (the SCA with information regarding a competition law infringement. Competition Damages Act (2016:964)) entered into force in Sweden. The Competition Damages Act governs actions for damages for infringements of competition law and implements the EU Antitrust

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Damages Actions Directive (Antitrust Damages Actions Directive). competition law damages cases. Furthermore, if the court finds it The aim of the new legislation is to facilitate for companies and appropriate, the SCA’s claim for the imposition of administrative consumers that have suffered harm to claim compensation for fines may be jointly processed with a private litigant’s action for competition law violations. The new legislation changes and damages. clarifies rules on liability, limitation periods, compensation, right of recourse, the passing-on defence, disclosure and other procedural 8.3 What are the applicable limitation periods? matters.

Section 2, paragraph 1, of the Competition Damages Act states The Competition Damages Act stipulates a statutory limitation that an undertaking which intentionally or negligently commits a period of five years from the moment when the infringement competition law infringement shall compensate the damage that is Sweden ceased, provided that the claimant became aware of, or could caused thereby. As a general rule, if there is more than one infringer, reasonably be expected to have been aware of, the infringement, the infringers are jointly and severally liable for the damages that this behaviour caused harm and the identity of the infringer. caused by the infringement. Competition damages actions follow The limitation period will be suspended or interrupted when the the general principles of the law on torts and the burden of proof SCA initiates infringement proceedings. A new limitation period rests with the claimant. However, in cartel infringements, there commences from the day when there is a legally binding decision is a presumption that the cartel infringement caused the damage. on the infringement or if the authority concludes its investigation. The scope of those entitled to claim damages is not defined in the Competition Damages Act but is limited by general principles of tort law, including proximate cause. If an indirect purchaser has suffered 8.4 Does the law recognise a “passing on” defence in a loss due to the passing-on of overcharges, this will in principle give civil damages claims? standing to bring an action for damages. The consequence of this is that defendants are permitted to argue vis-à-vis direct purchasers The “passing-on” defence is recognised by Swedish competition that their losses have been passed on downstream to end consumers. law. See question 8.1 for a more detailed description of the passing- on defence in Swedish competition law litigations. A party that has suffered economic harm due to an infringement of competition law is entitled to claim compensation if the party can prove causation and the extent of the harm. The compensation 8.5 What are the cost rules for civil damages follow-on for the harm suffered covers compensation for pure economic loss, claims in cartel cases? i.e. actual losses and loss of profit as well as interest. The right to recover damages is compensatory in nature and does not involve a The legal cost rules stipulated in the Judicial Code for civil matters punitive element. In relation to indirect buyers, the Competition apply in competition damages actions. The main rule is that the Damages Act states that when calculating the compensation, an losing party in a civil matter shall reimburse the opposing party’s overcharge will, unless otherwise proven, be considered to have litigation costs. However, the litigation costs may be determined been passed on to an indirect buyer if the infringement caused an and apportioned in relation to the amount of damages that the party overcharge for the direct buyer. has claimed and the degree of success of each party. If compensation Certain practical difficulties are frequently united with the for litigation costs are to be compensated by several parties joined assessment of damages, for instance providing sufficient evidence on the same side, the parties are severally liable for the costs. to prove the existence of damages suffered due to a competition law infringement. To this end, Section 35, paragraph 5, of the 8.6 Have there been any successful follow-on or stand Swedish Code of Judicial Procedure (1942:740) (Judicial Code) alone civil damages claims for cartel conduct? If there provides the court with discretion to estimate the damages to a have not been many cases decided in court, have reasonable amount if full proof cannot be presented. According to there been any substantial out of court settlements? the preparatory works of the Judicial Code, application of this rule is particularly appropriate in proceedings regarding competition law We are not aware of any successful judgments in regard to damages actions. competition damages claims for cartel conduct, but there have been The PMC is the first instance handling actions for cartel damages. a number of cases initiated where the involved parties eventually The PMC’s judgment or decision can be appealed to the PMCA. decided to settle the dispute out of court. There are, however, However, the PMCA will have to grant leave of appeal prior to several damages actions related to abuse of dominance cases where hearing and conducting an examination of an appealed case or private litigants have been successful in recovering damages. matter. The law does not distinguish different procedures for “follow on” 9 Miscellaneous and “stand alone” actions, respectively. However, in practice, a “follow on” action eases the claimant’s burden of proof, since the competition law infringement has been established by a court 9.1 Please provide brief details of significant, recent or judgment. A “stand alone” action increases the investigatory and imminent statutory or other developments in the field of cartels, leniency and/or cartel damages claims. evidential burden of the claimant, since the injured party cannot base its claim on a court decision or judgment. There are no imminent statutory developments to report.

8.2 Do your procedural rules allow for class-action or representative claims? 9.2 Please mention any other issues of particular interest in your jurisdiction not covered by the above. Swedish procedural rules allow for a group of undertakings or consumers to bring a claim for damages collectively. However, There are no other issues to report. to our knowledge, this possibility has never been used in Swedish

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Peter Forsberg Haris Catovic Hannes Snellman Attorneys Ltd Hannes Snellman Attorneys Ltd Kungsträdgårdsgatan 20 Kungsträdgårdsgatan 20 111 47 Stockholm 111 47 Stockholm Sweden Sweden

Tel: +46 760 000 00 80 Tel: +46 760 000 00 50 Email: [email protected] Email: [email protected] URL: www.hannessnellman.com URL: www.hannessnellman.com Sweden Peter Forsberg is partner and head of the competition and public Haris Catovic is an associate at Hannes Snellman in Stockholm. He procurement practice group at Hannes Snellman in Stockholm. He is specialised in EU and Swedish competition law and advises on all advises Swedish and international companies on competition law and aspects of competition law. public procurement issues. In particular, he has solid experience of domestic and international merger control, competition law disputes and compliance work. He regularly represents clients in proceedings before national competition authorities as well as before the European Commission. He has recently been involved in matters, e.g. in the following sectors: energy; financial services; food and consumer products; forest products; pharmaceuticals; and telecommunications.

Hannes Snellman is a premier Nordic law firm focusing on significant transactions and complex dispute resolution. Hannes Snellman’s competition practice regularly advises clients on critical competition law issues in transactions, commercial agreements and day-to-day business practices. The issues are often complex and extend beyond domestic borders. Our competition practice has an exceptionally broad experience of both international and domestic cases involving public and private antitrust enforcement, merger control, state aid and regulatory proceedings. Our expertise covers the full spectrum of both domestic and EU competition law, including the identification and assessment of competition concerns, preventing them through compliance programmes, and if necessary, representing our clients before authorities, courts or arbitral tribunals.

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Switzerland Prof. Dr. Patrick L. Krauskopf

AGON PARTNERS Fabio Babey

■ Duty to examine. Civil courts have to examine a case when it 1 The Legislative Framework of the Cartel has been filed properly. In contrast, Comco has no obligation Prohibition to take up all claims being filed. Although Comco is the only public authority to enforce competition law, its resources are too limited to handle all of the cases. 1.1 What is the legal basis and general nature of the ■ Damages. Parties who have suffered damages because of cartel prohibition, e.g. is it civil and/or criminal? cartel activity can only obtain compensation only by bringing the case before a civil court. Fines imposed by Comco will Legal basis. The heart of Swiss competition law is the Federal Act be of benefit only to the treasury department. on Cartels and other Restraints of Competition (Cartel Act, CartA) ■ Costs. Parties filing a claim with Comco do not have to bear of 6 October 1995. any costs for the procedure. In contrast, filing a claim with a ■ The CartA has been shaped through one major revision in civil court can lead to huge costs: the unsuccessful party not 2003, leading to more efficient prosecution (e.g. the dawn only has to bear the costs of the procedure, but it has also to raid) and financial sanctions. compensate the winning party. ■ The Ordinance on Sanctions imposed for Unlawful Restraints ■ Evidence. Comco has extensive investigative powers to of Competition (Cartel Act Sanctions Ordinance, CASO) set tackle a cartel. On appeal, an administrative court will assess the general rules for calculating the fines and for the leniency whether Comco had enough evidence to fine a company. In a programme. civil procedure, the plaintiff has to present all of the evidence The legal framework is completed by means of the Federal Law required in order to claim for damages. There is no pre-trial discovery. against Unfair Competition of 19 December 1986, and the Price Surveillance Act of 20 December 1985. Civil/administrative nature. The CartA is designed as a civil- 1.4 What are the basic procedural steps between the administrative bill. However, case law shows that fines imposed opening of an investigation and the imposition of sanctions? by the Competition Commission Comco (Article 49a CartA) are sanctions of a criminal nature. Courts are therefore applying, Preliminary and informal investigation (Article 26 CartA). An partially and in a selective way, guarantees of a criminal investigation can be initiated by any third party, by an undertaking investigation. which is carrying out misconduct, or by Comco itself. At this stage, Comco’s Secretariat examines whether there is prima facie evidence 1.2 What are the specific substantive provisions for the of misconduct. If there is no sufficient indication of a violation of cartel prohibition? the CartA, Comco closes the case, usually with a short report (not a decision) about the market and the companies under scrutiny. The substantive provisions are divided into three pillars: Formal opening of investigation (Article 27 CartA). If there are 1st pillar: Agreements (Article 5 CartA). indications of an unlawful restraint of competition, Comco opens 2nd pillar: Abuse of dominance (Article 7 CartA). a formal investigation, usually by carrying out a dawn raid on the premises of the companies suspected of violating the CartA. The 3rd pillar: Merger control (Articles 9, 10 CartA). decision to open a formal investigation cannot be appealed. The first and second pillars are ex post regulations: the conduct of Running the investigation. Comco’s Secretariat – the fully staffed the undertakings is assessed after the occurrence. investigative authority – can collect all kinds of evidence, proceed The focus of the third pillar is an ex ante analysis: undertakings to hearings and give experts the mandate to provide legal and have to give notice of their planned merger, thus enabling Comco to economic opinions. An investigation usually takes between 18 and assess in advance the potential effects of the merger on the market. 36 months. Decision. Based upon a proposal from the Secretariat and defence 1.3 Who enforces the cartel prohibition? materials and pleadings, Comco decides to either approve an amicable settlement or to impose measures and fines. The CartA is enforced either by Comco (public enforcement) or Appeal. Parties can file an appeal with the Federal Administrative by the civil courts (private enforcement). The vast majority of the Court against Comco’s ruling, right up to the Federal Supreme cases are enforced by Comco. Court.

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1.5 Are there any sector-specific offences or exemptions? 2.2 Please list specific or unusual features of the investigatory powers referred to in the summary table. No. By law, there are no sector-specific offences or exemptions. Non-sector-specific exemptions by law: Article 3 CartA, however, No structural separation between investigation and decision. states some exceptions: Comco’s Secretariat is responsible for carrying out the investigations. Comco itself acts as the decision-making body. There are so called ■ Statutory provisions that do not allow for competition in a “chinese walls” between the two bodies. At the end of the day, both market for certain goods or services, take precedence over the provisions of the CartA. bodies constitute two sides of the same coin. Comco is involved in investigations in many ways. Thus, a dawn raid by the Secretariat ■ The CartA does not apply to effects on competition which requires the approval of Comco’s president. result exclusively from legislation governing intellectual property. Appeal heals procedural deficit. The blurred lines between the Switzerland Sector-specific offences in case law: Comco has set up sector- duties of the decision-making body and the investigative body specific rules, such as those for the automotive sector. cannot be seen without demur, in connection with various procedural guarantees of Article 6 ECHR. A partially satisfactory argument is Sector-specific exemptions in case law: According to Article 8 that rulings can be appealed by an independent body, namely, the CartA, the Federal Council – as Switzerland’s federal government Federal Administrative Court. – may, based on public interest, authorise an agreement which affects competition or authorise certain behaviour by dominant undertakings, even if Comco has already declared it to be unlawful. 2.3 Are there general surveillance powers (e.g. bugging)?

The Swiss Competition Authorities do not have general surveillance 1.6 Is cartel conduct outside your jurisdiction covered by the prohibition? powers.

CartA applies to practices that have an effect within Switzerland, 2.4 Are there any other significant powers of even if they originate in another country (Article 2 CartA). Thus, investigation? Switzerland’s competition law is based on the effects doctrine, and its geographic reach is wider than Swiss borders. Concerning the prosecution of cross-border activities in competition law, the agreement between Switzerland and the European Union about cooperation in the application of their competition laws (CC 2 Investigative Powers 0.251.268.1) entered into force on 1 December 2014. This agreement enables the Swiss and the European Competition Authorities to notify each other and coordinate enforcement activities together, 2.1 Summary of general investigatory powers. even to the extent of exchanging confidential information. Table of General Investigatory Powers 2.5 Who will carry out searches of business and/or Investigatory Power Civil/Administrative Criminal residential premises and will they wait for legal Can order the advisors to arrive? production of Yes No specific documents or information Ordering a dawn raid. At the request of the Secretariat, Comco’s Can carry out presidency can order a dawn raid. compulsory Yes No Criteria. To conduct a dawn raid, the following are required: (1) interviews with sufficient grounds for suspicion; (2) likelihood of finding evidence; individuals (3) respect for the principle of proportionality; and (4) a correctly Can carry out an unannounced search Yes No completed search warrant signed by a member of the Comco. of business premises Conducting the dawn raid. The dawn raid itself is conducted by Can carry out the Secretariat and may encompass both business and residential an unannounced Yes No premises. search of residential premises Key points during a dawn raid: ■ Has the right to ■ The authority does not have to wait for the arrival of legal ‘image’ computer Yes No advisors. hard drives using forensic IT tools ■ The contact person for the authority is the highest-ranking person within the company. ■ Has the right to retain original Yes No documents 2.6 Is in-house legal advice protected by the rules of ■ Has the right privilege? to require an explanation of Yes No documents or No. An in-house lawyer is seen as being a regular employee. information supplied The prerequisite for holding that such a privilege exists is the ■ Has the right to independency of the legal undertaking providing the advice. secure premises Yes No overnight (e.g. by seal)

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addresses that issue. However – according to the principle of 2.7 Please list other material limitations of the proportionality – CASO states in Article 2(2) that Comco must take investigatory powers to safeguard the rights of such criteria into account when determining the sanction. defence of companies and/or individuals under investigation. 3.4 What are the applicable limitation periods? Legal privilege. The correspondence between an undertaking and its external lawyer is protected by the rules of privilege. No limitation period for investigation. Comco is not precluded from Procedural guarantees. Being as the criminal law nature of penalties investigating a cartel due to a limitation period having expired. imposed under competition law is usually upheld, defendants can Limitation period for fines. The limitation period for fines is derived rely on procedural guarantees (as seen under question 1.1). from Article 49a (3)b CartA. Fines cannot be imposed if the restraint

Switzerland Sealing. During a dawn raid, documents which are not covered by of competition has not been exercised for more than five years by the search warrant (or are private) can be sealed by the company the time an investigation is opened. and a court decision is needed by Comco before such documents can be reviewed. 3.5 Can a company pay the legal costs and/or financial penalties imposed on a former or current employee? 2.8 Are there sanctions for the obstruction of investigations? If so, have these ever been used? Has Fines (Article 49a CartA). Such sanctions are always imposed the authorities’ approach to this changed, e.g. become against the company and not against the employees. Regarding the stricter, recently? legal costs, the CartA does not provide a solution. Therefore, the companies are free to fund any legal costs for their employees. No general sanctions. No, there is no general provision for obstruction of investigations. Selective sanctions for individuals (Article 54 CartA). Those sanctions need to be paid by the convicted person individually. Selective sanctions in law. CartA gives Comco the power to fine a company for not fully fulfilling its obligations to provide information or for failing to produce documents (Article 50 ss CartA). 3.6 Can an implicated employee be held liable by his/her employer for the legal costs and/or financial penalties Selective sanctions in case law. Comco has shown a growing imposed on the employer? tendency to punish companies for obstruction of an investigation when the time comes to calculate the amount of a fine. No provisions in CartA. The CartA does not provide such a respective regulation. 3 Sanctions on Companies and Individuals Provisons in civil law (i.e. contractual labour law or torts). Swiss law states that an employee can be held responsible for such damage. 3.1 What are the sanctions for companies? 4 Leniency for Companies Selective breaches. Fines can be imposed when companies participate in an unlawful agreement – only where hard-core restrictions are involved – as mentioned in Article 5 para 3 and 4 4.1 Is there a leniency programme for companies? If so, CartA and for the abuse of a dominant position within the meaning please provide brief details. of Article 7 CartA. Maximum amount. The maximum amount of fines is 10% of the The CartA provides a leniency programme (Amnesty and (group) turnover that the undertaking achieved in Switzerland in the Amnesty+), which is stated in Article 49a(2) CartA. preceding three financial years. The amount of the fine is dependent Regarding Amnesty, the following should be taken into consideration upon the duration and severity of the infringement. (for Amnesty+ see question 4.6): ■ Comco may grant full or partial immunity. 3.2 What are the sanctions for individuals (e.g. criminal ■ The undertaking has to cooperate (fully) with the authority sanctions, director disqualification)? and help to reveal and remove the restraint of trade. ■ Only “first-movers” may obtain full immunity. No general sanctions. There are no sanctions for individuals ■ For full immunity, the undertaking must not be the ringleader regarding the original violation of competition law, nor prison of the cartel. sentences for individuals. Selective sanctions. Sanctions for individuals are listed in Article 4.2 Is there a ‘marker’ system and, if so, what is required 54 et seq. CartA. The sanctions may not exceed CHF 100,000 and to obtain a marker? result from the following: ■ Wilful violations of decisions made by Comco or of amicable Since only the first undertaking is eligible to benefit from full settlements made with Comco. immunity, the Comco has to determine the chronological order of ■ Failure to fully comply with information requests. the submissions of the voluntary reports. Some key aspects are the following: 3.3 Can fines be reduced on the basis of ‘financial ■ A voluntary report can only be submitted by one single hardship’ or ‘inability to pay’ grounds? If so, by how undertaking and not by two undertakings together. much? ■ A marker is the declaration of intention to submit a voluntary report, and therefore precedes the voluntary report. There is no specific provision in the CartA which explicitly

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■ If a marker is not followed by a voluntary report, it is disregarded. 5 Whistle-blowing Procedures for ■ A “marker for a voluntary report” is preferably sent by email Individuals or fax (time issue). ■ From the moment it applies for the marker, the undertaking 5.1 Are there procedures for individuals to report cartel has to cooperate fully. conduct independently of their employer? If so, ■ Comco provides detailed instructions on its website. please specify.

