EU CARTEL ENFORCEMENTMAY 2017

–MAY 2018

Maria Jaspers, European Commission

Johan Ysewyn, Covington

1

Overview

1. The Year in Numbers

2. Policy Output

3. Commission Decisions

4. Hot Topic : Artificial Intelligence and Collusion

5. Cartel Cases in the European Competition Network

6. The EU Courts

7. The Crystal Ball

2

1. The year in numbers

3

EC Total Fines & Number of Cartel Decisions

4

10

5

6

7

4

0

2

4

6

8

10

12

0

500

1000

1500

2000

2500

3000

3500

4000

2014 2015 2016 2017 2018

No.

EC

Dec

isio

ns

Fine

s/EU

R M

EC Total Fines & Number of undertakings

5

52

21

16

31

20

0

10

20

30

40

50

60

0

500

1000

1500

2000

2500

3000

3500

4000

2014 2015 2016 2017 2018

No.

Und

erta

king

s

Fine

s/EU

R M

Publicly known ongoing cases

» Automotive sector

» German car makers (AdBlue tank sizes in diesel engines)

» Financial services sector

» Bank customers’ account data

» European Government Bonds

» Forex

» Precious metal trading

6

Publicly known ongoing cases

» Aviation and aerospace insurance brokers

» Ethylene purchasing

» Kraft paper and industrial paper sacks

» Metal-packaging

» Motor insurance (Ireland)

» Sports-media rights distribution

» Supermarkets

7

2. Policy output

8

ECN+: Enhancing enforcement by national competition authorities

• Proposal for a directive– Means and instruments to effectively enforce EU competition rules– Aim: genuine common competition enforcement area in the Single

Market– Improving the enforcement of existing laws by Member States in

partnership with the EC– Provide for minimum guarantees

• Key features– Independence and resources– Effective tools to detect and stop infringements– Ability to impose deterrent fines

9

ECN+: Enhancing enforcement by national competition authorities

• Leniency– Problem:

leniency programmes key tool to discover illegal cartels, butthey work differently across Europe

– Proposal: ensure that companies benefit from leniency in the same way

across the EU by translating core principles of ECN ModelLeniency Programme into law

grant leniency and settlement material the same level ofprotection as before the EC

protect employees and directors of immunity applicants fromindividual sanctions if they cooperate

10

ECN+: Enhancing enforcement by national competition authorities

• Next steps– Discussions with European Parliament and Council (‘trilogues’)

started on 17 April and will go on until end May– Aim to adopt a final Directive spring 2019

11

Anonymous whistle blower tool

• Addition to the leniency programme : possibility to file informationanonymously

• External service will pass on the message without metadata – whistle-blowerto indicate whether the EC can reach out with additional questions

• Webpage gets 9,000 monthly hits shortly after launched

• Similar systems exist in Austria (Feb 2018) Germany, Denmark, Poland, …

• No reward mechanism, unlike in Slovakia, Hungary, UK…

• EC legislative proposal to strengthen whistleblower protection – aim toadopt an EU-wide standard

12

3. Commission Decisions

13

European Commission – Cartel Decisions

1. The traditional prohibition decisions

» Paper envelopes (June 2017) – re-adoption

» Trucks (September 2017) – staggered hybrid

» Capacitors (March 2018) – traditional prohibition decision

» Spanish raw tobacco (June 2017) – amending decision

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European Commission – Cartel Decisions

2. The settlement cases

» Lighting systems (June 2017)

» Occupant safety systems (November 2017)

» Maritime Car Carriers (February 2018)

» Braking systems (February 2018)

» Spark plugs (February 2018)

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3.1 Traditional decisions

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1. Paper envelopes – re-adoption

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1. Paper envelopes – re-adoption

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• COMP/39780 – Decision of 16 June 2017

– Re-adoption against Printeos– Original decision:

5 parties Customer allocation and price coordination Duration of 4.5 years

– Total fine against Printeos: €4.7 mio (identical to original fine)

