New OFT Guidance on Penalties

Posted on October 1st, 2012 by Daniel Geey

The Office of Fair Trading (the OFT) recently updated its guidance on how it will calculate penalties for breaches of the Competition Act 1998. The guidance document can be found here. Although the guidelines relate to any Competition Act breach it is worthwhile highlighting a number of points that would be relevant to companies found to have been involved in cartel behaviour.

Very briefly, the OFT set out how it will calculate a fine. This starting point is based on the seriousness of the infringement and will be up to 30% of the company’s relevant turnover in the relevant product market. The next step is to multiply the figure by the number of years of the duration. Steps three involves looking into aggravating and mitigating factors and then adjusting the number for punishment and deterrence value. The last step involves  ensuring that the final amount does not exceed the maximum of 10% of worldwide turnover for the business in its last business year.

With regard to a few specifics:

  1. As cartel activity is viewed by regulators as the most serious of competition law breaches any cartelists are likely to be at the higher tariff end of the 30% maximum scale revenue. The OFT has clarified that the relevant company turnover is that of the last business year before the infringement ended rather than the year before the infringement decision is announced.
  2. In weighing up aggravating and mitigating factors, a higher fine calculation is likely if a company undertook the lead role in a cartel or continued with the cartel after the start of any investigation. Mitigating factors can include the rolling out of an adequate and proportionate competition compliance programme and cooperation with the regulator to conclude an enforcement process more efficiently.

 

The guidance also sets out the OFT’s immunity/leniency framework for the grant of either total immunity from fines or a reduction of up to 50% of any subsequent penalty to be imposed. Such  conditions can be satisfied if for example the applicant accepts that it participated in the cartel, it provides all relevant information to demonstrate the existence of the cartel and continues to cooperate throughout the investigation and conclusion of any action.

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Stand-alone action can be brought against UK defendant who was not an addressee of cartel decision

Posted on September 14th, 2012 by Jessica Burns

The UK Court of Appeal has ruled that a stand-alone damages action can proceed against the UK subsidiary (“KME UK”) of KME Group, even though KME UK was not an addressee of a 2003 European Commission cartel decision.

Following the Commission’s decision in which it fined three group companies (including KME Group) a total of EUR 79m for price-fixing and market-sharing in the industrial copper tubes sector, Toshiba Carrier UK brought damages actions in the High Court against KME UK along with two other UK companies, all of which sold the cartelised products in the UK but none of which were named in the Commission’s 2003 decision. The actions were also brought against the group companies who were addressees of the Commission’s decision but which are not based in the UK.

An attempt was made by KME UK to strike out Toshiba’s claim. On 13 September 2012, the Court of Appeal dismissed the strike out action on the basis that it was satisfied that Toshiba’s claim not only covered damages linked directly to the Commission decision (i.e. a follow-on action), but also a stand-alone action unconnected to the decision. According to the Court, Toshiba’s claim made clear allegations of unlawful conduct by KME UK which presuppose knowledge of, and an intention to implement, the cartel conduct described in the Commission’s decision, amounting to a stand-alone claim.

This judgment highlights the difference between follow-on actions and stand-alone actions and could influence more claims to be brought in the UK – if claimants construct their pleas in a similar way to Toshiba (i.e. as a standalone claim that is related to the proven cartel agreement), they can target UK subsidiaries of cartel members even if the subsidiaries themselves are not direct addressees of the infringement decision. The UK subsidiary could then be used to ‘anchor’ the claim in the UK, so that connected actions can then be brought into the litigation against non-UK entities, which may be addressees of the regulator’s decision.

It will be interesting to see whether KME UK seeks to challenge this decision before the Supreme Court.

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Leniency applicants trump damage claimant in English court

Posted on August 29th, 2012 by Daniel Geey

An Irish power company, Bord na Mona, has been denied early access to leniency information by an English court in its pursuit of damages from members of an industrial bags cartel fined €290 million by the European Commission in 2005.

Amongst the defendants to the claim filed last year was whistleblower British Polythene Industries (BPI) who avoided the €52 million fine. Bord na Mona sought disclosure of information that BPI had handed over to the European Commission.

Kieron Beal for Bord na Mona said, ‘It is evident that we have also been affected by the cartel, even if the market in question is not the one the Commission looked at… the documents are relevant because they show the impact on our market and our particular circumstances. We are not asking for the whole filing cabinet. This court should at least see what they told the European Commission.’

Judge Cooke sided with BPI. In balancing the rights of damages claimants and leniency applicants, he believed the public interest of protecting leniency applicants outweighed the arguments of the private damages claimants.

This decision appears in keeping with the OFT’s recent recognition of the importance of ensuring protection for leniency documents, in part, to ensure immunity and leniency applicants are not disinventivised from coming forward.

For more information relating to the OFT’s response to the Government’s Consultation, ‘Private Actions in Competition Law: a consultation on options for reform’, click here.

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Commission sends Statement of Objections to 13 suspected participants in a cartel for the supply of computer CD and DVD drives

Posted on July 24th, 2012 by Jon Matthews

The European Commission has informed thirteen companies supplying optical disk drives in the European Economic Area (EEA) of its preliminary view that they may have infringed EU antitrust rules by participating in a worldwide cartel.

http://europa.eu/rapid/pressReleasesAction.do?reference=IP/12/830&format=HTML&aged=0&language=EN

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Cartel victim attempts to extend time limit for damages claim

Posted on July 13th, 2012 by Jessica Burns

A victim of the 2001 vitamins cartel, BCL, is seeking the right to an extension to file a damages claim against chemicals maker, BASF, after its action was previously considered time-barred. BASF was fined EUR 296 million by the European Commission in 2001 for its involvement in the vitamins cartel and has since appealed the decision to the EU Courts.  BCL is attempting to recover £1 million in losses allegedly made due to BASF’s involvement in the cartel.