No specific provisions in . law Anyone can report misconduct. 4.3 Can applications be made orally (to minimise any subsequent disclosure risks in the context of civil There are, however, no specific rules for whistle-blowers.

damages follow-on litigation)? Specific provisions in case law. Comco would do whatever it takes Switzerland to grant anonymity to a whistle-blower. According to CASO, an application can be made orally by the Secretariat of the Comco. The undertaking may also file the voluntary report by submitting anonymous information. The 6 Plea-Bargaining Arrangements Secretariat then determines whether the information is enough for immunity and will set the time period within which the undertaking 6.1 Are there any early resolution, settlement or plea must disclose its identity. bargaining procedures (other than leniency)? Has the competition authorities’ approach to settlements changed in recent years? 4.4 To what extent will a leniency application be treated confidentially and for how long? To what extent will documents provided by leniency applicants be Article 29 CartA states that if the Secretariat considers a restraint of disclosed to private litigants? trade as being inadmissible, it may propose an amicable settlement. The settlement needs to fulfil the following requirements: To what extent? ■ to be in written form; and ■ Access is restricted to other undertakings which are being ■ to be approved by Comco. investigated. No appeal commitment. The Secretariat will not settle with those ■ Files are only available at Comco’s offices under the undertakings which are willing to lodge an appeal. supervision of an officer. Framework agreement. Since 2014, the Secretariat and the ■ Information-gathering does not include copies of the file’s parties usually will conclude a framework agreement prior to the contents, but only the right to transcribe. commencement of settlement discussions. The aim is to facilitate ■ Information is only given where a written commitment is discussions without being exposed to the danger that something made that such information shall only be used for defence might be used against the parties in a procedure where settlement purposes in Comco proceedings (which does not include discussions have failed. private litigants). For how long? ■ A leniency applicant will be treated confidentially, at least 7 Appeal Process until the investigation is officially opened. ■ In some cases, confidentiality is maintained right until the 7.1 What is the appeal process? moment the final decision is published.

Appeals against decisions of the Secretariat (during the procedure) 4.5 At what point does the ‘continuous cooperation’ and against Comco (the final decision) can be made in first instance requirement cease to apply? to the Federal Administrative Court and subsequently to the Federal Court if need be. There is a 30-day period during which an appeal For full immunity, an undertaking must cooperate continuously is to be filed. during the entire investigation, until the decision is made. In some instances, the immunity applicant has to cooperate until a 7.2 Does an appeal suspend a company’s requirement to decision is reached in related investigations. pay the fine?

4.6 Is there a ‘leniency plus’ or ‘penalty plus’ policy? Yes, but only partially: an appeal in front of the first instance (federal administrative court) generally has a suspensive effect, Yes, Swiss Antitrust Law provides for “leniency plus”: An unless decided otherwise. If the federal administrative court undertaking which reveals another anticompetitive violation (2nd decides in favour of the authority, the sanction has to be paid even Cartel Case) can obtain a reduction of up to 80% (1st Cartel Case) if the company appeals the decision in front of the second instance (Article 12, para 3 CASO). This reduction is without prejudice to (supreme court). any possible full immunity or partial reduction of the sanction for nd the 2 Cartel Case. 7.3 Does the appeal process allow for the cross- examination of witnesses?

No. Swiss administrative law does not provide for the possibility of witnesses being cross-examined at any stage.

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8 Damages Actions 8.6 Have there been any successful follow-on or stand alone civil damages claims for cartel conduct? If there have not been many cases decided in court, have 8.1 What are the procedures for civil damages actions there been any substantial out of court settlements? for loss suffered as a result of cartel conduct? Is the position different (e.g. easier) for ‘follow-on’ actions as opposed to ‘stand alone’ actions? As the number of civil trials is remarkably small, there are no exceptional decisions. Moreover, most of the civil trials end in a Public enforcement is paramount in Switzerland (95%). Private settlement and do not reach the public domain. enforcement is still underdeveloped (5% of cases). According to Article 12/13 CartA, the following points in civil 9 Miscellaneous Switzerland proceedings have to be stressed: ■ The possibility of an action for an injunction or compensation for damages exists. 9.1 Please provide brief details of significant recent or imminent statutory or other developments in the field ■ The possibility of nullity of contracts exists. of cartels, leniency and/or cartel damages claims. ■ The possibility of a follow-on or a stand alone claim exists. ■ Access to and gathering evidence can be difficult as no pre- The last attempt to amend the CartA was turned down by the Swiss trial discovery phase exists. Parliament in September 2014. Some of the key themes of the ■ The losing party bears the financial risk. amendment were: It is often easier to estimate the success of follow-on claims. ■ Establishing a restriction by object for “hard-core” cartels However, the authority will not provide any evidence and the (price, quantity, territory). limitation period (one year) has to be respected. ■ Introducing the SIEC test in merger control cases – in analogy to the EU system. ■ The reduction of fines given the existence of a compliance 8.2 Do your procedural rules allow for class-action or programme. representative claims? ■ Facilitation of private enforcement, allowing consumers to sue, as well as allowing an interruption of the limitation No. Swiss competition law does not provide an instrument of period. collective redress. On 1 January 1 2016, the Comco adopted a revised Notice on the Assessment of Vertical Agreements in the Motor Vehicle Sector 8.3 What are the applicable limitation periods? which basically mirrors EU’s BER. It replaces the Notice of 2002. The most significant changes are: Swiss competition law applies the limitation periods of the Swiss ■ Manufacturers now have the possibility of showing efficiency Code of Obligation (CO) for civil enforcement. According to gains in all infringement cases. Article 60 CO, the relative limitation period is one year, counting ■ Manufacturer’s obligation to conclude a contract with auto from knowledge of the damage, and in any case within 10 years of dealers in the aftersales market, provided the dealer fulfils all the passing of the damaging action. requirements set by the manufacturer, has been softened. On 22 May 2017, the Comco adopted a revised Notice on the 8.4 Does the law recognise a “passing on” defence in Assessment of Vertical Agreements. It updates the Notice of 2010. civil damages claims? The most significant changes are: ■ Vertical Agreements on prices (RPM) and absolute territorial Yes, cartel members can defend themselves against direct purchasers protection are generally prohibited, unless they can be with the argument that the overprice has been passed on to the next justified on grounds of economic efficiency. market level. However, the cartel member bears the burden of proof in such a case. 9.2 Please mention any other issues of particular interest in your jurisdiction not covered by the above. 8.5 What are the cost rules for civil damages follow-on claims in cartel cases? The Swiss Federal (Supreme) Court (SC) rendered a landmark decision on 28 June 2016 regarding the significance of anti- The Federal Civil Procedural Code (CPC) defines the costs of civil competitive agreements under Swiss Law (decision 2C_180/2014). trials in Article 95. The costs are composed of (1) processing costs Gaba, the manufacturer of the toothpaste “Elmex” prohibited (e.g. court fees), and (2) the legal fees of both parties. As the trial is its Austrian licensee from selling “Elmex” products outside the held in a cantonal court, the amount of court fees varies from canton assigned territory. to canton and is also dependent upon the amount being disputed. ■ The SC found for the first time that vertical agreements In general, it can be said that the losing party bears the financial risk, between manufacturers and resellers on RPM or absolute and therefore, the costs for both parties. This rule may be allocated territorial protection allocations are generally prohibited differently by the judge. unless they can be justified on grounds of economic efficiency. ■ In a general assessment, the SC stated that in cases of horizontal and vertical “hard-core” agreements (on prices, quantities and territory), a significant restriction of competition by object is held to exist merely by having such an agreement.

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■ The SC made it clear the Comco can impose fines (Article 49a, para. 1 CartA) in all cases dealing with RPM or absolute territorial protection. From now on, Comco can impose fines regardless of whether there is a suppression of competition (Article 5, para. 3 and 4 CartA) or merely a significant restriction of competition (Article 5, para. 1 CartA) at stake.

Prof. Dr. Patrick L. Krauskopf Fabio Babey

AGON PARTNERS AGON PARTNERS Switzerland Wiesenstrasse 17 Wiesenstrasse 17 CH-8008 Zürich CH-8008 Zürich Switzerland Switzerland

Tel: +41 43 344 95 81 Tel: +41 43 344 95 82 Email: [email protected] Email: [email protected] URL: www.agon-partners.ch URL: www.agon-partners.ch

Prof. Dr. Patrick L. Krauskopf is chairman of AGON Partners and Fabio Babey is the managing director at AGON Partners, the head of the Center for Competition Law at the Zurich University. compliance officer of a dominant international company and a lecturer Prior to joining AGON, he was, inter alia, a law clerk with the Swiss at the Zurich University (Center for Competition Law). His focus is on Federal Supreme Court, both the deputy director and then the chief competition law and compliance and he is fluent in German, English, of international affairs with the Swiss Competition Commission French, Spanish and Italian. He manages a series of events for (COMCO). At both the Zurich University (ZHAW) and other universities young antitrust lawyers and economists in the field of competition law he lectures on contracts, torts and competition law. With the WTO, (“Debating Competition”); moreover, he is the programme manager UNCTAD, ICN and CUTS he frequently appears as an expert on of the “CAS International Competition Law and Compliance” course. competition law. During his mandate at COMCO, he led the revision Additionally, he contributes to the Swiss Association for Compliance of the Swiss Cartel Act 2003, the Ordinance on Fines and Leniency and Competition Law (ACCL) and organises the Event-Series Program 2004, the Communication on Car Distribution (BER) 2002, Competition Law Update (CLU). Previously, he was the founder/ and the Communication (BER) on Vertical Restraints 2007. He managing director of Emeritus-Work GmbH; and a doctoral candidate studied at the Universities of Fribourg and Berkeley (Master’s, 1991; at the chair of Prof. Heinemann (University of Zurich). Ph.D., 1999) and at Harvard Law School (LL.M., 2005). Besides being admitted to all Swiss courts, he has also passed the New York Bar.

AGON Partners offers a wide array of essential services to anticipate, assess, and ultimately provide defence against various threats in this field. With AGON’s experienced specialists, clients have access to the entire spectrum of services from one single source. Apart from their expertise, they also possess an international network of executives in regulatory agencies dealing with competition matters worldwide, and have profound know-how about selecting the right procedural strategy. Besides providing outstanding legal advice and representation in civil and administrative competition proceedings, AGON also develops the accompanying communication and media strategies together with you, as well as taking care of any needed political campaigns too. Thanks to AGON’s road-tested network and their experienced communication skills during proceedings, we offer a comprehensive process for promoting your reputation and credibility. AGON is also actively involved in shaping scientific discourse about the application and development of Swiss competition law through both its research papers and presentations. We continually pass-on to our clients any new insight gleaned from academia and we continue to train up on their behalf the next generation of competition lawyers.

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Turkey Gönenç Gürkaynak

ELIG, Attorneys-At-Law Öznur İnanılır

As is the case with Article 101 (1) of the EC Treaty, Article 4 brings 1 The Legislative Framework of the Cartel a non-exhaustive list of restrictive agreements. It prohibits, in Prohibition particular, agreements which: ■ directly or indirectly fix purchase or selling prices or any 1.1 What is the legal basis and general nature of the other trading conditions; cartel prohibition, e.g. is it civil and/or criminal? ■ share markets or sources of supply; ■ limit or control production, output or demand in the market; The statutory basis for cartel prohibition is the Law on the Protection ■ place competitors at a competitive disadvantage or involve of Competition no. 4054, dated 13 December 1994 (“Competition exclusionary practices such as boycotts; Law”). The Competition Law finds its underlying rationale in ■ aside from exclusive dealing, apply dissimilar conditions to Article 167 of the Turkish Constitution of 1982, which authorises the equivalent transactions with other trading parties; and government to take appropriate measures and actions to secure the ■ make the conclusion of contracts, in a manner contrary to free market economy. The Turkish cartel regime is “administrative” customary commercial practices, subject to acceptance by and “civil” in nature, not criminal. That being said, certain antitrust the other parties of supplementary obligations which, by their violations, such as bid-rigging in public tenders and illegal price nature or according to commercial usage, have no connection manipulation, may also be criminally prosecutable, depending on with the subject of such contracts. the circumstances. The Competition Law applies to individuals and The list is non-exhaustive and is intended to generate further companies alike, if and to the extent that they act as an undertaking examples of restrictive agreements. within the meaning of the Competition Law. (Please refer to the The prohibition on restrictive agreements and practices does not answer to question 1.5 for the definition of “undertaking”.) apply to agreements which benefit from a block exemption and/ or an individual exemption issued by the Board. To the extent not 1.2 What are the specific substantive provisions for the covered by the protective cloaks brought by the respective block cartel prohibition? exemption rules or individual exemptions, vertical agreements are also caught by the prohibition laid down in Article 4. The applicable provision for cartel-specific cases is Article 4 of The block exemption rules currently applicable are: (i) Block the Competition Law, which lays down the basic principles of Exemption Communiqué no. 2002/2 on Vertical Agreements; (ii) cartel regulation. The provision is akin to, and closely modelled Block Exemption Communiqué no. 2017/3 on Vertical Agreements on, Article 101 (1) of the EC Treaty. It prohibits all agreements and Concerted Practices in the Motor Vehicle Sector; (iii) Block between undertakings, decisions by associations of undertakings, Exemption Communiqué no. 2008/3 for the Insurance Sector; (iv) and concerted practices which have (or may have) as their object or Block Exemption Communiqué no. 2008/2 on Technology Transfer effect the prevention, restriction or distortion of competition within Agreements; (v) Block Exemption Communiqué no. 2013/3 on a Turkish product or services market or a part thereof. Similar Specialisation Agreements; and (vi) Block Exemption Communiqué to Article 101 (1) of the EC Treaty, the provision does not give a no. 2016/5 on R&D Agreements, which are all modelled on their definition of “cartel”. Rather, it prohibits all forms of restrictive respective equivalents in the EC. Restrictive agreements that agreements, which would include any form of cartel agreement. do not benefit from: (i) the block exemption under the relevant Therefore, the scope of application of the prohibition extends communiqué; or (ii) individual exemption issued by the Board, are beyond cartel activity. Unlike the EC Treaty, however, Article caught by the prohibition in Article 4. 4 does not refer to “appreciable effect” or “substantial part of a A number of horizontal restrictive agreement types such as price market” and thereby excludes any de minimis exception as of yet. fixing, market allocation, collective refusals to deal (group boycotts) Therefore, for an infringement to exist, the restrictive effect need and bid-rigging have consistently been deemed to be per se illegal. not be “appreciable” or “affecting a substantial part of a market”. The Turkish antitrust regime also condemns concerted practices, and Article 4 also prohibits any form of agreement which has the the Competition Authority (“Authority”) easily shifts the burden of “potential” to prevent, restrict or distort competition. Again, proof in connection with concerted practice allegations through a this is a specific feature of the Turkish cartel regulation system, mechanism called “the presumption of concerted practice”. The recognising broad discretionary power to the Board. definition of concerted practice in Turkey does not fall far from the definition used in the EC law of competition. A concerted practice

