European Union Competition Law - Enforcement

Enforcement

The task of tracking down and punishing those in breach of competition law has been entrusted to the European Commission, which receives its powers under Article 105 TFEU. Under this Article, the European Commission is charged with the duty of ensuring the application of Articles 101 and 102 TFEU and of investigating suspected infringements of these Articles. The European Commission and national competition authorities have wide on-site investigation powers. Article 105 TFEU grants extensive investigative powers including the notorious power to carry out dawn raids on the premises of suspected undertakings and private homes and vehicles.

There are many ways in which the European Commission could become aware of a potential violation: The European Commission may carry out investigation or inspections, for which it is empowered to request information from governments, competent authorities of Member States, and undertakings. In some cases, parties have sought to resist the taking of certain documents during an inspection based on the argument that those documents are covered by legal professional privilege between lawyer and client. The ECJ held that such a privilege was recognized by EC law to a limited extent at least.

The European Commission also could become aware of a potential competition violation through the complaint from an aggrieved party. In addition, Member States and any natural or legal person are entitled to make a complaint if they have a legitimate interest.

Article 101 (2) TFEU considers any undertaking found in breach of Article 101 TFEU to be null and void and that agreements cannot be legally enforced. In addition, the European Commission may impose a fine pursuant to Article 23 of Regulation 1/2003. These fines are not fixed and can extend into millions of Euros, up to a maximum of 10% of the total worldwide turnover of each of the undertakings participating in the infringement, although there may be a decrease in case of cooperation and increase in case of recidivism. Fines of up to 5% of the average daily turnover may also be levied for every day an undertaking fails to comply with Commission requirements. The gravity and duration of the infringement are to be taken into account in determining the amount of the fine. This uncertainty acts as a powerful deterrent and ensures that companies are unable to undertake a cost/benefit analysis before breaching competition law.

The Commission guideline on the method of setting fines imposed pursuant to Article 23 (2) (a) of Regulation 1/2003 uses a two-step methodology:

• The Commission first defines a basic amount of the fine for each involved undertaking or association of undertakings; and then
• Adjusts the basic amount according to the individual circumstances upwards or downwards.

The basic amount relates, inter alia, to the proportion of the value of the sales depending on the degree of the gravity of the infringement. In this regard, Article 5 of the aforementioned guideline states, that

“In order to achieve these objectives, it is appropriate for the Commission to refer to the value of the sales of goods or services to which the infringement relates as a basis for setting the fine. The duration of the infringement should also play a significant role in the setting of the fine. It necessarily has an impact on the potential consequences of the infringements on the market. It is therefore considered important that the fine should also reflect the number of years during which an undertaking participated in the infringement.”

In a second step, this basic amount may be adjusted on grounds of recidivism or leniency. In the latter case, immunity from fines may be granted to the company who submits evidence first to the European Commission which enables it to carry out an investigation and/or to find an infringement of Article 101 TFEU.

The highest cartel fine which was ever imposed was related to a cartel consisting of four car glass producers. The companies Asahi, Pilkington, Saint-Gobain and Soliver were fined over €1.3 billion. Between 1998 and early 2003 those companies had discussed target prices, market sharing and customer allocation in a series of meetings and other illicit contacts. In this case, the European Commission started its investigation based on an anonymous “tip”.

Another negative consequence for the companies involved in cartel cases may be the adverse publicity which may damage the company´s reputation.

Questions of reform have circulated around whether to introduce US style treble damages as added deterrent against competition law violaters. The recent Modernisation Regulation 1/2003 has meant that the European Commission no longer has a monopoly on enforcement, and that private parties may bring suits in national courts. Hence, there has been debate over the legitimacy of private damages actions in traditions that shy from imposing punitive measures in civil actions.

According to the Court of Justice of the European Union, any citizen or business who suffers harm as a result of a breach of the European Union competition rules (Articles 101 and 102 TFEU) should be able to obtain reparation from the party who caused the harm. However, despite this requirement under European law to establish an effective legal framework enabling victims to exercise their right to compensation, victims of European Union competition law infringements to date very often do not obtain reparation for the harm suffered. The amount of compensation that these victims are foregoing is in the range of several billion Euros a year. Therefore, the European Commission has taken a number steps since 2004 to stimulate the debate on that topic and elicit feedback from stakeholders on a number of possible options which could facilitate antitrust damages actions. Based on the outcomes of several public consultations, the Commission has suggested specific policy choices and measures in a White Paper.