• Most interesting features?– Second settlement decision without immunity applicant– GC annulled 2014 decision for failure to state reasons when departing

from traditional fining methodology (para. 37 Fining Guidelines)– Very fast re-adoption (GC judgment in December 2016)– Printeos appealed the re-adoption decision

2. Trucks – Scania

19

2. Trucks – Scania

• COMP/39824 – Decision of 27 September 2017

– Following settlement decision of 19 July 2016 involving MAN(immunity applicant), Volvo/Renault, Daimler, Iveco and DAF – recordfine

– Price coordination (gross list level), timing of compliance with EUemission standards, pass-on of emission technology cost

– Duration of 14 years– Total fine for Scania: €880.5 mio

• Most interesting features?– Staggered hybrid– Scania announced that it will appeal the decision

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3. Capacitors

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3. Capacitors

• COMP/40136 – Decision of 21 March 2018

– 10 Japanese companies together with Sanyo (immunity applicant)– Exchange of commercially sensitive information (future prices, pricing

intentions, supply and demand information), price coordination– Duration of 14 years– Total fine €254 mio

• Most interesting features?– Bilateral or trilateral contracts– Multilateral meetings between managers and even presidents– Cartelists were aware of their anti-competitive behavior– No settling parties– The 2 month appeal period is still running

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3.2 Settlement decisions

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4. Car lighting systems

24

4. Car lighting systems

• COMP/40013 – Decision of 21 June 2017

– 24th settlement– Price coordination, agreements on trade conditions– Duration of 3 years– Three parties– Total fine: €26.7 mio (immunity forValeo)

• Most interesting features?– Part of a series of investigations into suspected cartels in the

automotive parts sector

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5. Occupant safety systems

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5. Occupant safety systems

• COMP/39881 – Decision of 22 November 2017

– 25th settlement– One to four cartels of duration between 2 to 6 years– Price coordination, exchange of sensitive information to maintain

each competitor’s incumbent ‘commercial rights’– Five parties– Total fine: €34 mio (immunity for Takata in 3 cartels and for Tokai

Rika in 1 cartel)

• Most interesting features?– Part of a series of investigations into suspected cartels in the

automotive parts sector– Cartel meetings took place outside Europe (Japan) in the suppliers’

business premises, in restaurants and hotels

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5. Occupant safety systems

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First-inimmunity

First-inleniency

Second-in leniency

No leniency

Immunity extendedduration

SCI I(seatbelts →Toyota)

SCI II(airbags →Toyota)

SCI III(seatbelts →Suzuki)

SCI IV(seatbelts, airbags, steering wheels →Honda)

Tokai Rika100%€ 0

Takata50%€ 12.7 mio

Tokai Rika46%€ 1.8 mio

Autoliv30%€ 0.3 mio

Toyoda Gosei

Autoliv

Marutaka0%€ 0.2 mio

Autoliv

Autoliv

Autoliv50%€ 2.8 mio

Takata100%€ 0

Toyoda Gosei28%€ 11.3 mio

Autoliv50%€ 4.96 mio

Takata100%€ 0

Takata100%€ 0

6. Maritime car carriers

29

6. Maritime car carriers

• COMP/40009 – Decision of 21 February 2018

– 26th settlement– Price coordination, customer allocation, exchange of sensitive

information– Duration of 6 years– Five parties– Total fine: €395 mio (immunity for MOL)

• Most interesting features?– In 2016, 3.4 million imports and 6.3 million exports in Europe; half of

these vehicles were transported by the cartelists– The EC cooperated with the Australian, Canadian, Japanese and U.S.

competition authorities

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7. Spark plugs

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7. Spark plugs• COMP/40113 – Decision of 21 February 2018

– 27th settlement– Exchange of sensitive information, price coordination, market sharing– 2+1 parties - Bilateral contracts: Bosch/ NGK and Denso/ NGK– Duration of 11 years– Total fine: €76 mio (immunity for Denso)

• Most interesting features?– Part of a series of investigations into suspected cartels in the

automotive parts sector– Lack of knowledge by Bosch and Denso about the other’s agreement

with NGK: liable only for the bilateral contract each one participated ‘mitigating circumstance’ – additional 10% fine reduction