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is defined as a form of coordination between undertakings which, Board will then decide within 10 days whether to launch a formal without having reached the stage where a so-called agreement has investigation or not. If the Board decides to initiate an investigation, been properly concluded, knowingly substitutes practical cooperation it will send a notice to the undertakings concerned within 15 days. between them for the risks of competition. Therefore, this is a form The investigation will be completed within six months. If deemed of coordination, without a formal “agreement” or “decision”, by necessary, this period may be extended by the Board only once, for which two or more companies come to an understanding to avoid an additional period of up to six months. competing with each other. The coordination does not need to be The investigated undertakings have 30 calendar days as of the formal in writing. It is sufficient if the parties have expressed their joint service of the notice to prepare and submit their first written defences intention to behave in a particular way, perhaps in a meeting, via (first written defence). Subsequently, the main investigation report a telephone call or through an exchange of letters. The special

is issued by the Authority. Once the main investigation report is Turkey challenges posed by the proof standard concerning concerted served on the defendants, they have 30 calendar days to respond, practices are addressed under question 9.2. extendable for a further 30 days (second written defence). The investigation committee will then have 15 days to prepare an 1.3 Who enforces the cartel prohibition? opinion concerning the second written defence (additional opinion). The defending parties will have another 30-day period to reply to The national competition authority for enforcing the cartel the additional opinion (third written defence). When the parties’ prohibition and other provisions of the Competition Law in responses to the additional opinion are served on the Authority, the Turkey is the Authority. The Authority has administrative and investigation process will be completed (i.e. the written phase of financial autonomy. It consists of the Board, Presidency and investigation involving the claim/defence exchange will close with Service Departments including: five supervision and enforcement the submission of the third written defence). An oral hearing may departments; a department of decisions; an economic analysis and be held upon request by the parties. The Board may also ex officio research department; an information management department; an decide to hold an oral hearing. Oral hearings are held within at external relations, training and competition advocacy department; least 30, and at the most, 60 days following the completion of the a strategy development, regulation and budget department; a press investigation process under the provisions of Communiqué no. department; and a support division for on-the-spot cartel inspections. 2010/2 on Oral Hearings before the Board. The Board will render As the competent body of the Authority, the Board is responsible for, its final decision within: (i) 15 calendar days from the hearing, if an inter alia, investigating and condemning cartel activity. The Board oral hearing is held; or (ii) 30 calendar days from the completion currently consists of seven independent members. The Presidency of the investigation process, if no oral hearing is held. It usually handles the administrative works of the Authority. takes around three to five months (from the announcement of the final decision) for the Board to serve a reasoned decision onthe A cartel matter is primarily adjudicated by the Board. Administrative counterpart. enforcement is supplemented with private lawsuits as well. In private suits, cartel members are adjudicated before regular courts. Due to a treble damages clause allowing litigants to obtain three times their 1.5 Are there any sector-specific offences or exemptions? loss as compensation, private antitrust litigations increasingly make their presence felt in the cartel enforcement arena. Most courts wait There are no industry-specific offences or defences in the Turkish for the decision of the Authority, and build their own decision on jurisdiction. The Competition Law applies to all industries, without that decision (see section 8 below for further background on private exception. To the extent they act as an undertaking within the suits). meaning of the Competition Law (i.e. a single integrated economic unit capable of acting independently in the market to produce, market or sell goods and services), state-owned entities also fall 1.4 What are the basic procedural steps between the opening of an investigation and the imposition of within the scope of application of Article 4. Due to the “presumption sanctions? of concerted practice” (further addressed under question 9.2), oligopoly markets for the supply of homogenous products (e.g. The Turkish cartel regime does not recognise de minimis exceptions cement, bread yeast, etc.) have constantly been under investigation and there is currently no threshold for launching an investigation for concerted practice. Nevertheless, whether this track record leads into cartel conduct. The Board is entitled to launch an investigation to an industry-specific offence would be debatable. There are some into an alleged cartel activity ex officio or in response to a notice sector-specific block exemptions (such as the block exemption in or complaint. A notice or complaint may be submitted verbally or the motor vehicle sector and the block exemption regulations in the through a petition. The Authority has an online system in which insurance sector). complaints may be submitted via the online form on the official website of the Authority. In the case of a notice or complaint, 1.6 Is cartel conduct outside your jurisdiction covered by the Board rejects the notice or complaint if it deems it not to be the prohibition? serious. Any notice or complaint is deemed rejected in cases where the Board remains silent for 60 days. The Board decides Turkey is one of the “effect theory” jurisdictions, where what to conduct a pre-investigation if it finds the notice or complaint to matters is whether the cartel activity has produced effects on be serious. It may then decide not to initiate an investigation. At Turkish markets, regardless of: (i) the nationality of the cartel this preliminary stage, unless there is a dawn raid, the undertakings members; (ii) where the cartel activity took place; or (iii) whether concerned are not notified that they are under investigation. Dawn the members have a subsidiary in Turkey. The Board refrained from raids (unannounced on-site inspections, see section 2 below), and declining jurisdiction over non-Turkish cartels or cartel members other investigatory tools (e.g. formal information request letters), (see e.g. Şişecam/Yioula, 28 February 2007, 07-17/155-50; Gas are used during this pre-investigation process. The preliminary Insulated Swithchgear, 24 June 2004, 04-43/538-133; Refrigerator report of the Authority experts will be submitted to the Board within Compressor, 1 July 2009, 09-31/668-156) in the past, so long as 30 days after a pre-investigation decision is taken by the Board. The there is an effect in the Turkish markets. In recent years, the Board

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concluded an investigation conducted in relation to the allegation if the subject undertaking refuses to allow the dawn raid, which that nine international companies active in the railway freight would also result in a monetary fine. While the mere wording of forwarding services market have restricted competition by sharing the Competition Law allows verbal testimony to be compelled of customers (Railway Freight Forwarding, 16 December 2015, 15- employees, case handlers do allow the delaying of an answer so long 44/740-267). The Board explained that the practices of foreign as there is quick written follow-up correspondence. Therefore, in undertakings may be subject to the Competition Law if they have practice, employees can avoid providing answers on issues that are any effect on the Turkish markets in the meaning of Article 2, uncertain to them, provided that a written response is submitted in a regardless of whether these undertakings have any subsidiaries or mutually agreed timeline. Computer records are fully examined by affiliated entities in Turkey; and that such anticompetitive activities the experts of the Authority, including but not limited to the deleted of foreign undertakings should have “direct”, “significant” and items. Turkey “intended/foreseeable” effects on the Turkish markets. The Board Officials conducting an on-site investigation need to be in possession concluded that the agreements have not produced effects on the of a deed of authorisation from the Board. The deed of authorisation Turkish markets within the meaning of Article 2 of the Competition must specify the subject matter and purpose of the investigation. Law and therefore, the allegations in question did not fall within The inspectors are not entitled to exercise their investigative the scope of the Competition Law. The decision establishes that powers (copying records, recording statements by company staff, the Competition Authority’s jurisdiction is limited to conducts etc.) in relation to matters which do not fall within the scope of the that create an effect in any given product market in Turkey, investigation (i.e. that which is written on the deed of authorisation). notwithstanding whether the agreement, decision or practice takes place in or outside of Turkey. It should be noted, however, that the Board is yet to enforce monetary or other sanctions against firms 2.3 Are there general surveillance powers (e.g. bugging)? located outside Turkey without any presence in Turkey, mostly due to enforcement handicaps (such as difficulties of formal service to No, there are not. foreign entities).

2.4 Are there any other significant powers of 2 Investigative Powers investigation?

No, there are not. 2.1 Summary of general investigatory powers.

2.5 Who will carry out searches of business and/or Table of General Investigatory Powers residential premises and will they wait for legal Investigatory power Civil / administrative Criminal advisors to arrive? Order the production of specific documents Yes No The sole category of people participating in on-site inspections is or information the case handlers of the Authority only. Case handlers have no Carry out compulsory duty to wait for a lawyer to arrive. That said, they may sometimes interviews with Yes No agree to wait for a short while for a lawyer to come but may impose individuals certain conditions (e.g. to seal file cabinets and/or to disrupt email Carry out an communications). unannounced search Yes No of business premises Carry out an 2.6 Is in-house legal advice protected by the rules of unannounced Yes* No privilege? search of residential premises ■ Right to ‘image’ Attorney-client privilege under Turkish competition law has computer hard drives been discussed in several decisions of the Board in the near past. Yes No using forensic IT Specifically, in Sanofi Aventis (20 April 2009, 09-16/374-88), the tools Board indirectly recognised that the principles adopted by the Court ■ Right to retain No No of Justice of the European Communities in AM&S v. Commission original documents (Case. 155/79 AM&S Europe v. Commission [1982] ECR 1575) ■ Right to require an explanation might apply to attorney-client privileged documents in Turkish Yes No of documents or enforcement in the future, and in CNR/NTSR (13 October 2009, information supplied 09-46/1154-290), the Board elaborated in detail the privilege rules ■ Right to secure applied in the EC and tacitly concluded that the same rules would premises overnight Yes No apply in Turkish antitrust enforcement. In addition, according to (e.g. by seal) a more recent Dow Turkey decision of the Competition Board (2 December 2015, 15-42/690-259), the attorney-client protection Please Note: * indicates that the investigatory measure requires covers the correspondences made in relation to the client’s right the authorisation by a court or another body independent of the of defence and documents prepared in the scope of an independent competition authority. attorney’s legal service. Correspondences that are not directly related to use of the client’s right of defence or that aim to facilitate/ 2.2 Please list specific or unusual features of the conceal a violation are not protected, even when they are related investigatory powers referred to in the summary table. to a pre-investigation, investigation or inspection process. For example, while an independent attorney’s legal opinion on whether The Competition Law provides vast authority to the Authority on an agreement violates Law No. 4054 can be protected under the dawn raids. A judicial authorisation is obtained by the Board only attorney-client privilege, the correspondences on how Law No.

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4054 can be violated between an independent attorney and client Law makes reference to Article 17 of the Law on Minor Offences to do not fall within the scope of this privilege. On a final note, require the Board to take into consideration factors such as: the level correspondences with an independent attorney (i.e. without an of fault and the amount of possible damage in the relevant market; employment relationship with her/his client) fall into the scope of the market power of the undertaking(s) within the relevant market; attorney-client privilege and shall be protected. the duration and recurrence of the infringement; the cooperation or driving role of the undertaking(s) in the infringement; the financial power of the undertaking(s); and compliance with the commitments, 2.7 Please list other material limitations of the investigatory powers to safeguard the rights of etc. in determining the magnitude of the monetary fine. In line with defence of companies and/or individuals under this, the Regulation on Monetary Fines for Restrictive Agreements, investigation. Concerted Practices, Decisions and Abuses of Dominance (the Regulation on Fines) was enacted by the Authority in 2009. The Turkey This is not applicable. Regulation on Fines sets out detailed guidelines as to the calculation of monetary fines applicable in the case of an antitrust violation. The Regulation on Fines applies to both cartel activity and abuse 2.8 Are there sanctions for the obstruction of of dominance, but illegal concentrations are not covered by the investigations? If so, have these ever been used? Regulation on Fines. According to the Regulation on Fines, fines Has the authorities’ approach to this changed, e.g. become stricter, recently? are calculated by first determining the basic level, 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 (if this is not The Board may request all information it deems necessary from calculable, the turnover for the financial year nearest the date of all public institutions and organisations, undertakings and trade the decision); aggravating and mitigating factors are then factored associations. Officials of these bodies, undertakings and trade in. The Regulation on Fines also applies to managers or employees associations are obliged to provide the necessary information within who had a determining effect on the violation (such as participating the period fixed by the Board. Failure to comply with a decision in cartel meetings and making decisions that would involve the ordering the production of information may lead to the imposition company in cartel activity), and provides for certain reductions in of a turnover-based fine of 0.1% of the turnover generated in the their favour. financial year preceding the date of the fining decision (if this is not calculable, the turnover generated in the financial year nearest to the As for the highest monetary fines imposed by the Board as a result date of the fining decision will be taken into account). The minimum of a cartel investigation, two decisions stand out: fine is TL 18,377 (around EUR 4,482 at the time of writing) for the (i) The highest monetary fine imposed by the Board ona year 2017. In cases where incorrect or incomplete information has single company as a result of a cartel investigation is TL been provided in response to a request for information, the same 213,384,545.76 (around EUR 52 million at the time of penalty may be imposed. Similarly, refusing to grant the staff of the writing). This monetary fine was imposed by the Board on Authority access to business premises may lead to the imposition the economic entity composed of Türkiye Garanti Bankası A.Ş. and Garanti Ödeme Sistemleri A.Ş. and Garanti Konut of a daily-based periodic fine of 0.05% of the turnover generated in Finansmanı Danışmanlık A.Ş. (“Garanti”) in its decision the financial year preceding the date of the fining decision (if this is dated 8 March 2013 and numbered 13-13/198-100. This not calculable, the turnover generated in the financial year nearest amount represented 1.5% of Garanti’s annual gross revenue to the date of the fining decision will be taken into account). The for the year 2011. minimum fine to be applied in such case is also TL 18,337 (around (ii) The highest monetary fine imposed by the Board for an EUR 4,482 at the time of writing). entire case (i.e. total fine on all companies covered by the As for the Board’s practice, recently in 2016, the Board concluded cartel conduct) as a result of a cartel investigation was TL that Türk Telekomünikasyon A.Ş. had provided incorrect or 1,116,957,468.76 (around EUR 272.4 million at the time of misleading information requested within the framework of the writing) for the same case (decision dated 8 March 2013 and Competition Authority’s investigation on Türk Telekomünikasyon numbered 13-13/198-100). The total fine was imposed on 12 undertakings active in the banking sector. A.Ş. and TTNET A.Ş, and imposed a fine amounting to TL 7,551,953.95 (around EUR 1.84 million at the time of writing). In addition to the monetary sanction, the Board is authorised to take In 2016, the total amount of fine imposed on undertakings that all necessary measures to terminate the restrictive agreement, to obstructed on-site inspection was TL 7,551,954 (around EUR 1.84 remove all de facto and legal consequences of every action that has million at the time of writing). been taken unlawfully, and to take all other necessary measures in order to restore the same level of competition and status as before the infringement. Furthermore, such a restrictive agreement shall 3 Sanctions on Companies and Individuals be deemed legally invalid and unenforceable with all its legal consequences. Similarly, the Competition Law authorises the Board to take interim measures until the final resolution on the matter, in 3.1 What are the sanctions for companies? case there is a possibility of serious and irreparable damage. The sanctions that could be imposed under the Competition Law are In the case of proven cartel activity, the companies concerned administrative in nature. Therefore, the Competition Law leads to shall be separately subject to fines of up to 10% of their Turkish administrative fines (and civil liability) but not criminal sanctions. turnover generated in the financial year preceding the date of the That said, there have been cases where the matter had to be referred fining decision (if this is not calculable, the turnover generated in the to a public prosecutor after the competition law investigation was financial year nearest to the date of the fining decision will be taken complete. On that note, bid-rigging activity may be criminally into account). Employees and/or managers of the undertaking/ prosecutable under Sections 235 et seq. of the Turkish Criminal Code. association of undertakings who had a determining effect on the Illegal price manipulation (i.e. manipulation through disinformation creation of the violation are also fined up to 5% of the fine imposed or other fraudulent means) may also be punished by up to two years’ on the undertaking/association of undertakings. The Competition imprisonment and a civil monetary fine under Section 237 of the

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Turkish Criminal Code. (See section 8 for private suits, which may the implicated employee under the general principles of Turkish also become an exposure item against the defendant.) contracts or labour laws. This does not constitute tax advice.

3.2 What are the sanctions for individuals (e.g. criminal 4 Leniency for Companies sanctions, director disqualification)?

The sanctions specified in question 3.1 may apply to individuals 4.1 Is there a leniency programme for companies? If so, if they engage in business activities as an undertaking. Similarly, please provide brief details. sanctions for cartel activity may also apply to individuals acting as

Turkey the employees and/or board members/executive committee members Amendments to the Competition Law, which were enacted in of the infringing entities in case such individuals had a determining February 2008, brought about a stricter and more deterrent fining effect on the creation of the violation. Apart from these, there are no regime, coupled with a leniency programme for companies. other sanctions specific for individuals. The secondary legislation specifying the details of the leniency mechanism, namely the Regulation on Active Cooperation for 3.3 Can fines be reduced on the basis of ‘financial Discovery of Cartels (“Regulation on Leniency”), came into force hardship’ or ‘inability to pay’ grounds? If so, by how on 15 February 2009. much? With the enactment of the Regulation on Leniency, the main principles of immunity and leniency mechanisms have been set. No. The enforcement record indicates that the Board fined According to the Regulation on Leniency, the leniency programme entities that had gone bankrupt before the fining decision without is only available for cartelists. It does not apply to other forms of a reduction. However, Section 17 of the Law on Minor Offences antitrust infringement. A definition of “cartel” is also provided provides that the fining administrative entity (i.e. the Board) may in the Regulation on Leniency for this purpose. A cartelist may decide to collect the fine in four instalments (instead of one) over a apply for leniency until the investigation report is officially period of one year, on the condition that the first instalment is paid served. Depending on the application order, there may be total in advance. Also, the Regulation on Fines provides that the Board immunity from, or reduction of, a fine. This immunity or reduction may reduce the fine by 1/4 to 3/5, if the turnover that is linked to the includes both the undertaking and its employees/managers, with violation represents a very small portion of the fined undertaking’s the exception of the “ring-leader” which can only benefit from a entire turnover. second degree reduction of a fine. The conditions for benefiting from the immunity/reduction are also stipulated in the Regulation 3.4 What are the applicable limitation periods? on Leniency. Both the undertaking and its employees/managers can apply for leniency. The Board’s right to impose administrative monetary fines Additionally, the Authority published the Guidelines on the terminates upon the lapse of eight years from the date of Clarification of Regulation on Leniency on 19 April 2013. The infringement. In the event of a continuous infringement, the period perspective of the Board stands parallel with the perspective of starts running on the day on which the infringement has ceased or the European Commission, since the leniency applications are was last repeated. Any action taken by the Board to investigate quite minimal; however, it is not yet possible to say that Turkish an alleged infringement cuts the eight-year limitation period. competition law regulation has caught up with EU regulation The applicable periods of limitation in private suits (see section concerning leniency procedures and review. 8) are subject to the general provisions of the Turkish Code of Obligations, according to which the right to sue violators on the 4.2 Is there a ‘marker’ system and, if so, what is required basis of an antitrust-driven injury claim terminates upon the lapse to obtain a marker? of 10 years from the event giving rise to the damage of the plaintiff. Prosecution of offences of a criminal nature (such as bid-rigging Although no detailed principles on the “marker system” are activity and illegal price manipulation) is subject to the generally provided under the Regulation on Leniency, pursuant to the relevant applicable criminal statutes of limitation, which would depend on legislation, a document (showing the date and time of the application the gravity of the sentence imposable. and request for time (if such a request is in question) to prepare the requested information and evidence) will be given to the applicant 3.5 Can a company pay the legal costs and/or financial by the assigned unit. penalties imposed on a former or current employee?