BCL originally initiated proceedings in the UK to recover losses as a result of the cartel once the EU courts had confirmed the Commission’s decision, but its case was deemed time-barred by several years by the Court of Appeal. In parallel, BCL asked the Competition Appeal Tribunal (CAT) to grant an extension so it could still file an action against BASF. Although the request was rejected by both the CAT and the Court of Appeal, the Supreme Court has agreed to review the case (this being the first antitrust case to be reviewed by the Supreme Court).

BCL argues that the limitation rules in relation to bringing damages claims breach EU ‘principles of legal certainty’, because they are ambiguous and make it difficult for cartel victims to calculate deadlines. BASF argues that a cartel victim should not be granted an extension to seek damages and that the limitation laws should be clear and foreseeable so that citizens know where they stand. BASF say that, if the Supreme Court does find that the law governing limitation periods is unclear, then BCL should bring a claim against the state seeking redress as opposed to being granted an extension to lodge a claim.

For now, the hearing continues, although it appears that BCL, in its attempt to extend the time limit, will not surrender without a fight.

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Can a damages action be ‘anchored’ in the English Courts if the UK subsidiary of the cartelist was not an addressee of a Commission cartel Decision?

Posted on July 2nd, 2012 by Daniel Geey

It has been reported today that the English Court of Appeal is hearing arguments in the Toshiba Carrier damages action. This should be of interest to any company claiming damages against a cartelist who wishes to bring an action in the English Courts. Similarly, cartelists who have been subject to an infringement decision by, for example, the European Commission, will be looking closely at the use of the English courts in circumstances where their own English subsidiary was not named in an enforcement Decision.

The arguments in the cases  (A3/2011/2816 Toshiba Carrier UK Ltd and Others -v- KME Yorkshire Limited & Ors; A3/2011/2818 Toshiba Carrier UK Ltd and Others -v- KME Yorkshire Limited & Ors.) are being heard at the moment.

The Toshiba Carrier case may provide further clarification on the ability of a damages claimant to isolate a cartelist’s English subsidiary, who may not have even  been party to the original cartel decision, in order to bring the action in the English Courts. For a more detailed look at previous English court ‘anchor’ decisions, click here for our thoughts.

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Barclays settles

Posted on June 27th, 2012 by John Cassels

Barclays is reported to have settled with US and UK authorities in connection with the LIBOR investigation:

http://www.ft.com/cms/s/0/2a4479f8-c030-11e1-9867-00144feabdc0.html#axzz1z029jaI2

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UK’s criminal cartel offence

Posted on June 22nd, 2012 by John Cassels

I spoke at the IBA’s Transnational Crime Conference in Sao Paolo last week … a tough gig.   I took a straw poll on the four options for change to the UK cartel offence put forward by BIS:

(i) remove the requirement for dishonesty and instead provide guidance to the prosecutors;

(ii) remove the requirement for dishonesty and instead publish a “white list” of agreements that would fall outside the scope of the offence;

(iii) replace dishonesty with secrecy

(iv) remove the requirement for dishonesty and define the offence so that it does not catch agreements made openly (i.e. published).

And the winner was …. option (iv).   This is also the Government’s preferred option, as set out in the Enterprise and Regulatory Reform Bill.   I am not convinced that distinguishing criminal from non-criminal behaviour on the basis of a notice in the Law Gazette is the best way to proceed.  It seems to lack legal and intellectual rigour.

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How Far Should Competition Authorities Protect Cartelists?

Posted on June 6th, 2012 by Daniel Geey

The network of 27 EU competition authorities and the European Commission (the NCA) recently provided a public statement about incentivising cartelists to blow the whistle without hindering the right of  claimants to recover appropriate damages. Click here for the official statement.

The need for such a statement is, in part, due to the recent Pfleiderer judgment. Click here for our analysis piece on the case. The NCA statement was keen to stress the benefits of the current national and Commission leniency programmes, which included:

  1. being able to uncover secret cartels;
  2. that the programmes provided the best avenue for effective detection, investigation and punishment;
  3. providing a deterrence factor; and
  4. allowing claimants, as a result of finding out about the secret cartel, to claim compensation.

It is this final point which has caused much consternation. Usually, private damages claimants will start a ‘follow-on’ damages claim, piggy-backing off the competition authority’s prohibition decision. This means the claimants do not usually have to prove the anti-competitive behaviour which has already been established. Nonetheless,  claimants in Pfleiderer and the recent Gas Insulated Switchgear follow on damages action requested certain leniency documents. Such documents are usually provided orally by whistleblowing cartelists at the relevant competition authority’s offices specifically to ensure that such admissions of collusion cannot be disclosed in civil litigation proceedings.

If such documentary evidence, which is subsequently inserted into the Commission’s Decision or in Replies given by addressee’s of a Statement of Objections, is requested by claimants (as has been the case), the ECN is concerned potential cartelists would be disinsentivised from confessing in the first place .  If cooperation by cartel participants dries up, the largest weapon in a competition authority’s enforcement arsenal could be irrevocably weakened.

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Disclosure, disclosure, disclosure … Part 2

Posted on June 1st, 2012 by John Cassels

Areva is reported to have withdrawn its appeal against the European Commission’s decision of 26 January 2012 to provide the English High Court with copies of its response to the SO.  

The Commission is thought to have amended the documents, which appears to have changed the balance of risk/reward for Areva. 

Alstom, is maintaining its challenge to the Commission’s decision.

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