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8. Braking systems

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8. Braking systems

• COMP/39920 – Decision of 21 February 2018

– 28th settlement– Two cartels– Exchange of sensitive information, price coordination– Duration: 10 months and 4 years respectively– Two - three parties– Total fine: €75 mio (immunity for TRW and Continental respectively)

• Most interesting features?– Part of a series of investigations into suspected cartels in the

automotive parts sector– The EBS cartel related to one specific tender for electronic braking

systems forVolkswagen

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8. Braking systems

35

First-inimmunity

First-in leniency Second-in leniency

Immunity extendedscope

SCI I(hydraulic braking systems →Daimler, BMW)

SCI II(electronic braking systems →Volkswagen)

TRW(sales to Daimler)100%€ 0

ContinentalImmunity for sales to BMW

Bosch(sales to Daimler)35%€ 12 mio

Continental (sales to Daimler)20%€ 44 mio

Continental 100%€ 0

Bosch30%€ 19 mio

Commission decisions – some tentative conclusions

• Feedstock : Is the immunity pipeline drying up? • All cases (- paper envelopes) are based on immunity applications• More settlement than traditional decisions

– One staggered hybrid– One traditional decision

• All recent traditional Commission decisions (- Capacitors) appealed • Settlement procedure:

– Positive experience

– Now covers more than half of the cases

– Process getting shorter

– Number of EC decisions appealed

• Continued scrutiny of automotive, financial services and industrial sectors

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4. Hot Topic

37

Artificial Intelligence and CollusionThe competition risks of artificial intelligence

• Tacit collusion becomes more stable and durable– Automatic and immediate detection and possible retaliation reduces

incentive to engage in meaningful price competition

• Collusion in dynamic markets becomes easier– Algorithms automate price reactions to changes in market conditions

• Increased chance of competitors picking up price signalling

• But: nothing wrong with intelligently adapting to competitors’ prices(Dyestuffs, Woodpulp) – why different when using algorithms?

• Higher evidence threshold: where is the “concerted practice”?

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Artificial Intelligence and Collusion

Precedents

• Online poster sales: price fixing on Amazon Marketplace (2015)

– Trod Ltd and GB eye Ltd, merchants of licensed sport andentertainment merchandise

– Use of automated repricing software to keep prices at the same level– Investigations by US DoJ and UK CMA– GB eye Ltd was immunity applicant

• E-Turas: preliminary reference to ECJ (2016)

– Operator of electronic travel booking platform introduced arestriction on discount rates after informing travel agents

– Travel agents who read the message but did not (explicitly orimplicitly) distance themselves, could be found part of a concertedpractice

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Artificial Intelligence and Collusion

The cartel risks of artificial intelligence

• Monitoring role of algorithms

– Improve coordination and detection of diverging outcomes

• Hub & spoke potential

– Pricing algorithm as a hub, companies using the algorithm as the spokes

• Signalling potential

– Pricing algorithms can send and detect actions within real time

• Self-learning algorithms

– Collusive outcome without explicit programming of the algorithm tothat end – no human interference

• Companies using the same algorithm

– No contact, no coordination but potentially collusive outcome

40

Artificial Intelligence and Collusion

Is an enforcement change needed?

– Authorities have showed their willingness to stretch theconcept of collusion : information exchange, signalling, hub &spoke

– No reason why those concepts could not be applied toinfringements using algorithms

From smoke-filled rooms and trade associations toartificial intelligence

Algorithms are implementation mechanisms rather thana new infringement concept

41

Artificial Intelligence and Collusion

European approach to AI

• EC communication:“Artificial Intelligence for Europe”

• Commissioner Vestager appointed three digital competitionadvisers: advise on upcoming changes and how they will affectconsumers

– Professor Heike Schweitzer

– Professor Jacques Crémer

– Assistant Professor Yves-Alexandre de Montjoye

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5. Cartel Cases in the European Competition Network