4.3 Can applications be made orally (to minimise any Yes. This does not constitute advice on tax deductibility or the subsequent disclosure risks in the context of civil accounting/bookkeeping aspects of such payment. damages follow-on litigation)?

3.6 Can an implicated employee be held liable by his/her There is no legal obstacle over conducting a leniency application employer for the legal costs and/or financial penalties orally. The Regulation on Leniency provides that information imposed on the employer? required for making a leniency application (information on the products affected by the cartel, information on the duration of the The Competition Law does not provide any specific rules cartel, names of the cartelists, dates, locations, and participants of regarding the liability of implicated employees for the legal costs the cartel meetings, and other information/documents about the and/or financial penalties imposed on the employer. On the other cartel activity) might be submitted verbally. However, it should hand, much would depend on the internal contractual relationship be noted that in such a case, the submitted information should be between the employer and the implicated employee, as there is put into writing by the administrative staff of the Authority and no roadblock against the employer claiming compensation from confirmed by the relevant applicant or its representatives.

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4.4 To what extent will a leniency application be treated 6 Plea Bargaining Arrangements confidentially and for how long? To what extent will documents provided by leniency applicants be disclosed to private litigants? 6.1 Are there any early resolution, settlement or plea bargaining procedures (other than leniency)? Has the competition authorities’ approach to settlements According to the principles set forth under the Regulation on changed in recent years? Leniency, the applicant (the undertaking or employees/managers of the undertaking) must keep the application confidential until the end of The Board does not enter into plea bargain arrangements. A mutual the investigation, unless it is otherwise requested by the assigned unit. agreement (which would have to take the form of an administrative Articles 6 and 9 of the Regulation on Leniency provide that contract) on other liability matters has not been tested in Turkey Turkey unless stated otherwise by the authorised division, the principle is either. to keep leniency applications confidential until the service of the investigation report. Nevertheless, to the extent the confidentiality of the investigation will not be harmed, the applicant undertakings 7 Appeal Process could provide information to other competition authorities or institutions, organisations and auditors. The applicant is in any 7.1 What is the appeal process? case obliged to maintain active cooperation until the final decision is taken by the Board following the conclusion of the investigation. As per paragraph 44 of the Guideline, if the employees or personnel As per Law no. 6352, the administrative sanction decisions of the of the applicant undertaking disclose the leniency application to Board can be submitted for judicial review before the Administrative the other undertakings and breach the confidentiality principle, the Courts in Ankara by the filing of an appeal case within 60 days Board will evaluate the situation on a case-by-case basis based on upon receipt by the parties of the justified (reasoned) decision of the criteria of whether the person at issue is a high-level manager or the Board. As per Article 27 of the Administrative Procedural the Board was notified promptly after the breach or not. Law, filing an administrative action does not automatically stay the execution of the decision of the Board. However, upon request by the plaintiff, the court, providing its justifications, may decide the 4.5 At what point does the ‘continuous cooperation’ stay of execution of the decision if such execution is likely to cause requirement cease to apply? serious and irreparable damage; and if the decision is highly likely to be against the law (i.e. the showing of a prima facie case). Pursuant to the principles set forth under the Regulation on Leniency, The judicial review period before the Ankara Administrative Courts the active (continuous) cooperation shall be maintained until the usually takes about 12 to 24 months. After exhausting the litigation Board renders its final decision after the investigation is completed. process before the Administrative Courts of Ankara, the final step for the judicial review is to initiate an appeal against the Administrative 4.6 Is there a ‘leniency plus’ or ‘penalty plus’ policy? Court’s decision before the regional courts. The appeal request for the Administrative Courts’ decisions will be submitted to the Amnesty Plus is regulated under Article 7 of the Regulation on Fines. regional courts within 30 calendar days of the official service of the According to Article 7 of the Regulation on Fines, the fines imposed justified (reasoned) decision of the Administrative Court. on an undertaking which cannot benefit from immunity provided Since 2016, administrative litigation cases are subject to judicial by the Regulation on Leniency will be decreased by one-fourth if it review before the newly established regional courts (appellate provides the information and documents specified in Article 6 of the courts), creating a three-level appellate court system consisting of Regulation on Leniency prior to the Board’s decision of preliminary Administrative Courts, regional courts (appellate courts) and the investigation in relation to another cartel. High State Court. The regional courts go through the case file both on procedural and 5 Whistle-blowing Procedures for substantive grounds. The regional courts investigate the case file and Individuals make their decision considering the merits of the case. The regional courts’ decisions are considered as final in nature. In exceptional circumstances laid down in Article 46 of the Administrative 5.1 Are there procedures for individuals to report cartel Procedure Law, the decision of the regional court will be subject to conduct independently of their employer? If so, the High State Court’s review and therefore will not be considered please specify. as a final decision. In such a case, the High State Court may decide to uphold or reverse the regional courts’ decision. If the decision is A manager/employee of a cartelist may also apply for leniency until reversed, it will be remanded back to the deciding regional court, the “investigation report” is officially served. Such an application which will in turn issue a new decision to take account of the High would be independent from applications – if any – by the cartelist State Court’s decision. itself. Depending on the application order, there may be total Decisions of courts in private suits are appealable before the immunity from, or reduction of, a fine for such manager/employee. Supreme Court of Appeals. The appeal process in private suits is The requirements for such individual application are the same as governed by the general procedural laws and usually lasts 24 to 36 those stipulated under question 4.1 above. months.

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7.2 Does an appeal suspend a company’s requirement to 8.4 Does the law recognise a “passing on” defence in pay the fine? civil damages claims?

No. As stipulated under question 7.1 above, filing an administrative The Competition Law and the judicial precedents do not specifically action does not automatically stay the execution of the decision of recognise “passing on” defences in civil damages claims. “Passing the Board. However, upon request of the plaintiff, the court, by on” defences are yet to be tested in Turkish enforcement. However, providing its justifications, may decide the stay of execution. this is still an area of controversy: a part of the doctrine suggests that passing on defences should be allowed, whereas some other scholarly writings defend that they should not be accepted.

Turkey 7.3 Does the appeal process allow for the cross- examination of witnesses? However, there is no roadblock under the general civil claims rules against a defendant to put forward a “passing on” defence in civil damages claims. Nevertheless, the issue requires a case-by-case The Administrative Courts and High State Council do not cross- analysis, as the admissibility of the defence depends on the position examine witnesses. of the claimant and the nature of the claim.

8 Damages Actions 8.5 What are the cost rules for civil damages follow-on claims in cartel cases?

8.1 What are the procedures for civil damages actions for loss suffered as a result of cartel conduct? Is the Any person who is injured in his business or property by reason of position different (e.g. easier) for ‘follow-on’ actions cartel activity is entitled to sue the violators for three times their as opposed to ‘stand alone’ actions? damages, plus litigation costs and attorney fees. Other than this, there are no specific cost rules for cartel cases. The general cost Similar to the US antitrust enforcement, the most distinctive rules for civil law claims also apply in cartel cases. feature of the Turkish competition law regime is that it provides for lawsuits for treble damages. That way, administrative enforcement 8.6 Have there been any successful follow-on or stand is supplemented with private lawsuits. Articles 57 et seq. of the alone civil damages claims for cartel conduct? If there Competition Law entitle any person who is injured in his business have not been many cases decided in court, have or property by reason of anything forbidden in the antitrust laws, to there been any substantial out of court settlements? sue the violators for three times their damages plus litigation costs and attorney fees. The case must be brought before the competent Antitrust-based private lawsuits are rare, but increasing in practice. general civil court. In practice, courts usually do not engage in an The majority of the private lawsuits in Turkish antitrust enforcement analysis as to whether there is actually a condemnable agreement rely on refusal to supply allegations. Civil damage claims have or concerted practice, and wait for the Board to render its opinion usually been settled among the parties involved prior to the court on the matter, therefore treating the issue as a prejudicial question. rendering its judgment. 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. 9 Miscellaneous

8.2 Do your procedural rules allow for class-action or 9.1 Please provide brief details of significant, recent or representative claims? imminent statutory or other developments in the field of cartels, leniency and/or cartel damages claims. Turkish procedural law denies any class action or procedure. Class certification requests would not be granted by Turkish courts. While According to the annual report of the Turkish Competition Authority, Article 25 of Law no. 4077 on the Protection of Consumers allows the Authority received a leniency application in 2015 in the finance class actions by consumer organisations, these actions are limited sector but the Board decided, at the end of the pre-investigation to violations of Law no. 4077 on the Protection of Consumers, and stage, that there was no competition law infringement and therefore do not extend to cover antitrust infringements. Similarly, Article 58 did not initiate a fully-fledged investigation. of the Turkish Commercial Code enables trade associations to take Additionally, the annual report of the Competition Authority also class actions against unfair competition behaviour, but this has no indicates that there is an ongoing review initiated upon a leniency reasonable relevance to private suits under Articles 57 et seq. of the application that the Authority has received in 2016. Competition Law. In terms of its recent enforcement activity, the Board concluded that six cement companies operating in the Aegean region of 8.3 What are the applicable limitation periods? Turkey violated Article 4 of the Competition Law by sharing sales territories and increasing resale prices in collusion in the Aegean As noted above in question 3.4, the applicable periods of limitation region (14 January 2016, 16-02/44-14). The decision is pertinent in in private suits are subject to the general provisions of the Turkish that the Board classified the case as “cartel” and defined cartels in a Code of Obligations, according to which the right to sue violators manner that encapsulates both agreements and concerted practices. on the basis of an antitrust-driven injury claim terminates upon the The Board fined the cement producers by a total of approximately lapse of 10 years from the event giving rise to the damage of the TL 71 million (approximately EUR 17.3 million). The fines ranged plaintiff. between 3% and 4.5% of each company’s 2014 annual turnover. These fines were relatively high in the Turkish jurisdiction in terms of turnover percentage.

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competition is obstructed, disrupted or restricted. Turkish antitrust 9.2 Please mention any other issues of particular interest precedents recognise that “conscious parallelism” is rebuttable in your jurisdiction not covered by the above. evidence of forbidden behaviour and constitutes sufficient grounds to impose fines on the undertakings concerned. This is mostly The most important material issue specific to Turkey is the very due to the presumption of concerted practice introduced by the low proof standards adopted by the Board. The participation of an Competition Law, which reads as follows: undertaking in cartel activity requires proof: (i) that there was such “In cases where an agreement cannot be proven to exist, if price cartel activity or, in the case of multilateral discussions, cooperation; changes in the market, supply-demand equilibrium, or fields of and (ii) that the particular undertaking was a participant. With a activity of enterprises bear a resemblance to those in the markets broadening interpretation of the Competition Law, and especially

where competition is obstructed, disrupted or restricted, such Turkey the “object or effect of which…”, the Board has established an similarity shall constitute a presumption that the relevant enterprises extremely low standard of proof concerning cartel activity. The are engaged in concerted practice. standard of proof is even lower as far as concerted practices are concerned: in practice, if parallel behaviour is established, a Any party may absolve itself of responsibility by proving no concerted practice will readily be inferred and the undertakings engagement in concerted practice, provided such proof depends on concerned will be required to prove that the parallelism is not economic and rational facts.” the result of concerted practice. The Competition Law brings a Therefore, the burden of proof is very easily switched and it becomes “presumption of concerted practice”, which enables the Board to incumbent upon the enterprises to demonstrate that the parallelism engage in an Article 4 enforcement in cases where price changes in question is not based on concerted practice, but has economic and in the market, supply-demand equilibrium, or fields of activity rational reasons behind it. of enterprises bear a resemblance to those in the markets where

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Gönenç Gürkaynak Öznur İnanılır ELIG, Attorneys-at-Law ELIG, Attorneys-at-Law Çitlenbik Sokak No. 12 Çitlenbik Sokak No. 12 Yıldız Mahallesi Beşiktaş Yıldız Mahallesi Beşiktaş 34349 Istanbul 34349 Istanbul Turkey Turkey

Tel: +90 212 327 17 24 Tel: +90 212 327 17 24 Email: [email protected] Email: [email protected] URL: www.elig.com URL: www.elig.com Turkey Mr. Gönenç Gürkaynak is a founding partner and the managing Ms. Öznur İnanılır joined ELIG, Attorneys-at-Law in 2008. She partner of ELIG, Attorneys-at-Law, a leading law firm of 87 lawyers graduated from Başkent University, Faculty of Law in 2005 and based in Istanbul, Turkey. Mr. Gürkaynak graduated from Ankara following her practice at a reputable law firm in Ankara, she obtained University, Faculty of Law in 1997, and was called to the Istanbul Bar her LL.M. degree in European Law from London Metropolitan in 1998. Mr. Gürkaynak received his LL.M. degree from Harvard Law University in 2008. She is a member of the Istanbul Bar. Ms. Öznur School, and is qualified to practise in Istanbul, New York, Brussels and İnanılır became a partner within the “Regulatory and Compliance” England and Wales. Before founding ELIG, Attorneys-at-Law in 2005, department in 2016 and has extensive experience in all areas of Mr. Gürkaynak worked as an attorney at the Istanbul, New York and competition law, in particular, compliance to competition law rules, Brussels offices of a global law firm for more than eight years. defences in investigations alleging restrictive agreements, abuse of dominance cases and complex merger control matters. She has Mr. Gürkaynak heads the competition law and regulatory department represented various multinational and national companies before of ELIG, Attorneys-at-Law, which currently consists of 45 lawyers. He the Turkish Competition Authority. Ms. İnanılır has authored and co- has unparalleled experience in Turkish competition law counselling authored articles published internationally and locally in English and issues with more than 20 years of competition law experience, Turkish pertaining to her practice areas. starting with the establishment of the Turkish Competition Authority. Mr. Gürkaynak frequently speaks at conferences and symposia on competition law matters. He has published more than 150 articles in English and Turkish by various international and local publishers. Mr. Gürkaynak also holds teaching positions at undergraduate and graduate levels at two universities, and gives lectures at other universities in Turkey.

ELIG, Attorneys-at-Law is an eminent, independent Turkish law firm based in Istanbul. The firm was founded in 2005. We are committed to providing our clients with high-quality legal services in an effective and business-minded manner. We focus on the interests of our clients and combine a solid knowledge of Turkish law to develop legal solutions that meet the ever-changing needs of our clients in their international and domestic operations. Our legal team consists of 87 lawyers. We take pride in being able to assist our clients in all fields of law. Our areas of expertise particularly include competition law, corporate law, M&A, contracts law, white collar irregularities and compliance, data protection and cybersecurity law, litigation and dispute resolution, internet law, technology, media and telecommunications law, intellectual property law, administrative law, real estate law, anti- dumping law, pharma and healthcare regulatory, employment law, and banking and finance law. We have established close working relationships with a number of international law firms and have served mutual clients on numerous mergers & acquisitions transactions, competition law matters, white collar and compliance matters, commercial arbitrations and various other projects.

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United Kingdom Matthew Readings

Shearman & Sterling LLP Shirin Lim

the Payment Systems Regulator and the Financial Conduct 1 The Legislative Framework of the Cartel Authority) enforce the civil prohibition. The CMA and Serious Prohibition Fraud Office (“SFO”) enforce the criminal offence.

1.1 What is the legal basis and general nature of the 1.4 What are the basic procedural steps between the cartel prohibition, e.g. is it civil and/or criminal? opening of an investigation and the imposition of sanctions? The legal basis of the cartel prohibition in the UK is Section 2 of the Competition Act 1998 (the “Competition Act”) which sets The CMA or a sectoral regulator may conduct an investigation if out the civil offence for companies (also known as the “Chapter there are reasonable grounds for suspecting that the Competition I prohibition”), and Section 188 of the Enterprise Act 2002 (the Act or Article 101 TFEU have been infringed, usually based on “Enterprise Act”), which sets out the criminal offence for individuals. a complaint or leniency application, or its own intelligence. The In addition, the Competition and Markets Authority (“CMA”) must CMA can then issue a statement of objections (“SO”) to the relevant apply Article 101 of the Treaty on the Functioning of the European parties, setting out its allegations and giving them an opportunity to Union (“TFEU”) where the CMA applies the Chapter I prohibition be heard. Depending on the outcome, an infringement decision may to conduct which may affect trade between EU Member States. then be issued. The CMA may choose to convert a civil investigation into a criminal one, or conduct a parallel criminal investigation, subsequently bringing proceedings before the relevant courts. 1.2 What are the specific substantive provisions for the cartel prohibition? 1.5 Are there any sector-specific offences or exemptions? Section 2(1) of the Competition Act prohibits agreements between undertakings, decisions by associations of undertakings or concerted The Competition Act excludes certain agreements from the practices which: may affect trade within the UK; and may have Chapter I prohibition, such as those relating to the production as their object or effect the prevention, restriction or distortion of and trade of agricultural products, as well as those subject to competition within the UK. competition regulation under other legislation, including the Financial Services and Markets Act 2000, the Broadcasting Act Under Section 188 of the Enterprise Act, an individual will be guilty 1990 and the Communications Act 2003. The Secretary of State of an offence if they enter into a horizontal agreement with one or may also order that the Chapter I prohibition not apply where there more other persons that undertakings will engage in cartel activities, are exceptional and compelling public policy reasons. No sector- namely: reciprocal direct and indirect price fixing; reciprocal specific exemptions apply to the criminal offence. limitation of supply or production; market sharing; or bid rigging. This applies irrespective of whether the agreement was implemented or whether the individuals had authority to act on behalf of the 1.6 Is cartel conduct outside your jurisdiction covered by undertakings at the time of the agreement. An individual can also the prohibition? be prosecuted for attempting to commit and conspiracy to do so. Dishonesty on the part of the individuals concerned must also be The civil offence applies to agreements actually (or intended to be) shown as regards arrangements performed from 20 June 2003 to 31 implemented in the UK, regardless of where they were entered into. March 2014. The criminal offence only applies to agreements entered into outside the UK if they are in fact implemented in whole or in part in the UK (i.e. not merely based on intent). The test for implementation can be 1.3 Who enforces the cartel prohibition? satisfied if there are affected sales in the UK.

The CMA, along with sectoral regulators (such as the Office of Communications, the Gas and Electricity Markets Authority, the Water Services Regulation Authority, the Civil Aviation Authority,

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2 Investigative Powers 2.4 Are there any other significant powers of investigation?

2.1 Summary of general investigatory powers. In criminal investigations only, the CMA/SFO has the power to access communications data (including records of telephone calls Table of General Investigatory Powers and messages) of the individuals under investigation. Investigatory Power Civil/Administrative Criminal The CMA runs a whistle-blower or “reward programme” for Order the production informants, allowing individuals who are aware of the existence of, of specific documents Yes Yes but not actively involved in, the activities of the cartel, to receive up or information to £100,000 for providing significant ‘inside information’ about the Carry out compulsory interviews with Yes Yes cartel. Individuals actively participating in the cartel would not be United Kingdom individuals entitled to any financial remuneration when blowing the whistle, but Carry out an will instead benefit from immunity from prosecution by submitting unannounced search Yes* Yes* a leniency application. The CMA has left open the possibility of of business premises parallel applications for immunity/leniency and financial rewards Carry out an in cases where the individual’s involvement in the cartel was very unannounced Yes* Yes* limited. search of residential premises ■ Right to ‘image’ 2.5 Who will carry out searches of business and/or computer hard drives Yes Yes residential premises and will they wait for legal using forensic IT advisors to arrive? tools ■ Right to retain Yes Yes original documents Searches in business and/or residential premises will be conducted ■ Right to require by CMA officers, and other assisting third parties named on the an explanation search warrant. The occupiers of the premises subject to the search Yes Yes of documents or can request the presence of a legal adviser, following which CMA information supplied officers will ordinarily wait a reasonable time for the lawyers to ■ Right to secure arrive. Where the CMA has not given prior notice about the search, premises overnight Yes Yes (e.g. by seal) but there is an in-house lawyer on the premises, the CMA can conduct their search irrespective of whether such lawyer specialises * Searches of business and residential premises with a warrant in competition law. require the authorisation of the High Court, the CAT or another body While the legal advisers arrive, the CMA may take the necessary independent of the competition authority. In a civil investigation, precautions to prevent any tampering with evidence or warning the CMA can also visit business premises without a warrant if it has other businesses about the investigation (e.g. suspending external a reasonable suspicion that these are or have been occupied by a email or calls, or sealing filing cabinets). party to a suspected competition law infringement, though will have limited powers (no ability to search the premises, but only to request 2.6 Is in-house legal advice protected by the rules of documents or information). privilege?

2.2 Please list specific or unusual features of the Under English law, privileged communications are communications investigatory powers referred to in the summary table. either between a professional legal adviser and his client or those made in connection with, or in contemplation of, legal proceedings, The CMA and sectoral regulators have the power to take original including communication with both in-house and private practice documents, albeit only where it is necessary to preserve them or counsel. The English rules on privilege apply where the CMA where it is not reasonably practicable to make copies. This power conducts an inspection on its own initiative, or on behalf of the only applies in civil investigations and original documents must be European Commission (“EC”) or a competition authority of another returned within three months. EU Member State. For criminal investigations, the CMA/SFO will generally always When the CMA is only assisting the EC with an investigation in the take original documents. UK, EU rules of privilege apply, meaning legal advice provided by in-house counsel and lawyers not qualified in an EU Member State 2.3 Are there general surveillance powers (e.g. bugging)? are not considered privileged.

The CMA has powers of directed surveillance and to make use 2.7 Please list other material limitations of the of covert human intelligence sources in order to investigate investigatory powers to safeguard the rights of infringements of the Competition Act and the Enterprise Act. defence of companies and/or individuals under investigation. In criminal investigations, the CMA/SFO has the power to use intrusive surveillance, including bugging. The CMA does not have the power to search a person and in civil investigations cannot force a business to provide answers that would result in an admission that it has infringed competition law when the CMA makes requests for information.

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The CMA/SFO has the power to compel individuals to answer 2. Aggravating or mitigating factors: aggravating factors questions if they relate to a criminal cartel investigation, but any include: (i) role of the undertaking as a leader or instigator; statements made in response to mandatory interview questions may (ii) involvement of directors and senior management; and (iii) generally not be used in evidence against that person on prosecution recidivism. Mitigating factors include: (i) the undertaking for the cartel offence. acting under severe duress; (ii) genuine uncertainty on the part of the undertaking as to whether the agreement or conduct constituted an infringement; and (iii) termination of 2.8 Are there sanctions for the obstruction of the infringement as soon as the CMA intervenes. investigations? If so, have these ever been used? 3. Deterrence and proportionality: the fine should have a Has the authorities’ approach to this changed, e.g. deterrent effect on the undertaking on which it is imposed become stricter, recently? and on other undertakings in the same field. 4. The overall cap: the fine will be adjusted to ensure that it does There are both civil and criminal sanctions applicable to ‘persons’ not exceed the cap of 10% of worldwide turnover. (both individuals and undertakings) for non-compliance or United Kingdom 5. Leniency or settlement discounts: any such discounts will be obstruction with the CMA’s powers of investigation. applied at the final stage. Officers of bodies corporate (including a director, manager, secretary or other similar officer, or anyone purporting to act as such) can be liable to punishment if they consent to or connive at an offence or if 3.2 What are the sanctions for individuals (e.g. criminal sanctions, director disqualification)? it is due to neglect on their part. There are monetary penalties for persons who fail to comply with For criminal cartel conduct committed after 20 June 2003, an the CMA’s investigations (intentionally or without reasonable individual could face up to five years’ imprisonment and/or an excuse), such as failing to answer questions asked by the CMA, unlimited fine. Directors can also be disbarred from office fora failing to produce documents required by the CMA, and failing to period of up to 15 years where they knew, or ought to have known, provide adequate or accurate information in response to a request. that their company was guilty of an infringement of EU or UK The CMA may impose a fixed penalty of up to £30,000 and/or a daily penalty of up to £15,000. competition law. The CMA secured its first director disqualification on 12 August 2016 against Daniel Aston, who was disqualified for Sanctions of a criminal nature include fines or even imprisonment being a director for five years due to his breaches of competition law. for a person: Individual prosecutions under the Enterprise Act were first imposed 1. intentionally obstructing an officer investigating with or in the Marine Hoses cartel, where three individuals were imprisoned without a warrant; (two for three years, and one for two-and-a-half years) in June 2. intentionally or recklessly destroying, disposing of, falsifying 2008. Most recently in March 2016, one individual pleaded guilty or concealing documents, or causing or permitting those to the criminal cartel offence in the Precast Concrete Drainage things to happen; or Products cartel. Although the investigation against this particular 3. knowingly or recklessly supplying information which is false individual is ongoing, the CMA announced in June 2017 that there or misleading in a material particular either directly to the was insufficient evidence to charge any further individuals with the CMA, or to anyone else, knowing it is for the purpose of providing information to the CMA. offence in the same case. The individual criminal cartel offence has otherwise only been applied by the CMA in two other cases in Penalties can be substantial and depend on whether the offence is addition to the Marine Hoses and Concrete cartels, with a number of tried summarily or is serious enough to be taken to the Crown Court. additional investigations suspected to be ongoing but not identified Usually penalties are financial, but imprisonment for up to two years in the public domain. is also possible.

3.3 Can fines be reduced on the basis of ‘financial 3 Sanctions on Companies and Individuals hardship’ or ‘inability to pay’ grounds? If so, by how much?

3.1 What are the sanctions for companies? Financial hardship can, in exceptional circumstances, be a reason for a reduction in the amount of a fine imposed. The undertaking The CMA has the power to impose fines on companies that have will have to provide sufficient information to show that it is unable intentionally or negligently breached the Chapter I prohibition, up to pay the fine due to its financial position, including in relation to to a maximum of 10% of the company’s worldwide turnover. Such all parent or subsidiary entities. However, it has been made clear agreements are void and unenforceable. that there can be no expectation that a fine will be adjusted on this Generally, companies with a combined UK annual turnover below basis. £20 million will benefit from immunity from fines, but this will not apply for breaches of Article 101 TFEU or price-fixing agreements. 3.4 What are the applicable limitation periods? The maximum starting point for the fine calculation is 30% of relevant turnover and will be determined taking into consideration There are no limitation periods for public enforcement action for the the seriousness of the infringement and the relevant turnover criminal cartel offence under the Enterprise Act or for the civil cartel (defined as the turnover of the undertaking in the product and offence under Chapter I of the Competition Act. geographic market affected by the infringement, in the undertaking’s last financial year preceding the date when the infringement ended). This is then subject to five different stages of adjustments: 3.5 Can a company pay the legal costs and/or financial penalties imposed on a former or current employee? 1. Duration: for infringements lasting more than one year, the fines cannot be multiplied by more than the number of years of the infringement. Subject to a company’s articles of association, a company can

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indemnify the legal costs and/or financial penalties imposed on a 50%, and discretionary immunity from criminal prosecution former or current employee. for specific individuals, to be agreed with the CMA onan individual basis. Director disqualification protection is available if a corporate leniency reduction is granted. 3.6 Can an implicated employee be held liable by his/her employer for the legal costs and/or financial penalties imposed on the employer? 4.2 Is there a ‘marker’ system and, if so, what is required to obtain a marker? Employees or directors cannot be held liable by their employer for legal costs or fines imposed on the employer as a result of breaches To secure a Type A ‘marker’, an applicant can approach the CMA of competition law. The Court of Appeal found in Safeway Stores on a hypothetical no-names basis to confirm that Type A immunity Ltd v Twigger that a company could not recover the fines from the is available. The applicant should identify a ‘concrete basis for the employees or directors, as the Competition Act does not impose suspicion’ of a cartel and have a ‘genuine intention to confess’. If the United Kingdom liability of any kind on the directors or employees for which it could CMA confirms that Type A immunity is available, the undertaking be vicariously responsible. The Court of Appeal also outlined a must make an immediate application and provide the identity of number of policy reasons; namely encouraging individuals to blow the undertaking. A discussion of perfecting the marker would then the whistle and report cartel activity and incentivising companies to follow. A similar approach may be taken to secure a Type B marker; adopt a compliance culture. however, there is no requirement to make an immediate application once the CMA confirms it is available. To ‘perfect’ a marker for Type A immunity, the applicant must be 4 Leniency for Companies able to provide the CMA with all available information so as to give a sufficient basis for taking forward a credible investigation. 4.1 Is there a leniency programme for companies? If so, For Type B immunity/leniency, or Type C leniency, applicants please provide brief details. must provide all information so as to add significant value to, and genuinely advance, the CMA investigation. Part 3 of the OFT’s September 2012 “Guidance as to appropriate amount of penalty for substantive infringements of competition law” 4.3 Can applications be made orally (to minimise any (which the CMA applies) outlines the corporate leniency policy subsequent disclosure risks in the context of civil applied in the UK. A more detailed explanation of the CMA’s damages follow-on litigation)? leniency policy is outlined in the OFT’s July 2013 guidance on “Applications for leniency and no-action in cartel cases” (the “July Yes. However, certain parts of the process will have to be in 2013 guidance”). writing, for example: (i) all pre-existing evidence of the cartel; (ii) The three types of leniency include: witness signatures confirming the accuracy and authenticity of their 1. Type A: The applicant must be the first applicant and there statements; and (iii) leniency agreements. must not be a pre-existing investigation by the CMA. The information provided must be enough for the CMA to take 4.4 To what extent will a leniency application be treated forward a credible investigation, and the company/individuals confidentially and for how long? To what extent involved must provide all relevant information, accept will documents provided by leniency applicants be participation in the cartel, cooperate with the CMA and not disclosed to private litigants? participate further in the cartel. Applicants that successfully meet this threshold will receive full corporate immunity In cases where the CMA launches a civil investigation, the name (no fine), blanket immunity from criminal prosecution for cooperating current or former individual employees of the party who applied for leniency and the information that it or officers, and director disqualification protection. Ifthe has submitted which the CMA intends to rely on, will be set out applicant coerced other undertakings to participate in the in the SO issued to the other parties to the proceedings, as well as cartel, Type A immunity will not be available. during the course of the access to file. The leniency applicants and 2. Type B: The applicant must be the first in a pre-existing the nature of certain of the leniency evidence submitted will also investigation. Information provided must add significant be included in the public version of any infringement decision. value to the investigation, and the applicant must comply Leniency statements are now protected from disclosure in national with the other conditions for Type A above. The applicant proceedings in line with Article 6 of the EU Damages Directive will benefit from discretionary corporate immunity (Directive 2014/104/EU, “Damages Directive”), a provision now from financial penalties, or percentage fine reductions. incorporated into UK law (see below at question 8.1). Additional Cooperating current or former individual employees and documents submitted as part of a leniency application may still be directors could benefit from discretionary immunity from disclosed under certain conditions. criminal prosecution, which may be ‘blanket’ for some, but not all individuals. Directors could benefit from protection against disqualification provided corporate immunity or a 4.5 At what point does the ‘continuous cooperation’ leniency reduction is granted. If the applicant coerced other requirement cease to apply? undertakings to participate in the cartel, Type B leniency/ immunity will not be available The cooperation requirement, which requires parties to adopt a 3. Type C: Available for applicants who are coercers and/or ‘constructive approach’ and genuinely assist the CMA, is expected not the first to apply, regardless of whether there is apre- to continue until the conclusion of any action brought by the CMA, existing investigation. Information must add significant which the CMA considers to extend to the conclusion of any appeals. value to the investigation. Applicants will benefit from a discretionary corporate leniency reduction in fines of up to

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competition tribunal set up to determine appeals from regulators’ 4.6 Is there a ‘leniency plus’ or ‘penalty plus’ policy? decisions applying the competition provisions ‘on the merits’ (both law and fact; and both liability and quantum). The CMA operates a ‘leniency plus’ policy. If a firm is already Further appeals on points of law or quantum of a penalty are cooperating with an investigation in respect of one cartel, and comes available at the Court of Appeal in relation to CAT proceedings in forward with information and obtains immunity in relation to a England and Wales, but only with the permission of the CAT or second cartel, it may receive an additional reduction in the penalty the appellate court. CMA decisions may also be challenged under to be imposed for the first cartel. Reductions are not likely to be judicial review procedures before the High Court. high and will depend on factors such as the amount of effort by the applicant to uncover the second cartel and whether the CMA would have been likely to discover such cartel in any event. 7.2 Does an appeal suspend a company’s requirement to pay the fine? The CMA does not operate a ‘penalty plus’ policy; it will not consider it an aggravating factor if a leniency applicant in one case United Kingdom Yes, until the appeal is determined. does not report the existence of another unrelated cartel, which is later discovered and sanctioned by the CMA. 7.3 Does the appeal process allow for the cross- examination of witnesses? 5 Whistle-blowing Procedures for Individuals Yes, but any cross-examination can be limited by the CAT as it deems appropriate.

5.1 Are there procedures for individuals to report cartel conduct independently of their employer? If so, 8 Damages Actions please specify.