43

Enforcement in the ECN

• 1035 envisaged decisions submitted by NCAs in addition to EC’s own

antitrust decisions (May 2004 - 31 December 2017)

• Many focusing on bid rigging and markets important for public

expenditure (e.g. construction and public procurement)

• Work-sharing / case-allocation – flexible and pragmatic approach

• Assistance in investigations and exchange of information

• ECN report on investigative powers:

http://ec.europa.eu/competition/ecn/investigative_powers_report_en.pdf

and ECN Recommendation on investigative powers:

http://ec.europa.eu/competition/ecn/recommendation_powers_to_investigate_enforcement

_measures_sanctions_09122013_en.pdf

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NCA DecisionsMay 2004 – December 2017

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0

20

40

60

80

100

120

140

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

ECN Cases – Selected Examples• France - Dairy products sold under Retailers' private labels, ca. - € 44,700 000, 12 March 2015

• Germany - Resale price maintenance in the food retail sector - € 151,600 000, June 2015

• Germany - Acoustically effective components - € 75, 000,000, June 2015

• Italy - Schools cleaning services - € 113,841,882 , 22 December 2015

• Finland - Bus companies - € 38,000,000, 25 January 2016

• France - Parcel delivery services - € 672,300,000, 3 March 2016

• Germany - Manufacturers of railway sleepers - € 1,500,000, 3 March 2016

• Germany - Resale price maintenance in food retail sector - € 90,500,000, 28 April 2016

• Spain - Manufacturers of adult diapers - € 128,800,000, 31 May 2016

• Italy - Vending machines - € 100,750,028, 8 June 2016

• Spain - Rail cargo transport services - € 75,600,000, 6 March 2017

• Cyprus - Interchangeable fees - € 31, 000 000, 23 May 2017

• Germany - Battery makers - € 28,000,000, 27 June 2017

• France - Flooring suppliers - € 302, 000, 000, 19 October 2017

• Italy - Steel producers - € 140,000,000, 2 August 2017

• Greece - Construction cartel - € 80,700,000, 3 August 2017

• Italy - Cement cartel - € 184,000,000, 8 August 2017

• Spain - Power cables cartel - € 44,700,000, 28 November 2017

• Lithuania - Wedding dresses - € 1 to 1,260, 31 October 201746

6. The EU Courts

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Level of General Court Scrutiny

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35 judgments re 8 EC decisions

2015

11 judgments Decision fully upheld 31%

10 judgments Partial annulment 29%

14 judgments Full annulment 40%

15 judgments re 8 EC decisions

2016

12 judgments Decision fully upheld 80%

3 judgments Partial annulment 20%

0 judgments Full annulment 0%

2 judgments re 2 EC decisions

2017

0 judgments Decision fully upheld 0%

2 judgments Partial annulment 100%

0 judgments Full annulment 0%

Level of ECJ Scrutiny

49

10 rulings on GC judgments re 6 EC decisions

20159 judgments GC judgment upheld 90%

1 judgments GC judgment annulled 10%

18 rulings on GC judgments re 8 EC decisions

201613 judgments GC judgment upheld 72%

5 judgments GC judgment annulled 28%

32 rulings on GC judgments re 11 EC decisions

201725 judgments GC judgment upheld 78%

7 judgments GC judgment annulled 22%

Court Review – A Closer Look

1. Investigation issues

2. Substantive assessment

3. Fining issues

4. Settlements

5. GC proceedings: reasonable time for adjudication

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6.1 Investigation Issues

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Challengeable nature of actsT-274/15 Alcogroup and Alcodis (GC 10 April 2018)

• Interesting challenge but wrong fact-pattern

• Two dawn raids:– September 14 : manipulation of Platts

Lots of legally privileged correspondence– March 15 : bioethanol cartel

Commission ultimately didn’t seize any of the legally privilegedcorrespondence from after September 14

Investigation was closed on 7 April 2017

• Can a “fully employed” external lawyer at a company be “independent”within the Akzo case-law? Letter by the DG of the Legal Service to theBrussels bar