Yes, see above at question 2.4. A “no-action” letter may also be 8.1 What are the procedures for civil damages actions granted, where an individual reports cartel conduct directly to the for loss suffered as a result of cartel conduct? Is the CMA in return for immunity from prosecution and/or director position different (e.g. easier) for ‘follow-on’ actions as opposed to ‘stand alone’ actions? disqualification, provided they are the first to report the conduct. In such instances, the relevant company may lose the chance to apply for Type A or Type B immunity. Both follow on and stand alone claims can be brought before the CAT or the High Court. While follow on actions rely on a decision taken by either the CMA 6 Plea Bargaining Arrangements or the EC establishing a breach of competition law, meaning the claimant is not required to prove a breach of competition law but only that it suffered damage as a result, stand alone claims would 6.1 Are there any early resolution, settlement or plea bargaining procedures (other than leniency)? Has only succeed if the claimant establishes that the defendant breached the competition authorities’ approach to settlements competition law, and that it suffered a loss as a result. The CAT changed in recent years? may also grant injunctions as regards both stand alone and follow on actions, and such actions may be brought in the civil courts by way Once the CMA considers that the evidential standard for issuing an of a claim of a breach of statutory duty. SO is met, it may, at its discretion, enter into discussions with the On 9 March 2017, the UK incorporated the Damages Directive defendants about the possibility of a settlement. To be eligible for a into national law by way of the Competition Act 1998 and Other settlement, the defendant must: Enactments (Amendment) Regulations 2017. Some changes 1. make a ‘clear and unequivocal’ admission of the infringement; introduced include: the incorporation of a single regime for damages 2. terminate its involvement in the infringement; claims, regardless of whether the original infringement was one of EU or UK competition law; permission for courts to order disclosure 3. confirm that it will pay a penalty set at a maximum amount, including a discount for settlement; and of documents in competition proceedings where proportionate, provided they are not leniency statements or settlement submissions; 4. agree to procedural cooperation with the CMA. the introduction of a rebuttable presumption that cartels cause Settlement discount is capped at 20% if settlement occurs before harm; and the possibility of joint and several liability between the CMA has issued an SO, and at 10% thereafter. The CMA infringing companies, with some exceptions for small and medium determines the actual reduction in the level by taking into account sized entities and immunity recipients. However, the distinction in the resource savings it has achieved by adopting a settlement. The transitional application of substantive and procedural provisions, settlement procedure is streamlined, with no oral hearings or written where the former only apply to claims where both the infringement responses to the SO, and only limited access to file. Where a settling and harm suffered occurred post-9 March 2017, whilst the latter party appeals the infringement decision, it ceases to benefit from the apply to all proceedings brought post-9 March 2017, may lead to settlement discount. some uncertainty.

7 Appeal Process 8.2 Do your procedural rules allow for class-action or representative claims?

7.1 What is the appeal process? Collective proceedings can be brought before the CAT if the claimants have “the same, similar or related issues of fact or law” The Competition Appeals Tribunal (“CAT”) is a specialist

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and the matter in dispute is “suitable to be brought in collective against MasterCard. This related to MasterCard’s imposition of proceedings”, with the CAT making an order approving the UK multilateral interchanges fees for its cards, which Sainsbury’s proceedings. In July 2017, the CAT dismissed an application for alleged infringed the Chapter I prohibition, Article 101 of TFEU collective proceedings in the MasterCard case, on the basis that the and Article 53 of the Agreement on the Economic Area. MasterCard parties had not adequately shown how any damages award would sought to appeal the CAT’s judgment, but in its decision dated 22 be distributed so as to adequately reflect the losses suffered by the November 2016, the CAT rejected all of MasterCard’s grounds for individual consumer parties, given their substantial number and appeal, and ordered MasterCard to pay £68.5 million in damages. stark differences. Several cases have been brought before the courts which have Collective proceedings will be brought by a “representative” on subsequently settled, an approach now heavily encouraged in behalf of the wider class of claimants, who does not need to be, certain of the new provisions in Schedule 8A of the Competition Act but usually is, a claimant itself. The CAT must also consider that (see below at question 9.1). it is “just and reasonable” for it to be the representative. The CAT United Kingdom order approving the action will stipulate whether the class will be defined using the “opt-in” or “opt-out” models: under the former, 9 Miscellaneous the representative will bring a claim on behalf of all parties who have expressly decided to participate in the collective proceeding, 9.1 Please provide brief details of significant, recent or and under the latter, the representative will bring a claim on behalf imminent statutory or other developments in the field of all parties who fit a particular description, unless some parties of cartels, leniency and/or cartel damages claims. expressly choose to be excluded from the proceedings. The legislation introducing the Damages Directive also introduced 8.3 What are the applicable limitation periods? Part 9 of Schedule 8A to the Competition Act, bringing into force on 9 March 2017 the settlement and contribution scheme. Under The limitation period for stand alone actions before the courts or this scheme, where a cartel member settles a claim, the remaining the CAT is six years in England and Wales. The beginning of the cartelists are not permitted to seek a contribution for the loss or limitation period is the later of: (i) the day on which the infringement damage arising from the cartel from such settling cartel member. of competition law that is the subject of the claim ceases; and (ii) This reform is aimed at encouraging cartel members to settle private the claimant’s day of knowledge (defined as the day on which the action claims. claimant first knows or could reasonably be expected to know: (a) The CMA also launched a public advertising campaign in March of the infringer’s behaviour; (b) that the behaviour constitutes an 2017 to “crack down” on cartels by publicising the £100,000 reward infringement of competition law; (c) that the claimant has suffered and full anonymity for whistle-blowers on social media feeds and loss or damage arising from the infringement; and (d) the identity other websites. This ties in to the CMA’s recent increasing trend of the infringer). towards greater enforcement, particularly apparent at the end of 2016 with the imposition of the record £84 million fine on Pfizer and the first director disqualification. It remains to be seen, however, 8.4 Does the law recognise a “passing on” defence in whether such a culture of strict enforcement can be upheld following civil damages claims? the UK’s exit from the EU, to be completed within two years from the trigger of Article 50 on 29 March 2017 (unless EU Member The Competition Act specifically recognises passing on damages for States agree to an extension). Although the specific terms of the overcharges and underpayments. The regulations implementing the exit are yet to be concluded following commencement of formal Damages Directive now also clarify that the burden of proving that negotiations on 19 June 2017, it is likely that following the UK’s an overcharge has been passed on rests with the defendant (namely, exit, most UK related competition cases will be subject to review the entity from whom damages are being sought). Claimants must by the CMA only without assistance from the EC. This will in turn therefore merely show that the defendant has infringed competition likely lead to a much greater case load to be managed by the CMA, law, such infringement has resulted in an overcharge and that, as an potentially threatening its effectiveness in light of a more stretched indirect purchaser, the claimant has purchased goods or services that and limited budget following the UK’s departure from the EU. were the object of the infringement, in order to make a successful claim. While similar rules apply as regards underpayments, The CMA also discussed the potential changes to UK competition clarification on the standard of proof to be met is yet to be provided. law as a result of the UK’s exit from the EU at its June 2017 board meeting. Although the UK competition regime would be left intact, elements of EU competition law would likely be removed given 8.5 What are the cost rules for civil damages follow-on the expectation on the CMA and UK courts to make independent claims in cartel cases? decisions on UK competition issues. The extent of the latter task will also depend on whether the UK remains in the EEA or not. If In civil courts, costs usually follow the event, meaning that the so, there may be less requirement for a drastic change given that losing party will ordinarily have to pay a proportion of the costs the majority of EU law will still be applicable. There is also the of the winning party, though this ultimately remains at the court’s possibility for the UK being required to commit to a transitional discretion. The CAT does not have specific rules on costs, but may period of adhering to EU law following its exit, though this is still make any order it thinks fit on costs at any point in the proceedings. subject to continued negotiation. At the time of writing, the CMA is engaged in consultation on 8.6 Have there been any successful follow-on or stand proposed changes to the 2012 OFT penalties guidance. These alone civil damages claims for cartel conduct? If there proposals include the introduction of further details on how the have not been many cases decided in court, have CMA will assess the seriousness of an infringement and apply the there been any substantial out of court settlements? starting point percentage range, the addition of a new aggravating factor (failure to comply with competition law following receipt of The first successful stand alone claim was brought by Sainsbury’s

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a warning or advisory letter in respect of the same conduct), and the addition of new financial indicators to consider when assessing 9.2 Please mention any other issues of particular interest the appropriate fine adjustment for deterrence and proportionality in your jurisdiction not covered by the above. purposes (profit after tax, net assets and dividends). The CMA is also analysing responses to a consultation on leniency applications This is not applicable. which asked whether the CMA should act as the single port of call for all leniency applications within the regulated sectors.

Matthew Readings Shirin Lim

Shearman & Sterling LLP Shearman & Sterling LLP United Kingdom 9 Appold Street 9 Appold Street London, EC2A 2AP London, EC2A 2AP United Kingdom United Kingdom

Tel: +44 20 7655 5937 Tel: +44 20 7655 5708 Email: [email protected] Email: [email protected] URL: www.shearman.com URL: www.shearman.com

Mr. Readings is head of the Global Antitrust Group and the managing Shirin Lim is an associate of the firm’s London office and her practice partner of the firm’s Brussels office. He splits his time between Brussels focuses on EU and UK antitrust law. and London with a practice focused on EU and UK competition law, including transactional and behavioural/contentious work. Mr. Readings advises clients on cartel investigations by the European Commission and appeals to the European Courts and advises in respect of UK cartel investigations and market studies/investigations by the CMA and sector regulators such as the FCA. He is experienced in private enforcement of antitrust rights in the UK courts. Mr. Readings advises a broad range of clients on strategic merger clearance issues, representing clients before the European Commission and the CMA, oversees multi-jurisdictional merger clearance processes in countries throughout the world and has advised on complex European Commission and CMA cases including Phase II investigations and remedy cases. Mr. Readings is recommended in the principal legal directories, including, for example, Chambers and Partners, and teaches EU competition law at Oxford University.

As one of the first law firms to establish a presence in key international markets, Shearman & Sterling has led the way in serving clients wherever they do business. This innovative spirit and the experience we have developed over our 140-year history makes us the ‘go-to’ law firm for seamless service. An elite antitrust practice Shearman & Sterling wins antitrust cases and successfully defends multinational companies’ transactions before the US and European antitrust authorities, as well as coordinating the multijurisdictional antitrust defence of transactions and global investigations. We deliver practical and effective solutions to the most challenging antitrust issues and are committed to achieving success for our clients. Consistently recognised as among the leaders in the field, clients come to us for our: ■■ Top quality advocacy to maximise the persuasiveness of a client’s position. ■■ Deep experience with antitrust authorities. Our partners, including several former officials, have the knowledge and experience to facilitate dealings with the key antitrust authorities. ■■ M&A experience. Clients entrust us with their most important transactions to assure maximum chances of swift approval with the minimum of conditions. ■■ Behavioural expertise with a track record in investigations relating to dominant firm conduct, cartels, and cooperation agreements. ■■ Litigation abilities, including in antitrust class action lawsuits and jury trials. ■■ Breadth. Our team consists of over 70 lawyers, including 18 partners, representing over 10 nationalities. We advise on all aspects of US and EU antitrust law and practice, in a wide range of sectors, and in many languages. ■■ Transatlantic and international coverage.

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USA Charles F. (Rick) Rule

Paul, Weiss, Rifkind, Wharton & Garrison LLP Joseph J. Bial

on competition. These agreements include, but are not 1 The Legislative Framework of the Cartel limited to, price fixing, bid-rigging, and market division. If Prohibition an agreement is per se illegal, the defendant is foreclosed from arguing either against the agreement’s alleged adverse effects on competition or for the agreement’s procompetitive 1.1 What is the legal basis and general nature of the justifications. With very few exceptions, per se violations cartel prohibition, e.g. is it civil and/or criminal? are the subject of criminal investigations and prosecutions. Other agreements, such as joint ventures or participation in Corporations and individuals may face both civil and criminal standard-setting organisations, that are not per se illegal, are penalties under the United States federal antitrust laws, which subject to the rule of reason. Because of difficulty in proving that conduct is unreasonable compared to its procompetitive prohibit economic agreements that unreasonably restrain free effects, the DOJ typically only prosecutes per se violations trade. Section 1 of the Sherman Act prohibits “[e]very contract, criminally. combination, in the form of trust or otherwise, or conspiracy, in Effect on Interstate and/or Foreign Commerce. Only restraint of trade of commerce among the several states, or with agreements that take place in or affect interstate or foreign foreign nations”. Section 4 of the Clayton Act enables private commerce are subject to federal antitrust laws. The interstate parties (including state and local governments) to bring civil actions commerce test is met if products or services related to the for damages because of Sherman Act violations. agreement move across the borders of any state within the United States. The foreign commerce requirement is described in question 1.6. 1.2 What are the specific substantive provisions for the cartel prohibition? In a criminal prosecution, the government must prove all four of the above elements beyond a reasonable doubt. The government also must prove that either the agreement itself or an act in furtherance of To prove a criminal violation under Section 1, the government must the agreement occurred within the federal district where the criminal demonstrate four elements: (1) an agreement or concerted action; (2) indictment is returned for trial. In a civil case, each element must be between two or more potential competitors; (3) in an unreasonable proven by a preponderance of the evidence. restraint of trade; and (4) in or affecting interstate commerce or commerce with foreign nations. Agreement or Concerted Action. An agreement, defined as an 1.3 Who enforces the cartel prohibition? understanding or meeting of the minds between competitors, is the “essence” of a Sherman Act violation. The agreement The Antitrust Division of the Department of Justice (the “Division”) does not need to be express or involve overt actions; tacit is the sole enforcer of the antitrust laws with respect to criminal understandings are sufficient. Evidence used to prove violations of the cartel prohibition. The Federal Trade Commission this element of the offence may include direct evidence (“FTC”) can challenge certain coordinating conduct pursuant to such as testimony from participants or other witnesses and Section 1, but if it uncovers evidence of a criminal cartel violation in communications with competitors, or circumstantial evidence its investigations, it ordinarily will refer the matter to the Division. such as identical bidding behaviour. In addition, state attorneys general and private plaintiffs (as well as Between Competitors. The parties must do business in the the Division) can bring a civil action for injuries resulting from a same product and geographic market in order to qualify cartel violation. These other parties (including the FTC) can seek as competitors. Products do not have to be identical to be treble damages for injuries suffered, but only the Division can seek considered part of the same market; a product market consists of all goods or services that buyers view as close substitutes. criminal fines for the cartel violation under federal antitrust laws. To qualify as a competitor, companies do not have to actively In addition to federal antitrust laws, some state antitrust laws give participate in the market, but they must be capable of state attorneys general the ability to prosecute antitrust violations participating. criminally as well. Unreasonable Restraint of Trade. Under the rule of reason, which is the default doctrine for determining if a restraint is 1.4 What are the basic procedural steps between the “unreasonable”, conduct is unreasonable when its restraint opening of an investigation and the imposition of on trade is greater than its procompetitive effects. Courts sanctions? have found certain types of agreements to be illegal per se because of the harmful effect these arrangements have When the Division learns of a potential antitrust violation, its first

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step is usually to convene a grand jury, an independent investigatory body described in question 2.2. The Division can use the grand 2 Investigative Powers jury to gather relevant documentary and testimonial evidence. Throughout the investigative process, the Antitrust Division may 2.1 Summary of general investigatory powers. also rely on the Federal Bureau of Investigation (“FBI”) to execute search warrants, conduct surveillance, and interview witnesses. Table of General Investigatory Powers Once the Division has gathered sufficient evidence of the potential antitrust violation, it may present this evidence to the grand jury. If Investigatory Power Civil/Administrative Criminal the grand jury determines probable cause which exists to support Order the production

of specific documents Yes Yes* USA criminal charges, they will issue an indictment charging the or information defendant and initiating formal criminal proceedings. Following the Carry out compulsory indictment, the defendant must appear before a federal court to enter interviews with Yes Yes* a plea of guilty or not guilty on the charges. If the defendant decides individuals to plead not guilty, the case will proceed to trial where the defendant Carry out an has the right to be tried by a jury. If, after trial, the defendant is unannounced search No Yes* of business premises found guilty, the judge will issue a sentence according to the United Carry out an States Federal Sentencing Guidelines (“Guidelines”). unannounced No Yes* In many cases, defendants enter into negotiated pleas with the search of residential Division that waive their right to the grand jury. In those cases, premises the Division does not have to seek an indictment from the grand ■ Right to ‘image’ computer hard drives jury and instead files an information charging the defendant. Plea No Yes* using forensic IT bargaining is explained in question 6.1. tools ■ Right to retain No Yes* 1.5 Are there any sector-specific offences or exemptions? original documents ■ Right to require an explanation Yes Yes Federal antitrust laws do not identify sector-specific offences, of documents or although exemptions do apply to certain types of activities. Most information supplied of the exemptions are created by statutes. For example, the ■ Right to secure Merchant Marine Act exempts ocean shipping carrier companies premises overnight No Yes* from antitrust prosecution, while the McCarran-Ferguson Act (e.g. by seal) largely exempts insurance companies. In addition to the statutory Please Note: * indicates that the investigatory measure requires exemptions, court-created doctrines may protect specific entities the authorisation by a court or another body independent of the and activities. For example, states and certain state supervised competition authority. entities are exempt under the Parker Immunity doctrine while joint lobbying or litigation efforts between competitors are protected under the Noerr-Pennington doctrine. Major League Baseball was 2.2 Please list specific or unusual features of the granted an exemption to antitrust laws in a 1922 Supreme Court investigatory powers referred to in the summary table. case. Congress limited the exemption slightly in 1998 with the Curt Flood Act, which repealed the exemption with respect to labour In a criminal investigation, the Division must convene a grand jury, issues. an independent body vested with the power to issue subpoenas. Through this subpoena power, the Division has a broad ability to investigate alleged conduct. The DOJ has significant discretion 1.6 Is cartel conduct outside your jurisdiction covered by which it can (and routinely does) implement in carrying out an the prohibition? investigation. As a result, individuals (even those on the fringe of an investigation) may face substantial burdens in connection with The Foreign Trade Antitrust Improvements Act (“FTAIA”) limits sitting before a grand jury. the reach of antitrust laws with regard to foreign commerce. Under the FTAIA, only foreign conduct that has a “direct, substantial and Documentary Evidence and Compulsory Interviews. Grand juries reasonably foreseeable” effect on U.S. commerce with foreign can issue subpoenas to compel the production of documentary nations may be prosecuted. However, U.S. courts have not settled (subpoena duces tecum) or testimonial (subpoena ad testificandum) the meaning of “direct, substantial, and reasonably foreseeable”. evidence. If a witness refuses to cooperate with or testify before the Some courts require the domestic effects to be an immediate grand jury, he or she can be held in contempt and subjected to fines consequence of the defendant’s activity, while others only require or imprisonment. a reasonably proximate causal nexus between the alleged conduct Searches of Premises. The Division must obtain a search warrant and the domestic effects. There also remains some question as to from a judge before conducting a search of company or residential whether the FTAIA applies with the same force to civil actions as premises or seizing documentary evidence. To obtain a search to criminal actions. warrant, the Division must submit an affidavit stating facts that show probable cause that a crime has been committed, that evidence of the crime exists, and that the relevant evidence is on the premises to be searched. However, the government may take possession of documentary evidence even without a search warrant if the party being searched voluntarily hands over the evidence. The Division