52

53

• GC about the first inspection decision:– Acts subsequent to the adoption of a decision cannot effect the validity

of the decision– Deutsche Bahn: irregularities in an inspection may call into question only

decisions subsequently adopted, but not the decision ordering it– Decision with no legal effects = challenge is inadmissible

• GC about the EC’s refusal to suspend the second inspection:– A letter/response by the EC is not a challengeable act (Global Steer

Wire)– Part of a procedure of several stages – only the final decision produces

legal effects and can be contested (Nexans France and Nexans)

• GC dismissed the appeal but left open the possibility of damage claims

Challengeable nature of actsT-274/15 Alcogroup and Alcodis (GC 10 April 2018)

6.2 Substantive Assessment

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Burden of proofT-180/15 ICAP (GC 10 November 2017)

55

• Detailed review of evidence, both in relation to facilitation (awareness) andduration

• GC: EC did not prove to the requisite legal standard that ICAP hadknowledge of the collusion between UBS and RBS in 2008– UBS acknowledged use of ICAP services in settlement submission

no UBS claim that it informed ICAP of RBS’ participation

– UBS statement to ICAP that RBS’ submission would be “low across theboard” no unequivocal meaning – could be trader’s opinion

– Internal ICAP e-mail: “[I think] UBS and RBS have a vested interest inthe rates being low” no unequivocal meaning – could be ICAP’s internal opinion

EC used truncated form of the quote to strengthen its interpretation

• No firm, precise and consistent evidence → no ICAP awareness

6.3 Fining issues

56

Departure from Fining Guidelines (para. 37) T-180/15 ICAP (GC 10 November 2017)

57

• Particularities of a given case or the need to achieve deterrence mayjustify departing from traditional methodology (Para. 37 FG)

• Reason for application of para. 37 was sufficiently justified– ICAP was not active on the JYIRD market– Taking into account brokerage fees would not reflect gravity and

nature of the infringements

• But alternative calculation method was insufficiently motivated– General assurance that basic amounts reflect gravity, duration and

nature of ICAP’s involvement and need for deterrent effect– No justification for calculation method– Not taken into account:

exploratory, informal discussions during administrative procedure five-stage test for basic amount explained during court proceedings

– GC annuls fines for insufficient reasoning

Departure from Fining Guidelines (para. 37) C-39/18P ICAP v Commission

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• EC brought an appeal against the GC decision in January 2018

• Single ground of appeal:

– Incorrect application of Case-194/14P, AC -Treuhand v Commission

– GC imposes a stricter obligation on the EC to explain morethoroughly the methodology it uses in calculating fines when applyingpara 37

– If accepted, it is detrimental to the EC’s ability to determine adequatefines so as to achieve the right level deterrence, and inappropriatelylimits the EC’s margin of discretion

6.4 Settlements

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Presumption of innocence in staggered hybrids T-180/15 ICAP (GC 10 November 2017)

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• GC: Commission can choose the hybrid route (Timab)• BUT : must be carried out in compliance with the presumption of

innocence – Commission must take the necessary measures“including possible adoption on the same date”

• The facts set out in the settlement decision “reveal very clearly theCommission’s position on ICAP’s partipation in the unlawful conduct”

• Breach of presumption of innocence

• But breach does not mean annulment of infringement decision• EC demonstrated ICAP infringement to requisite legal standard →

decision would not have been different

• Impact on staggered hybrid procedure?

7. The Crystal Ball

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The Crystal Ball

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• Proof and motivation of decisions: close scrutiny by theCourts

• Settlements: established instrument, cases moving morequickly

• Private damages: impact on public enforcement

– SCI definition

– Publication arguments

– Immunity

– More ex officio cases

• Deepening of cooperation within the ECN

Mar i a J a spe r sDG Compe t i t i on , Eu ropean Commis s ionMar i a . JASPERS@ec .eu ropa . eu

Johan Ysewyn , P a r tne rCov in g ton & Bur l i n g LLP, B ru s se l s / Londonj y sewyn@cov. com

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