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can also conduct, without a search warrant, surprise visits to individuals that are not represented by counsel. These individuals 2.5 Who will carry out searches of business and/or are not required to cooperate with the Division and do not have to residential premises and will they wait for legal permit the Division to search their property. advisors to arrive? Informal Witness Interviews. The Division can interview an When the Division obtains a search warrant, FBI agents will execute individual informally at any time if the individual is not represented searches of residential and company property, usually at the same by counsel. If the individual is represented by counsel, the Division time as or just prior to service of a grand jury subpoena. This timing must coordinate with counsel before conducting an interview. minimises the opportunity for the defendant to destroy evidence Usually these interviews will occur either at the company’s

USA while also incentivising targeted companies to seek leniency. The premises (such as in the course of executing a search warrant) or at agents do not have to wait for counsel to arrive, but may wait if the employee’s home. The locus of the interview could impact who specifically requested. Also, the agents are limited in their search questions the witness. While both Division attorneys and agents from the FBI may conduct an interview at an employee’s home, it is by the warrant itself, which must describe the exact location to be Division policy that attorneys not be present on company premises searched as well as identify with particularity the evidence to be while agents execute a search warrant. seized. Companies should develop procedures to protect employees from negative consequences of a government search. In a search and 2.6 Is in-house legal advice protected by the rules of seizure, the company should contact legal counsel immediately. privilege? Employees should remain calm and vigilant, taking note of any items collected during the search. Additionally, individuals have the right The attorney-client privilege protects communications between to remain silent during informal interviews and should not answer in-house counsel and company employees made for the purpose any questions without an attorney present. These conversations of seeking or providing legal advice. Companies should be aware have as much weight as formal interviews and any false statement that not all communications involving in-house legal counsel are made during an informal interview is subject to prosecution. privileged – only those with the purpose of seeking legal advice are covered. Communications strictly about business are not protected. Therefore, an email is not considered privileged simply because an 2.3 Are there general surveillance powers (e.g. bugging)? attorney is copied; the communication must contain or seek legal advice. Companies should also be aware that an attorney’s business While the Division mainly relies on the grand jury process to collect advice is not protected. For example, an employee requesting a evidence, it can work in conjunction with the Federal Bureau of lawyer’s opinion about the legal issues posed by a merger likely Investigation (“FBI”) to utilise electronic surveillance, such as would be covered by attorney-client privilege, while a conversation wiretaps, if it receives Court authorisation. The Division’s electronic about the financial soundness of the merger would be considered surveillance can include monitoring and/or accessing electronic unprotected business advice. Because of this, companies should data, including text messages, instant message communications, make sure that discussions that seek legal advice are kept separate and social media accounts. Companies should be cognisant of the from business discussions to strengthen any claim of privilege made content of these communications, as the Division may use them as evidence in antitrust investigations. Given the increasing prevalence during an investigation. of messaging platforms – as well as the sometimes blurred line between personal and professional accounts – companies should 2.7 Please list other material limitations of the consider implementing policies governing employee use of investigatory powers to safeguard the rights of electronic communications, especially regarding interactions with defence of companies and/or individuals under competitors. investigation.

Challenging a Subpoena. As noted above, the Division has broad 2.4 Are there any other significant powers of grand jury powers, and it can be difficult to quash a subpoena if investigation? its subject has any connection to the alleged conduct. Even so, the Division can avoid imposing burdens upon potential witnesses by Cooperating parties seeking plea agreements or immunity not planning its investigation accordingly. For instance, with respect only provide documents and testimony in excess of what the to scheduling, the Division may accommodate alternative dates for Division can obtain through the grand jury, but also may consent a witness that is not available on the date the subpoena identifies, to wiretaps and other electronic surveillance that may be used to particularly if the witness is not essential to the investigation. incriminate co-conspirators. Cooperating parties can be particularly Furthermore, because the Division can compel the attendance of devastating tools for building an antitrust case against an alleged violator because they often obtain persuasive evidence of criminal grand jury members under threat of imprisonment, it can avoid conduct. However, a defendant can refute this evidence. For imposing unnecessary burden on a witness (e.g., by cancelling a example, a defendant can impeach a government’s witness if the grand jury session if failing to meet quorum) by planning in advance. witness’s testimony does not comport with other evidence in the Privileged Documents. If either party believes that privileged case, including the witness’s own prior statements. documents (e.g., documents containing legal advice) have been Given the Division has recently placed an emphasis on obtaining seized during a search, the Division must put procedures in place to cooperation from companies accused of criminal violations, it is ensure that attorneys and agents working on the case do not access possible the prevalence of cooperating witnesses seeking to gather those documents. evidence that implicates fellow conspirators will increase. However, Privilege Against Self-Incrimination. An individual called to testify the parallel emphasis on prosecuting individuals stemming from before the grand jury has the right to invoke the Fifth Amendment’s the Yates Memo (which is discussed further in question 6.1) could privilege against self-incrimination and confer with counsel outside chill cooperation as well, resulting in fewer cooperating witnesses the jury room. However, grand jury proceedings themselves are overall. conducted in secret and witnesses have no right to counsel inside the

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jury room. Generally, the government will not seek the testimony of to develop an effective compliance programme, and the extent of the an individual who states an intention to invoke the privilege before company’s cooperation with the government’s investigation. The the grand jury because, to compel the testimony, the government culpability score correlates to minimum and maximum multipliers, would be required to provide that individual with immunity. The which are then applied to the base fine to calculate a fine range. This privilege against self-incrimination does not apply to documentary range is merely advisory, however, and the court may upwardly or evidence. downwardly depart from the suggested range in setting the final fine. Jurisdictional Limitations. Because of jurisdictional limitations in The DOJ, for its part, typically seeks a sanction that falls within the the federal rules governing the service of subpoenas, the Division range the Guidelines suggest. In special circumstances, the DOJ generally cannot serve subpoenas on individuals or companies may recommend a downward departure from the Guidelines range located outside of the United States. However, if an individual or in recognition of a defendant’s cooperation or assistance. The DOJ USA company does receive a subpoena and fails to respond, it is possible also can, and usually does, seek discounted fines against defendants the Division will cooperate with the relevant foreign government to who cooperate immediately following the leniency applicant (e.g., enforce the subpoena or otherwise secure the requested materials. a company that was second to report its antitrust violation). Like the Guidelines ranges themselves, however, the DOJ’s role in the sentencing process is only advisory, and the courts retain broad 2.8 Are there sanctions for the obstruction of investigations? If so, have these ever been used? discretion in making the final determination as to the size of the Has the authorities’ approach to this changed, e.g. penalty. become stricter, recently? In recent years, the Division also has emphasised probationary periods for companies convicted of antitrust violations. If the In criminal investigations, the government will bring obstruction Division believes a company has an ineffective compliance of justice charges against individuals who attempt to impede programme or is continuing to employ culpable individuals, then enforcement efforts by destroying evidence or providing false it could argue court-supervised probation is necessary to prevent information to the government. The Division has pursued a recidivism. This probation could include a court-appointed monitor. number of obstruction cases in recent years, suggesting increased In addition to these criminal fines, corporate defendants may enforcement on this issue. Individuals also should note that, while be ordered to pay restitution to the victims of the conspiracy. the Division has had limited success extraditing foreign nationals Defendants with federal contracts may be subject to prosecution for antitrust violations (as explained further in question 9.2), under companion criminal statutes, such as those prohibiting mail obstruction of justice is prosecutable in nearly every jurisdiction, fraud or wire fraud; and any company may be disbarred from future and thus could serve as a basis for extradition. participation in government contract work. In civil cases, obstruction may result in fines, jury instructions to make an adverse inference against the defendant, or other sanctions 3.2 What are the sanctions for individuals (e.g. criminal the court deems appropriate. sanctions, director disqualification)?

3 Sanctions on Companies and Individuals The Sherman Act provides for criminal penalties of up to $1 million and 10 years’ imprisonment for individuals who commit an antitrust violation. Individuals also are subject to the alternative fine regime 3.1 What are the sanctions for companies? by which the DOJ may seek to impose monetary penalties of up to twice the losses or wrongful gains resulting from the conspiracy. Under the Sherman Act, corporations that commit antitrust violations Like corporate defendant penalties, fines against individuals are are subject to fines of up to $100 million. In the alternative, the based in part on the volume of commerce affected by the unlawful corporation may be subject to penalties based on the unlawful activity, with typical individual fines falling between one and five gains or losses occasioned by anticompetitive activity. Federal law percent of this figure. Individual sanctions are not multiplied by a provides for fines of up to twice the gross amount the antitrust co- culpability score, but the Guidelines provide that these fines should conspirators gained through the violation or twice the gross amount in all cases exceed $20,000. that the victims lost through the violation, whichever is greater. The volume of affected commerce also guides the court’s These alternative fines can – and often do – exceed the $100 million determination regarding sentences of imprisonment. Antitrust ceiling the Sherman Act establishes, although the government is violations increasingly are punished on an individual level using jail required to prove the amount of gain or loss in these cases beyond time: between 2010 and 2016, an average of 29 individuals per year a reasonable doubt. were sentenced to prison, and average prison sentences increased When imposing criminal penalties for antitrust violations, the courts from 20 months between 2000 and 2009 to 22 months between 2010 assess antitrust-violation fines based on the formula and guidance set and 2016. The DOJ may recommend the court impose terms of forth in the United States Sentencing Guidelines (the “Guidelines”). imprisonment below the suggested Guidelines ranges for defendants The court begins the analysis by calculating 20% of the total volume who provide substantial assistance to the government’s investigative of commerce affected by the antitrust violation, which is then taken efforts. The DOJ also may make such recommendations pursuant as the base fine. Note, the Guidelines do not define “volume of to plea agreements. commerce affected”, nor do they specify how to calculate the figure. Consequently, the court has significant flexibility in determining the 3.3 Can fines be reduced on the basis of ‘financial appropriate base fine. hardship’ or ‘inability to pay’ grounds? If so, by how The court next assigns the corporate defendant a “culpability score” much? reflecting the circumstances involved in the particular case. The Guidelines outline various factors that may bear on the culpability Criminal fines in corporate antitrust cases can be reduced tothe determination, including the company’s criminal history, the role that extent necessary “to avoid substantially jeopardizing the continued high-level personnel played in the conspiracy, the company’s efforts viability of the organization”. The Guidelines clarify that a

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defendant will be eligible for a reduction only if the court finds the The Corporate Leniency Policy establishes two types of leniency, company would be unable to pay the minimum recommended fine, Type A and Type B, which incentivise companies to report antitrust even if allowed the benefit of an instalment schedule. Additionally, violations through reduced sanctions. Critically, the Division the court may reduce the size of a criminal fine to ensure that will grant only one corporate leniency application per cartel the defendant company can pay restitution to the victims of the conspiracy; thus, the programme may result in situations in which conspiracy. co-conspirators race to turn themselves into the government. Both The Guidelines require the courts to impose fines on individuals Type A and Type B leniency require that applicants confess fully in antitrust cases unless the defendant can establish “that he is to their participation in the conspiracy, take steps to terminate such participation, and agree to cooperate fully with the DOJ’s unable to pay and is not likely to become able to pay any fine”.

USA investigative and enforcement efforts going forward. Successful When determining the amount of the defendant’s fine, the court applicants are awarded prosecutorial benefits, which vary depending may consider evidence of “the defendant’s ability to pay the fine on the form of leniency. . . . in light of his earning capacity and financial resources”. The Guidelines provide that the courts may impose a lesser fine or waive Type A leniency may be available under the following six the fine if the court finds that (1) the defendant is unable to pay and conditions. The company must have: (i) voluntarily come forward is not likely to ever become able to pay, or (2) imposing the fine before the DOJ became aware of any illegal conduct; (ii) taken steps would “unduly burden the defendant’s dependents”. to terminate its participation in the illegal activity immediately upon its discovery of the conspiracy; (iii) confessed fully and committed to providing complete, ongoing assistance to the Department’s 3.4 What are the applicable limitation periods? investigative efforts; (iv) come forward as an entity, rather than through isolated confessions of executives; (v) made restitution to Criminal antitrust actions are subject to a five-year statute of victims of the conspiracy where possible; and (vi) not originated, limitations. In cases involving prolonged conspiratorial activity, the led, or coerced others to participate in the illegal activity. A grant of statutory period begins to run after the termination of the conspiracy; Type A leniency confers automatic amnesty upon the company and that is, the point at which the purpose of the antitrust conspiracy has its cooperating employees. been achieved or abandoned. Type B leniency allows companies to apply for amnesty after the DOJ has become aware of illegal activity. The DOJ will grant 3.5 Can a company pay the legal costs and/or financial this type of application only if it lacks the evidence to obtain a penalties imposed on a former or current employee? successful conviction against the applicant and it determines that leniency would not be unfair given the timing of the confession, Companies may pay for the legal costs current and former employees the applicant’s role in the conspiracy, and the nature of the illegal incur during antitrust investigations. Generally, companies are conduct. Additionally, companies must satisfy requirements (ii) prohibited from paying the financial penalties imposed on their through (v) of the above paragraph to qualify for the programme. employees, however, pursuant to state laws forbidding indemnification If the DOJ grants the application, the company’s employees will be in cases involving wilful violations of the criminal law. considered for immunity from prosecution.

4.2 Is there a ‘marker’ system and, if so, what is required 3.6 Can an implicated employee be held liable by his/her to obtain a marker? employer for the legal costs and/or financial penalties imposed on the employer? Yes, a company that confesses to an antitrust violation before its In theory, an employer could hold a rogue employee liable for the co-conspirators come forward can reserve its place as first in line costs associated with an antitrust violation; however, this scenario for leniency by securing a marker for its application. To do so, the is unlikely under U.S. law. Vicarious liability allows plaintiffs to company must contact the DOJ with information about the antitrust sue employers who benefit from their employees’ misconduct, even violation and its potential role therein; the marker then will allow the company a finite period of time – typically 30 days – to conduct if the misconduct in question was not at the employer’s request. a preliminary internal investigation into the nature of its role in For this reason, a company seeking to hold its employee liable for the conspiracy. Because the leniency programme is only available antitrust sanctions or legal fees would be unlikely to succeed unless on a “first in” basis, the marker system can play a critical role in it could prove that the company was not involved in the violation, determining which amnesty applications will be granted. that it derived no benefit from the violation, and that the employee was not acting within the scope of his employment. 4.3 Can applications be made orally (to minimise any subsequent disclosure risks in the context of civil 4 Leniency for Companies damages follow-on litigation)?

Companies may apply orally for leniency, and the DOJ does not 4.1 Is there a leniency programme for companies? If so, specify that applications take any particular form. However, the please provide brief details. DOJ may require applicants to turn over any documents relevant to their illegal activity. The Division operates a Leniency Programme for both individuals and companies. The Leniency Programme underlies many of the Division’s cartel investigations, with DOJ officials stating, “self- 4.4 To what extent will a leniency application be treated reporting under our leniency programme remains at high levels confidentially and for how long? To what extent will documents provided by leniency applicants be … increasingly, non-US companies are reporting anticompetitive disclosed to private litigants? behaviour”. The Division protects the confidentiality of all information provided

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through leniency applications, and will disclose the contents of an activity. The DOJ treats such nondisclosure as an aggravating factor application only with the applicant’s consent, upon prior disclosure and therefore may seek greater sanctions against the company at by the applicant, or pursuant to a court order. These protections sentencing. apply even against foreign antitrust agencies seeking information on applicants to the DOJ. The information in leniency applications may, however, be subject to discovery in criminal litigation. 5 Whistle-blowing Procedures for Additionally, federal law provides for broad discovery in civil cases Individuals that could cover documents used as part of a leniency application.

Leniency applicants also can make the strategic decision to 5.1 Are there procedures for individuals to report cartel USA disclose incriminating documents to private litigants pursuant conduct independently of their employer? If so, to incentives established by the Antitrust Criminal Penalty please specify. Enhancement and Reform Act of 2004 (“ACPERA”). ACPERA provides that successful leniency applicants may limit their civil The Department of Justice (“DOJ”) has programmes that allow liability by cooperating with plaintiffs in private suits related to individuals to contact the government in their individual capacities the government’s enforcement actions. To satisfy the statutory to report antitrust violations to the Antitrust Division. Under requirements, a company seeking relief generally must begin to current DOJ policy, an employee whistle-blower may be eligible cooperate early in the government’s investigation, and also must for leniency or immunity if he reports antitrust activity of which produce to the private plaintiffs a substantially larger body of the government was unaware and provides full cooperation with the documents than would be required under typical discovery rules. DOJ. The employee cannot have originated or led the conspiracy in Companies that provide satisfactory cooperation are subject to question, and he will not be granted immunity if he coerced others only actual damages suffered by the plaintiff. In the absence of into participating in the illegal activity. Additionally, federal law ACPERA’s civil liability limitation, the defendant, in civil actions, prohibits companies from retaliating against employees who report would be subject to statutorily authorised treble damages and joint corporate wrongdoing to the authorities. and several liability with other co-conspirators.

6 Plea Bargaining Arrangements 4.5 At what point does the ‘continuous cooperation’ requirement cease to apply? 6.1 Are there any early resolution, settlement or plea A company that seeks leniency is obligated to cooperate with the bargaining procedures (other than leniency)? Has government’s enforcement efforts until the DOJ’s investigation has the competition authorities’ approach to settlements concluded. These obligations are set forth in a conditional leniency changed in recent years? agreement the DOJ can revoke at any time during the investigation. Upon the conclusion of the investigation, the DOJ will provide the The Division frequently engages in plea bargaining rather than company with a final letter indicating that the leniency application pursuing a matter to a contested trial. In a typical plea bargaining has been granted. agreement, the defendant pleads guilty to the antitrust violation and agrees to cooperate fully in the investigation. In return, the Division Whether a company has satisfied its leniency obligations will depend generally recommends a punishment less severe than the minimum in part on the number of individuals the company makes available of the range given by the Sentencing Guidelines. The district court and the information they provide. The DOJ has attempted to revoke does not have to follow either the Division’s recommendation or a conditional leniency agreement only once based on a company’s the Sentencing Guidelines, but usually selects a sentence below the alleged failure to promptly terminate its involvement in the illegal minimum of the Guidelines range for each offence. activity, but this attempt failed before the courts. As a result, the DOJ amended the terms of its standard conditional leniency agreements Following a memo the DOJ issued in September 2015 (often to provide that if the DOJ does revoke a company’s conditional referred to as the “Yates Memo” in reference to its author, former leniency agreement, the company cannot appeal the decision prior Deputy Attorney General Sally Yates), the Division has placed to the conclusion of the investigation. a greater emphasis on accountability for individual defendants. Among other things, the memo instructed Division attorneys to include a provision in plea agreements that requires a company to 4.6 Is there a ‘leniency plus’ or ‘penalty plus’ policy? provide information about all culpable individuals. The memo was consistent with the Division’s position that, because it is seldom Yes, the DOJ has policies that provide for both additional rewards able to stop a crime before it starts, it must rely on deterrence, which for certain cooperating companies, “leniency plus”, and harsher entails seeking large criminal fines for corporations and significant sanctions for companies that fail to comply fully with the DOJ in jail time for executives. its investigations, “penalty plus”. Under the former programme, a company that cooperates with the DOJ in one investigation may be eligible for special benefits if it also reports information about 7 Appeal Process an additional antitrust violation occurring in a separate industry. A company that obtains amnesty plus status will not be fined in 7.1 What is the appeal process? connection with the second conspiracy, nor will the DOJ prosecute any cooperating employees, officers, or directors for the offence. The Division also may seek reduced sanctions for the first offence. To initiate a criminal prosecution, the government must convince a grand jury to issue an indictment against the defendant. After Conversely, a company that cooperates with an investigation may receiving the indictment, the government must proceed to trial be subject to the “penalty plus” policy if the DOJ discovers that the promptly and prove each element of the antitrust violation beyond company has failed to disclose information about separate antitrust a reasonable doubt to a jury of the defendant’s peers. During this

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trial, the defendant has the right to confront its accusers and cross- party generally receives three times the amount of the damages examine them. While an individual defendant cannot be compelled sustained as well as costs and attorney fees, except against the to testify at trial, he or she can waive this right and take the stand in following defendants: (1) a leniency applicant or co-operator in his or her own defence. a preceding DOJ investigation; (2) a joint venture engaged in If the defendant is acquitted at trial, the government is precluded research, development, and production, or a standards development from trying the defendant again or appealing the acquittal. On the organisation that has given prior notification to the DOJ and other hand, if the defendant is found guilty, he or she does have the the FTC; and (3) an export trading company that has received a right to appeal. While the government may not appeal a criminal certificate review from the Department of Commerce. Section 16 verdict, it may appeal any sentence within 30 days. of the Clayton Act also allows a private party to sue for injunctive USA relief against any threatened loss or damage that an antitrust The appeal process in antitrust cases is the same as in any federal violation would cause. In contrast to Section 4, a party bringing suit proceeding. The defendant must file a notice of appeal with the under Section 16 does not have to show actual injury to receive an district clerk within 14 days of either the entry of judgment or the injunction but only that a threat of injury exists. filing of the government’s notice of appeal. Defendants in civil cases not only are jointly and severally liable However, a defendant subject to a plea agreement typically will but also have no right of contribution. Therefore, private parties can have waived the right to appeal for any reason other than ineffective pursue a single defendant for the totality of damages from a cartel assistance of counsel or prosecutorial misconduct. violation, and the defendant will have no recourse against the other To initiate a civil case, a plaintiff must file a complaint and prove members of the cartel. in court by a preponderance of the evidence all the elements of the In addition to private parties, the United States may bring a civil alleged violation. While the parties have a right to a jury trial in a suit for antitrust injuries and receive an injunction or three times its civil case, the parties can also elect to have a bench trial. damages along with costs if it prevails. A state attorney general also In a civil proceeding filed in federal court, either party may appeal may bring an action for Sherman Act violations as parens patriae on a district court’s judgment within 30 days, except that when the behalf of natural persons within the state and receive an injunction United States is a party it has 60 days to appeal. or triple damages and costs, including attorneys’ fees. A losing party at the appellate level may ask the Supreme Court Given that a judgment in a criminal antitrust proceeding constitutes to review the case by filing a petition for a writ of certiorari. The prima facie evidence of a violation in the subsequent civil Court rarely grants writs of certiorari and only does so when at least proceeding, plaintiffs in “follow on” civil actions may be litigating four justices agree to hear the case. from a more advantageous position than plaintiffs bringing suit in a If the civil case is filed in state court, the appeals process will follow “stand alone” action. Civil plaintiffs, nevertheless, generally cannot that state’s appellate procedure. rely on evidence used in the criminal proceeding, but rather must obtain it independently.

7.2 Does an appeal suspend a company’s requirement to pay the fine? 8.2 Do your procedural rules allow for class-action or representative claims? The district court exercises discretion in deciding whether to stay a judgment. An appeal does not stay a judgment automatically. If As in other areas of law, private parties may bring class actions the district court does stay the judgment, it may take measures to in antitrust if they satisfy the requirements of Rule 23 of the ensure the company can pay the fine after an unsuccessful appeal, Federal Rules of Civil Procedure. A putative class must meet the such as requiring the company to post a bond. As a practical matter, numerosity, commonality, typicality, and adequacy of representation a district court is unlikely to stay a fine. requirements under Rule 23(a). Moreover, a court must find the conditions set forth in Rule 23(b) are satisfied as well. These conditions include that a class action is a fair and efficient way 7.3 Does the appeal process allow for the cross- examination of witnesses? of resolving the antitrust dispute and the questions of law or fact common to the class members predominate over any questions unique to individual members. Because of the predominance The appeal process does not allow for the cross-examination of requirement, antitrust class actions generally are based on price- witnesses, which occurs during the trial period described in question fixing violations and courts rarely certify classes of plaintiffs 7.1. Instead, appellate courts review the district court record, which asserting claims of price discrimination. generally consists of the parties’ papers and exhibits, any transcripts of proceedings, and the district clerk’s official docket entries. Appellate courts review the district court’s factual findings for clear 8.3 What are the applicable limitation periods? error and legal conclusions de novo. A civil action must be commenced within four years of the time when the action accrued. An action accrues whenever a plaintiff 8 Damages Actions is injured by a violation of the antitrust laws. Thus, when anticompetitive conduct consists of multiple acts over time, each 8.1 What are the procedures for civil damages actions act has its own four-year statute of limitations. For a conspiracy, for loss suffered as a result of cartel conduct? Is the each independent act that injures the plaintiff restarts the statute of position different (e.g. easier) for ‘follow-on’ actions limitations. as opposed to ‘stand alone’ actions? This limitation is subject to tolling under certain equitable doctrines, such as fraudulent concealment, duress and estoppel. In addition, Section 4 of the Clayton Act allows a private party to bring a civil the civil statutory period may be tolled pursuant to government suit for any injury that results from an antitrust violation. The enforcement actions or class action proceedings.

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e-commerce. The case was against third-party sellers of wall décor 8.4 Does the law recognise a “passing on” defence in on an online marketplace who had coordinated prices consistent with civil damages claims? a collusive agreement through the use of commercially available algorithm-based pricing software. In the summer of 2017, the DOJ A “passing on” defence generally is not available to an antitrust announced another e-commerce prosecution, this time of a company defendant in a civil case. Succeeding in such a defence requires and its president engaged in fixing prices of customised promotional showing the plaintiff (1) raised its price fully to compensate for the products sold online. While the defendants in the prior case overcharge, (2) experienced no reduction in sales or profit margin, allegedly fixed prices through algorithm-based pricing software, the and (3) would not have raised his price absent the overcharge and/or DOJ alleged defendants in this case utilised widespread encrypted

maintained the higher price after the overcharge was discontinued. USA messaging services and social media platforms to implement and Such a showing usually requires a pre-existing cost-plus contract further the conspiratorial agreement. The case is believed to be the under which an indirect purchaser would suffer the entirety of the first prosecution of a conspiracy furthered through these means. harm. While the DOJ’s focus likely will continue to be on traditional Indirect purchasers also are unable to use a “passing on” theory under industries, these cases indicate DOJ will not ignore the increasing the Illinois Brick doctrine. However, many states have rejected the importance and presence of e-commerce, a development of which Illinois Brick doctrine and allow suits by indirect purchasers under companies in the space should take notice. Not only has the DOJ state law. shown an interest in identifying and prosecuting antitrust violations that seem difficult to detect using conventional investigative tools 8.5 What are the cost rules for civil damages follow-on but also the companies themselves would have difficulty detecting claims in cartel cases? the conduct using traditional compliance programmes.

Private plaintiffs, the United States, and state attorneys general acting as parens patriae can all recover reasonable costs. The relevant 9.2 Please mention any other issues of particular interest provisions for private plaintiffs and state attorneys general specify in your jurisdiction not covered by the above. that costs include reasonable attorneys’ fees. They also allow for pre- and post-judgment interest, although no private plaintiff has As explained above, any criminal penalty levelled on a company pleaded facts sufficient to obtain pre-judgment interest. Prevailing will be based off of the volume of affected commerce (“VOAC”). defendants, on the other hand, must bear their own attorneys’ fees Given this significance and the fact there is no agreed upon method and are unable to obtain reimbursement from losing plaintiffs except for calculating VOAC, determining the VOAC can be contentious. under very special circumstances. In fact, the DOJ has stated publicly that it will not negotiate VOAC and any defendant that wishes to challenge the DOJ’s calculations will have to do so at trial. 8.6 Have there been any successful follow-on or stand alone civil damages claims for cartel conduct? If there Despite this stated position, defendants do have an opportunity have not been many cases decided in court, have to influence the DOJ’s VOAC calculations before the staff draws there been any substantial out of court settlements? their final conclusions. In fact, the DOJ typically will include all commerce into its fine calculation at the start of an investigation The DOJ is very active in pursuing cartel cases, initiating dozens of and then request the defendant identify which commerce is relevant investigations each year. In recent years, it has focused in particular to the DOJ’s allegations and which commerce should be excluded. on the electronics and automotive industries. Because indictments Given the DOJ likely could not prove beyond a reasonable doubt and investigations regularly become public, civil actions typically at trial that all commerce was at issue, the defendant’s failure to follow. exclude irrelevant commerce will result in a much higher VOAC Most cases are settled, and some are settled for substantial amounts. than is justified. Defendants therefore should take advantage of all Among the few that go to trial, jury verdicts in favour of plaintiffs opportunities to influence VOAC. The resulting work product will are common, although they are overturned sometimes on legal be important not only if the defendant reaches a negotiated outcome grounds. such as a plea deal but also if the defendant litigates the case and has to defend against the DOJ’s damages claims. 9 Miscellaneous While calculating VOAC is a complex endeavour, one of the most important factors in successful VOAC discussions is reliable and extensive sales data. Sales data offers a more comprehensive and 9.1 Please provide brief details of significant, recent or thus more conclusory view of the defendant’s commerce than can be imminent statutory or other developments in the field ascertained using traditional documentary or testimonial evidence. of cartels, leniency and/or cartel damages claims. While counsel and experts can analyse sales data extensively, identifying numerous types of commerce to exclude with precision, In recent years, the DOJ’s cartel enforcement efforts have seemed to the DOJ likely will not be convinced by documents or testimony that focus on the automotive and financial services industries, leading to are much more limited in scope with respect to products, customers, a number of high profile investigations resulting in record amounts geography, and time. Therefore, counsel should work closely with of criminal fines and individual prosecutions. Typically, these the company to identify and collect its sales data and then analyse investigations have focused on foreign companies, particularly that data using counsel’s own tools or with the assistance of an manufacturers in Asia that create components or parts for a economic expert. larger finished product, and relied on evidence found in company documents or individual testimony. Despite this apparent focus, the DOJ has increased its attention Acknowledgment on the e-commerce industry and the new challenges that industry The authors thank Paul, Weiss associate Eric R. Sega for his presents. In the spring of 2015, the DOJ announced it was for invaluable assistance in preparing this chapter. the first time prosecuting a conspiracy specifically targeting

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Charles F. (Rick) Rule Joseph J. Bial Paul, Weiss, Rifkind, Wharton & Garrison LLP Paul, Weiss, Rifkind, Wharton & Garrison LLP 2001 K Street 2001 K Street NW Washington, D.C. 20006-1047 NW Washington, D.C. 20006-1047 USA USA

Tel: +1 202 223 7320 Tel: +1 202 223 7318 Email: [email protected] Email: [email protected] URL: www.paulweiss.com URL: www.paulweiss.com USA

A partner and co-chair of the Antitrust Group, Rick Rule provides Joseph Bial regularly represents clients across a wide array of antitrust advice to major international corporations on “bet-the- industries in high-profile antitrust and commercial litigation in federal company” matters, including M&A, criminal and civil investigations by district and appellate courts, as well as before state and federal the FTC and DOJ, and trial and appellate litigations. Over the last 30 regulatory agencies. Joe also has a particular expertise and extensive years, Rick has advised on a number of the highest-profile antitrust experience handling antitrust, international cartel and anti-monopoly matters, including representing Exxon in its merger with Mobil, leading cases in the United States and Asia, as well as in defending civil the team for Microsoft that settled its antitrust case with the DOJ, and actions following grand jury and government investigations. representing US Airways in its merger with American Airlines. Joe has been an Adjunct Professor at George Mason School of Rick began his career in the Antitrust Division of the DOJ, becoming, in Law and at the University of Alaska College of Business and Public 1986, the youngest person ever confirmed as the head of the Division. Policy. Prior to Paul, Weiss, Joe worked as an economist at the White Rick left the DOJ in 1989 and has since been a partner and head of House Office of Management and Budget and has also testified as an antitrust practices at several leading New York and D.C. firms. Rick economic expert and consulted as an economist. received a J.D. from the University of Chicago Law School and a B.A. Mr. Bial received his JD from the University of Chicago Law School, from Vanderbilt University. his Ph.D. in Economics from the University of Arizona and his undergraduate degree from Miami University.

Paul, Weiss, Rifkind, Wharton & Garrison LLP is a firm of more than 900 lawyers with diverse backgrounds, personalities, ideas and interests who collaboratively provide innovative solutions to our clients’ most critical and complex legal and business challenges. We represent the largest publicly and privately held corporations and investors in the world as well as clients in need of pro bono assistance. Our firm is headquartered in New York City with offices in Washington, D.C., Wilmington, London, Tokyo, Hong Kong, Beijing and Toronto. We have long maintained a commitment to diversity and public service and our efforts to recruit and retain a diverse workforce have been recognised through rankings at the top of surveys addressing the hiring and retention of minority lawyers. Paul, Weiss is known for an unwavering dedication to representing those in need. From helping individuals facing injustice to championing a precedent-setting Supreme Court decision, our lawyers’ pro bono work has contributed to significant outcomes that have improved the lives of many in our community and our nation.

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